EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of June 16, 1997, by
and among MEDIALINK WORLDWIDE INCORPORATED ("Purchaser"), a Delaware
corporation with offices at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
CORPORATE TV GROUP, INC., a New York corporation with offices at 000 Xxxxx
Xxxxxx, Xxx Xxxx, XX 00000 ("Seller") and XXXXXXX XXXXXX, the principal
shareholder of Seller, having an address c/o Corporate TV Group, Inc., 000
Xxxxx Xxxxxx, Xxx Xxxx, XX 00000 ("Shareholder").
W I T N E S S E T H :
WHEREAS, Seller conducts a business which strategizes and
consults with business entities on their business objectives and produces video
communications programs both live and taped, including the production and
distribution of video and audio news releases, press conferences and satellite
media tours (such business as conducted since August 1, 1995 being hereinafter
referred to as the "Business"); and
WHEREAS, Purchaser desires to purchase, and Seller desires to
sell, all of Seller's right, title and interest in and to the Acquired Assets
(as hereinafter defined) upon the terms and subject to the conditions of this
Agreement and in connection with and as partial consideration for the sale of
the Acquired Assets (as hereinafter defined) Seller and Shareholder shall each
enter into a Non-Compete Agreement and a Confidentiality Agreement with
Purchaser in the form of Exhibits A and B attached hereto (the "Non-Compete
Agreements" and the "Confidentiality Agreements").
NOW THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
Section 1. Certain Definitions. For purposes of this
Agreement, the words and terms listed below shall have the following means:
(a) "MCT Division" shall mean the Medialink
CTV Division of the Purchaser.
(b) "MCT Division Pre-Tax Net Income" shall
mean the MCT Division Revenue attributable to the performance of services by
the MCT Division less (i) Direct Costs, as hereinafter defined, (ii) Salary and
Related Costs, as
hereinafter defined, (iii) Telephone Charges, as hereinafter defined, (iv)
General and Administrative Costs, as hereinafter defined, and (v) Corporate
Overhead, as hereinafter defined. The MCT Division Pre-Tax Net Income shall be
calculated on the operating results of the MCT Division on an accrual basis
using Purchaser's standard accounting practices and policies, excluding
goodwill amortization and gains and losses arising from the disposition of
assets not in the ordinary course of business.
"Direct Costs" shall mean those costs incurred solely for the
purpose of a specific revenue generating project. Direct costs include, but are
not limited to, camera crews and equipment, playout, uplink and satellite time,
tape dubbing and distribution charges, editing and studio costs. In addition,
direct costs include the use of third party labor for production, editing etc.
In the event that the MCT Division uses Purchaser's employees for production
etc. they will be charged to the MCT Division on the basis of the rates on
Schedule A hereto. The Schedule A rates will be increased at the beginning of
each of Year Two through Year Five by the CPI, as hereinafter defined. The MCT
Division will be charged for the use of the Purchaser's services such as video
and audio distribution in accordance with Schedule A. Direct costs will also
include sales commissions on MCT Division Revenue including commissions paid to
the Purchaser's sales people arising from that portion of the MCT Division
Revenue set forth in subparagraph (iv) of the definition of MCT Division
Revenue.
"Salary and Related Costs" shall mean all employment costs of
MCT Division employees, including but not limited to, salaries and bonuses,
medical, dental and disability premiums, employers contributions as to any 401K
or other pension plan together with the costs of administering such plans and
employment taxes. Wherever practicable, such costs will be allocated to MCT
Division on an actual basis. In all other instances, the cost will be allocated
to MCT Division on a pro rata basis calculated by multiplying (x) the actual
cost of the Purchaser (including the MCT Division) by (y) (i) the number of MCT
Division employees associated with that cost divided by (ii) the total number
of Purchaser employees (including the MCT Division employees) associated with
that cost ("Employee Allocation Method"). Any compensation charged to MCT
Division employees arising from the exercise of stock options granted to such
employees by the Purchaser shall not be deducted from MCT Division Pre-Tax Net
Income.
"Telephone Charges" shall mean the actual charges therefor,
if possible, and if not possible shall be allocated to the MCT Division on a
pro rata basis calculated by multiplying (x) the total telephone charges of
Purchaser by (y) a fraction, the numerator of which is the MCT Division Revenue
and the denominator of which is the total United States revenue of Purchaser
(including the MCT Division Revenue) ("Revenue Allocation Method").
"General and Administrative Costs" shall mean all other costs
incurred by MCT Division that were not included in Direct Costs or Salary and
Related Costs and excluding interest expense. General and Administrative Costs
incurred solely for the MCT Division will be charged directly to MCT Division
on an actual basis wherever
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practicable ("Directly Charged Costs"). In all other instances the cost will be
allocated to MCT Division on a pro rata basis in accordance with Schedule B
attached hereto.
"Corporate Overhead" shall mean a management fee charged by
Purchaser to the MCT Division to cover administrative costs, marketing support,
management time and the cost of employment of Xxxx Xxxxxxxxx, accountant, and
Xxxxxx Xxxxxx, officer manager, calculated as the greater of (i) a base amount
of $110,000 (per annum ("Base Amount Charge") for each of Year One through Year
Five) or (ii) 1.8% of MCT Division Revenue in Year One through Year Five;
provided that such Base Amount Charge to revenue shall increase by 15% per
annum compounded annually for each of Year 2, Year 3, Year 4 and Year 5.
(c) "MCT Division Revenue" shall mean all
revenue derived from (i) existing clients of CTV, (ii) revenue from new clients
of the MCT Division, excluding revenue from the Purchaser's existing clients,
(iii) revenue generated by the MCT Division edit suite, and the MCT Division
will charge Purchaser for the use of the edit suite in accordance with Schedule
A; and (iv) revenue from clients of Purchaser introduced to the MCT Division
earned as follows: (a) MCT Division revenue will be credited for all "non-media
video" revenue, such as corporate identity tapes, lobbying tapes, videos for
corporate events; (b) for all traditional broadcast revenue, such as Video News
Releases, Audio News Releases, Satellite Media Tours and Radio Media Tours, the
MCT Division will be credited for revenue in excess of the average of the
previous two years broadcast revenue of the Purchaser from such clients for
such services; and (c) one-half of all Purchaser's revenue from
videoconferences will be credited to the MCT Division and one-half shall be
credited to the Purchaser.
(d) "Value" shall mean the last reported
closing price of the Medialink Shares, as defined in Section 4.1(a)(i) hereof,
as reported on a National Securities Exchange or on the NASDAQ system on the
last trading day which is two business days prior to the delivery of the
Medialink Shares.
(e) "Year One" shall mean the twelve month
period commencing on the first day of the month following the Closing Date.
(f) "Year Two" shall mean the twelve month
period commencing on the day after the end of Year One.
(g) "Year Three" shall mean the twelve
month period commencing on the day after the end of Year Two.
(h) "Year Four" shall mean the twelve month
period commencing on the day after the end of Year Three.
(i) "Year Five" shall mean the twelve month
period commencing on the day after the end of Year Four.
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ARTICLE II
Section 2. Purchase and Sale.
2.1. Assets to be Acquired. Subject to the terms and
conditions of this Agreement, Seller hereby agrees to sell, assign, transfer,
convey and deliver to Purchaser, and Purchaser hereby agrees to purchase and
accept from Seller, on the Closing Date, as hereinafter defined, those certain
assets, tangible and intangible (the "Assets") relating to the Business,
wherever the same may be located, whether in Seller's possession or in the
possession of third parties (the "Acquired Assets") as follows:
(a) All inventory of the Business as set
forth on Schedule 2(a) attached hereto owned by Seller including
work-in-process and finished goods (the "Inventory");
(b) All right, title and interest of Seller
in and to the equipment as set forth on Schedule 2(b) attached hereto owned by
Seller;
(c) All right, title and interest of Seller
in and to trademarks, copyrights, trade names and trademark applications
related to the Business (the "Acquired Intellectual Property"), including all
goodwill associated therewith, all as more specifically described on Schedule
2(c) attached hereto;
(d) All market research data, promotional
and advertising materials in Seller's or any of its agencies' possession,
including but not limited to, catalog sheets of Seller used in, developed for
use in or held for use in the Business; and
(e) All technology, plans, know-how,
production details, software, artwork, research data, tape library, data, books
and records, regulatory files, customer contracts, customer lists and files,
distributor lists and files, vendor lists and files, data processing records
and goodwill of the Seller relating exclusively to the Business, including,
without limitation, all files and documents relating to the Acquired
Intellectual Property, including registrations, applications, prosecution
files, files relating to conflicts, demands and challenges in each case in
whatever form, including computer discs and electronic storage (the "Acquired
Books and Records").
