Exhibit 2.1
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ASSET PURCHASE AGREEMENT
BY AND AMONG
STUDENT SPORTS, INC.,
A CALIFORNIA CORPORATION
("SELLER"),
STUDENT SPORTS INC.,
A DELAWARE CORPORATION
("BUYER"),
SILVERSTAR HOLDINGS, LTD.
("PARENT")
AND
THE SHAREHOLDERS OF SELLER
(THE "SHAREHOLDERS")
DATED AS OF SEPTEMBER 24, 2001
TABLE OF CONTENTS
Article I. Certain Definitions..............................................1
Article II. Sale and Purchase of Assets......................................6
2.1 Sale of Transferred Assets.......................................6
2.2 Method of Conveyance.............................................9
2.3 Assumed Obligations..............................................9
2.4 Excluded Obligations.............................................9
2.5 Closing Date.....................................................9
2.6 Purchase Price..................................................10
2.7 Payment Terms...................................................10
2.8 Allocation of Consideration.....................................10
2.9 Payment of Deferred Parent Shares...............................10
2.10 Earn-Out........................................................11
2.11 Litigation Proceeds.............................................13
Article III.Representations and Warranties..................................13
3.1 Seller and Shareholders.........................................13
3.2 Buyer and Parent................................................24
Article IV. Covenants.......................................................26
4.1 Obtaining Consents..............................................26
4.2 Further Assurances..............................................26
4.3 Payments Received...............................................26
4.4 Agreements Relating to Leased Real Property.....................27
4.5 Name Changes....................................................27
4.6 Covenant Not to Compete.........................................27
Article V. The Closing.....................................................28
5.1 Seller Deliveries...............................................28
5.2 Buyer Deliveries................................................29
Article VI. Survival of Representations and Warranties; Indemnification.....30
6.1 Survival of Representations and Warranties and Covenants........30
6.2 Indemnification by Seller and Shareholders......................30
6.3 Indemnification by Buyer........................................31
6.4 Limitations on Amount...........................................31
6.5 Defense of Claims...............................................32
6.6 Offset..........................................................33
Article VII.Brokerage.......................................................33
7.1 Finders and Brokers Fees........................................33
Article VIIIGeneral Provisions..............................................34
8.1 Sales and Transfer Taxes........................................34
8.2 No Third Party Beneficiaries....................................34
8.3 Expenses of the Parties.........................................34
8.4 Amendment and Waiver............................................34
8.5 Miscellaneous...................................................34
8.6 Binding Effect..................................................35
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8.7 Publicity.......................................................35
8.8 Complete Agreement..............................................35
8.9 Notices.........................................................35
8.10 Assignment......................................................36
8.11 Severability....................................................36
8.12 Choice of Law; Choice of Forum..................................36
8.13 Arbitration.....................................................36
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EXHIBITS AND SCHEDULES
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EXHIBITS
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Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Employment Agreement
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Trademark Assignment
Exhibit E Form of Domain Name Assignment
Exhibit F September 15 Balance Sheet
Exhibit G Form of Shareholder Representation Agreement
Exhibit H Form of Assignment and Assumption of Leases
SCHEDULES*
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Schedule 1 Seller Shareholders
Schedule 2.1(a) Personal Property
Schedule 2.1(c) Receivables
Schedule 2.1(f) Contracts
Schedule 2.1(k) Advertising Material
Schedule 2.1(m) Prepaid Expenses
Schedule 2.3 Assumed Agreements
Schedule 2.11 Litigation
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* Note: Certain Schedules are set forth in the Seller Disclosure Memorandum
(as defined herein) referred to herein and delivered contemporaneously
herewith.
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ASSET PURCHASE AGREEMENT
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ASSET PURCHASE AGREEMENT, dated as of September 24, 2001 (the "AGREEMENT"),
by and among Student Sports, Inc., a California corporation ("SELLER"), the
Shareholders (as defined below), Student Sports Inc., a Delaware corporation
("BUYER"), and Silverstar Holdings, Ltd., a Bermuda corporation ("PARENT").
WHEREAS, Seller is engaged in the business of providing information and
marketing services in the field of high school sports, and related activities;
WHEREAS, the Shareholders are the record and beneficial owners of an
aggregate of 300,000 shares of common stock, par value $.01 per share, of
Seller ("SELLER COMMON STOCK"), representing one hundred percent (100%) of the
issued and outstanding shares of Seller Common Stock;
WHEREAS, Parent is the record and beneficial owner of one hundred percent
(100%) of the issued and outstanding common stock, par value $.01 per share, of
Buyer ("BUYER COMMON STOCK"); and
WHEREAS, Buyer desires to acquire and assume from Seller, and Seller
desires to sell, transfer and assign to Buyer, Seller's business, including all
of the assets, properties and rights of Seller, as a going concern unencumbered
by any of the liabilities, debts and obligations of Seller, other than the
Assumed Obligations (hereinafter defined), and on the terms and subject to the
conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and promises
hereinafter contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS.
When used in this Agreement, the following capitalized terms shall have the
meanings specified in this Article I.
"ACCOUNTS PAYABLE" shall have the meaning given to such term in Section 2.3.
"ACQUISITION TRANSACTION" shall have the meaning given to such term in Section
4.6.
"ADDITIONAL AGREEMENTS" means the Registration Rights Agreement, the Assignment
and Assumption Agreement, the Trademark Assignment, the Domain Name Assignment,
the Employment Agreement and the Assignment and Assumption of Leases and any
other documents, certificates and agreements necessary to facilitate the
transfer of the Transferred Assets as contemplated by this Agreement.
"AFFILIATE" or "AFFILIATES" means, with respect to any Person, any other Person,
directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common
control with, such first mentioned Person. As used in this definition of
Affiliate, the term "CONTROL" (including "CONTROLLED BY" or "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, as trustee, by contract, or
otherwise.
"AGREEMENT" shall have the meaning given to such term in the Preamble.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means the Instrument of Transfer,
Assignment and Assumption Agreement (Transferred Assets and Assumed
Obligations), dated the Closing Date, in the form attached hereto as Exhibit A.
"ASSIGNMENT AND ASSUMPTION OF LEASES" means the Assignment and Assumption of
Leases, dated the Closing Date, in the form attached hereto as Exhibit H.
"ASSUMED AGREEMENTS" shall have the meaning given to such term in Section 2.3.
"ASSUMED OBLIGATIONS" shall have the meaning given to such term in Section 2.3.
"BUYER" shall have the meaning given to such term in the Preamble.
"BUYER COMMON STOCK" shall have the meaning given to such term in the Preamble.
"BUYER INDEMNITORS" shall have the meaning given to such term in Section 6.2.
"BUYER INDEMNITEE(S)" shall have the meaning given to such term in Section 6.2.
"CLAIM" or "CLAIMS" means any claim, demand, action, cause of action, suit,
enforcement action or proceeding, whether in law or in equity.
"CLOSING" shall have the meaning given to such term in Section 2.5 of this
Agreement.
"CLOSING DATE" shall have the meaning given to such term in Section 2.5 of this
Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSIDERATION ALLOCATION SCHEDULE" shall have the meaning given to such term in
Section 2.8.
"CONTRACTS" shall have the meaning given to such term in Section 2.1(f).
"DEFERRED PARENT SHARES" shall have the meaning given to such term in Section
2.6(b).
"DOMAIN NAME ASSIGNMENT" shall mean the domain name assignment of Seller in
favor of Buyer, to be dated the Closing Date, in the form annexed hereto as
Exhibit E.
"EARN-OUT" shall have the meaning given to such term in Section 2.6(d).
"EMPLOYEE BENEFIT PLAN(S)" shall have the meaning given to such term in Section
3.1(i).
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"EMPLOYMENT AGREEMENT" means the employment agreement, dated the Closing Date,
between Buyer and Xxxxxx Bark, in the form attached hereto as Exhibit B.
"ENVIRONMENTAL LAW" means any Law and any enforceable judicial or administrative
interpretation thereof, including any judicial or administrative order, consent,
decree or judgment, relating to pollution or protection of the environment or
natural resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
(i) any petroleum, petroleum products, by-products or breakdown products,
radioactive materials, asbestos-containing materials or polychlorinated
biphenyls or (ii) any chemical, material or substance defined or regulated as
toxic or hazardous or as a pollutant or contaminant or waste under any such Law,
as in effect as of the date hereof.
"ENVIRONMENTAL PERMIT" means any permit, approval, identification number,
license or other authorization required under or issued pursuant to any
applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"EXCLUDED OBLIGATIONS" means those obligations of Seller which are not part of
the Assumed Obligations.
"FINANCIAL STATEMENTS" means the financial statements of Seller described in
Section 3.1(r).
"GAAP" means generally accepted accounting principles in effect in the United
States of America at the time of any determination, applied on a consistent
basis.
"GOVERNMENTAL AUTHORITY" or "GOVERNMENTAL AUTHORITIES" means any government, any
governmental entity, department, authority, commission, board, agency or
instrumentality, and any judicial or administrative court, tribunal or judicial
or arbitral body, whether foreign, supra-national, federal, state or local.
"INDEMNIFIED LOSSES" means losses, damages, costs, Claims, expenses,
liabilities, Taxes, interest, penalties, suits, judgments, orders, Liens,
obligations and claims of any kind, whether administrative, judicial or
otherwise, including, without limitation, the costs and expenses of assessments,
settlements, investigations and compromises and also including, without
limitation, reasonable attorneys', consultants', accountants' and expert witness
fees and expenses.
"INTANGIBLE ASSETS" shall have the meaning given to such term in Section 2.1(i).
"INTELLECTUAL PROPERTY" shall have the meaning given to such term in Section
2.1(h).
"IRS" means the Internal Revenue Service.
"LANDLORD ESTOPPEL CERTIFICATE" shall have the meaning given to such term in
Section 4.4.
"LAWS" means applicable federal, state, local, foreign or other laws, rules,
regulations, guidelines, orders, injunctions, building and other codes,
ordinances, permits, licenses, authorizations, judgments, decrees of federal,
state, local, foreign or other authorities, and all orders, writs,
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decrees and consents of any governmental or political subdivision or agency
thereof, or any court or similar Person established by any such governmental or
political subdivision or agency thereof, including but not limited to, Laws
relating to zoning, building codes, antitrust, occupational safety and health,
consumer product safety, product liability, hiring, wages, hours, employee
benefit plans and programs, collective bargaining and the payment of withholding
and social security taxes.
"LEASE(S)" shall have the meaning given to such term in Section 2.1(e).
"LEASED PREMISES" shall have the meaning given to such term in Section 3.1(f).
"LIABILITY" means any liability or obligation whether known or unknown, asserted
or unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated and whether due or to become due.
"LICENSES AND PERMITS" means licenses, franchises, registrations, permits,
approvals, certificates, certifications and other authorizations from all
applicable Governmental Authorities which are necessary for the conduct of
Seller's business and the conduct, ownership, use, occupancy or operation of the
Transferred Assets on the Closing Date.
"LIENS" means liens, encumbrances, claims, charges, security interests,
mortgages, pledges, easements, obligations, rights of redemption, equitable
interests, and any other restrictions or limitations of any kind or nature
whatsoever.
"LITIGATION PROCEEDS" shall have the meaning given to such term in Section 2.11.
"MATERIAL ADVERSE EFFECT" (including all derivations thereof) means a material
adverse effect on the operations, condition (financial or otherwise), assets,
properties or prospects of Seller, its business or the Transferred Assets.
"MATERIAL CONTRACT" shall have the meaning given to such term in Section 3.1(g).
"OBJECTION NOTICE" shall have the meaning given to such term in Section 2.10(c).
"NOTICE" shall have the meaning given to such term in Section 8.9.
"PARENT" shall have the meaning given to such term in the Preamble.
"PARENT COMMON STOCK" means the shares of common stock, par value $.01 per
share, of Parent.
"PARENT COMMON STOCK MARKET PRICE" shall have the meaning given to such term in
Section 2.9(b).
"PARENT FINANCIAL STATEMENTS" means the financial statements of Parent described
in Section 3.2(c).
