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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
STUDENT ADVANTAGE, INC.,
XXX.XXX, INC.
AND
THE OTHER PARTIES NAMED HEREIN
--------------------
AS OF MAY 10, 2001
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TABLE OF CONTENTS
Page
ARTICLE I THE ASSET PURCHASE....................................................................................1
1.1 Purchase and Sale of Assets..............................................................................1
1.2 Liabilities..............................................................................................3
1.3 Base Purchase Price......................................................................................4
1.4 The Closing..............................................................................................5
1.5 Allocation...............................................................................................7
1.6 Performance-Related Adjustment of Purchase Price.........................................................7
1.7 Certain E-Commerce Transactions..........................................................................8
1.8 Further Assurances.......................................................................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER..........................................................9
2.1 Organization, Qualification and Corporate Power..........................................................9
2.2 Indebtedness............................................................................................10
2.3 Authorization of Transaction............................................................................10
2.4 Noncontravention........................................................................................10
2.5 Subsidiaries............................................................................................10
2.6 Financial Information...................................................................................11
2.7 Absence of Certain Changes..............................................................................11
2.8 Undisclosed Liabilities.................................................................................12
2.9 Tax Matters.............................................................................................12
2.10 Ownership and Condition of Assets.......................................................................13
2.11 Books and Records.......................................................................................14
2.12 Real Estate.............................................................................................14
2.13 Intellectual Property...................................................................................14
2.14 Inventory...............................................................................................15
2.15 Contracts...............................................................................................15
2.16 Insurance...............................................................................................17
2.17 Litigation..............................................................................................17
2.18 Warranties..............................................................................................17
2.19 Employees...............................................................................................17
2.20 Employee Benefits.......................................................................................18
2.21 Environmental Matters...................................................................................19
2.22 Legal Compliance........................................................................................20
2.23 Customers and Suppliers.................................................................................20
2.24 Permits.................................................................................................20
2.25 Certain Business Relationships With Affiliates..........................................................20
2.26 Brokers' Fees...........................................................................................20
2.27 Investment Representation...............................................................................21
2.28 Disclosure..............................................................................................21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER..........................................................22
3.1 Organization, Qualification and Corporate Power.........................................................22
3.2 Capitalization..........................................................................................22
3.3 Authorization of Transaction............................................................................23
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3.4 Noncontravention........................................................................................23
3.5 Reports and Financial Statements........................................................................23
3.6 Absence of Material Adverse Change......................................................................24
3.7 Brokers' Fees...........................................................................................24
3.8 Disclosure..............................................................................................24
ARTICLE IV INDEMNIFICATION......................................................................................24
4.1 Indemnification by the Stakeholders.....................................................................24
4.2 Indemnification Claims..................................................................................25
4.3 Survival of Representations and Warranties..............................................................26
4.4 Limitations.............................................................................................27
ARTICLE V POST-CLOSING AGREEMENTS..............................................................................28
5.1 Proprietary Information.................................................................................28
5.2 No Solicitation or Hiring of Former Employees...........................................................28
5.3 Non-Competition Agreement...............................................................................28
5.4 Sharing of Data.........................................................................................29
5.5 Nasdaq Listing..........................................................................................29
5.6 Use of Name.............................................................................................29
5.7 Expenses................................................................................................29
5.8 Restrictions on Transfer................................................................................30
5.9 Solvency................................................................................................30
5.10 Reservation of the Shares...............................................................................31
5.11 Employee Matters and Option Grants......................................................................31
ARTICLE VI DEFINITIONS..........................................................................................32
ARTICLE VII MISCELLANEOUS........................................................................................34
7.1 Transfer and Sales Tax..................................................................................34
7.2 Press Releases and Announcements........................................................................34
7.3 No Third Party Beneficiaries............................................................................35
7.4 Entire Agreement........................................................................................35
7.5 Successors and Assigns..................................................................................35
7.6 Counterparts and Facsimile Signature....................................................................35
7.7 Headings................................................................................................35
7.8 Notices.................................................................................................35
7.9 Governing Law...........................................................................................36
7.10 Certain Provisions Regarding Stakeholders...............................................................36
7.11 Amendments and Waivers..................................................................................36
7.12 Severability............................................................................................36
7.13 Dispute Resolution......................................................................................36
7.14 Construction............................................................................................38
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Exhibit A-1 - Form of Buyer Warrant I
Exhibit A-2 - Form of Buyer Warrant II
Exhibit A-3 - Form of Performance Warrant
Exhibit B - Form of Sublease
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ASSET PURCHASE AGREEMENT
Agreement entered into as of May 10, 2001 by and among Student Advantage,
Inc., a Delaware corporation (the "Buyer"), xxx.xxx, a Delaware corporation (the
"Seller"), and those debtholders of the Seller who are listed on the signature
page of this Agreement under the caption "Stakeholders" (the "Stakeholders").