It is hereby expressly understood and agreed that
the foregoing Acquired Assets are to be transferred and conveyed to Purchaser
as above specified, by good and sufficient xxxx of sale, and other documents of
transfer, as provided in Section 8 hereof, free and clear of all liens,
charges, encumbrances, debts, liabilities and obligations whatsoever, except as
specifically described herein.
2.2. Assets Not Being Acquired. Excluded from the
Acquired Assets to be sold, conveyed, transferred and assigned by Seller, and
purchased and
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accepted by Purchaser under Section 2 hereof, are the following (collectively
referred to herein as the "Excluded Assets"):
(a) All cash and cash equivalents (such as
certificates of deposit, treasury bills and marketable securities) of Seller;
(b) All accounts or notes receivable of any
type of Seller;
(c) All of Seller's rights to any Federal,
state or local tax refunds; and
(d) All of Seller's stock records,
corporate documents, minutes, tax returns or any other records or documents
which Seller is required by law or governmental regulation to keep in its
possession (subject to Section 7.4 hereof).
ARTICLE III
Section 3. Retained Obligations and Liabilities of Seller and
Shareholder; Assumed Liabilities of Purchaser.
3.1. Assumption of Certain Obligations and
Liabilities by Purchaser. On the Closing Date Purchaser shall assume and be
solely and exclusively liable with respect to, and shall pay, perform or
discharge in accordance with their respective terms, only the obligations of
Seller incurred after the Closing Date under the acquired agreements (the
"Acquired Agreements") listed on and incorporated by reference in Schedule 3.1
attached hereto (the "Assumed Liabilities").
3.2. Retention of Obligations and Liabilities by
Seller. Except for the Assumed Liabilities, Purchaser shall not assume, pay,
perform or discharge, or take subject to, and Seller and Shareholder shall
jointly and severally indemnify Purchaser from and against, any obligations or
liabilities related to the Business of any nature whatsoever, whether fixed or
contingent, known or unknown, including, without limitation Taxes (as
hereinafter defined) and all liabilities, costs and expenses resulting from all
actions, claims, and proceedings against Seller and Shareholder for all periods
prior to the Closing Date; liabilities and obligations to employees or arising
out or under any employee benefit plan or program or policy or any employment
agreement, including all accrued vacation time of any employee, except those
agreements listed on and incorporated by reference in Schedule 3.2 attached
hereto; obligations and liabilities of Seller related in any manner whatsoever
to a breach by Seller or Shareholder of any of their representations and
warranties set forth herein; any and all taxes assessed on either Seller or
Shareholder relating to the transactions contemplated hereby; or any and all
legal, accounting and other professional fees of the professionals representing
Seller and Shareholder in the transactions contemplated hereby; and liabilities
or obligations arising out of the production and distribution of video news
releases and audio news releases, press releases and satellite media tours
prior to the Closing Date (collectively the "Retained Liabilities").
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The indemnification obligation hereunder shall be governed by the provisions of
Section 11 hereof.
ARTICLE IV
Section 4. Purchase Price.
4.1. Payment Terms.
(a) Subject to the terms and conditions of
this Agreement, Purchaser hereby agrees to purchase the Acquired Assets for a
maximum aggregate purchase price of up to Ten Million One Hundred and Seventy
Seven Thousand Nine Hundred ($10,177,900) Dollars ("Purchase Price"), including
the amount of Three Hundred Thousand ($300,000) Dollars, payable under the Non-
Compete Agreement, as hereinafter defined ("Non-Compete Payment"), to be paid
as follows:
(i) Three Million One Hundred
Sixty-Six Thousand Three Hundred and Sixty-Seven
($3,366,667) Dollars plus Three Hundred Thousand
($300,000) Dollars, representing the Non-Compete
Payment to be paid in cash on the Closing Date in a
bank cashier check or by wire transfer and such
number of shares of the common stock of Medialink
Worldwide Incorporated, par value $.01 per share
("Medialink Shares") having a Value equal to Three
Hundred Thirty-Three Thousand Three Hundred and
Thirty-Three ($333,333) Dollars, as of the close on
the last trading day which is two (2) business days
prior to the Closing Date; and
(ii) (a) during Year One, Three
Hundred Thirty-Six Thousand Seven Hundred ($336,700)
Dollars, provided, that the MCT Division Revenue for
such year equals or exceeds Four Million Five
Hundred Thousand ($4,500,000) Dollars. Such amount
shall be payable in the amount of $28,058.33 for
each month during Year One that the MCT Division
Revenue for a month during Year One equals or
exceeds $375,000. In the event the MCT Division
Revenue for a month is less than $375,000, the
monthly payment for such month shall be
proportionately reduced. By way of illustration, if
the MCT Division Revenue in Year One equals or
exceeds $4,500,000, Seller shall receive for a month
during Year One the amount of $28,058.33 ($336,700
[divide] 12). By way of illustration, if the MCT
Division Revenue in Year One equals $2,250,000,
Seller shall receive for a month during Year One
the amount of $14,029.17 ($168,350 [divide] 12); and
(b) for Year Two, within
sixty (60) days following the end of Year Two such
number of Medialink Shares
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having a Value equal to Three Hundred Forty Thousand
Two Hundred ($340,200) Dollars and for Year Three,
within sixty (60) days following the end of Year
Three, such number of Medialink Shares having a
Value equal to Three Hundred and Forty-Three
Thousand Seven Hundred ($343,700) Dollars; provided,
that the MCT Division Revenue for each of such years
equals or exceeds Four Million Five Hundred Thousand
($4,500,000) Dollars; and further, provided that in
the event that in Year Two or Year Three the MCT
Division Revenue is less than Four Million Five
Hundred Thousand ($4,500,000) Dollars, then the cash
payable and the Medialink Shares payable above shall
be proportionally reduced. By way of illustration,
if the MCT Division Revenue in Year Two equals
$2,250,000, within sixty (60) days following the end
of Year Two, Seller shall receive such number of
Medialink Shares having a Value equal to $170,000;
and
(iii) up to an additional aggregate
payment of Five Million One Hundred Fifty-Seven
Thousand Three Hundred ($5,157,300) Dollars (the
"Contingent Consideration") at a rate not to exceed
One Million Eleven Thousand ($1,011,000) Dollars in
Year One, One Million Twenty-One Thousand Seven
Hundred ($1,021,700) Dollars in Year Two, One
Million Thirty-Two Thousand and Two Hundred
($1,032,200) Dollars in Year Three, One Million
Forty-Two Thousand ($1,042,000) Dollars in Year Four
and One Million Fifty Thousand and Four Hundred
($1,050,400) Dollars in Year Five (each such payment
being hereafter referred to as the "Maximum
Payment"); provided, that the MCT Division Pre-Tax
Net Income exceeds the amounts for each of Year One
through Year Five determined as follows:
(1) Two Million ($2,000,000) Dollars in
Year One;
(2) Two Million Two Hundred and Fifty
Thousand ($2,250,000) Dollars in
Year Two;
(3) Two Million Five Hundred Thousand
($2,500,000) Dollars in Year Three;
(4) Two Million Five Hundred Thousand
($2,500,000) Dollars in Year Four;
and
(5) Two Million Five Hundred Thousand
($2,500,000) Dollars in Year Five.
Such amounts are collectively referred to herein as the "Target Amounts" and
individually as the "Target Amount".
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(b) In the event MCT Division does not
reach the Target Amount for Year One, the portion of the Contingent
Consideration to be paid by Purchaser to Seller shall be as follows:
(i) If the actual pre-tax net
income attained by the MCT Division ("Actual Pre-Tax
Net Income") is greater than or equal to $1,800,000
(a) an amount equal to the Actual Pre-Tax Net Income
for Year One divided by the Target Amount for such
year ("Target Amount Fraction") multiplied by (b)
the Maximum Payment for Year One multiplied by (c)
the Target Amount Fraction. By way of illustration,
if the MCT Division Pre-Tax Net Income in Year One
equals $1,800,000, Seller shall receive
$1,800,000/$2,000,000 X $1,011,000 X
$1,800,000/$2,000,000 or $818,910.
(ii) If Actual Pre-Tax Net Income
for Year One is less than $1,800,000 (a) an amount
equal to the Maximum Payment multiplied by (b) the
Target Amount Fraction multiplied by (c) .95 minus
the Penalty Adjustment Amount (as hereinafter
defined). The Penalty Adjustment Amount shall be
calculated by subtracting the Actual Pre-Tax Net
Income from the Target Amount and dividing the
result by two times the Target Amount. By way of
illustration, if the MCT Division Pre-Tax Net Income
in Year One equals $1,500,000, Seller shall receive
$1,011,000 X ($1,500,000/$2,000,000) X (.95-
($2,000,000- $1,500,000)/($2,000,000X2)) or
$625,556.