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"PARENT SHARES" shall have the meaning given to such term in Section 2.6(a).
"PERSON" means any individual, corporation, limited liability Seller,
partnership, trust, estate, unincorporated association or other entity.
"PERSONAL PROPERTY" shall have the meaning given to such term in Section 2.1(a).
"PRE-TAX PROFIT" and "PRE-TAX PROFIT CALCULATION" shall have the meanings given
to such terms in Section 2.10.
"PURCHASE PRICE" shall have the meaning given to such term in Section 2.6.
"RECEIVABLES" shall have the meaning given to such term in Section 2.1(c).
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, to be
dated the Closing Date, between the Parent and Seller, in the form attached
hereto as Exhibit C.
"REPRESENTATIVE" shall mean Xxxxxx Bark, or his designee, as agent for Seller
and/or the Shareholders, as the context indicates.
"RETURN" means any report, return, statement or other information required to be
supplied to a Governmental Authority in connection with Taxes.
"SECURITIES LAWS" shall have the meaning given to such term in Section 3.1(v).
"SELLER" shall have the meaning given to such term in the Preamble.
"SELLER DISCLOSURE MEMORANDUM" shall have the meaning given to such term in
Section 3.1.
"SELLER INDEMNITEE(S)" shall have the meaning given to such term in Section 6.3.
"SELLER INDEMNITORS(S)" shall have the meaning given to such term in Section
6.3.
"SEPTEMBER 15 BALANCE SHEET" means the Seller's balance sheet as of September
15, 2001, a copy of which is annexed hereto as Exhibit F.
"SHARE VALUATION DATE" shall have the meaning given to such term in Section
2.9(a).
"SHAREHOLDERS" means the shareholders of Seller listed on Schedule 1, being all
of the shareholders of Seller as of the Closing Date.
"SHARES" shall have the meaning given to such term in Section 3.1(w).
"TAXES" shall have the meaning given to such term in Section 3.1(d).
"TRADEMARK ASSIGNMENT" shall mean the trademark assignment of Seller in favor of
Buyer, to be dated the Closing Date, in the form annexed hereto as Exhibit D.
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"TRANSACTION DOCUMENTS" means this Agreement and the Additional Agreements.
"TRANSFERRED ASSETS" shall have the meaning given to such term in Section 2.1.
"VALUATION PERIOD" shall have the meaning given to such term in Section 2.9(b).
ARTICLE II. SALE AND PURCHASE OF ASSETS.
2.1 SALE OF TRANSFERRED ASSETS.
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On the terms and subject to the conditions set forth in this Agreement,
Seller hereby conveys, transfers and assigns to Buyer, and Buyer hereby accepts
from Seller, all right, title and interest of Seller in and to all of the assets
and rights of every nature, kind, and description, whether real or personal,
tangible and intangible, of Seller, including, without limitation, the assets
described in Sections 2.1(a) through (n) hereof, but excluding all cash of
Seller on the date hereof (collectively, the "TRANSFERRED ASSETS"), free and
clear of all Liens:
(a) PERSONAL PROPERTY.
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All machinery, equipment, tools, furniture, office equipment, computer
hardware, supplies, materials, spare parts, vehicles and other items of tangible
personal property owned or leased by Seller including without limitation, those
assets listed on Schedule 2.1(a) (the "PERSONAL PROPERTY").
(b) [INTENTIONALLY OMITTED].
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(c) RECEIVABLES.
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All notes receivable, accounts receivable and other amounts receivable of
Seller and all proceeds of the foregoing including without limitation, the notes
receivable and accounts receivable listed on Schedule 2.1(c) (collectively, the
"RECEIVABLES").
(d) INVENTORY.
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All inventory of Seller, consisting of promotional and marketing materials
and related supplies which are not held for resale (collectively, the
"INVENTORY").
(e) LEASES.
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Seller's leasehold interests in the real properties located at 0000 Xxxxxxx
Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx, 00000 and 0000 Xxxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxx, Xxxxxxxxxx, 00000, respectively, leased from third parties, and all of
Seller's right, title and interest in and to all improvements thereon, together
with all easements, rights of way, licenses and other interests therein
(collectively, the "LEASES").
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(f) CONTRACTS.
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All the rights and benefits of Seller under all contracts, agreements,
personal property leases, vendor agreements, employee agreements, consulting
agreements, guaranties, purchase orders and commitments, leases, non-compete
agreements, licenses, indemnities, commitments, arrangements, collective
bargaining or similar agreement, purchase and sale orders, and all contracts
which were entered into by Seller with an officer, director or significant
employee of Seller, including without limitation, those set forth on Schedule
2.1(f) (the "CONTRACTS").
(g) LICENSES AND PERMITS.
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All the Licenses and Permits of Seller, including without limitation, those
Licenses and Permits listed on Section 3.1(k) of the Seller Disclosure
Memorandum, to the extent such assignment or transfer is permitted by applicable
law.
(h) INTELLECTUAL PROPERTY.
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The following items of intangible and tangible property anywhere in the
world, and all of the goodwill associated therewith (collectively, the
"INTELLECTUAL PROPERTY"):
o Patents, whether in the form of utility patents or design patents and
all pending applications for such patents, including reexaminations,
reissues, continuations-in-part, continuing prosecution applications,
continuations, divisions, extension, renewal, and the like;
o Trademarks, trade names (including the trademark and name "Student
Sports" or any derivation thereof), service marks, designs, logos,
trade dress, and trade styles, whether or not registered, and all
pending applications for registration of the same;
o Copyrights, whether or not registered, and all pending applications
for registration of the same;
o Domain names and URLs;
o Inventions, research records, trade secrets, confidential information,
product designs, engineering specifications and drawings, technical
information, formulae, net lists, schematics, technology, know how,
ideas, algorithms, processes, customer lists, supplier lists and
market analyses;
o Products of Seller; and
o Computer programs and related documentation, including, without
limitation, computer programs embodied in semiconductor chips
("firmware") or otherwise embodied, and related flow-charts,
programmer notes, updates and data, whether in object or source code
form
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("software"), in other than licenses for shrink-wrap software
commercially available.
(i) INTANGIBLE ASSETS.
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All the confidential information, customer lists, supplier lists, mailing
lists, sales records and order information, restrictive covenants or indemnity
rights of Seller, all confidentiality obligations and similar obligations of
present and former officers and employees of Seller, and all other information,
including without limitation, any other information related to the Transferred
Assets or the Seller, in each case whether owned outright by Seller or as to
which Seller has rights as a licensee or otherwise, and all of the goodwill
associated therewith (collectively, excluding any Intellectual Property, the
"INTANGIBLE ASSETS").
(j) RECORDS AND DOCUMENTS.
----------------------
All financial, bookkeeping, accounting and Tax records of, and all other
books and records of or relating to, Seller or its business, including without
limitation, all files, papers, technical and research analyses, sales, marketing
and other studies, data and plans, records and other data of Seller, and all
files and correspondence related to any of the foregoing (collectively, the
"RECORDS").
(k) TELEPHONE NUMBERS; ADVERTISING MATERIAL.
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All rights and benefits of Seller in and to telephone and facsimile
numbers, e-mail and website addresses and directory listings, supplies,
catalogs, brochures, art work, photographs and advertising and promotional
materials of Seller, including without limitation, the rights and benefits set
forth on Schedule 2.1(k).
(l) NAME.
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All right, title and interest of Seller in and to the business name
"Student Sports, Inc." and all similar names thereto, and all goodwill
associated therewith.
(m) PREPAID EXPENSES.
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All right, title and interest of Seller in and to all prepaid expenses,
advances, deposits, promotional discounts, rebates, refunds and all similar
rights and claims, except as set forth on Schedule 2.1(m).
(n) RIGHTS OF RECOVERY.
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All causes of action, judgments, settlements, claims, indemnity or other
rights of Seller, known or unknown, material or immaterial, accrued or
contingent, against third parties, including those rights that relate to
Seller's business or the Transferred Assets, including, without limitation, all
claims for refunds of any Taxes relating to Seller's business, and all claims,
suits, rights, awards, insurance proceeds, and similar assets or rights of
Seller, except to the extent any of the foregoing relate to Excluded
Obligations; provided, however, that if Buyer does not pursue the
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litigation described in Section 2.11 and Schedule 2.11, Seller shall have all
rights of recovery from such litigation.
2.2 METHOD OF CONVEYANCE.
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Upon payment of the Purchase Price, Seller shall sell, transfer, convey,
assign and deliver to Buyer all of Seller's interest in and to all of the
Transferred Assets, free and clear of any and all Liens, by Seller's execution
and delivery of an Assignment and Assumption Agreement, Trade Xxxx Assignment,
Lease Assignments and other instruments of conveyance and transfer listed in
Article V hereof.
2.3 ASSUMED OBLIGATIONS.
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At the Closing, Buyer shall assume and agree to pay or perform, as
appropriate, only the following obligations and liabilities of Seller (the
"ASSUMED OBLIGATIONS"):
(a) Accounts payable of Seller reflected as liabilities on the
September 15 Balance Sheet to the extent that they are so reflected and remain
unpaid on the Closing Date ("ACCOUNTS PAYABLE");
(b) Liabilities of Seller directly relating to its business which have
been directly incurred by Buyer during the period from September 15, 2001 to the
Closing Date in the ordinary course of business, consistent with the past
practices of Seller and otherwise in compliance with the provisions of this
Agreement, to the extent remaining unpaid on the Closing Date; and
(c) Those obligations of Seller under the agreements listed on
Schedule 2.3 (the "ASSUMED AGREEMENTS") which fall due following the Closing and
are attributable to acts or events and periods following the Closing.
2.4 EXCLUDED OBLIGATIONS.
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Buyer is not assuming, and Seller and the Shareholders shall remain fully
responsible for, all indebtedness, Liabilities, obligations, contracts and
commitments of Seller and/or any predecessors in interest of Seller, known or
unknown, fixed or contingent (including, without limitation, any obligations
relating to Taxes of Seller), arising out of or resulting from the operation of
Seller or the ownership or use of the Transferred Assets on or before the
Closing Date, that are not Assumed Obligations (the "EXCLUDED OBLIGATIONS").
2.5 CLOSING DATE.
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The closing of the transactions contemplated by this Agreement (the
"CLOSING") shall take place at 10:00 A.M. on the date hereof (the "CLOSING
DATE"), at the offices of Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP, The Chrysler
Building, 405 Lexington Avenue, New York, New York, or at such other date, time
and place as may be agreed upon by the parties.
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2.6 PURCHASE PRICE.
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The aggregate consideration for the Transferred Assets (the "PURCHASE
PRICE") shall consist of the following:
(a) Nine Hundred Thousand (900,000) shares of Parent Common Stock (the
"PARENT SHARES");
(b) such number of shares of Parent Common Stock that may be delivered
by Buyer to Seller in accordance with Section 2.9 hereof (the "DEFERRED PARENT
SHARES");
(c) the Assumed Obligations;
(d) up to an aggregate of $500,000 in cash, payable in accordance with
Section 2.10 hereof (the "EARN-OUT"); and
(e) 33% of the Litigation Proceeds.
2.7 PAYMENT TERMS.
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The Purchase Price shall be payable by Buyer to Seller at the Closing by
(a) delivery by Buyer to Seller of certificate(s) representing the Parent Shares
and (b) Buyer's assumption of the Assumed Obligations, with the Deferred Parent
Shares, the Earn-Out (if any) and the Litigation Proceeds (if any) to be
delivered to Buyer in Accordance with Sections 2.9, 2.10 and 2.11 hereof,
respectively.