The Buyer, the Seller and the Stakeholders are referred to collectively herein
as the "Parties."
This Agreement contemplates a transaction in which the Buyer will purchase
substantially all of the assets and assume certain of the liabilities of the
Seller.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE ASSET PURCHASE
1.1 Purchase and Sale of Assets.
(a) ACQUIRED ASSETS. Upon and subject to the terms and conditions of
this Agreement, the Buyer shall purchase from the Seller, and the Seller shall
sell, transfer, convey, assign and deliver to the Buyer, at the Closing (as
defined in Section 1.4(a)), for the consideration specified below in this
Article I, all right, title and interest in, to and under all of the assets of
the Seller existing as of the Closing (collectively, the "Acquired Assets"),
including without limitation:
(i) any inventories of raw materials, work in process, finished
goods, supplies, packaging materials, spare parts and similar items, wherever
located, including consignment inventory and inventory held on order or in
transit;
(ii) all equipment, tools, furniture, fixtures, leasehold
improvements, motor vehicles and other tangible personal property;
(iii) all (A) patents, patent applications, patent disclosures
and all related continuation, continuation-in-part, divisional, reissue,
re-examination, utility model, certificate of invention and design patents,
patent applications, registrations and applications for registrations, (B)
trademarks, service marks, trade dress, internet domain names, logos, trade
names and corporate names and registrations and applications for registration
thereof, (C) copyrights and registrations and applications for registration
thereof, (D) mask works and registrations and applications for registration
thereof, (E) computer software, data and documentation (including without
limitation the Seller's e-commerce engine and the Seller's licenses of
technology from Epiphany and Microsoft), (F) trade secrets and confidential
business information, whether patentable or nonpatentable and whether or not
reduced to practice, know-how, manufacturing and product processes and
techniques, research and development information, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information, (G) other
proprietary rights relating to any of the foregoing (including without
limitation
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remedies against infringements thereof and rights of protection of interest
therein under the laws of all jurisdictions) and (H) copies and tangible
embodiments thereof, including without limitation those trademark applications
and domain name registrations listed on SCHEDULE 1.1(a) (collectively,
"Intellectual Property");
(iv) except as provided in Sections 1.1(b)(v), (vi) and (vii),
all rights under contracts, agreements or instruments to which the Seller is a
party, including without limitation any agreements or instruments securing any
amounts owed to the Seller, and any licenses or sublicenses relating to
Intellectual Property (collectively, the "Assigned Contracts");
(v) all securities owned by the Seller, including securities of
its subsidiaries;
(vi) all claims, prepayments, refunds, causes of action, choses
in action, rights of recovery, rights of setoff and rights of recoupment and
rights under warranties relating to the Assumed Contracts but excluding such
items relating to Retained Assets, and excluding any such item relating to the
payment of Taxes (as defined in Section 2.9);
(vii) all permits, licenses, registrations, certificates, orders,
approvals, franchises, variances and similar rights ("Permits") issued by or
obtained from any court, arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency (a
"Governmental Entity"); and
(viii) copies of all books, records, accounts, ledgers, files,
documents, correspondence, lists, employment records (other than confidential
records the disclosure of which is prohibited by law), manufacturing and
procedural manuals, advertising and promotional materials, studies, reports and
other printed or written materials.
(b) RETAINED ASSETS. Notwithstanding the provisions of Section
1.1(a), the Acquired Assets shall not include the following assets (the
"Excluded Assets"):
(i) the corporate charter, qualifications to conduct business as
a foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books and other documents relating to the organization and
existence of the Seller as a corporation;
(ii) any of the rights of the Seller under this Agreement or
under the xxxx of sale and other instruments of conveyance referred to in
Section 1.4(b)(vi), and the instrument of assumption and other instruments
referred to in Section 1.4(b)(ii) (the "Ancillary Agreements");
(iii) all cash, cash equivalent instruments, short-term
investments, marketable securities, deposits, bank accounts and other similar
assets;
(iv) all trade and other accounts receivable and notes receivable
that are payable to the Seller;
(v) any employment agreements;
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(vi) any leases or subleases of real property; and
(vii) those assets listed on SCHEDULE 1.1(b) attached hereto.