(c) In the event the MCT Division does not
reach the Target Amount for any year from Year Two to Year Five, the portion of
the Contingent Consideration to be paid by Medialink to Seller shall be (a) an
amount equal to the Target Amount Fraction multiplied by (b) the Maximum
Payment multiplied by (c) the Target Amount Fraction. By way of illustration,
if the MCT Division Pre-Tax Net Income in Year Two equals $2,000,000, Seller
shall receive $2,000,000/$2,250,000 X $1,021,700 X $2,000,000/$2,250,000 or
$807,269.
(d) In no event shall the Seller receive
under Section 4.1 (a)(iii), (b) or (c) hereof an amount greater than the
Maximum Payment for each of Year One through Year Five.
(e) The Contingent Consideration shall be
paid by Medialink to Seller eighty (80%) percent in a bank cashier check or by
wire transfer and twenty (20%) percent in Medialink Shares, the amount of which
shall be determined based on the definition of Value set forth in Section 1(d)
hereof, not later than sixty (60) days following the delivery to Seller of
Purchaser's financial statements for Year One to Year Five, which delivery
shall be no later than ninety (90) days following the end of each Year, as the
case may be (the "Target Payment Date"). For purposes of reviewing Purchaser's
calculation of the MCT Division Pre-Tax Net
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Income, Medialink shall permit Seller or its authorized agents at the election
of Seller, after reasonable prior written notice, to have access during normal
business hours to Purchaser's books solely as they relate to the MCT Division
Pre-Tax Net Income. If within such sixty (60) days following such review Seller
and Purchaser shall agree on the calculation of the MCT Division Pre-Tax Net
Income, then the determination of Seller and Purchaser shall be final, binding
and conclusive upon the parties hereto. If within sixty (60) days following
such review, Seller shall disagree as to the calculation of the MCT Division
Pre-Tax Net Income, then Seller shall provide prompt notice thereof to
Purchaser within such sixty (60) day period and Ernst & Young (the "Selected
Firm") shall then be authorized to audit the MCT Division Pre-Tax Net Income
and such audit shall be completed within 60 days. The audit by the Selected
Firm shall be final, binding and conclusive upon the parties hereto. The cost
of the Selected Firm's audit of the MCT Division Pre-Tax Net Income shall be
borne by the Seller in the event the Selected Firm determines that the MCT
Division Pre-Tax Net Income is equal to or less than the Purchaser's
calculation thereof or by Purchaser in the event such audit determines that the
MCT Division Pre-Tax Net Income is greater than the Purchaser's calculation
thereof.
4.2. Allocation of Purchase Price. The parties agree
that the Purchase Price shall be allocated as specified in Exhibit D annexed
hereto and made a part hereof except that the allocations for goodwill of the
Business and Seller's customer list shall be mutually agreed to by Seller and
Purchaser within thirty (30) days from the Closing Date. The parties agree to
report this transaction and the allocations for income tax purposes in a manner
consistent with this Agreement. Purchaser and Seller each agrees to file
Internal Revenue Service Form 8594, and all Federal, state, local and foreign
Tax Returns, in accordance with the allocation schedule. Purchaser and Seller
each agrees to provide the other promptly with any other information required
to complete Form 8594.
4.3. Reliance on the Non-Compete Agreement. Seller
and Shareholder hereby acknowledge that Purchaser would not have entered into
this Agreement but for the execution by each of them of the Non-Compete
Agreement. The terms of the Non-Compete Agreement are incorporated herein by
reference and made a part hereof.
ARTICLE V
Section 5. Representations and Warranties by Seller and
Shareholder. Seller and Shareholder jointly and severally represent and warrant
to Purchaser as set forth below:
5.1. Organization, Existence and Authority of
Seller. Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York and has all requisite
corporate power and authority to carry on its operations as now being conducted
and to execute, deliver and perform this Agreement and the other agreements and
instruments to be executed and delivered
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by Seller pursuant hereto and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement by Seller and
Shareholder does not, and the consummation of the transactions contemplated
hereby will not, violate any provisions of (a) Seller's Certificate of
Incorporation or By-Laws or (b) any law or regulation applicable to Seller or
Shareholder, the Business or the Acquired Assets or (c) the provisions of any
agreement, mortgage, lease, instrument, order, arbitration award, judgment or
decree to which Seller or Shareholder is a party or by which Seller or
Shareholder or any of the Acquired Assets is bound or affected.
5.2. Power and Authority. Seller has the corporate
power and corporate authority to execute, deliver and perform this Agreement
and the other agreements and instruments to be executed and delivered by Seller
pursuant hereto, and Seller has taken all action required by law or otherwise,
including, but not limited to, approval by its Board of Directors and its
shareholders, to authorize such execution, delivery and performance. This
Agreement has been duly executed and delivered by Seller and Shareholder and
constitutes, and such other agreements and instruments when duly executed and
delivered by Seller and Shareholder will constitute, legal, valid and binding
obligations enforceable in accordance with their respective terms, except that
(a) such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or hereafter
in effect, relating to or limiting creditors' rights generally and (b) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. The execution, delivery
and performance by Seller and Shareholder of this Agreement and such other
agreements and instruments and its consummation of the transactions
contemplated hereby and thereby will not violate, conflict with or result in
any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or result in the creation of a
lien on any of the Acquired Assets under, any agreement by which Seller or the
Shareholder or any of the Acquired Assets may be bound or affected.
5.3. Consents. No consent, filing or approval of any
Federal, state or local governmental agency or department or any other person
not a party to this Agreement is required or necessary in connection with the
execution, delivery and performance of this Agreement or to consummate the
transactions contemplated hereby, excluding from the foregoing such consents,
filings or approvals the failure of which to secure would not have a material
adverse effect on the Business ("Material Adverse Effect") and would not have a
Material Adverse Effect on the ability of Seller or Shareholder to consummate
the transactions contemplated by this Agreement.
5.4. Title to and Condition of Acquired Assets.
Seller is, and on the Closing Date will be, the owner of the Acquired Assets
free and clear of all liens, encumbrances, claims, security interests and
charges ("Liens") of any kind whatsoever, except for those Liens disclosed on
Schedule 5.4(a) attached hereto, all of which liens will be released and fully
discharged of record on the Closing Date. Seller is, and on the Closing Date
will be, the owner of all right, title and interest in and to its trademarks
free and clear of all Liens. The Inventory is of good and
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merchantable quality and is of quality, quantity and condition that is usable
or saleable in the ordinary course of business. No affiliate of Seller provides
any goods or services which are used in or necessary for the operation of the
Business or the ownership or use of the Acquired Assets. The Acquired Assets
and the services set forth on Schedule 5.4(b) are all of the assets tangible or
intangible currently used, or used in the Business since Seller's inception
except for assets of de minimis value or utility in the operation of the
Business.
5.5. Compliance with Agreements. Schedules 5.5 and
7.6 contain lists of all written and oral contracts, agreements and commitments
used in or relating to the Business or any of the Acquired Assets. True and
complete copies of all such written contracts and other agreements have been
delivered to Purchaser prior to the execution of this Agreement. Seller, and to
the best of Seller's knowledge, each such other party to each such contract and
agreement, has complied in all material respects with the provisions of each
such contract and other agreement and is not, and at the time of the Closing
will not be, in default under any of them nor in breach of any obligations
thereunder. Such contracts and other agreements are on the date hereof and will
be on the Closing Date valid, binding and in full force and effect and
enforceable in accordance with its terms.
5.6. Taxes. Seller has filed or will file when due
all Federal, state and local tax returns required by law and shall pay and
remit any and all Federal, state and municipal income, Federal and state
withholding, FICA, FUTA, state unemployment taxes, state and municipal sales
and use taxes, license fees and other taxes, fees or charges ("Taxes") levied
or imposed upon Seller or the Acquired Assets as the result of the ownership
and use of the Acquired Assets or the operation of the Business that are
payable or have accrued on or prior to the Closing Date. Seller has not
incurred any tax liability, including interest, penalties or assessments, which
may result in the imposition of any lien, charge, security interest or any
other encumbrance on the Acquired Assets other than liens for Taxes not yet due
and payable or that are being contested in good faith.
5.7. Litigation or Disputes. Except as set forth in
Schedule 5.7, there is no action at law or in equity, governmental proceeding,
arbitration, claim, suit, administrative hearing, investigation or other
dispute, litigation, or proceeding pending, or to the best of Seller's
knowledge threatened, against Seller relating to the Business or any of the
Acquired Assets or which challenges the validity or enforceability of this
Agreement. Seller is not in default with respect to any judgment, order, writ,
injunction or decree of any court or administrative body or in violation of any
statute, ordinance or regulation relating to the Acquired Assets. There is no
judgment, injunction, award or order binding upon Seller to which Seller is a
party relating to the Business or any of the Acquired Assets. Notwithstanding
the disclosure of any action set forth on Schedule 5.7, Seller and Shareholder
each indemnify Purchaser under Section 11 hereof for all actions, suits,
litigation or disputes, whether or not pending, based on such matters that
occurred prior to the Closing Date.