2.8 ALLOCATION OF CONSIDERATION.
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For purposes of complying with Section 1060 of the Code, the Purchase Price
shall be allocated among each class of the assets being transferred by Seller
("CONSIDERATION ALLOCATION SCHEDULE"). The Consideration Allocation Schedule
shall, no later than four weeks from the Closing Date, be prepared by Buyer with
Seller's assistance and provided to Seller for Seller's approval, which approval
shall not be unreasonably withheld or delayed. Seller and Buyer shall prepare
their federal, state, local and foreign income tax returns for all current and
future tax reporting periods and file Form 8594 (and corresponding state, local
and foreign forms) with respect to the transfer of the assets to Buyer in a
manner consistent with the Consideration Allocation Schedule. If any
governmental entity challenges such allocation, the party first receiving notice
of such challenge shall give the other party prompt notice of such challenge,
and Seller and Buyer shall cooperate in good faith in responding to such
challenge, in order to preserve the effectiveness of the Consideration
Allocation Schedule. Neither Seller nor Buyer shall report the allocation of the
Purchase Price in a manner inconsistent with the Consideration Allocation
Schedule.
2.9 PAYMENT OF DEFERRED PARENT SHARES.
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(a) As promptly as practicable following the close of business on
March 31, 2004 (the "SHARE VALUATION DATE"), Buyer shall deliver to the
Representative, on behalf of
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Seller, a certificate for such number of shares of Parent Common Stock that
represents, in the aggregate, a total market value of One Million Five Hundred
Thousand Dollar ($1,500,000), based on the lower of (i) $3.00 per share of
Parent Common Stock and (ii) the Parent Common Stock Market Price; provided,
however, that in no event will such number of Deferred Parent Shares exceed
1,500,000; and provided further, that the foregoing shall be equitably adjusted
to reflect any change in the number of outstanding shares of Parent Common Stock
on account of any subdivision, combination or other capital transaction relating
to shares of Parent Common Stock.
(B) "PARENT COMMON STOCK MARKET PRICE" as of the Share Valuation Date
shall mean the price per share of Parent Common Stock determined by reference to
the average last reported sale price for the Parent Common Stock for the twenty
(20) trading day period immediately preceding the Share Valuation Date (the
"VALUATION PERIOD") on the principal securities exchange on which the Parent
Common Stock is listed or admitted to trading or, if not so listed or admitted
to trading on any securities exchange, the average last reported sale price of
the Parent Common Stock for the Valuation Period on the National Association of
Securities Dealers national market system or, if the Parent Common Stock shall
not be listed on such system, the average of the closing bid and asked prices
for the Valuation Period in the over-the-counter market as furnished by any NASD
member firm selected from time to time by the Parent for such purpose, or if the
Parent Common Stock is not publicly traded, the fair market value thereof, as
determined in good faith by the Board of Directors of the Parent.
2.10 EARN-OUT.
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Seller shall be entitled to additional purchase consideration of up to Five
Hundred Thousand Dollars ($500,000), if earned, as follows:
(a) Not later than one hundred twenty (120) days after the end of the
fiscal years of Buyer ended December 31, 2002 and 2003, Buyer shall deliver to
the Representative a calculation, set forth in reasonable detail, of Buyer's
Pre-Tax Profit (hereinafter defined) for each such fiscal year. Each such
calculation is referred to as the "PRE-TAX PROFIT CALCULATION."
(b) The Representative shall be entitled to review each Pre-Tax Profit
Calculation in order to confirm the information reflected therein. The
Representative shall complete its review as promptly as possible, but in no
event later than fifteen (15) days following receipt of a Pre-Tax Profit
Calculation.
(c) If, within fifteen (15) days (or such shorter period) following
receipt by the Representative of a Pre-Tax Profit Calculation, the
Representative objects to any part thereof, the Representative shall notify
Buyer in writing (the "OBJECTION NOTICE"), specifying in reasonable detail the
nature of the objections. If the Representative does not deliver an Objection
Notice within such 15-day period, such Pre-Tax Profit Calculation shall be
deemed final and binding. If the Representative does timely deliver an Objection
Notice, the Representative and Buyer shall promptly seek to agree upon any
disputed matters. If full agreement is not reached within ten (10) business days
following the date of the Objection Notice, the parties shall jointly designate
a firm of independent certified public accountants having no past or current
affiliation with the
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Representative, Seller, Buyer or any of their respective Affiliates to resolve
any disputed matters in accordance with this Section and, if the parties cannot
jointly agree on the designation of such firm within twenty (20) business days
following the date of the Objection Notice, the parties shall jointly request
the American Institute of Certified Public Accountants promptly to designate a
firm of independent certified public accountants having no past or current
affiliation with the Representative, Seller, Buyer or any of their respective
Affiliates. The firm so designated shall, within thirty (30) days thereafter,
determine all unresolved issues between the Representative and Buyer in
accordance with GAAP, as qualified by the definition of "Pre-Tax Profit" set
forth below, and certify in writing the resolution thereof to the Representative
and Buyer. The costs and expenses of such firm shall be borne equally by the
Shareholders, on the one hand, and Buyer, on the other hand. The Pre-Tax Profit
Calculation, with such changes as are agreed upon between the Representative and
Buyer or as so determined by the independent accounting firm appointed pursuant
to the terms hereof, shall be deemed final and binding. All references in other
sections of this Agreement to a Pre-Tax Profit Calculation shall mean such
Pre-Tax Profit Calculation as shall have become final and binding in accordance
with this Section.
(d) The Earn-Out, if any, to be paid to Seller shall be determined as
follows:
(i) If the Pre-Tax Profit for each of the two fiscal years of Buyer
ended December 31, 2002 and 2003 is less than zero, Company shall
not be entitled to any Earn-Out.
(ii) If the Pre-Tax Profit for Buyer's fiscal year ended December 31,
2002 is greater than zero, Buyer shall pay to the Representative,
on behalf of Seller, no later than April 30, 2003, a cash payment
equal to thirty-three percent (33%) of such Pre-Tax Profit.
(iii) If the Pre-Tax Profit for Buyer's fiscal year ended December 31,
2003 is greater than zero, Buyer shall pay to the Representative,
on behalf of Seller, no later than April 30, 2004, a cash payment
equal to thirty-three percent (33%) of such Pre-Tax Profit.
(iv) Notwithstanding the foregoing, in no event shall the Earn-Out
exceed Five Hundred Thousand Dollars ($500,000) in the aggregate.
(e) For purposes of this Section 2.10, with respect to any fiscal year
of Buyer, "PRE-TAX PROFIT" shall mean Buyer's net income from operations before
federal, state, local and foreign income taxes, determined in accordance with
GAAP, excluding the effect of the following items:
(1) Annual salary costs in excess of $100,000 paid to a senior
executive to serve as chief operating officer of Buyer;
(2) the gain or loss from any sale, exchange or other
disposition of assets other than sales of assets in the
ordinary course of business consistent with past practice;
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(3) any extraordinary gain or loss, including any proceeds paid
to Buyer or Parent pursuant to the litigation referred to in
Section 2.11 below; or
(4) any gain, loss, income or expense resulting from a change in
Buyer's accounting methods, principles or practices or a
change in GAAP.
2.11 LITIGATION PROCEEDS.
--------------------
Seller shall be entitled to additional Purchase Price equal to thirty-three
percent (33%) of the Litigation Proceeds, if any, payable to the Representative
within thirty (30) days of Buyer's receipt thereof. For purposes of this Section
2.11, "LITIGATION PROCEEDS" shall mean gross cash proceeds paid to Buyer or
Parent pursuant to the litigation described in Schedule 2.11 annexed hereto (the
"LITIGATION"). The parties acknowledge and agree that any and all decisions
relating to or arising out of the Litigation, including, without limitation, any
settlement thereof, shall be made in the sole discretion of the Board of
Directors of Parent or Buyer, and nothing in this Agreement shall be deemed to
require Parent or Buyer to take any action relating to the Litigation for the
benefit of Seller or any Shareholder.
ARTICLE III. REPRESENTATIONS AND WARRANTIES.
-------------------------------
3.1 SELLER AND SHAREHOLDERS.
------------------------
Seller has prepared and delivered to Buyer a disclosure memorandum (the
"SELLER DISCLOSURE MEMORANDUM") setting forth any and all exceptions to the
representations and warranties of Seller and the Shareholders contained in this
Agreement.
Subject to the exceptions and qualifications set forth in Seller Disclosure
Memorandum, Seller and the Shareholders, jointly and severally, hereby represent
and warrant to Buyer as follows:
(a) ORGANIZATION AND QUALIFICATION.
-------------------------------
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Seller is
qualified or licensed to do business in those jurisdictions (which are
identified in Section 3.1(a) of the Seller Disclosure Memorandum) where the
conduct of its business requires it to be licensed or qualified, except where
the failure to do so would not have a Material Adverse Effect. Seller has the
corporate power and authority to own or lease those properties currently owned
or leased by it, and to conduct those businesses presently conducted by it.
(b) AUTHORIZATION; NO RESTRICTIONS, CONSENTS OR APPROVALS.
------------------------------------------------------
Seller has the corporate power and authority to enter into and perform the
Transaction Documents to which it is a party, to perform its obligations
thereunder and to consummate the transactions contemplated thereby. All
corporate action, including any required shareholder
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approval, necessary to authorize the execution and delivery by Seller of the
Transaction Documents and the performance by Seller of its obligations
thereunder has been duly taken. Each of the Transaction Documents to which
Seller is a party has been duly executed by Seller and constitutes its legal,
valid, binding obligation, enforceable against it, subject to general equity
principles, in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally. Except as set forth in Section 3.1(b) of the
Seller Disclosure Memorandum, the execution and delivery of the Transaction
Documents, the sale of the Transferred Assets and the consummation by Seller of
the transactions contemplated thereby do not and shall not (i) conflict with or
violate any of the terms of the Certificate of Incorporation and By-Laws of
Seller, (ii) conflict with, or result in a breach of any of the terms of, or
result in the acceleration of any indebtedness or obligations under, any
agreement, obligation or instrument by which Seller is bound or to which any
property of Seller is subject, or, with or without the passage time or the
giving of notice, or both, constitute a default thereunder, (iii) result in the
creation or imposition of any Lien on any of the Transferred Assets, or (iv)
conflict with, or results in or constitute a default under or breach or
violation of or grounds for termination of, any License and Permit or result in
the violation by Seller of any Laws to which Seller or any assets of Seller may
be subject. Other than the transfer of Licenses and Permits, no Governmental
Authority authorization, approval, order, consent, or filing is required,
including, without limitation, any filings which may be required under the Laws,
on the part of Seller in connection with the execution, delivery, and
performance of the Transaction Documents.
(c) ABSENCE OF CERTAIN CHANGES.
---------------------------
Since September 15, 2001, (i) no event, condition or circumstance has
occurred that would have a Material Adverse Effect on Seller and (ii) Seller has
conducted its business in the ordinary course and consistent with past practice.
As amplification and not in limitation of the foregoing, since September 15,
2001, Seller has not (A) made any change in any method of accounting or
accounting practice, principle or policy used by Seller, (B) incurred any
indebtedness, obligation or other Liability or paid, satisfied or discharged any
indebtedness, obligation or other Liability prior to the due date or maturity
thereof, except current indebtedness, obligations and other Liabilities in the
ordinary course of business, or (C) made any change or modification in any
manner of Seller's (x) billing and collection policies, procedures and practices
with respect to accounts receivable or unbilled charges, (y) policies,
procedures and practices of Seller with respect to the provision of discounts,
rebates or allowances, or (z) payment policies, procedures and practices of
Seller with respect to accounts payable.
(d) TAXES.
------
Seller has timely filed (timely being understood to include all properly
granted extensions) all returns required to be filed by it on or before the
Closing Date with respect to all federal, state, local and foreign income,
payroll, employment, unemployment, withholding, excise, sales, personal
property, use, business and occupation, franchise and occupancy, real estate, or
other taxes (all of the foregoing taxes including interest and penalties thereon
and including estimated taxes, being hereinafter collectively the "TAXES"). All
such returns were correct and complete in all material respects, and all Taxes
which are due or which may be claimed to be due have been paid. Seller has
withheld or collected and paid over to the
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appropriate governmental authorities or is properly holding for such payment all
Taxes required by Law to be withheld or collected. Seller is not a party to or
has received any notice with respect to any pending or, to Seller's knowledge,
proposed, action by any Governmental Authority for assessment or collection of
Taxes, and is not a party to any dispute or, to Seller's knowledge, threatened
dispute with respect to, and Seller has not received a notice of any such claim
for, assessment or collection of Taxes. There are no Liens for Taxes upon any of
the Transferred Assets. Seller has no liability for unpaid Taxes under Treasury
Regulation section 1.1502-6 (or any similar provision of state or foreign law),
or under any other provision of law or tax sharing, tax indemnity or similar
contract.