1.2 LIABILITIES.
(a) ASSUMED LIABILITIES. Upon and subject to the terms and conditions
of this Agreement, the Buyer shall assume and become responsible for, from and
after the Closing, (i) all liabilities relating to E-commerce transactions which
occur after 11:59 p.m. on the date hereof as provided in Section 1.4, (ii) all
payment obligations of the Seller arising after the Closing under the Assigned
Contracts and all other obligations under the Assigned Contracts, whenever
arising (provided that if the Seller has received payment of $1,000 or more for
services not yet performed under any such Assigned Contract, it shall pay such
amount to the Buyer in the same manner as is provided in Section 1.4), (iii)
those obligations of the Seller under the Lincoln Street Lease (as defined in
Section 1.4(b)(xiv) which are to be assumed by the Buyer under the Sublease
referred to in Section 1.4(b)(xiv), and (iv) those liabilities set forth on
Schedule 1.2(a)(iv) (collectively, the "Assumed Liabilities").
(b) RETAINED LIABILITIES. The Buyer shall not assume or become
responsible for, and the Seller shall remain liable for, any and all liabilities
or obligations (whether known or unknown, whether absolute or contingent,
whether liquidated or unliquidated, whether due or to become due, and whether
claims with respect thereto are asserted before or after the Closing) of the
Seller which are not Assumed Liabilities (collectively, the "Retained
Liabilities"). The Retained Liabilities shall include, without limitation, the
following:
(i) all liabilities of the Seller for income, transfer, sales,
use or other Taxes arising in connection with the consummation of the
transactions contemplated by this Agreement (including without limitation any
income Taxes arising as a result of the transfer by the Seller to the Buyer of
the Acquired Assets;
(ii) all liabilities of the Seller for costs and expenses
incurred in connection with this Agreement or the consummation of the
transactions contemplated by this Agreement;
(iii) all liabilities or obligations of the Seller under this
Agreement or the Ancillary Agreements;
(iv) all liabilities of the Seller for any Taxes, including
without limitation deferred taxes or taxes measured by income of the Seller
earned prior to the Closing, any liabilities for federal or state income tax and
FICA taxes of employees of the Seller which the Seller is legally obligated to
withhold prior to the Closing, any liabilities for employer FICA and
unemployment taxes incurred prior to the Closing, and any liabilities for sales,
use or excise taxes or customs and duties incurred prior to the Closing;
(v) all liabilities and obligations of the Seller under any
agreements, contracts, leases or licenses which are described under Sections
1.1(b)(v) and (vi) or listed on SCHEDULE 1.1(b);
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(vi) except as provided in Section 1.2(a), all obligations of the
Seller arising prior to the Closing under the Assigned Contracts, and all
liabilities for any breach, act or omission by the Seller prior to the Closing
under any Assigned Contract;
(vii) any obligations of the Seller for remediation of services
rendered or sold prior to the Closing;
(viii) all liabilities and obligations of the Seller arising out
of events, conduct or conditions existing or occurring prior to the Closing that
constitute a violation of or non-compliance with any law, rule or regulation
(including without limitation Environmental Laws (as defined in Section
2.21(a)), any judgment, decree or order of any Governmental Entity, or any
Permit;
(ix) all liabilities and obligations of the Seller, whether
arising before or after the Closing, under any Employee Benefit Plan (as defined
in Section 2.20(d));
(x) all liabilities or obligations of the Seller to pay severance
benefits to any former employee or employee of the Seller whose employment is
terminated (or treated as terminated) in connection with the consummation of the
transactions contemplated by this Agreement or otherwise, and all liabilities
resulting from the termination of employment of employees of the Seller prior to
the Closing that arose under any federal, state or local law or regulation under
any Employee Benefit Plan established or maintained by the Seller, except for
amounts payable (and not theretofore paid or required to be paid by the Seller
pursuant to Section 1.4(xx)) to former employees of the Seller whom the Buyer
elects to hire and who have remained employees of the Buyer for a period of 90
days prior to termination of their employment with the Buyer;
(xi) all liabilities of the Seller for injury to or death of
persons or damage to or destruction of property occurring prior to the Closing
(including without limitation any workers compensation claim);
(xii) all liabilities of the Seller for medical, dental and
disability (both long-term and short-term benefits), whether insured or
self-insured, owed to employees or former employees of the Seller based upon (A)
exposure to conditions in existence prior to the Closing or (B) disabilities
existing prior to the Closing (including any such disabilities which may have
been aggravated following the Closing); and
(xiii) except as set forth in Section 1.2(a) hereof, all trade
payables and other liabilities of the Seller to the extent that they have not
been paid or discharged prior to the Closing.