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5.8. Financial Information. Seller has delivered to
Purchaser audited balance sheets of Seller at December 31, 1995 and 1996 and
the related income statements and statements of shareholders' equity and cash
flows for the years then ended and interim audited financial statements for the
four (4) month period ended April 30, 1997 (collectively, "Financial Data").
The Financial Data has been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
("GAAP"), is true and correct in all material respects and was prepared from
the books and records of Seller, and except as set forth on Schedule 5.8,
fairly presents in all material respects the assets and liabilities of the
Business at the dates specified and the results of operations, shareholders'
equity and cash flows for the years then ended. The Financial Data accurately
reflect and record, in all material respects, insofar as required in accordance
with GAAP, all of the assets used in or held for use in the Business, all
transactions between Seller and any affiliates and related parties and all
expenses of or relating to the Business. Except as disclosed in the notes to
the Financial Data, no material revenues or expenses of the Business are
derived from or funded by affiliates of Seller or Shareholder.
5.9. Trademarks, Licenses, Etc. Schedule 2(b) sets
forth a list of all registered trademarks, patents, copyrights and applications
for use in the Business since Seller's inception including the record owner,
registration or application number, jurisdiction, application or registration
date and expiration date. Since Seller's inception, no claim has been asserted
or, to the best knowledge of Seller, threatened against Seller or any affiliate
of Seller to the effect that the operation of the Business or the use of the
Acquired Assets infringes upon or conflicts with the rights of any person, and
no claim has been asserted that any person infringes any of the Acquired
Intellectual Property. Seller owns free and clear of any rights or claims of
others the rights to use all trademarks, service marks, copyrights and
registrations thereof and applications therefor and all trade names, licenses,
franchises, permits, processes, trade secrets, inventions and royalties, and
rights with respect thereto, and all technical know-how, customer lists,
research and development projects and data and non-competition covenants
accruing to the benefit of Seller used in, held for use in or under development
for use in or necessary for the conduct of the Business as now conducted and
conducted since Seller's inception (collectively, "Business Rights") without
any conflict or infringement with the rights of others, including officers,
directors or shareholders of Seller, and Seller has not received notice of any
claim or assertion that any of the Acquired Assets or Business Rights infringe
or conflict with the rights of others, and, to the best of Seller's knowledge,
there is no infringement or violation by any other person of the Business
Rights.
5.10. No Material Adverse Change. Since December 31,
1996:
(a) there has been no material adverse
change in the Business or results of operations or financial condition of the
Business;
(b) the Business has been operated in the
ordinary course, consistent with past practice;
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(c) no customers which in the aggregate
account for more than 10% of gross sales for 1996 have advised or threatened
Seller that they will discontinue or decrease materially the services provided
by Seller;
(d) no material supplier has advised
Seller, or to the best knowledge of Seller, threatened Seller that it will
discontinue its supply of products or materially increase prices or materially
change terms in any way adverse to Seller;
(e) there has been no event, occurrence or
condition which could reasonably be expected to result in a Material Adverse
Effect; and
(f) Seller has not taken any action or
failed to take any action nor has any event occurred which would, in any case,
have been restricted by Section 7.5 if it had taken place during the period
between the execution of this Agreement and the Closing Date.
5.11. Employees. Schedule 5.11(a) lists those
employees and consultants of Seller or any of its affiliates, that perform or
since Seller's inception performed services for the Business including name,
date of hire, position, salary and bonus eligibility (the "Eligible
Employees"). Schedule 5.11(b) lists all medical, dental, life or other
insurance coverage, disability benefit, vacation, perquisite and fringe benefit
plans, programs or policies in which any of the Eligible Employees participate.
5.12. Employee Plans.
(a) For purposes of this Agreement, the
term "Employee Plan" means each employee benefit plan as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and each other bonus, incentive compensation, deferred compensation,
severance or similar plan, policy or payroll practice providing compensation or
employee benefits maintained by Seller or to which Seller is a participating
employer or is obligated to contribute or has any legally enforceable liability
and under which any person presently employed by Seller as an employee or
consultant or formerly employed by Seller or its predecessors as an employee or
consultant of the Seller (a "Former Employee") participates or has accrued any
rights or under which Seller is liable in respect of a Eligible Employee or
Former Employee. The terms "Eligible Employee" and "Former Employees, will
include, where applicable, the beneficiaries, spouses and dependents of a
Eligible Employee or Former Employee. Schedule 5.12(a) lists or describes all
Employee Plans of Seller. Each Employee Plan has been maintained in all
respects in accordance with its terms and with applicable law. Except as set
forth on Schedule 5.12(a), each Employee Plan (including the related trust)
which is intended to qualify under Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), or comparable foreign law, does so qualify
and is exempt from taxation pursuant to Section 501(a) of the Code. None of the
Employee Plans listed on Schedule 5.12(a) are Multi-employer Plans (as defined
within the meaning of
13
Section 3(37) of ERISA) and Seller has no liability under or with respect to,
and does not contribute to, any Multi-employer Plan.
(b) As of the Closing Date, Seller will
have made or will make full payment by direct contributions of all amounts
which Seller is required to make under the terms of each Employee Plan in
respect of periods ending on or prior to the Closing Date.
(c) There is no accumulated funding
deficiency (as defined in Section 412 of the Code), waived funding deficiency
(as defined in Section 412 of the Code), or failure to make any payment on or
before a required installment due date (as defined in Section 412(m) of the
Code) with respect to any defined benefit plan (as defined in Section 3(35) of
ERISA) maintained by Seller or any member of the controlled group (within the
meaning of Sections 414(b), (c), (m), (n) and (o) of the Code ("Controlled
Group") of which Seller is a member, that is or could after the Closing Date
become a liability of Purchaser.
(d) Neither Seller nor any member of
Seller's Controlled Group has incurred or reasonably expects to incur any
liability under Title IV of ERISA (or comparable foreign law) arising in
connection with the termination of, or withdrawal from, any plan covered or
previously covered by Title IV of ERISA (or comparable foreign law) that is or
could become a liability of Purchaser after the Closing Date.
(e) No event has occurred that could
subject Seller or Purchaser to an excise tax under Section 4975 of the Code or
a civil penalty under Section 502(i) of ERISA or any comparable section under
any foreign law.
(f) There exists no condition or set of
circumstances which could result in the imposition of any liability under ERISA
(including, without limitation, Title I or Title IV thereof), the Code or other
applicable law with respect to the Employee Plans. From and after the Closing,
Seller shall, subject to Section 10 hereof, indemnify and hold Purchaser
harmless from, all liabilities and obligations arising at any time with respect
to Eligible Employees or Former Employees of Seller under Employee Plans (and
all related reporting requirements), and any other employee benefits mandated
by law, regardless of the applicable funding arrangements, attributable to
periods of employment by Seller of its employees prior to the Closing Date.
5.13. Compliance With Law. Seller has conducted and
currently conducts the Business and its operations and the Acquired Assets
comply with all material applicable Federal, state and local laws, ordinances,
regulations and requirements, and Seller possesses all approvals, consents,
licenses and permits required for the conduct of the Business. Seller has not
received any notice relating to changes in the requirements for such approvals,
consents, licenses or permits which might be deemed to affect such operations
nor has Seller received notice of any challenge, investigation or proceeding in
connection with any applicable regulation,
14
guidelines, ordinance or other law, order, regulation or requirement relating
to the Business and its operations or the Acquired Assets.
5.14. Obligation to Update Schedules. Seller shall
promptly disclose to Purchaser any information contained in its representations
and warranties or Schedules which, because of an event occurring after the date
hereof, is materially incomplete or is no longer materially correct as of all
times after the date hereof until the Closing Date or any material adverse
development affecting the results of operations of the Business; provided,
however, that none of such disclosures shall be deemed to modify, amend or
supplement the representations and warranties of Seller or the Schedules
attached hereto unless Purchaser shall have consented thereto in writing.
5.15. Representations and Warranties. Neither the
representations and warranties of Seller contained (i) herein or (ii) in any
certificate, Exhibit, Schedule or other writing required by the terms hereof to
be delivered by Seller (and so delivered) contained any untrue statement of a
material fact or, to the best of Seller's knowledge taken together, omit to
state a material fact necessary in order to make the statements herein and
therein not misleading in light of the circumstances in which made.