(e) TITLE TO TRANSFERRED ASSETS.
----------------------------
Seller has good and marketable title to all of the Transferred Assets, free
and clear of any Liens, subject to any Liens listed in Section 3.1(e) of the
Seller Disclosure Memorandum. The Transferred Assets do not include any real
property owned by Seller.
(f) LEASES.
-------
Section 3.1(f) of the Seller Disclosure Memorandum sets forth a complete
and accurate listing or description of all real property Leases to which Seller
is a party. Section 3.1(f) of the Seller Disclosure Memorandum lists the
location of all of the leased premises (the "LEASED PREMISES"), the dates of the
Leases and any and all amendments thereto. Each of the Leases is valid, binding
and enforceable against Seller in accordance with its terms and is in full force
and effect; there are no existing defaults on the part of Seller or any other
party under any Lease; and each such Lease will, subject to obtaining any
consent listed in Section 3.1(f) of the Seller Disclosure Memorandum, continue
to be in full force and effect on the same terms and conditions immediately
after the Closing without the need for any action on the part of Buyer. Seller's
interest in each of the Leases is free and clear of all Liens. Seller has not
granted to any Person any right to the possession, use, occupancy or enjoyment
of the Leased Premises; and Seller lawfully maintains actual and exclusive
possession of all portions of the Leased Premises. There is not now pending or
contemplated any reassessment on real estate taxes or otherwise of any parcel
included in the Leased Premises which would result in an increase of the rent,
additional rent or other sums and charges payable by Seller under any Lease or
pertaining to any Leased Premises. Seller has not received notice of any breach
or violation of any covenant, condition, restriction, right of way or easement,
or any condemnation or eminent domain proceeding affecting the Leased Premises
or any part thereof.
All buildings, structures and other improvements included within the Leased
Premises, including but not limited to the roofs and structural elements thereof
and the heating, ventilation, air conditioning, plumbing, electrical,
mechanical, sewer, waste water, storm water, paving and parking equipment,
systems and facilities included therein, are in good working order and repair
for their type and age, normal wear and tear excepted. The water, gas,
electrical, steam, compressed air, telecommunication, sanitary and storm sewage
lines and systems and other similar systems serving the Leased Premises are
sufficient to enable the Leased Premises to continue to be used and operated in
the manner currently being used and operated.
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(g) CONTRACTS AND OTHER DOCUMENTS.
------------------------------
Section 3.1(g) of the Seller Disclosure Memorandum sets forth a list of all
Contracts to which Seller is a party (other than real property Leases, which are
described in Section 3.1(f)) which include: (i) Contracts providing for payment
or receipt of more than $5,000; (ii) Contracts granting, or consenting to the
existence of, any Lien on or in any of the Transferred Assets in favor of any
Person; (iii) Collective bargaining arrangements or other Contracts with any
labor union; (iv) Contracts relating to the borrowing of money or the incurrence
of any indebtedness for borrowed money, or the issuance of any letter of credit,
or the guaranty of another Person's indebtedness, or Contracts of suretyship or
relating to the repurchase of any goods or assets of any other Person; (v)
Contracts granting to any Person a right of first refusal, first offer, option
or similar preferential right to purchase or acquire any of its properties,
assets or securities; (vi) Contracts limiting, restricting or prohibiting Seller
from conducting any business anywhere in the United States of America or
elsewhere in the world; (vii) joint venture or partnership agreements or other
similar Contracts; (viii) Contracts of employment or for the retention of
consultants or advisors or the furnishing of similar services by any third
party; (ix) Contracts which indemnify any other Person or which are in the
nature of a severance agreement or which would otherwise entitle any Person not
a party to this Agreement to receive a payment based upon the consummation of
the transactions contemplated hereby; or (x) any other Contract which is
material to the operation of Seller or any of the Transferred Assets (the
foregoing Contracts referred to as "MATERIAL CONTRACTS"). No default by Seller
or any other party exists, or has been claimed or alleged by any Person, with
respect to any Material Contract, and no event has occurred that, with notice or
lapse of time or both, would constitute a default under any Material Contract.
Other than as set forth on Seller's Disclosure Memorandum, no consent, approval,
claim, authorization or waiver from, or notice to, any Governmental Authority or
other Person is required in order to maintain in full force and effect any of
the Contracts to which Seller is a party. Consents for assignment of all
Materials Contracts have been obtained by Seller, and copies thereof have been
given to Buyer.
(h) LABOR DIFFICULTIES. (i) Seller is not a party to any Contract with
any labor organization or other representative of its employees; (ii) there is
no unfair labor practice charge or complaint pending or, to the knowledge of
Seller, threatened against Seller; (iii) Seller has not experienced any labor
strike, slowdown, work stoppage or similar labor controversy within the past
five years and, to the knowledge of Seller, no such labor strike, slow down,
work stoppage or similar labor controversy is threatened; (iv) no representation
question has been raised respecting any of Seller's employees, nor are there any
organizing activities or campaigns being conducted to solicit authorization from
Seller's employees to be represented by any labor organization and no such
activity or campaign is threatened; (v) no Claim before any Governmental
Authority brought by or on behalf of any employee, prospective employee, former
employee, retiree, labor organization or other representative of employees or
any Governmental Authority is pending or, to the knowledge of Seller, threatened
against Seller; (vi) Seller is not a party to, or otherwise bound by, any
judgment, decree, injunction, rule or order relating to its employees or
employment practices; (vii) except with respect to ongoing disputes of a routine
nature involving immaterial amounts, Seller has paid in full to all of its
employees all wages, salaries, commissions, bonuses, benefits and other
compensation due and payable to such
-16-
employees; and (viii) Seller is in compliance with all applicable Laws affecting
employment and employment practices.
(i) ERISA; EMPLOYEE BENEFIT PLANS.
------------------------------
(i) Section 3.1(i) of the Seller Disclosure Memorandum contains a
true and complete list of (i) each qualified beneficiary (within the meaning of
Section 4980B(g)(1) of the Code) of any group health plan (within the meaning of
Section 4980B(g)(2) of the Code) which is an Employee Benefit Plan (hereinafter
defined) who as of the date hereof, is eligible for continuation of group health
plan coverage under any Employee Benefit Plan on account of a qualifying event
(within the meaning of Section 4980B(f)(3) of the Code) occurring on or prior to
the Closing Date, and (ii) with respect to each such qualified beneficiary, the
date and nature of such qualifying event.
(ii) Neither Seller nor any other Seller or entity which together
with Seller constitutes a member of Seller's "controlled group" or "affiliated
service group" (within the meaning of Sections 4001(a)(14) and/or (b) of ERISA
and/or Sections 414(b), (c), (m) or (o) of the Code (each such group or groups
and each member thereof hereinafter referred to individually and collectively as
the "Group")), has at any time adopted or maintained, has any liability or is a
fiduciary with respect to or has any present or future obligation to contribute
to or make payment under (i) any employee benefit plan (as defined in Section
3(3) of ERISA), or (ii) any other benefit plan, program, contract or arrangement
of any kind whatsoever (whether for the benefit of present, former, retired or
future employees, officers, directors, consultants or independent contractors of
the Group, or for the benefit of any other person or persons) including, without
limitation, arrangements providing for contributions, benefits or payments in
the event of a change of ownership or control in whole or in part of the Group,
or with respect to disability, relocation, child care, educational assistance,
deferred compensation, pension, retirement, profit sharing, thrift, savings,
stock ownership, stock bonus, restricted stock, health, dental, medical, life,
hospitalization, stock purchase, stock option, incentive, bonus, sabbatical
leave, vacation, severance, cafeteria or other contribution, benefit or payment
of any kind, or (iii) any employment, consulting, service or other contract or
agreement of any kind whatsoever (all such employee benefit plans and other
benefit plans, programs, contracts or arrangements and such employment,
consulting, service or other contracts or agreements whether written or oral
hereinafter individually and collectively called the "Employee Benefit
Plan(s)"). No member of the Group has any obligation or commitment to establish,
maintain, operate or administer any Employee Benefit Plan not set forth on
Section 3.1(i) of the Seller Disclosure Memorandum or to amend any Employee
Benefit Plan so as to increase benefits thereunder or otherwise.
(iii) No Employee Benefit Plan is subject to Title IV of ERISA. No
member of the Group has completely or partially withdrawn, within the meaning of
Title IV of ERISA, from any "multiemployer plan" within the meaning of Section
3(37) of ERISA (hereinafter, individually and collectively a "Multiemployer
Plan") or any single employer plan (within the meaning of Section 4001(a)(15) of
ERISA) which has two or more contributing sponsors at least two of whom are not
under common control (hereinafter, individually and collectively, a "Single
Employer Plan").
-17-
(iv) Any and all amounts which any member of the Group is required
to pay as contributions or otherwise, or with respect to the Employee Benefit
Plans, have been timely paid. No Employee Benefit Plan has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, and no member of the Group has
provided, or is required to provide, security to any Employee Benefit Plan. The
current value of all "benefit liabilities" within the meaning of Section
4001(a)(16) of ERISA under each Employee Benefit Plan which is subject to Title
IV of ERISA or otherwise, does not exceed the current value of the assets of
such Employee Benefit Plan allocable to such benefit liabilities.
(v) Each of the Employee Benefit Plans has been established,
maintained, operated and administered in accordance with its terms and all
applicable law. Each of the Employee Benefit Plans which is intended to be
"qualified" within the meaning of Sections 401(a) and 501(a) of the Code has
been determined by the IRS to be so qualified and continues to be so qualified.
There are no pending, threatened or anticipated Proceedings involving any of the
Employee Benefit Plans. There have been no "prohibited transactions" within the
meaning of Section 406 of ERISA or Section 4975 of the Code with respect to any
of the Employee Benefit Plans.
(vi) No liability has been or is expected to be incurred by the
Group under Title IV of ERISA with respect to the Employee Benefit Plans. No
member of the Group has incurred and no member of the Group will incur any
withdrawal liability with respect to a Multiemployer Plan under Title IV of
ERISA or any liability with respect to a Single Employer Plan under Section
4062, 4063 or 4064 of ERISA. No notice of a "reportable event" within the
meaning of Section 4043 of ERISA has been or is required to be filed with
respect to any Employee Benefit Plan. No member of the Group is a party to, or
participates in, or has any liability or contingent liability with respect to
any Multiemployer Plan or any Single Employer Plan.
(vii) Neither the execution and delivery of this Agreement and the
other Transaction Documents, nor the consummation of the transactions
contemplated hereby and thereby, will (either alone or upon the occurrence of
additional events or acts) accelerate vesting or payment of any benefits or
other amounts, increase the amount or value of any benefit or payment under any
Employee Benefit Plan or result in the payment of or obligation to pay any
"parachute payment" (within the meaning of Section 280G of the Code).
(viii) A true and complete copy of each of the Employee Benefit
Plans (and all amendments thereto, whether currently effective or to become
effective at a later date) and all contracts and agreements relating thereto, or
to the funding thereof (including, without limitation, all trust agreements,
insurance contracts, investment management agreements, subscription and
participation agreements, administration and recordkeeping agreements) have been
provided to Buyer. In the case of any Employee Benefit Plan which is not in
written form, an accurate and complete description of such Employee Benefit Plan
has been provided to Buyer. With respect to each Employee Benefit Plan, Buyer
has been provided with a true and complete copy of each of (i) the three most
recent annual reports (Form 5500 series), Pension Benefit Guaranty Corporation
filings and actuarial reports, and (ii) the most recent summary plan
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description (including summaries of material modification), IRS determination
letter and/or ruling, and, in the case of any funded Employee Benefit Plan, a
current schedule of assets (and the fair market value thereof assuming
liquidation of any asset which is not readily tradable) held with respect
thereto.