1.3 BASE PURCHASE PRICE. The base purchase price to be paid by the Buyer
for the Acquired Assets at the Closing shall be (i) 90,000 shares (the "Shares")
of common stock, par value $.01 per share, of the Buyer (the "Common Stock"),
(ii) a warrant ("Buyer Warrant I") in the form attached hereto as EXHIBIT A-1 to
purchase 225,000 shares of the Common Stock at a purchase price equal to the
average closing price of the Common Stock for the 30 trading days ending on the
second trading day prior to the Closing Date (as defined in Section 1.4(a)) as
reported on the Nasdaq National Market (the "Average Closing Price"), (iii) a
warrant ("Buyer
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Warrant II") in the form attached hereto as EXHIBIT A-2 to purchase 225,000
shares of the Common Stock at a purchase price equal to 150% of the Average
Closing Price and (iv) cancellation of that certain secured promissory note,
dated March 22, 2001, made by the Seller in favor of the Buyer (the "Secured
Promissory Note"). The Shares, Buyer Warrant I, Buyer Warrant II, the
Performance Warrant referred to in Section 1.6 and the shares of Common Stock
for which Buyer Warrant I, Buyer Warrant II and the Performance Warrant may be
exercised are referred to collectively herein as the "Securities." The Shares,
Buyer Warrant I, Buyer Warrant II, the Performance Warrant, the cancellation of
the Secured Promissory Note, the Buyer's assumption of the Assumed Liabilities
and Buyer's payment to the Seller at Closing of $26,000 in cash (which cash the
Seller shall use to pay in full $26,000 of obligations of the Seller to parties
to the Assigned Contracts or such lesser amount of obligations of Seller to
parties to the Assigned Contracts as may exist on the date hereof, in which case
Seller shall use the balance of such cash as it deems appropriate) are referred
to collectively as the "Purchase Price".
1.4 THE CLOSING.
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Xxxx and Xxxx LLP in Boston,
Massachusetts, commencing at 10:00 a.m. local time on the date hereof (the
"Closing Date").
(b) At the Closing:
(i) the Buyer shall pay to the Seller the Purchase Price as
specified in Section 1.3 by (x) holding as pledgee the certificates evidencing
the Shares, Buyer Warrant I and Buyer Warrant II, all registered in the name of
the Seller and (y) delivering the Secured Promissory Note, marked canceled;
(ii) the Buyer shall execute and deliver to the Seller an
instrument of assumption and such other instruments as the Seller may reasonably
request in order to effect the assumption by the Buyer of the Assumed
Liabilities;
(iii) the Buyer shall deliver to the Seller a certificate of the
Secretary of State of the State of Delaware as to the legal existence and good
standing (including tax) of the Buyer in Delaware;
(iv) the Buyer shall deliver to the Seller certificates of the
Secretary of the Buyer attesting to the incumbency of the Buyer's officers,
respectively, the authenticity of the resolutions authorizing the transactions
contemplated by the Agreement, and the authenticity and continuing validity of
the charter documents referred to in Section 3.1;
(v) the Seller shall execute and deliver to the Buyer a xxxx of
sale and such other instruments of conveyance (such as trademark assignments,
assigned certificates or documents of title and stock transfer powers) as the
Buyer may reasonably request in order to effect the sale, transfer, conveyance
and assignment to the Buyer of valid ownership of the Acquired Assets;
(vi) the Seller shall deliver to the Buyer, or otherwise put the
Buyer in possession and control of, all of the Acquired Assets of a tangible
nature;
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(vii) the Seller shall deliver to the Buyer all technical data,
formulations, product literature and other documentation relating to the
Seller's business, all in form and substance satisfactory to the Buyer;
(viii) the Seller shall deliver to the Buyer such contracts,
files and other data and documents pertaining to the Acquired Assets or the
Seller's business as the Buyer may reasonably request;
(ix) the Seller shall deliver to the Buyer copies of the general
ledgers and books of account of the Seller, and all federal, state and local
income, franchise, property and other tax returns filed by the Seller with
respect to the Assets since inception;
(x) the Seller shall execute and deliver to the Buyer a pledge
agreement (the "Pledge Agreement") and such other instruments as the Buyer may
reasonably request in order to effect the pledge to the Buyer of all of the
Securities;
(xi) the Seller shall deliver to the Buyer a certificate of the