5.16. Absence of Unlawful Payments. Neither the
Seller nor any of its affiliates, or, to Seller's knowledge, any other person,
entity or corporation, acting on behalf of it has accepted, received or made
any unlawful contributions, payments, gifts or expenditures.
ARTICLE VI
Section 6. Representations and Warranties by Purchaser.
Purchaser represents and warrants to Seller and Shareholder as set forth below:
6.1. Organization, Existence and Authority of
Purchaser. Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its operations as now being
conducted, and to execute, deliver and perform this Agreement and the other
agreements and instruments to be executed and delivered by Purchaser pursuant
hereto and to consummate the transactions contemplated hereby and thereby,
except where any such failure would not individually or in the aggregate have a
material adverse effect on the business, operations or financial condition of
Purchaser taken as a whole. The execution and delivery of this Agreement by
Purchaser does not, and the consummation of the transactions contemplated
hereby will not, violate any provisions of (a) Purchaser's Certificate of
Incorporation or By-Laws or (b) any law or regulation applicable to Purchaser
or the provisions of any agreement, mortgage, lease, instrument, order,
arbitration award, judgment or decree to which Purchaser is a party or by which
Purchaser is bound.
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6.2. Power and Authority. Purchaser has the
corporate power and corporate authority to execute, deliver and perform this
Agreement and the other agreements and instruments to be executed and delivered
by Purchaser pursuant hereto, and Purchaser has taken all action required by
law or otherwise, including but not limited to approval by its Board of
Directors, to authorize such execution, delivery and performance. This
Agreement has been duly executed and delivered by Purchaser and constitutes,
and such other agreements and instruments when duly executed and delivered by
Purchaser will constitute, legal, valid and binding obligations enforceable
against it in accordance with their respective terms, except that (a) such
enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws, now or hereafter in effect,
relating to or limiting creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. The execution, delivery and performance
by Purchaser of this Agreement and such other agreements and instruments and
its consummation of the transactions contemplated hereby and thereby will not
violate, conflict with or result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, any agreement by which the Purchaser may be bound or affected.
6.3. Consents. No consent, filing or approval of any
Federal, state or local governmental agency or department or any other person
not a party to this Agreement is required or necessary in connection with the
execution, delivery and performance of this Agreement or to consummate the
transactions contemplated hereby, excluding from the foregoing such consents,
filings or approvals which would not have a Material Adverse Effect and would
not have a material adverse effect on the ability of Purchaser to consummate
the transactions contemplated by this Agreement.
6.4. Litigation. There is no action, claim or
proceeding pending or, to the best knowledge of Purchaser, threatened, against
Purchaser, by or before any court, governmental or regulatory authority or by
any third party which challenges the validity of this Agreement.
6.5. Representations and Warranties. Neither the
representations and warranties of Purchaser contained (i) herein or (ii) in any
certificate, Exhibit, Schedule or other writing required by the terms hereof to
be delivered by Purchaser (and so delivered) contained any untrue statement of
a material fact or, to the best of Purchaser's knowledge taken together, omit
to state a material fact necessary in order to make the statements herein and
therein not misleading in light of the circumstances in which made.
16
ARTICLE VII
Section 7. Additional Covenants and Agreements.
7.1. Bulk Sales Law. Compliance with the laws of any
jurisdiction relating to the bulk sale of assets, if applicable, is waived and
Seller and Shareholder shall indemnify and hold Purchaser harmless from any
liability or claim arising from a failure to comply with such laws. The
indemnification obligations hereunder shall be governed by the provisions of
Section 11 hereof.
7.2. Reasonable Access By Purchaser Pending Closing.
Seller will give to Purchaser, its counsel, accountants, financial advisers and
lenders, and other representatives, after reasonable notice, reasonable access,
during normal business hours, throughout the period prior to the Closing, to
all of the properties, books, contracts, commitments and records relating
exclusively to the Business, and shall fully cooperate with Purchaser and its
accountants in connection with the preparation of timely and complete audited
financial statements relating to the financial disclosure of the acquisition of
the Business in accordance with the rules under Regulation S-X and Form 8-K
promulgated under the Securities Exchange Act of 1934, as amended, and
applicable registration statement forms under the Securities Act of 1933, as
amended. Purchaser agrees that any information provided pursuant to this
Section will not be used for any purpose other than in connection with the
transactions contemplated by this Agreement, will not be revealed to third
parties but will be kept strictly confidential and will be returned, together
with all copies of such information, to Seller if, for any reason, the Closing
does not take place.
7.3. Taxes. Seller and Shareholder shall be liable
for and shall indemnify and hold Purchaser harmless from and against all Taxes
with respect to the Business and the Acquired Assets for all periods up to the
Closing Date, including all penalties and interest relating thereto, and shall
be responsible for filing all Tax Returns and responding to all audits with
respect thereto. Purchaser shall be liable for all Taxes with respect to the
Acquired Assets for all periods from and after the Closing Date and shall be
responsible for filing all Tax Returns and responding to all audits with
respect thereto. The indemnification obligations hereunder shall be governed by
the provisions of Section 11 hereof.
Each party shall deliver to the other such
information and other data relating to Tax returns and Taxes with respect to
the Business and the Acquired Assets and shall make available such of its
employees as the other party may reasonably request, including providing the
information and other data customarily required, to cause the completion and
filing of all Tax Returns for which it has responsibility or liability under
this Agreement or to respond to audits by any taxing authorities with respect
to any Tax Returns or taxable periods for which it has any responsibility or
liability under this Agreement or to otherwise enable it (or any of its
affiliates) to satisfy its reasonable accounting or Tax requirements.
17
For purposes of this Agreement, "Taxes"
shall mean all taxes, charges, fees, levies or other assessments, including,
without limitation, income, excise, property, real estate, sales, purchase,
use, value added, payroll (including required withholdings), compensation and
franchise taxes imposed by any governmental entity with respect to the
Business, the Seller or any of the Acquired Assets and any interest, penalties
or additions payable in connection with such taxes, charges, fees, levies or
other assessments. For purposes of this Agreement, "Tax Returns" shall mean all
returns, declarations, reports, statements and other documents required to be
filed with any governmental entity in respect of any Tax.
7.4. Books and Records. Until the expiration of the
applicable statutory period of limitations, or for such longer period if such
statutory period is extended, each of the parties hereto will to the extent
necessary in connection with any tax or other matters relating to the Business
(i) retain and, as each may reasonably request, permit the other and their
agents to inspect and copy, all books and records relating to the Business and
provide such information from such books and records as may be reasonably
requested and (ii) furnish to the other party the information necessary to file
required returns with respect to Taxes for which such party is responsible
under this Agreement.
7.5. Conduct of Business Pending the Closing. From
the date hereof until the Closing Date, Seller shall conduct the Business only
in the ordinary course and consistent with past practice and will:
(a) preserve intact the Acquired Assets and
its current business operations and properties;
(b) take no action or fail to take such
action the consequence of which will cause a breach of or default in any
representation, warranty or covenant in this Agreement or in any contract,
agreement, commitment or obligation to which it is a party or by which it may
be bound;
(c) keep at all times full and complete
books and records, both consistently and in accordance with GAAP;
(d) use its best efforts to preserve the
form, structure and goodwill of its business organization in tact and preserve
its relationship with suppliers, customers and others having business relations
with it;
(e) not enter into any agreements including
any with suppliers or brokers except any which are terminable for not more than
30 days notice without payment of any penalty;
(f) not change any salary, wage, bonus or
severance terms with Eligible Employees or any of the terms of any consulting
agreements relating to the Business except as described on Schedule 5.11
attached hereto; and
18
(g) not sell, transfer or otherwise dispose
of any of the Acquired Assets.
7.6. Employees. Purchaser shall employ the Eligible
Employees. Subject to the following sentence, Purchaser shall be responsible
for all salary, benefits and other obligations with respect to any Eligible
Employees for periods from and after their employment with Purchaser. Seller
and Shareholder shall be responsible for and shall indemnify and hold Purchaser
harmless from and against all obligations and liabilities with respect to
Eligible Employees for the period prior to the Closing Date. The
indemnification obligations hereunder shall be governed by the provisions of
Section 11 hereof.
7.7. Confidentiality. From and after the Closing
Date, Seller and Shareholder will treat and hold as confidential any
information concerning the Business which is either non-public, confidential or
proprietary in nature, including analyses, compilations, studies or other
documents prepared by Seller, Shareholder and their affiliates or any of their
agents or employees ("Confidential Information"), refrain from using any of the
Confidential Information and deliver promptly to Purchaser or destroy, at the
request and option of Purchaser, all tangible embodiments (and all copies) of
Confidential Information which are in their possession. In the event that
Seller or Shareholder is required by legal proceeding, interrogatory, subpoena,
civil investigative demand or similar process to disclose any Confidential
Information, Seller or Shareholder will notify Purchaser promptly of the
request so that Purchaser may at its expense seek an appropriate protective
order or waive compliance with the provisions hereof.