(ix) Each Employee Benefit Plan, and all contracts and agreements
relating thereto or to the funding thereof, can be unilaterally terminated
without penalty by Seller on no more than thirty (30) days' notice, and all
obligations of Seller with respect to all other Employee Benefit Plans can be
unilaterally terminated without penalty by Seller on no more than thirty (30)
days' notice. There have been no material changes in the financial condition in
the respective Employee Benefit Plans (or other information provided hereunder)
from that stated in each Employee Benefit Plan's most recent of such annual
reports, actuarial reports and schedule of assets furnished to Buyer.
(j) EMPLOYEES.
----------
Section 3.1(j) of the Seller Disclosure Memorandum contains a true and
complete list, by category, of all full-time employees, part-time employees and
other employees and consultants of Seller, including any Contracts or agreements
relating thereto, and a description of the rate and nature of all compensation
payable by Seller to, and the amount of vacation, sick days, personal days and
other leave accrued by, each such Person. Buyer has been provided with access to
true and complete (i) copies of all manuals and handbooks applicable to any
current or former director, officer, employee or consultant of Seller, (ii)
copies of all standard forms of employee trade secret, non-compete,
non-disclosure and invention assignment agreements, together with a list of all
agreements that deviate therefrom and a description of such deviation, and (iii)
descriptions of all existing severance, accrued vacation or other leave policies
or retiree benefits of any such employee or consultant. The employment or
consulting arrangement of all such persons is, subject to applicable Laws
involving the wrongful termination of employees, terminable at will (without the
imposition of penalties or damages) by Seller, except as otherwise set forth in
Section 3.1(j) of the Seller Disclosure Memorandum. No current or former
employee of Seller is (i) absent on a military leave of absence and/or eligible
for rehire under the terms of the Uniformed Services Employment and Reemployment
Rights Act, or (ii) absent on a leave of absence under the Family and Medical
Leave Act. Except as set forth in Schedule 3.1(j) of the Seller Disclosure
Memorandum there are no bonuses, profit sharing, incentives, commissions or
other compensation of any kind, including, without limitation, severance
benefits, and accrued vacation time or pay, due to or expected by present or
former employees of Seller in excess of $30,000 in the aggregate.
(k) LICENSES AND PERMITS.
---------------------
Seller has obtained, has fully paid for, and has, in full force and effect,
all Licenses and Permits, which Licenses and Permits are set forth in Section
3.1(k) of the Seller Disclosure Memorandum. Except as set forth in Section
3.1(k) of the Seller Disclosure Memorandum, the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in the revocation, cancellation, suspension,
modification, or limitation of any such Licenses and Permits and will not give
to any Person any right to revoke,
-19-
cancel, suspend, modify, or limit any such Licenses and Permits. Renewal of each
of such Licenses and Permits has been timely applied for to the extent required
under all Laws, and to the extent appropriate to protect renewal rights
thereunder. There is no fact or event which is likely to prevent the renewal of
any of the Licenses and Permits under existing Law or which, with the passage of
time or the giving of notice or both, is likely to constitute a violation of the
terms of any of the Licenses and Permits or of any applications or agreements
made in connection therewith.
(l) RECEIVABLES.
------------
All of the Receivables of Seller arose from bona fide transactions in the
ordinary course of business of Seller, have not been discounted, are fully
collectible as and when due (subject to any reserve with respect to such
Receivables reflected in the Financial Statements), and no counterclaim or right
of set-off has been asserted with respect thereto. The Financial Statements
accurately set forth the amounts of such Receivables in existence as of the
date(s) of the Financial Statements, and any applicable reserves with respect to
such Receivables are reflected in the Financial Statements.
(m) ABSENCE OF UNDISCLOSED LIABILITIES.
-----------------------------------
Except as set forth in Section 3.1(m) of the Seller Disclosure Memorandum,
as of September 15, 2001, Seller has no material liability (individually or in
the aggregate) that is not fully reflected or disclosed in the Financial
Statements. Since September 15, 2001, Seller has incurred no liabilities other
than those incurred in the ordinary course of business and consistent with past
practice, and there is no liability (individually or in the aggregate) of Seller
which could have a Material Adverse Effect.
The accounts payable set forth in the September 15 Balance Sheet contained
in the Financial Statements or arising subsequent to the date of such balance
sheet are the result of bona fide transactions in the ordinary course of
business and either have been paid or are not yet due and payable, in accordance
with the respective invoices relating thereto.
(n) COMPLIANCE WITH LAW.
--------------------
Since January 1, 1998, Seller has operated its business in material
compliance in all respects with all applicable Laws and Seller has received any
notice of any alleged violation by Seller of any Laws.
(o) INTELLECTUAL PROPERTY.
----------------------
(i) Seller has the sole, exclusive, unrestricted and legally
enforceable right to use, free and clear of all Liens, restrictions or licenses
in favor of third parties, the Intellectual Property used or proposed to be used
in the business as currently conducted or as proposed to be conducted by Seller
("Seller Intellectual Property"). Seller has not (i) licensed any of its
Intellectual Property in source code form to any party; (ii) entered into any
exclusive agreements relating to its Intellectual Property with any party; (iii)
entered into any distribution or agency agreements with respect to the Seller
Intellectual Property; or (iv) entered into any
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agreement obligating Seller to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, the Seller
Intellectual Property.
(ii) Section 3.1(o) of the Seller Disclosure Memorandum sets forth
a true and complete list of all (i) Seller Intellectual Property, including the
jurisdictions in which each such Intellectual Property right has been issued or
registered or in which any application for such issuance and registration has
been filed, (ii) all licenses, sublicenses and other agreements as to which
Seller is a party and pursuant to which any person is authorized to use any
Intellectual Property, and (iii) all licenses, sublicenses and other agreements
as to which Seller is a party and pursuant to which Seller is authorized to use
any Intellectual Property of third party including patents, trademarks or
copyrights, including software ("THIRD PARTY INTELLECTUAL PROPERTY RIGHTS").
(iii) Except as set forth in Schedule 3.1(o) of the Seller
Disclosure Memorandum, there is no unauthorized use, disclosure, infringement or
misappropriation of any Seller Intellectual Property rights, or any Third Party
Intellectual Property Rights, by any third party, including any employee or
former employee of Seller. Seller has not entered into any agreement to
indemnify any other person against any charge of infringement of any Seller
Intellectual Property, other than customary indemnification provisions contained
in purchase orders arising in the ordinary course of business.
(iv) Seller is not and will not be as a result of the execution
and delivery of this Agreement or the performance of Seller's obligations under
this Agreement, in breach of any license, sublicense or other agreement relating
to the Seller Intellectual Property or Third Party Intellectual Property Rights.
(v) Except as set forth in Schedule 3.1(o) of the Seller
Disclosure Memorandum, all of the Seller Intellectual Property is valid,
subsisting, unexpired, has not been abandoned and has been properly and validly
filed, submitted to or maintained with the applicable government agency if such
filing, submission or maintenance is necessary in order to perfect such
Intellectual Property. Seller (i) has not been sued in any suit, action or
proceeding which involves a claim of infringement of any patents, trademarks,
service marks, copyrights or violation of any trade secret or other proprietary
right of any third party; (ii) has no knowledge that the manufacturing,
marketing, licensing or sale of its products infringes any patent, trademark,
service xxxx, copyright, trade secret or other proprietary right of any third
party or (iii) has not brought any action, suit or proceeding for infringement
of Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party.
(vi) There are no actions that must be taken by Seller within one
hundred and eighty (180) days following the date of this Agreement that, if not
taken, will result in the loss of any Seller Intellectual Property, including
the payment of any registration, maintenance or renewal fees or the filing of
any responses, documents, applications or certificates for the purposes of
obtaining, maintaining, perfecting or preserving or renewing any Seller
Intellectual Property.
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(vii) All of the rights and interests possessed by Seller in the
Seller Intellectual Property are fully and completely transferable and
assignable to Buyer, free and clear of any Liens in connection with the
transactions contemplated hereby, without the consent or approval of any
Governmental Authority or other third party.
(p) LITIGATION.
-----------
There are no actions, suits, claims, enforcement actions or proceedings
pending or, to Seller's knowledge, threatened, against Seller or against any
Person by reason of such Person being a director, officer or employee of Seller,
whether at law or in equity or before or by any Governmental Authority; nor is
there outstanding any writ, order, decree, or injunction applicable to Seller
that (i) calls into question Seller's authority or right to enter into this
Agreement and consummate the transactions contemplated hereby or (ii) would
otherwise prevent or delay the transactions contemplated by this Agreement.
(q) TRANSFERRED ASSETS; OWNERSHIP OF ASSETS AND RIGHTS.
---------------------------------------------------
All Personal Property of Seller is listed in the detailed fixed
assets ledger of Seller included in Section 3.1(q) of the Seller Disclosure
Memorandum. The portion of the Transferred Assets constituting fixed assets,
taken as a whole, or individually, as to any piece of equipment currently valued
at more than $1,000, are in good working order and repair for equipment of like
type and age, reasonable wear and tear excepted. The Inventory is in good
condition and suitable for its intended use.
Except as set forth in Section 3.1(q) of the Seller Disclosure
Memorandum, no capital expenditures in excess of $5,000 are contemplated by
Seller for the current fiscal quarter ending September 30, 2001.
(r) FINANCIAL STATEMENTS.
---------------------
Seller has delivered to Buyer or its advisors the unaudited balance
sheets of Seller, together with the related statements of operations and cash
flows (including the related notes), for the fiscal years ended December 31,
1998, 1999 and 2000 and the unaudited balance sheet of Seller, together with the
related statement of operations and cash flow (including the related notes), for
the eight (8) month period ended August 31, 2001, and the September 15 Balance
Sheet, copies of which are annexed to Section 3.1(r) of the Seller Disclosure
Memorandum (collectively, the "FINANCIAL STATEMENTS"). The Financial Statements
have been derived from the books and records of Seller and fairly present the
assets, liabilities, and results of operations of Seller as of the respective
dates thereof and for the periods indicated, subject to normal fiscal year end
adjustments in the ordinary course of business (none of which, individually or
in the aggregate, are or are expected to be material). The Financial Statements
for the fiscal year ended December 31, 2000 and the eight (8) month period ended
August 31, 2001 reflect all Transferred Assets and Assumed Obligations, except
for Transferred Assets acquired or sold and Assumed Obligations discharged or
incurred after the date of such Financial Statements, in each case in the
ordinary course of business consistent with past practice. Since January 1,
2000, there has been no change in any accounting (including Tax accounting)
policies, practices or procedures of
-22-
Seller. No uncollectible accounts receivable are reflected on any of said
balance sheets in excess of the reserves set forth thereon for uncollectible
items.
(s) RELATED PARTY TRANSACTIONS.
---------------------------
Except as disclosed in Section 3.1(s) of the Seller Disclosure
Memorandum, no director, officer, employee or stockholder of Seller (i) owns,
directly or indirectly, on an individual or joint basis, any material interest
in, or serves as an officer or director of, any customer, competitor or supplier
of Seller or any organization which has a material contract or arrangement with
Seller or (ii) has any contract or agreement with Seller.
(t) INSURANCE. Seller has provided to Buyer or its advisors all
policies of insurance of any kind or nature covering the business of Seller,
including without limitation, policies of life, fire, theft, casualty, product
liability, workmen's compensation, business interruption, employee fidelity and
other casualty and liability insurance, which policies are listed on Section
3.1(t) of the Seller Disclosure Memorandum. All such policies (i) are in full
force and effect; and (ii) are valid and enforceable.
(u) DELIVERY OF DOCUMENTS. Seller has heretofore delivered or made
available to Buyer or its advisors true, correct and complete copies of all
documents, instruments, agreements and records which are referred to in this
Article III or in the Seller Disclosure Memorandum.
(v) INVESTMENT INTENT.