Secretary of State of the State of Delaware as to the legal existence and good
standing (including tax) of the Seller in Delaware;
(xii) the Seller shall deliver to the Buyer certificates of the
Secretary of the Seller attesting to the incumbency of the Seller's officers,
respectively, the authenticity of the resolutions authorizing the transactions
contemplated by the Agreement, and the authenticity and continuing validity of
the charter documents delivered pursuant to Section 2.1;
(xiii) Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, counsel to the Seller,
shall have delivered to the Seller an opinion dated as of May 2, 2001, a copy of
which has heretofore been reviewed by the Buyer;
(xiv) the Seller and the Buyer shall have agreed upon and
attached hereto as EXHIBIT B a form of Sublease of premises (the "Premises") at
000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx (the "Lincoln Street Lease");
(xv) Xxxxx Xxxxxx, Xxx Xxxxxxxxxx, Xxxxx Xxxxxxx, Xxxx Xxxxxx,
Xxxxxx Xxxxx and Xxxxxxx Xxxx shall each have entered into employment
arrangements satisfactory to the Buyer, containing non-competition and
non-solicitation covenants;
(xvi) the Seller shall pay to each of its employees who is
contractually entitled to a retention bonus upon consummation of the
transactions contemplated by the Agreement the respective amount set forth next
to his or her name on SCHEDULE 1.4(b)(XVI) or to each such employee a lesser
amount in exchange for a full release of any and all claims against the Seller
and the Buyer, fully satisfactory in form and substance to the Buyer;
(xvii) the Seller shall have paid all required severance
benefits, cash for accrued vacation and similar amounts to all of its employees
that it has terminated prior to the date hereof, except for Xxxxxxx X. Xxxxxx,
Xxxxx Xxxxxx, Xxxxx Xxxxxx and Xxxx Xxxxxx, each of whom shall have executed and
delivered to the Seller a full written release of any and all claims that he or
she may have against the Seller; and
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(xviii) the Buyer and the Seller shall execute and deliver to
each other a cross-receipt evidencing the transactions referred to above.
1.5 ALLOCATION. The Buyer and the Seller agree to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes). The Secured
Promissory Note shall be the purchase price for those Acquired Assets which are
currently collateral for the Secured Promissory Note and the remainder of the
Purchase Price shall be the purchase price for the other Acquired Assets.
1.6 PERFORMANCE-RELATED ADJUSTMENT OF PURCHASE PRICE. The Purchase Price
set forth in Section 1.3 shall be subject to adjustment after the Closing Date
(if the conditions set forth below are satisfied) as follows:
(a) On March 31, 2002 (or such later date as is required under
Section 1.6(c)), the Buyer will issue, and hold as pledgee, a warrant registered
in the name of the Seller in the form attached hereto as EXHIBIT A-3 (the
"Performance Warrant") to purchase the following number of shares of Common
Stock (but in no event more than 1,000,000 shares) at a purchase price per share
equal to the Average Closing Price, if the Buyer attains the following amounts
of Gross Margin from Qualifying Revenues (as hereinafter defined):
Total Number of Shares Covered by the
Gross Margin from Qualifying Revenues Performance Warrant
-------------------------------------------------------- -------------------------------------
Less than $400,000 0
At least $400,000 but less than $900,000 333,334
At least $900,000 but less than $1,400,000 666,667
At least $1,400,000 1,000,000
(b) "Gross Margin" and "Revenues" are defined as gross margin and
revenues calculated and recognized in accordance with generally accepted
accounting principles applied on a basis consistent with the Buyer's past
practices in calculating and recognizing Gross Margin and Revenues. "Qualifying
Revenues" are defined as revenues directly attributable to the sales of
hardware, software, electronics and peripheral products sold through the
electronic commerce tool developed by the Seller and acquired by the Buyer
pursuant to this Agreement or through any third party web site with whom the
Seller's business under the Buyer's ownership of the Seller has a contractual
relationship to sell electronics, hardware, software, and peripheral products
between the date hereof and December 31, 2001; PROVIDED, HOWEVER, that Gross
Margin from Qualifying Revenues shall exclude gross margin attributable to
media, merchandising and marketing revenues earned by the Buyer related to the
electronics, hardware, software and peripheral product categories.