7.8. Corporate Name. Promptly after the Closing
Date, Seller shall wind up its business as of the Closing Date and shall pay
all of its outstanding obligations as soon as is reasonably practicable after
the Closing Date. For a period of ninety (90) days from the Closing Date,
Seller shall be entitled to use the name "Corporate TV". Promptly thereafter
Seller and Shareholder hereby agree to deliver to Purchaser an executed
certificate of amendment to Seller's certificate of incorporation whereby it
shall change its name to a name dissimilar to "Corporate TV".
ARTICLE VIII
Section 8. Conditions to Closing.
8.1. Conditions to Purchaser's Obligations. All the
obligations of Purchaser under this Agreement are subject to the fulfillment,
prior to or at the Closing, of each of the following conditions, any or all of
which (other than the condition set forth in clause (d) below) Purchaser may
waive in writing:
19
(a) Seller and Shareholder shall have
performed in all material respects all of their obligations under this
Agreement required to be performed at or before the Closing, and there shall
have been delivered to Purchaser a certificate of the Shareholder and an
officer of Seller, dated the Closing Date, to such effect;
(b) The representations and warranties of
Seller and Shareholder contained in Section 5 of this Agreement shall be true
and correct in all material respects as of the date hereof and as of the
Closing Date with the same force and effect as though such representations and
warranties had been made as of the Closing Date, and there shall have been
delivered to Purchaser a certificate of an executive officer of Seller and
Shareholder, dated the Closing Date, to such effect;
(c) No action or proceeding to enjoin any
transaction contemplated by this Agreement shall have been instituted, and no
injunction or restraining order in any action or proceeding against any such
transaction shall then be in effect;
(d) Seller shall have delivered to
Purchaser documents in form and substance reasonably satisfactory to Purchaser
demonstrating the release of all Liens on the Acquired Assets;
(e) No change that has had a Material
Adverse Effect on the Business shall have occurred and shall not be threatened
in any way as a result of any event or occurrence; and
(f) Purchaser shall enter into an
employment agreement with Xxxxxx Xxxxx in form and substance satisfactory to
Purchaser in its sole discretion.
8.2. Conditions to Seller's Obligations. All the
obligations of Seller under this Agreement are subject to the fulfillment,
prior to or at the Closing, of each of the following conditions, any or all of
which (other than the condition set forth in clause (d) below, Seller may waive
in writing:
(a) Purchaser shall have performed in all
material respects all of its obligations under this Agreement required to be
performed at or before the Closing, and there shall have been delivered to
Seller a certificate of an executive officer of Purchaser, dated the Closing
Date, to such effect;
(b) The representations and warranties of
Purchaser contained in Section 6 of this Agreement shall be true and correct in
all material respects as of the date hereof and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made as of the Closing Date, and there shall have been delivered to Seller a
certificate of an officer of Purchaser, dated the Closing Date, to such effect;
and
20
(c) No action or proceeding to enjoin any
transaction contemplated by this Agreement shall have been instituted, and no
injunction or restraining order in any action or proceeding against any such
transaction shall then be in effect.
ARTICLE IX
Section 9. Closing Documents to be Delivered by Seller and
Shareholder. On the Closing Date and as a further condition to the obligations
of Purchaser and Seller to close hereunder, Seller and Shareholder shall
deliver to Purchaser:
(a) A xxxx of sale in substantially the
form of Exhibit H hereto, conveying to Purchaser good and marketable title to
all of the tangible assets to be acquired by Purchaser hereunder;
(b) One or more assignments in
substantially the form of Exhibit I hereto, with all consents necessary for
Purchaser's unencumbered enjoyment of the Acquired Assets to be transferred
hereunder, assigning to Purchaser all of the Acquired Agreements and all other
intangible rights to be assigned to Purchaser hereunder;
(c) Assignments in substantially the form
of Exhibit J hereto, assigning to Purchaser all of Seller's right, title and
interest in and to Seller's trademarks, Business Rights and Seller's other
intangible assets included within the Acquired Assets;
(d) The originals of the Acquired
Agreements to be assigned to Purchaser hereunder;
(e) Certificates of the appropriate
officers of the Seller, dated as of the Closing Date, certifying as to the
fulfillment of the conditions set forth in Section 8.1;
(f) The Non-Compete Agreement executed by
Seller and Shareholder;
(g) The Confidentiality Agreement executed
by Seller and Shareholder;
(h) The employment agreement executed by
Shareholder with Purchaser in the form of Exhibit C attached hereto (the
"Employment Agreement");
(i) The loan agreement and security
agreement executed by Seller in connection with a bridge loan to be made by
Purchaser to Seller
21
in the amount of $300,000 (the "Bridge Loan") in the form of Exhibit E attached
hereto (the "Loan Agreement and Security Agreement");
(j) A non-negotiable promissory note and
guarantee executed by Seller and Shareholder, respectively, in connection with
the Bridge Loan in the form of Exhibits F and G attached hereto;
(k) An opinion of Seller's counsel, in a
form reasonably satisfactory to Purchaser's counsel, with respect to the
matters described in Sections 5.1, 5.2, 5.3, 5.7 and 5.13 hereof; and
(l) An assignment, assumption and amendment
agreement, dated the Closing Date, with Xxxxx Xxxxx; and
(m) Any other documents or instruments
which may reasonably be required to give the transactions contemplated herein
full force and effect.
Unless otherwise provided in this Agreement, all
documents and instruments delivered hereunder shall be dated the Closing Date
and shall be reasonably satisfactory as to form and content to each party and
its respective counsel.
ARTICLE X
Section 10. Closing Documents to be Delivered by Purchaser.
On the Closing Date and as a further condition to the obligations of Purchaser
and Seller to close hereunder Purchaser shall deliver to Seller:
(a) The Purchase Price set forth in Section
4 hereof in certified funds or by means of wire transfer;
(b) One or more agreements of assumption
whereby Purchaser assumes all of Seller's and Shareholder's liabilities and
obligations to be assumed by Purchaser hereunder;
(c) Certificates of the appropriate
officers of the Purchaser, dated as of the Closing Date, certifying as to the
fulfillment of the conditions set forth in Section 8.2;
(d) The Non-Compete Agreement;
(e) The Confidentiality Agreement;
(f) The Loan Agreement and Security
Agreement;
22
(g) The Employment Agreement executed by
Purchaser;
(h) An opinion of Purchaser's counsel, in a
form reasonably satisfactory to Seller's counsel, with respect to the matters
described in Sections 6.1, 6.2, 6.3 and 6.4 hereof;
(i) A key-man life insurance policy on the
life of Xxxxxxx Xxxxxx. Purchaser shall have the right to purchase ordinary or
term life insurance on the life of Xxxxxxx Xxxxxx. Any such life insurance and
any policy evidencing such insurance shall be owned by, and shall be for the
benefit of, the Purchaser. Xx. Xxxxxx shall cooperate in all respects in the
securing of such insurance; and
(j) Any other documents or instruments
which may reasonably be required to give the transactions contemplated herein
full force and effect.
Unless otherwise provided in this Agreement, all
documents and instruments delivered hereunder shall be dated the Closing Date
and shall be reasonably satisfactory as to form and content to each party and
its respective counsel.
ARTICLE XI
Section 11. Indemnification; Survival.
11.1. Survival; Remedy for Breach. The covenants,
agreements, representations and warranties of the parties hereto contained
herein or in any certificate, Schedule or other writing attached hereto, or
required by the terms hereof to be delivered (and so delivered), by the parties
on the Closing Date shall survive the Closing Date for a period equal to three
(3) years, except for the representations in Sections 5.4, 5.6, 5.12 and 7.3
which shall survive until the expiration of the statute of limitations and any
waivers or extensions thereof (the period of survival shall be referred to as
the "Survival Period"). No action or proceeding may be brought with respect to
any of the representations and warranties unless written notice of the claimed
misrepresentation or breach of warranty shall have been delivered prior to the
expiration of the Survival Period.