------------------
Seller acknowledges that the offer and sale of the Parent Shares and
the Deferred Parent Shares (collectively, the "Shares") has not been registered
under any United States federal, state or other securities law ("Securities
Laws"). Seller is acquiring the Shares solely for Seller's own account for
investment and not with a view to resale or distribution of any of the Shares,
except to the extent that the Shares may be transferred to the Shareholders upon
liquidation of Seller, whereupon it shall be a condition precedent to such
transfer that each Shareholder deliver to Buyer and Parent a Shareholder
Representation Agreement in the form of Exhibit G annexed hereto. Seller
acknowledges that the Shares are characterized as "restricted securities" under
the Securities Laws inasmuch as they are being acquired in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be sold without registration under the Act only in certain
limited circumstances and in accordance with the terms and conditions set forth
in the legend described in Section 3.1(w) below.
(w) LEGENDS.
--------
It is understood that the certificates evidencing the Shares will
bear a legend in substantially the following form:
"These securities have not been registered under the Securities Act of
1933, as amended, or any state securities law. They may not be sold,
offered for sale, pledged or hypothecated in the absence of a registration
statement in effect with respect to the
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securities under such Act or an opinion of counsel satisfactory to Seller
that such registration is not required or unless sold pursuant to Rule 144
of such Act."
(x) NO MISSTATEMENTS OR OMISSIONS.
------------------------------
No representation or warranty by Seller or the Shareholders
contained in this Agreement and no statement contained in the Seller Disclosure
Memorandum or other document delivered by Seller to Buyer contains or will
contain any untrue statement of a material fact or omits or will omit any
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
3.2 BUYER AND PARENT.
-----------------
Subject to the exceptions and qualifications set forth herein, Buyer and
Parent, jointly and severally, hereby represent and warrant to Seller and the
Shareholders as follows:
(a) ORGANIZATION AND QUALIFICATION.
-------------------------------
Each of Buyer and Parent is a corporation duly formed, validly existing and
in good standing under the Laws of its jurisdiction of incorporation. All of the
issued and outstanding shares of Buyer Common Stock are owned by Parent. Except
for Buyer's qualification to do business in the State of California, which will
be effected following the Closing, Buyer is qualified or licensed to do business
in those jurisdictions where the conduct of its business requires it to be
licensed or qualified, except where the failure to do so would not have a
material adverse effect on Buyer. Buyer has all requisite power and authority to
own or lease those properties currently owned or leased by it, and to conduct
those business presently conducted by it.
(b) AUTHORIZATION; NO RESTRICTIONS, CONSENTS OR APPROVALS.
------------------------------------------------------
Each of Buyer and Parent has full power and authority to enter into and
perform the Transaction Documents to which it is a party, and has taken all
necessary corporate action to authorize the execution and delivery of the
Transaction Documents to which it is a party and the performance by it of its
respective obligations hereunder and thereunder. Each of the Transaction
Documents to which Buyer or Parent is a party have each been duly executed by
Buyer or Parent, as applicable, and constitutes the legal, valid, binding
obligation of Buyer or Parent is applicable, enforceable against Buyer and
Parent, subject to general equity principles, in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of creditors
generally. The execution and delivery of the Transaction Documents, the delivery
of the Shares and the consummation by Buyer and Parent of the transactions
contemplated herein do not (i) conflict with or violate any of the terms of the
Certificate of Incorporation and By-Laws of Buyer or Parent, (ii) conflict with,
or result in a breach of any of the terms of, or result in the acceleration of
any indebtedness or obligations under, any material agreement, obligation or
instrument by which Buyer or Parent is bound or to which any property of Buyer
is subject, or constitute a default thereunder, or (iii) conflict with, or
result in or constitute a default under or breach or violation of or grounds for
termination of, any material license, permit or other authorization from a
Governmental Authority to which Buyer or
-24-
Parent is a party or by which Buyer or Parent may be bound, or result in the
violation by Buyer or Parent of any Laws to which Buyer or Parent may be
subject, in each case, which would have a material adverse effect on the
transactions contemplated herein, other than pursuant to applicable Securities
Laws. No governmental or regulatory authorization, approval, order, consent, or
filing is required, including, without limitation, any filings which may be
required under the Laws, on the part of Buyer or Parent in connection with the
execution, delivery, and performance of the Transaction Documents.
(c) FINANCIAL STATEMENTS.
---------------------
Each of (i) Parent's audited consolidated balance sheet and related
consolidated statement of income, cash flows and changes in stockholders' equity
(together with related notes) as of and for the year ended June 30, 2000, as
contained in the reports filed by Parent with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "SEC
REPORTS"), and (ii) Parent's unaudited consolidated balance sheet and related
consolidated statement of income, cash flows and changes in stockholders' equity
as of and for the nine-month period ended March 31, 2001, as contained in the
SEC Reports (collectively, the "PARENT FINANCIAL STATEMENTS"), (x) fairly
present in all material respects the financial position of Parent as of the
dates thereof and the results of its operation, cash flows and stockholders'
equity for each of the periods then ended, except that the unaudited financial
statements are subject to normal year-end adjustments, and (y) were prepared in
accordance with GAAP throughout the periods involved, in each case, except as
otherwise indicated in the notes thereto.
(d) PENDING LITIGATION.
-------------------
There no actions, suits, claims, enforcement actions, or proceedings
pending or, to Buyer's knowledge, threatened against Buyer, whether at law or in
equity or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality which, if
adversely determined, would have a material adverse effect on the business,
financial position, or results of operations of Buyer; nor is there outstanding
any writ, order, decree, or injunction applicable to Buyer or Parent that (i)
calls into question Buyer's or Parent's authority or right to enter into the
Transaction Documents and consummate the transactions contemplated hereby or
thereby, or (ii) would otherwise prevent or delay the transactions contemplated
by this Agreement or the other Transaction Documents.
(e) CAPITALIZATION OF BUYER; SHARE ISSUANCE.
----------------------------------------
The entire authorized capital stock of Buyer consists of ten thousand
(10,000) shares of common stock, $.01 par value ("Buyer Common Stock"), of which
one hundred (100) shares are issued and outstanding as of the date hereof, all
of which are owned by Parent. As of the Closing, Buyer shall be capitalized with
not less than $600,000 in cash. There are no outstanding warrants, options,
subscriptions, convertible or exchangeable securities or other agreements,
instruments, documents or commitments pursuant to which Buyer is or may become
obligated to issue, sell, purchase, retire or redeem any shares of capital stock
or other securities of Buyer except as contemplated by the Transaction
Documents. At the Closing, the Parent Shares, and, after the Closing, the
Deferred Parent Shares, will be issued to Seller free and clear of all Liens,
-25-
except for Liens relating to restrictions under applicable Securities Laws and
Liens created by the Transaction Documents.
ARTICLE IV. COVENANTS.
----------
4.1 OBTAINING CONSENTS.
-------------------
The parties hereto recognize that nothing in this Agreement shall be
construed as an attempt to assign to Buyer any Transferred Asset that, as a
matter of law or by the terms of the applicable Contract (if such Transferred
Asset is rights in a Contract), is not assignable without the consent of a third
party, and unless and until assigned to Buyer, any such Transferred Asset shall
be held by Seller in trust for the benefit of Buyer as of the Closing Date.
Seller and each Shareholder shall, at the request and under the direction of
Buyer, take all commercially reasonable actions and do or cause to be done all
commercially reasonable things as are necessary or proper in order that the
obligations of Seller relating to any such Transferred Asset may be performed by
Buyer in a manner that would enable Buyer to preserve and benefit from the value
of such Transferred Asset.
4.2 FURTHER ASSURANCES.
-------------------
(a) After the Closing, each of the parties hereto shall execute such
documents and other instruments and perform such further acts as may be required
or reasonably requested by any other party hereto to carry out the provisions
hereof and the transactions contemplated hereby including, without limitation,
vesting in Buyer good and marketable title to the Transferred Assets free and
clear of any and all Liens.
(b) After the Closing, Seller and the Shareholders shall promptly
advise Buyer in writing of the commencement or threat (of which any of them has
knowledge) against Seller or the Shareholders of any claim, action, suit or
other proceeding that relates to or might reasonably be expected to affect
Parent, Buyer, Seller or the Transferred Assets.
4.3 PAYMENTS RECEIVED.
------------------
Seller and the Shareholders agree that, after the Closing, each of them,
jointly and severally, will hold for the benefit of Buyer and will promptly
transfer and deliver to Buyer, from time to time as and when received by any of
them, any cash, checks with appropriate endorsements (using their best efforts
not to convert such checks into cash) or other property that they may receive on
or after the Closing which relates to any of the Transferred Assets prior to the
Closing including, without limitation, any accounts receivable and insurance
proceeds. From and after the Closing, Buyer shall have the right and authority
to endorse without recourse the name of Seller on any check or any other
evidence of indebtedness received by Buyer on account of the Transferred Assets
or the operations of Seller prior to the Closing and Seller hereby designates
and appoints (which designation and appointment is irrevocable and coupled with
an interest) Buyer as its attorney-in-fact, in the name, place and stead of
Seller, for such purposes.
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4.4 AGREEMENTS RELATING TO LEASED REAL PROPERTY.
--------------------------------------------
Seller and the Shareholders shall cooperate with Buyer and take all
reasonable actions necessary to obtain and deliver to Buyer at the Closing a
current estoppel certificate from the landlord under each Lease ("Landlord
Estoppel Certificate") stating (i) that such Lease has not been amended,
modified or supplemented and is in full force and effect; (ii) that all rent and
other sums and charges payable under such Lease are current and setting forth
the date through which such payments have been made; (iii) whether any rent or
other charge has been paid more than one month in advance; (iv) the amount of
any security or other similar deposit held by or on behalf of such landlord
under such Lease; (v) that no notice of default or termination under such Lease
is outstanding; (vi) that to the best of such landlord's knowledge and belief,
no uncured default or termination event or condition exists under such Lease and
no event has occurred or condition exists which, with the giving of notice or
the lapse of time or both, would constitute such a default or termination event
or condition; (vii) that, as of the date of such certificate, such landlord has
no charge, Lien, claim, defense or offset of any kind under such Lease; (viii)
that the consummation of the transactions contemplated hereby will not
constitute a default (with or without the giving of notice or lapse of time or
both) under such Lease or grounds for the termination thereof or for the
exercise of any right or remedy adverse to the interests of Seller thereunder;
and (ix) that the landlord under each Lease consents to the assignment of such
Lease to Buyer effective as of the Closing Date.
4.5 NAME CHANGES.
-------------
Seller covenants and agrees that, promptly after the Closing, it shall file
a certificate of amendment to its Articles of Incorporation, and file
appropriate documentation in those jurisdictions in which it is qualified to do
business as a foreign corporation, if any, changing its corporate name from
"Student Sports, Inc." to a name that does not include or bear any similarity to
said name or any name or any Intellectual Property included in the Transferred
Assets. Seller and the Shareholders shall not use any names that bear any
similarity to such corporate names. Each of Seller and the Shareholders hereby
irrevocably designates and appoints (which designation and appointment is
coupled with an interest) Buyer as their respective agent and attorney-in-fact
for purposes of filing all such documents following the Closing Date necessary
in the judgment of Buyer to implement the intent and purpose of this Section;
provided, however, that such designation and appointment of Buyer shall only be
effective if Seller fails to file such documents following the Closing Date.
4.6 COVENANT NOT TO COMPETE.
------------------------
In order to induce Buyer and Parent to enter into and perform this
Agreement, Seller and each Shareholder agree that with respect to Seller and any
Shareholder not employed by Buyer or an Affiliate of Buyer on the Closing Date,
for a period of two (2) years beginning on the Closing Date (in each case, the
"RESTRICTED PERIOD"), it or he shall not, without the prior written consent of
Buyer, for its own account or jointly or in combination with another Person,
directly or indirectly, for or on behalf of any Person, as principal, agent or
otherwise: (i) engage in a business that is the same as, or similar to, or
directly competes with, the business of Seller as conducted by Seller on the
Closing Date; (ii) solicit or induce, or in any manner attempt to solicit
-27-
or induce, any individual who is employed by Seller at the Closing Date to leave
such employment, whether or not such employment is pursuant to a written
contract or otherwise, or (iii) induce or influence any customer, supplier or
any other Person who had a business relationship with Seller prior to the
Closing, or that has a business relationship with Parent or Buyer, or any of
their respective Affiliates, whether before or after the Closing Date, to
terminate such relationship or to discontinue or reduce the extent of its
relationship with Buyer, Parent or any of their respective Affiliates.