(c) No later than February 28, 2002, the Buyer shall prepare and
deliver to Seller and Stakeholders the calculation of the Gross Margin, as
determined in accordance with this Section 1.6. The calculation of the Gross
Margin shall be final and binding upon the Seller and the representative of the
Stakeholders appointed pursuant to Section 13 of the Pledge Agreement unless
Seller within thirty (30) days of receipt of the calculation notifies the Buyer
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that the calculation is in dispute. In such case the parties shall discuss and
try to resolve the dispute in good faith. In the event the parties are unable to
resolve the dispute within ten (10) days of receipt by the Buyer of the notice
of dispute then they or any of the parties may submit a statement setting forth
the issue of disagreement to a mutually agreed upon certified public accounting
firm for a binding and nonappealable determination to be rendered within thirty
(30) days after such submission. Such accounting firm shall have the right to
review, on a confidential basis, the Buyer's records relating to gross revenues
and other items referred to in Section 1.6(b) as they relate to Gross Margins
from Qualifying Revenues. Such accounting firm's fees and expenses shall be
borne 50% by the Seller and 50% by the Buyer. The Seller shall also have the
right to retain, at its sole expense, accountants to investigate the facts
involved in such disputes.
(d) All managerial decisions regarding the conduct of the Buyer's
business shall be made by the Buyer in its sole discretion, and nothing
contained in this Agreement shall require the Buyer to market, promote, produce,
finance or otherwise support the products described in Section 1.6(b) or, if it
elects to do so, to deal with such products in any particular manner.
1.7 CERTAIN E-COMMERCE TRANSACTIONS. E-commerce purchase and sale
transactions shall be for the account of the Seller or the Buyer depending on
whether they occur before or after 11:59 p.m. on the date hereof. All aspects of
each transaction, including recognition of revenues, risk of collection, and
payment of costs, shall be allocated to the Seller or to the Buyer based upon
this criterion. The Seller and the Buyer shall account to one another at least
weekly and each party shall within 15 business days remit any payments received
by it that are allocable to the other party hereunder and reimburse the other
party for any costs paid by such other party if such costs are allocable to it,
rather than to such other party.
1.8 FURTHER ASSURANCES. At any time and from time to time after the
Closing, at the request of the Buyer and without further consideration, the
Seller shall execute and deliver such other instruments of sale, transfer,
conveyance and assignment and take such action as the Buyer may reasonably
determine is necessary to transfer, convey and assign to the Buyer, and to
confirm Buyer's rights to, title in and ownership of, the Acquired Assets and to
place the Buyer in actual possession and operating control thereof, including
using its best efforts to diligently and repeatedly contact any third parties to
Assigned Contracts whose consent is required to the assignment of such Contracts
to seek to obtain such consents; PROVIDED, HOWEVER, that the Buyer may, in its
sole discretion, elect to treat or not to treat as an Assigned Contract any
contract not listed in SCHEDULE 1.1(b) hereto whose existence is made known to
the Buyer after the Closing Date. The Seller and the Buyer shall enter into the
Sublease, substantially in the form attached hereto as EXHIBIT B, on or prior to
May 11, 2001. The Seller shall deliver the Sublease, together with a request for
consent of the landlord to the Sublease in the form delivered at the Closing
pursuant to Section 1.4(b)(xiv), to the landlord on or prior to May 15, 2001,
and shall use its best efforts to obtain the consent of the landlord to the
Sublease. At any time and from time to time after the date hereof, at the
request of the Buyer and without further consideration, the Seller hereby agrees
to execute and deliver such other documents and take such action as the Buyer
may reasonably determine is necessary to obtain the consent of the landlord to
the Sublease. The Seller shall maintain its corporate existence for so long as
the Sublease is in effect and shall provide financial statements to the
landlord, maintain insurance policies in effect and take such
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other steps as shall be reasonably necessary to keep the lease and the Sublease
in effect without breaches or defaults thereof. The Seller shall not provide
access to the Premises to any person without the prior written consent of the
Buyer. The Seller shall not enter into any other sublease involving the Premises
with any person other than the Buyer or its designees.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule provided by the Seller to the Buyer on the date hereof and
accepted in writing by the Buyer (the "Disclosure Schedule"). The Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article II, and the disclosures in any
paragraph of the Disclosure Schedule shall qualify other paragraphs in this
Article II only to the extent it is clear from a reading of the disclosure that
such disclosure is applicable to such other paragraphs. For purposes of this
Article II, the phrase "to the knowledge of the Seller" or any phrase of similar
import shall be deemed to refer to the actual knowledge of the officers of the
Seller, as well as any other knowledge which such officers would have possessed
had they made diligent inquiry of appropriate employees and agents of the Seller
with respect to the matter in question.