11.2. Indemnification by Seller and Shareholder.
(a) Subject to the terms and conditions set
forth herein, Seller and Shareholder, jointly and severally, indemnify
Purchaser against and agree to hold it harmless from any and all damage, loss,
liability, expense (including, without limitation, reasonable attorneys' fees
and expenses in connection with any action, suit or proceeding brought against
or involving Purchaser) and cost (collectively, "Purchaser Indemnified
Amounts") incurred or suffered by Purchaser arising out of (i) any
misrepresentation or breach of warranty, or breach of any covenant or
23
agreement to be performed by Seller and Shareholder pursuant to this Agreement,
(ii) all Taxes with respect to the Business and the Acquired Assets for all
periods up to and including the Closing Date; (iii) the Retained Liabilities;
and (iv) except for the Assumed Liabilities, any and all damages, losses,
expenses, obligations, liabilities or deficiencies incurred or paid by
Purchaser as a result of a claim of any kind arising from or based upon the
operation, business or ownership of the Acquired Assets or the Business on or
prior to the Closing Date. The agreements and indemnities of Seller and
Shareholder contained herein shall be cumulative, except that Purchaser shall
not recover more than once for the same Purchaser Indemnified Amount.
(b) Purchaser agrees to give notice to
Seller and the Shareholder promptly after learning of the assertion of any
claim, or the commencement of any suit, action or proceeding, in respect of
which indemnity may be sought hereunder. The failure of Purchaser to give such
notice shall not affect Seller's and Shareholder's obligations unless Seller
and Shareholder are actually prejudiced in the defense of such claim, suit,
action or proceeding in which case such failure to provide such notice shall
constitute a waiver of Purchaser's rights hereunder in respect of the claim,
suit, action or proceeding with respect to which such notice was required to
have been given hereunder to the extent Seller and Shareholder have been
actually prejudiced by such late notice.
(c) Except as otherwise provided in Section
11.5, Seller and Shareholder shall not be liable under this Section 11.2 for
any settlement of any claim, litigation or proceeding effected without their
consent in respect of which indemnity may be sought hereunder.
(d) The amount required to be paid to
Purchaser by Seller and Shareholder for any Purchaser Indemnified Amounts
hereunder shall be an amount reduced by (i) the tax benefits available to
Purchaser and (ii) any amount received by Purchaser under any insurance
coverage or from any other party alleged to be responsible therefor. Such
amounts shall be paid not later than thirty (30) days after receipt by Seller
and Shareholder of written notice from Purchaser stating that such Purchaser
Indemnified Amounts have been incurred (and, in the case of claims of third
parties, paid) and the amount thereof and of the related indemnity payment;
provided, however, that any disputed amounts shall be due and payable within
thirty (30) days after such amounts are finally determined to be owing by
Seller and Shareholder to Purchaser.
11.3. Set-Off for Indemnified Amounts. Purchaser may
at any time, set off from the payments of cash or Medialink Shares due and
payable to Seller and Shareholder under this Agreement, and the payments under
the Non-Compete Agreement, any amount or amounts which Purchaser, in its sole
and absolute discretion, shall determine may be necessary to satisfy (i) any
Seller Indemnified Amount or (ii) any prospective, pending or threatened loss,
liability, expense or cost which may reasonably be expected to give rise to an
indemnity obligation of the Seller and Shareholder hereunder, including but not
limited to payments due under the Bridge Loan (collectively, a "Set-Off
Amount"). Any amounts so set off shall be
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delivered and paid into an interest-bearing escrow account to be established
pursuant to the terms of an escrow agreement, in substantially the form of
Exhibit K attached hereto (the "Escrow Agreement"). The terms of the Escrow
Agreement shall provide that Purchaser's counsel shall serve as escrow agent
thereunder (the "Escrow Agent"). Purchaser may exercise such right of set-off
against (i) all or a portion of the Medialink Shares and/or (ii) all or a
portion of the payments due and payable to Seller and Shareholder under this
Agreement and/or the Non-Compete Agreement, by giving written notice (the
"Set-Off Notice") of the exercise of such right of set-off to the Seller and
Shareholder, with a copy of such notice to be delivered to the Escrow Agent.
Such Set-Off Notice shall indicate that Purchaser has exercised its right of
set-off hereunder. Seller and Shareholder shall have the right, by written
notice, time being of the essence, within five (5) business days after receipt
of notice from Purchaser of their intention to seek to receive such Seller
Indemnified Amounts or Set-Off Amounts, to direct Purchaser or the Escrow Agent
to satisfy such Seller Indemnified Amount or Set-Off Amount from all or a
portion of either the Medialink Shares, or the payments under this Agreement or
the Non-Compete Agreement. Nothing herein shall be deemed to impair, diminish
or restrict the Purchaser's indemnification rights or set-off rights.
11.4. Indemnification by Purchaser.
(a) Subject to the terms and conditions set
forth herein, Purchaser indemnifies Seller and Shareholder against and agrees
to hold them harmless from any and all damage, loss, liability, expense
(including, without limitation, reasonable attorneys' fees and expenses in
connection with any action, suit or proceeding brought against or involving
Seller and Shareholder) and cost (collectively, "Seller Indemnified Amounts"
and together with Purchaser Indemnified Amounts, the "Indemnified Amounts")
incurred or suffered by Seller and Shareholder arising out of (i) any
misrepresentation or breach of warranty, or breach of any covenant or agreement
to be performed by Purchaser pursuant to this Agreement; (ii) any Assumed
Liabilities; (iii) all Taxes with respect to the Business and the Acquired
Assets for all periods following the Closing Date; (iv) except as otherwise
expressly provided in this Agreement, any and all damages, losses, expenses,
obligations, liabilities or deficiencies incurred or paid by Seller and
Shareholder as a result of a claim of any kind arising from the operation,
business or ownership of the Acquired Assets or the Business after the Closing
Date. The agreements and indemnities of Purchaser contained herein shall be
cumulative, except that Purchaser shall not recover more than once for the same
Seller Indemnified Amount.
(b) Seller agrees to give notice to
Purchaser promptly after learning of the assertion of any claim, or the
commencement of any suit, action or proceeding, in respect of which indemnity
may be sought hereunder. The failure of Seller to give such notice shall not
affect Purchaser's obligations unless Purchaser is actually prejudiced in the
defense of such claim, suit, action or proceeding in which case such failure to
provide such notice shall constitute a waiver of Seller's and Shareholder's
rights hereunder in respect of the claim, suit, action or proceeding with
25
respect to which such notice was required to have been given hereunder to the
extent Purchaser has been actually prejudiced by such late notice.
(c) Except as otherwise provided in Section
11.4, Purchaser shall not be liable under this Section 11.4 for any settlement
of any claim, litigation or proceeding effected without its consent in respect
of which indemnity may be sought hereunder.
(d) The amount required to be paid to
Seller and Shareholder by Purchaser for any Seller Indemnified Amounts
hereunder shall be an amount reduced by (i) the tax benefits available to
Seller and Shareholder and (ii) any amount received by Seller under any
insurance coverage or from any other party alleged to be responsible therefor.
Such amounts shall be paid not later than thirty (30) days after receipt by
Purchaser of written notice from Seller stating that such Seller Indemnified
Amounts have been incurred and the amount thereof and of the related indemnity
payment; provided, however, that any disputed amounts shall be due and payable
within thirty (30) days after such amounts are finally determined to be owing
by Purchaser to Seller and Shareholder.
11.5. Conduct of Litigation. Each party indemnified
under the provisions of this Agreement, upon receipt of written notice of any
claim or the service of a summons or other initial legal process upon it in any
action instituted against it in respect of matters for which it is entitled to
indemnity under this Agreement, shall promptly give written notice of such
claim, or the commencement of such action, or threat thereof, to the party from
whom indemnity shall be sought hereunder. In the event such claim involves a
claim by a third party against the indemnified party, the indemnifying party
shall have ten (10) days after receipt of such notice to decide whether it will
undertake, conduct and control, through counsel of its own choosing and
reasonably acceptable to the indemnified party and at its own expense the
settlement or defense thereof, and if it shall so decide to undertake the
defense thereof, the indemnified party shall cooperate with it in connection
therewith, provided that the indemnified party may participate (subject to the
indemnifying party's control) in such settlement or defense through counsel
chosen by it, and provided further that the fees and expenses of such
indemnified party's counsel shall be borne by the indemnified party. If the
indemnifying party does not indicate or indicates that it will not undertake
the defense of such third party claim within the ten (10) day period above, the
indemnified party shall undertake and control the defense thereof and the
indemnifying party shall be liable for all fees and expenses of such defense,
including the fees and expenses of such indemnified party's counsel. The
indemnifying party may, without the consent of the indemnified party, settle or
compromise or consent to the entry of any judgment in any action involving only
the payment of money and which does not involve any undertaking which would
affect the operation of the Business or the use of the Acquired Assets by the
Purchaser after the Closing Date, which includes as an unconditional term
thereof the delivery by the claimant or plaintiff to the indemnified party of a
written release from all liability in respect of such action, which written
release shall be reasonably satisfactory in form and substance to counsel for
the indemnified party. The indemnifying party shall not, without the written
26
consent of the indemnified party, settle or compromise any action involving
relief other than the payment of money in any manner that, in the reasonable
judgment of the indemnified party, would adversely affect the indemnified
party; provided, however, that if the indemnified party shall fail or refuse to
consent to a settlement, compromise or judgment proposed by the indemnifying
party and approved by the third person in any such action and a judgment
thereafter shall be entered or a settlement or compromise thereafter shall be
effected on terms less favorable in the aggregate to the indemnified party than
the settlement, compromise or judgment proposed by the indemnifying party, then
notwithstanding any other provision hereof the indemnifying party shall have no
liability hereunder with respect to any losses and damages in excess of those
that were provided for in the settlement, compromise or judgment proposed by
the indemnifying party or any costs or expenses related to such claim arising
after the date such settlement, compromise or judgment was so proposed. If the
indemnifying party does not notify the indemnified party within ten (10) days
after the receipt of the indemnified party's notice of a claim of indemnity
hereunder that it elects to undertake the defense thereof, the indemnified
party shall have the right to contest, settle or compromise the claim but shall
not thereby waive any right to indemnity therefor pursuant to this Agreement.