ARTICLE V. THE CLOSING.
------------
Subject in each case to the terms and conditions contained in this
Agreement, the following steps shall be taken concurrently at the Closing,
except as otherwise expressly stated:
5.1 SELLER DELIVERIES.
------------------
Seller and the Shareholders shall deliver, or cause to be delivered,
to Buyer the following:
(i) All bills of sale, certificates of title, assignments and
instruments of transfer as shall be necessary and requested by Buyer in order to
assign and transfer, or to evidence the assignment and transfer of, all of the
Transferred Assets to Buyer, including, without limitation, the Assignment and
Assumption Agreement, the Assignment and Assumption of Leases, the Trademark
Assignment and the Domain Name Assignment;
(ii) All consents, estoppels and authorizations, in form and
substance satisfactory to Buyer, from all Persons whose consent or authorization
is required for the consummation of the transactions contemplated by this
Agreement;
(iii) A Schedule, certified by Seller and the Shareholders to be
true, correct and complete as of the Closing Date, of all (1) receivables of the
Seller, setting forth an aging thereof, and (2) Accounts Payable;
(iv) Resolutions duly adopted by the Board of Directors of
Seller, authorizing the execution, delivery and performance of this Agreement
and the other instruments and agreements to be executed and delivered by Seller,
duly certified by the Secretary or an Assistant Secretary of Seller, and an
incumbency certificate, certifying the names and true signatures of the officers
of Seller executing and delivering this Agreement and such other instruments and
agreements;
(v) A copy of the Certificate of Incorporation of Seller,
certified by the Secretary of State of the State of its incorporation as of a
date no more than ten (10) days prior to the Closing Date;
(vi) A copy of the By-Laws of the Seller, certified by an officer
of the Seller to be true, correct and complete as of the Closing Date;
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(vii) A certificate of good standing for Seller as of a date not
more than ten (10) days prior to the Closing Date issued by the Secretary of
State of the State of its incorporation and every other state in which the
Seller is authorized to do business;
(viii) A clearance certificate or similar document that may be
required by any taxing authority of any jurisdiction in order to relieve Buyer
of any obligation to withhold any portion of the Purchase Price;
(ix) All Records;
(x) A receipt for the Parent Shares;
(xi) The Employment Agreement, duly executed by Xxxxxx Bark;
(xii) The Registration Rights Agreement, duly executed by Seller;
(xiii) Any documentation requested by Buyer or Parent pursuant to
Section 3.1(v);
(xiv) Duly executed Landlord Estoppel Certificates; and
(xv) Such other documents as shall reasonably be requested by
Buyer in order to effectively carry out the transactions contemplated by this
Agreement, duly executed by the Seller where appropriate.
5.2 BUYER DELIVERIES.
-----------------
Buyer shall deliver, or cause to be delivered, to Seller the following:
(i) A Certificate for the Parent Shares, for transfer to the
Shareholders in accordance with Seller's written instruction;
(ii) Resolutions duly adopted by the Board of Directors of Buyer
authorizing the execution, delivery and performance by Buyer of this Agreement
and the other instruments and agreements to be executed by Buyer, duly certified
by the Secretary or an Assistant Secretary of Buyer, and an incumbency
certificate, certifying the names and true signatures of the Officers of Buyer
executing and delivering this Agreement and such other instruments and
agreements;
(iii) A copy of the Certificate of Incorporation of Buyer,
certified by the Secretary of State of the State of Delaware, dated a date not
more than fifteen (15) days prior to the Closing Date;
(iv) A certificate of good standing for Buyer issued as of a date
not more than ten (10) days prior to the Closing Date by the Secretary of State
of the State of Delaware;
(v) The Employment Agreement, duly executed by Buyer; and
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(vi) The Registration Rights Agreement, duly executed by Parent.
ARTICLE VI. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
------------------------------------------------------------
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS.
---------------------------------------------------------
The representations, warranties, covenants, agreements and indemnities
of the parties contained in this Agreement will survive any investigation prior,
on or subsequent to the date of this Agreement made by any party or its
representatives and the consummation of the transactions contemplated in this
Agreement and will continue in full force and effect until the date that is one
(1) year from the Closing Date, provided, however, that the representations,
warranties and indemnitees of Seller and the Shareholders with respect to
Section 3.1(d) ("Taxes") shall continue in full force and effect until ninety
(90) days after the applicable statute of limitations and any extensions thereof
(the "SURVIVAL PERIOD"); provided, however, that the Survival Period will be
extended automatically to include any time period necessary to resolve a Claim
for indemnification which arises out of any written notice to a Buyer Indemnitor
or a Seller Indemnitor advising such Indemnitor of the facts or circumstances
that may give rise to a claim for indemnification, provided notice was delivered
before expiration of the Survival Period. Liability for any item will continue
until the Claim will have been finally settled, decided or adjudicated.
6.2 INDEMNIFICATION BY SELLER AND THE SHAREHOLDERS.
-----------------------------------------------
In accordance with and subject to the further provisions of this Article
VI, Seller and the Shareholders ("BUYER INDEMNITORS") will, jointly and
severally, indemnify and hold harmless Parent, Buyer and their Affiliates, and
their respective officers, directors, agents and employees (collectively, "BUYER
INDEMNITEES"), from and against and in respect of any and all loss, damage,
Liability, cost and expense, including costs of investigation and reasonable
attorneys' fees and amounts paid in settlement ("INDEMNIFIED LOSSES"), suffered
or incurred by any one or more of Buyer Indemnitees by reason of, or arising out
of:
(a) any misrepresentation, breach of warranty or breach or
nonfulfillment of any agreement or covenant of Seller or any Shareholder
contained in this Agreement.
(b) all Liabilities and obligations of, or claims, demands or actions
against, Seller or the Transferred Assets, whether known or unknown, accrued,
absolute, contingent or otherwise (including, without limitation, Liabilities
related to Taxes), existing as of the date of this Agreement, in any case under
this Section 6.2(b) to the extent not an Assumed Obligation;
(c) the ownership, operation or conduct of the business of Seller
prior to the Closing Date, except for the Assumed Liabilities; and
(d) any and all Claims, suits, proceedings, claims, demands,
assessments, judgments, fees and expenses, incident to any of the foregoing or
incurred in investigating or attempting to avoid any Claims, suits, proceedings,
demands, assessments,
-30-
judgments, fees and expenses or to oppose the imposition of any Claims, suits,
proceedings, demands, assessments, judgments, fees and expenses, or in enforcing
this Agreement, including the provisions of this Article VI.
6.3 INDEMNIFICATION BY BUYER.
-------------------------
In accordance with and subject to the provisions of this Article VI, Buyer
("SELLER INDEMNITOR") will indemnify and hold harmless Seller and the
Shareholders, and their respective Affiliates, officers, directors, agents and
employees (the "SELLER INDEMNITEES"), for any Indemnified Losses suffered or
incurred by one or more of such Seller Indemnitees by reason of, or arising out
of:
(a) any misrepresentation, breach of warranty or breach or
nonfulfillment of any agreement of Buyer contained in this Agreement;
(b) the failure of Buyer to perform any Assumed Obligations with
respect to periods after the Closing, in any case under this Section 6.3(b) to
the extent not an Excluded Obligation; and
(c) any and all Claims, suits, proceedings, demands, assessments,
judgments, fees and expenses, incident to any of the foregoing or incurred in
investigating or attempting to avoid any Claims, suits, proceedings, demands,
assessments, judgments, fees and expenses or to oppose the imposition of any
Claims, suits, proceedings, demands, assessments, judgments, fees and expenses,
or in enforcing this Agreement, including the provisions of this Article VI.
6.4 LIMITATIONS ON AMOUNT.
----------------------
(a) Seller and the Shareholders shall have no liability for
indemnification under this Article VI with respect to any Indemnified Loss on
account of a breach of a representation or warranty set forth in Section 3.1
until the aggregate of all such Indemnified Losses exceeds $25,000 (the
"LIABILITY THRESHOLD"), and then after the Liability Threshold has been
exceeded, Seller and all of the Shareholders, jointly and severally, shall be
responsible for all such Indemnified Losses from the first dollar of Indemnified
Loss, without regard to the Liability Threshold. Anything to the contrary
notwithstanding, Seller and each of the Shareholders shall have no liability for
indemnification under this Article VI on account of a breach of a representation
or warranty set forth in Section 3.1 other than to the extent that Buyer or
Parent may exercise their respective rights of offset under Section 6.6 hereof
(the "INDEMNIFICATION LIMIT").
(b) Notwithstanding anything to the contrary set forth in Section
6.4(a) hereof, the limitations set forth in said Section 6.4(a) shall not apply
to any claim by Buyer or other Buyer Indemnitee with respect to a claim for
indemnification with respect to (i) the representations or warranties set forth
in Section 3.1(d) (Taxes) or; (ii) any claim for indemnification based upon
fraud.
(c) Buyer shall have no liability for indemnification for any
Indemnified Losses on account of any breach of any representation or warranty
set forth in Section 3.2 until
-31-
the Liability Threshold has been exceeded, and after the Liability Threshold has
been exceeded Buyer shall be responsible for all such Indemnified Losses from
the first dollar of Indemnified Loss without regard to the Liability Threshold;
provided that Buyer shall have no liability for indemnification hereunder to the
extent the aggregate amount of such Indemnified Losses exceeds the value of the
Indemnification Limit.
6.5 DEFENSE OF CLAIMS.
-----------------
(a) If any Claim by a third party arises after the Closing Date for
which Buyer Indemnitors may be liable under the terms of this Agreement, then
Seller Indemnitees will notify Buyer Indemnitors in accordance with the
provisions of this Section, and will give such Buyer Indemnitors a reasonable
opportunity: (i) to conduct any proceedings or negotiations in connection with
the Claim and necessary or appropriate to defend such Seller Indemnitees; (ii)
to take all other steps or proceedings required to settle or defend any Claim;
and (iii) to employ counsel reasonably acceptable to such Seller Indemnitees to
contest any Claim in the name of such Seller Indemnitees or otherwise. Subject
to Section 6.5(g), the expenses of all proceedings, contests or lawsuits with
respect to the Claims will be borne by Buyer Indemnitors.
(b) If any Claim by a third party arises after the Closing Date for
which Seller Indemnitors may be liable under the terms of this Agreement, then
the Buyer Indemnitee will notify the Seller Indemnitors in accordance with the
provisions of this Section, and will give such Seller Indemnitors a reasonable
opportunity: (i) to conduct any proceedings or negotiations in connection with
the Claim and necessary or appropriate to defend the such Buyer Indemnitees;
(ii) to take all other steps or proceedings required to settle or defend any
Claim; and (iii) to employ counsel reasonably acceptable to such Buyer
Indemnitees to contest any Claim in the name of such Seller Indemnitees or
otherwise. Subject to Section 6.5(g), the expenses of all proceedings, contests
or lawsuits with respect to the Claims will be borne by Seller Indemnitors.
(c) Notwithstanding Section 6.5(a) or (b), if (i) a Buyer Indemnitee
or a Seller Indemnitee determines in good faith that there is a reasonable
probability that such a Claim may adversely affect it or its Affiliates other
than as a result of monetary damages for which it would be entitled to
indemnification hereunder, or (ii) the Claim seeks injunctive or similar relief,
or (iii) the Claim brought or initiated by a Governmental Authority, such
Indemnitee may, by notice to Buyer Indemnitor or the Seller Indemnitor, as
applicable, assume the exclusive right to defend, compromise or settle such
Claim, and such Indemnitor shall be obligated to reimburse the legal fees, costs
and expenses of that defense.