So long as the indemnifying party is contesting any such claim in good faith,
the indemnified party shall not pay or settle any such claim, unless such
settlement includes as an unconditional term thereof the delivery by the
claimant or plaintiff and by the indemnified party to the indemnifying party of
duly executed written releases of the indemnifying party from all liability in
respect of such claim, which written releases shall be reasonably satisfactory
in form and substance to counsel for the indemnifying party. The indemnified
party shall cooperate fully in all aspects of any investigation, defense,
pre-trial activities, trial, compromise, settlement or discharge of any claim
in respect of which indemnity is sought pursuant to Article XI.
11.6. Limitations on Indemnification. The Seller and
Shareholder shall be obligated to indemnify the Purchaser for the applicable
Indemnified Amounts hereunder up to a maximum aggregate amount equal to the
Purchase Price and Non-Compete Payment received by Seller and Shareholder.
11.7. Insurance. Each of the Purchaser and Seller
shall use their best efforts to collect the insurance proceeds pursuant to
Subsections 11.2(d) and 11.4(d) hereof. If the Purchaser or Seller, as the case
may be, receives an amount under insurance coverage, an amount is paid on its
behalf under insurance coverage, or from any other party with respect to the
Indemnified Amounts at any time subsequent to any indemnification provided by
Seller and Shareholder or Purchaser pursuant to Sections 11.2 and 11.3 hereof,
then Purchaser or Seller and Shareholder, as the case may be, shall promptly
reimburse the other for any payment made or expense incurred by the
indemnifying party in connection with providing such indemnification up to such
amount received by the indemnified party.
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ARTICLE XII
Section 12. Notices. Any notices or other communications
required or permitted hereunder shall be sufficiently given if sent by
registered or certified mail or overnight special delivery, postage prepaid,
addressed as follows:
To Seller:
Corporate TV Group, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxxx Xxxxxx, President
To Shareholder:
Xx. Xxxxxxx Xxxxxx
Corporate TV Group, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Copy to:
Xxxxxxxxxxx Xxxxxxxx Xxxx Most & Xxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx X. Most, Esq.
To Purchaser:
Medialink CTV
Division of Medialink Worldwide Incorporated
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxxxx Xxxxxxxxx, President
Copy to:
Tashlik, Xxxxxxxx & Xxxxxxx P.C.
000 Xxxxxxxx Xxxxxxxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxxxxx Xx. Tashlik, Esq.
or such other addresses as shall be furnished by like notice by such party. Any
such notice or communication shall be effective two days after it is sent.
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ARTICLE XIII
Section 13. Miscellaneous.
13.1. Nondisclosure of Agreement. Purchaser and
Seller shall make no public disclosure regarding the negotiations between the
parties, the existence of this Agreement or the specific financial and other
terms and conditions of this Agreement, unless such disclosure is agreed upon
by prior written approval of the parties hereto or unless required by law (in
which case the disclosing party shall, if practicable, prior to disclosure,
advise and consult with the other party and its counsel concerning such
disclosure), except by Seller to its brokers, employees, suppliers, customers,
broadcasters and other third parties in the ordinary course to advise them of
the transaction. No press release regarding this Agreement shall be made by
either party until such press release is approved in writing by both parties.
13.2. Brokers. Seller and Purchaser each represents
to the other that it has not dealt with any broker for this transaction and has
not employed any investment banker, broker, finder or intermediary in
connection with the transactions contemplated hereby who might be entitled to a
fee or a commission upon the consummation of the transactions contemplated
hereby. Purchaser and Seller agree to indemnify and hold each other harmless
from and against any loss, damage, liability, cost or expense (including
reasonable attorneys' fees) suffered or incurred as a result of any breach of
the foregoing representations.
13.3. Expenses. All legal, accounting and other
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses. Notwithstanding the foregoing, except for the fees of the Selected
Firm pursuant to Section 4.1(d) hereof, all audit expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid in accordance with the terms of that certain agreement between
Purchaser and Xxxxxxxxx Xxxxx Xxxxxxx & Company, P.C. dated April 11, 1997.
Purchaser shall be responsible for and shall pay the costs of any transfer
taxes as a result of the transfer of the Acquired Assets.
13.4. Successors and Assigns. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement may be assigned by
either party only with the prior written consent of the other party except that
Purchaser (or any affiliate of Purchaser) may assign, delegate or otherwise
transfer any or all of its rights or obligations under this Agreement to any of
its affiliates (including without limitation assignment of Purchaser's rights
to acquire the Acquired Assets to a subsidiary incorporated in the United
States or to any successor in interest to the Business by purchase of stock or
assets or by merger or consolidation, provided that such successor expressly in
writing assumes all obligations and liabilities of Purchaser hereunder.
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13.5. Entire Agreement; Amendment. This Agreement
and the Confidentiality Agreement embody the entire agreement of the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect thereto. This
Agreement may be amended, and any provision hereof waived, but only in a
writing signed by each of the parties hereto.
13.6. Counterparts. This Agreement may be executed
in counterparts, all of which shall together constitute one and the same
instrument. All documents and signatures required hereunder may be delivered or
exchanged by telecopy and telecopied signatures shall be effective as originals
thereof.
13.7. Agreement to Take Necessary and Desirable
Actions. Seller, Shareholder and Purchaser each agree to use its best efforts
to execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be reasonably necessary or
desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
13.8. Headings. The headings of Articles and
Sections herein are inserted for convenience of reference only and shall be
ignored in the construction or interpretation hereof.
13.9. Governing Law. This Agreement shall be
governed by and interpreted and enforced under the laws of the State of New
York applicable to contracts made and to be performed therein between residents
of New York. Except in respect of any action commenced by a third party in
another jurisdiction, the parties hereto agree that any legal suit, action or
proceeding against them arising out of or relating to this Agreement shall be
brought exclusively in the United States Federal Courts or New York Supreme
Court, in the State of New York. The parties hereto hereby accept the
jurisdictions of such courts for the purpose of any such action or proceeding,
and agree that venue for any action or proceeding brought in the State of New
York shall lie in the Southern District of New York or Supreme Court, New York
or Nassau County, as the case may be. Each of the parties hereto hereby
irrevocably consents to the service of process in any action or proceeding in
such courts by the mailing thereof by United States registered or certified
mail postage prepaid to such party at its address set forth herein.
13.10. Consents. Seller and Purchaser shall each, on
and prior to the Closing Date, use its best efforts to obtain from each person,
firm, association, corporation and governmental authority all consents and
approvals which are necessary to authorize and validate the sale, transfer and
assignment of the Acquired Assets to be assigned to Purchaser, and otherwise to
effectuate the purposes of this Agreement.
13.11. No Implied Waiver. No failure or delay on the
part of the parties hereto to exercise any right, power or privilege hereunder
or under any
30
instrument executed pursuant hereto shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. All rights and remedies granted herein shall be in addition to
other rights and remedies to which the parties may be entitled at law or in
equity.
IN WITNESS WHEREOF, this Agreement has been duly executed on
behalf of each of the parties hereto by their duly authorized officers as of
the day and year first above written.
MEDIALINK WORLDWIDE INCORPORATED
By: /s/ Xxxxxxxx Xxxxxxxxx
----------------------------------
Xxxxxxxx Xxxxxxxxx
Title: President
CORPORATE TV GROUP, INC.
By: /s/ Xxxxxxx Xxxxxx
----------------------------------
Xxxxxxx Xxxxxx
Title: President
/s/Xxxxxxx Xxxxxx
--------------------------------------
Xxxxxxx Xxxxxx, individually
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