(d) If Buyer Indemnitor or Seller Indemnitor does not assume the
defense of, or if after so assuming such Indemnitor fails to defend, any such
Claims, then Buyer Indemnitees or Seller Indemnitees, as applicable, may defend
against any Claims in the manner they may deem appropriate and such Indemnitees
may settle any Claims on the terms they deem appropriate, and such Indemnitor
will promptly reimburse such Indemnitees for the amount of all expenses, legal
and otherwise, reasonably and necessarily incurred by such Indemnitees in
connection with the defense against and settlement of any Claims. If no
settlement of any Claims are made, such Indemnitor will satisfy any judgment
rendered with respect to any Claim, before
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such Indemnitees are required to do so, and pay all expenses, legal or
otherwise, reasonably and necessarily incurred by such Indemnitees in the
defense of any claim or action.
(e) If a judgment is rendered against any Buyer Indemnitees or Seller
Indemnitees in any Claim covered by the indemnification under this Agreement, or
any Lien in respect of any judgment attaches to any of the assets of any such
Indemnitees, Buyer Indemnitor or Seller Indemnitor, as applicable, will
immediately upon any entry or attachment pay the relevant judgment in full or
discharge the relevant Lien unless, at the expense and direction of such
Indemnitor, an appeal is taken under which the execution of the judgment or
satisfaction of the Lien is stayed. If and when a final judgment is rendered in
any action, such Indemnitor will forthwith pay any judgment or discharge any
Lien before any of such Indemnitees is compelled to do so.
(f) Any notice required to be given to a Buyer Indemnitor or a Seller
Indemnitor pursuant to Section 6.5 shall be given no later than the latter of:
(i) the end of the first half of the term within which an answer or other
response to the Claim is required to be made (the "ANSWER PERIOD") and (ii) two
(2) business days after receipt by a Buyer Indemnitee or a Seller Indemnitee, as
applicable, of notice of the action. Such Indemnitor shall assume the defense of
any Claim, if at all, by notice to such Indemnitees no later than the earlier
of: (i) the end of the second third of the Answer Period and (ii) three (3)
business days prior to the date by which an answer or other response to the
Claim is required to be made. Such Indemnitor's failure to notify such
Indemnitees within the specified time shall be conclusively deemed an election
by such Indemnitor not to assume such defense. Any failure by such Indemnitees
to give the requisite notice within the time specified in this Section 6.5(f)
will not relieve an Indemnitor of the obligation to indemnify Indemnitees
pursuant to this Article VI except to the extent that the defense of any Claim
is materially prejudiced by the delay.
(g) The Indemnitor or the Indemnitee, as appropriate, shall have the
right to participate in the defense of any Claim related to an Indemnified Loss
at its sole cost and expense and the cost and expense of that participation
shall not be a loss that is indemnified.
6.6 OFFSET.
-------
Other than with respect to claims for Indemnified Losses arising out of
fraudulent acts, with respect to which there shall be no limitation of
liability, the sole remedy of Buyer, Parent and any other Buyer Indemnitee to
recover Indemnified Losses under this Article VI shall be to offset Indemnified
Losses against any obligation of Buyer or Parent to pay all or any portion of
the Deferred Parent Shares (based on the fair market value of the Deferred
Parent Shares determined in accordance with Section 2.9(b) hereof).
ARTICLE VII BROKERAGE.
----------
7.1 FINDERS AND BROKERS FEES.
-------------------------
Neither Buyer nor Parent, on the one hand, nor Seller nor any Shareholder,
on the other hand, has dealt with any broker or finder in connection with any of
the transactions contemplated
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by this Agreement, and, insofar as it knows, no broker or other person is
entitled to any compensation including, without limitation, a commission or
finder's fee, in connection with any of these transactions. The parties each
agree to indemnify and hold harmless one another against any loss, Liability,
damage, cost, Claim, or expense incurred by reason of any compensation,
including, without limitation, brokerage, commission, or finder's fee, alleged
to be payable because of any act, omission, or statement of the indemnifying
party.
ARTICLE VIII GENERAL PROVISIONS.
-------------------
8.1 SALES AND TRANSFER TAXES.
-------------------------
Seller shall pay any and all taxes, federal, state, or local, in the nature
of sales, use, transfer gains, conveyance, recording, ad valorem, stamp,
transfer and any similar tax, fee or duty required to be paid in respect of the
conveyance, assignment, or transfer to Buyer of the Transferred Assets and the
other transactions contemplated by this Agreement.
8.2 NO THIRD PARTY BENEFICIARIES.
-----------------------------
Except as expressly set forth herein, nothing in this Agreement is
intended, nor shall it be construed, to confer any rights or benefits upon any
Person (including, but not limited to, any employee or former employee of
Seller) other than the parties hereto, and no other Person shall have any rights
or remedies hereunder.
8.3 EXPENSES OF THE PARTIES.
------------------------
Subject to Section 8.1 hereof, all expenses involved in the preparation,
authorization, and consummation of this Agreement, incurred up to and including
the Closing, including, without limitation, all fees and expenses of agents,
representatives, counsel, and accountants in connection therewith, shall be
borne solely by the party who shall have incurred the same, and the other
parties shall have no liability in respect thereof; provided, however, that
nothing herein shall be construed to release or impair any claim for damages by
any party. No such fees and expenses of Seller are included as Assumed
Obligations.
8.4 AMENDMENT AND WAIVER.
---------------------
This Agreement may not be changed or terminated orally. No waiver of
compliance with any provision or condition hereof, and no consent provided for
herein shall be effective unless evidenced by an instrument in writing duly
executed by the party hereto sought to be charged with such waiver or consent.
8.5 MISCELLANEOUS.
--------------
The Section headings of this Agreement are for convenience of reference
only and do not form a part hereof and do not in any way modify, interpret, or
construe the intentions of the parties. This Agreement may be executed in one or
more counterparts and all such counterparts shall constitute one and the same
instrument.
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8.6 BINDING EFFECT.
---------------
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective administrators, legal representatives,
successors and permitted assigns.
8.7 PUBLICITY.
----------
After the Closing, all general notices, releases, statements and
communications to the general public and the press relating to the transactions
contemplated by this Agreement shall be made only at such times and in such
manner as may be determined by Parent or Buyer.
8.8 COMPLETE AGREEMENT.
-------------------
This Agreement and the Exhibits and Schedules and other documents referred
to herein contain the entire agreement between the parties hereto with respect
to the transactions contemplated herein and supersede all previous negotiations,
commitments, and writings.
8.9 NOTICES.
--------
Any notice, report, demand, waiver, consent or other communication given by
a party under this Agreement (each a "NOTICE") shall be in writing, may be given
by a party or its legal counsel, and shall be deemed to be duly given (i) when
personally delivered, or (ii) upon delivery by a nationally recognized overnight
courier service which provides evidence of delivery, or (iii) when five (5) days
have elapsed after its transmittal by registered or certified mail, postage
prepaid, return receipt requested, addressed to the party at that party's
address as it appears below or another address of which that party has given
notice, or (iv) when delivered by facsimile transmission if a copy thereof is
also delivered in person or by overnight courier. Notices of address change
shall be effective only upon receipt notwithstanding the provisions of the
foregoing sentence.
Notice to Parent or Buyer shall be sufficient if given to:
Silverstar Holdings, Ltd.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxxxxxx
Fax: (000) 000-0000
With a copy to:
Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
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Notice to Seller or to any Shareholder shall be sufficient if given to the
Representative at:
0000 Xxxxxxx
Xx. 000
Xxxxxxxx, Xxxxxxxxxx 00000
8.10 ASSIGNMENT.
-----------
Except as expressly provided herein, this Agreement and any rights pursuant
hereto shall not be assignable by any party without the prior written consent of
the other party. Except as provided in the previous sentence, this Agreement and
all of the rights and obligations hereunder shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
8.11 SEVERABILITY.
-------------
If any term or provision of this Agreement shall be held to be invalid or
unenforceable for any reason, such term or provision shall be ineffective to the
extent of such invalidity or unenforceability without invalidating the remaining
terms and provisions hereof, and this Agreement shall be construed as if such
invalid or unenforceable term or provisions had not been contained herein.
8.12 CHOICE OF LAW; CHOICE OF FORUM.
-------------------------------
(a) APPLICABLE LAW.
---------------
All questions concerning the construction, validity, and interpretation of
this Agreement and the performance of the obligations imposed by this Agreement
shall be governed by the internal law, not the law of conflicts, of the State of
New York, United States of America.
(b) DISPUTE RESOLUTION.
-------------------
Any and all disputes arising out of or related to this Agreement
including, without limitation, questions concerning the construction,
enforceability, validity, and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement, and any dispute which
relates to the confidential or proprietary information of any party hereto, will
be initially mediated in accordance with the dispute resolution procedures set
forth below. No provision of, or the exercise of any rights, under Section 8.13
shall limit the right of any party to pursue all legal remedies available to it,
or obtain provisional or ancillary remedies such as injunctive relief from a
court having jurisdiction before, during or after the pendency of any
alternative dispute resolution.
8.13 ARBITRATION.
------------
(a) In case any party ("First Party") shall so object to any claim or
claims by another party ("Second Party"), the Second Party shall have thirty
(30) days after receipt of an objection by the First Party to respond in a
written statement to the objection of the First Party. If
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after such thirty (30) day period there remains a dispute as to any claims, the
First Party and the Second Party shall attempt in good faith for forty-five (45)
days to agree upon the rights of the respective parties with respect to each of
such claims. If the First Party and the Second Party should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties.
(b) If no such agreement can be reached after good faith negotiation,
either party may, by written notice to the other, demand arbitration of the
matter unless the amount of the damage or loss is at issue in pending litigation
with a third party, in which event arbitration shall not be commenced until such
amount is ascertained or both parties agree to arbitration; and in either such
event the matter shall be settled by arbitration conducted by three arbitrators.
Within fifteen (15) days after such written notice is sent, the parties shall
each select one arbitrator, and the two arbitrators so selected shall select a
third arbitrator. The decision of the arbitrators as to the validity and amount
of any claim shall be binding and conclusive upon the parties to this Agreement.
Judgment upon any award rendered by the arbitrators may be entered in any
court having jurisdiction. Any such arbitration shall be held in the State of
New York under the commercial arbitration rules then in effect of the American
Arbitration Association. For purposes of this Section 11.13, in any arbitration
hereunder in which any claim or the amount thereof stated is at issue, the First
Party shall be deemed to be the "Non-Prevailing Party" unless the arbitrators
award the First Party at least one-half (1/2) of the amount in dispute, plus any
amounts not in dispute; otherwise, the Second Party shall be deemed to be the
Non-Prevailing Party. The Non-Prevailing Party to an arbitration shall pay its
own expenses, the fees of each arbitrator, the administrative fee of the
American Arbitration Association, and the expenses, including without
limitation, attorneys' fees and costs, reasonably incurred by the other party to
the arbitration.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed by their respective authorized officer, as the
case may be, as of the date first above written.
STUDENT SPORTS INC., a Delaware corporation
By: /s/ Xxxxx Xxxxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chairman
SILVERSTAR HOLDINGS, LTD.
By: /s/ Xxxxx Xxxxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: CEO
STUDENT SPORTS, INC. a California corporation
By: /s/ Xxxxxx Bark
------------------------------------------
Name: Xxxxxx Bark
Title: CEO
[SIGNATURE PAGE - ASSET PURCHASE AGREEMENT]
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SHAREHOLDERS:
/s/ Xxxxxx Bark
------------------------------------------
XXXXXX BARK
INTERNET PARTNERSHIP GROUP
By: /s/ Xxxxxxx Xxxxxxx
------------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Director
/s/ Xxxxxxx Xxxxxxxxx
------------------------------------------
XXXXXXX XXXXXXXXX
/s/ Xxxxx Xxxxx
------------------------------------------
XXXXX XXXXX
XXXXXX XXXXXXXX FAMILY TRUST
By: /s/ Xxxxxxxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxxx
Title: Trustee
/s/ Xxxxxxx Xxxxx
------------------------------------------
XXXXXXX XXXXX
[SIGNATURE PAGE - ASSET PURCHASE AGREEMENT]
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