2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Seller is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware. The Seller is duly qualified
to conduct business and is in corporate and tax good standing under the laws of
each jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification except where failure to be
so qualified or in good standing, individually or in the aggregate, has not had
and would not reasonably be expected to have a Seller Material Adverse Effect.
The Seller has all requisite corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. The Seller has furnished to the Buyer complete and accurate copies
of its Certificate of Incorporation and By-laws. The Seller is not in default
under or in violation of any provision of its Certificate of Incorporation or
By-laws.
As used in this Agreement, the term "Seller Material Adverse Effect" means
a material adverse effect on the business, financial condition, properties,
results of operation or prospects of the Seller, provided, however, that none of
the following shall be deemed by itself or by themselves, either alone or in
combination, to constitute a Seller Material Adverse Effect: (a) any change
arising out of conditions affecting the economy or industry of the Seller in
general which does not affect the Seller in a materially disproportionate manner
relative to other participants in the economy or such industry, respectively, or
(b) with respect to the Seller, employee attrition, or delays or cancellations
of projects (or contracts) involving the Seller and any third party (including
any delay or pause in negotiations with such third party) which is attributable
to the announcement of the execution of this Agreement and the transactions
contemplated hereby. Except as set forth in the preceding sentence, a Material
Adverse Effect will be deemed to exist if the "effect" results in or could
reasonably be expected to result in a liability or reduction in value of the
Seller's assets in excess of $50,000.
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2.2 INDEBTEDNESS. The Stakeholders are the only persons, other than the
Buyer and unsecured trade creditors, who hold debt of the Seller. Section 2.2 of
the Disclosure Schedule sets forth a complete list of all such Stakeholders and
the respective amounts of bridge notes, other promissory notes and other debt
securities held by each (the "Outstanding Notes").
2.3 AUTHORIZATION OF TRANSACTION. The execution, delivery and performance
by the Seller of this Agreement and the agreements and instruments contemplated
hereby and the consummation by the Seller of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate or other action. No other corporate act or proceeding on the part of
the Seller or any stockholder or debtholder thereof is necessary to authorize
this Agreement or the other agreements and instruments contemplated hereby, or
the consummation of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by the Seller and constitutes the
valid and binding obligation of the Seller enforceable against the Seller in
accordance with its terms.
2.4 NONCONTRAVENTION. Except as described in Section 2.4 of the Disclosure
Schedule, neither the execution and delivery by the Seller of this Agreement or
the Ancillary Agreements, nor the consummation by the Seller of the transactions
contemplated hereby or thereby, will (a) conflict with or violate any provision
of the Certificate of Incorporation or By-laws of the Seller, (b) require on the
part of the Seller any filing with, or any permit, authorization, consent or
approval of, any Governmental Entity, (c) conflict with, result in a breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of obligations under, create in any party the
right to terminate, modify or cancel, or require any notice, consent or waiver
under, any contract or instrument to which the Seller is a party or by which the
Seller is bound or to which any of its assets is subject, except for (i) any
conflict, breach, default, acceleration, termination, modification or
cancellation which would not have a Seller Material Adverse Effect and would not
adversely affect the consummation of the transactions contemplated hereby or
(ii) any notice, consent or waiver the absence of which would not have a Seller
Material Adverse Effect and would not adversely affect the consummation of the
transactions contemplated hereby, (d) result in the imposition of any Security
Interest (as defined below) upon any assets of the Seller or (e) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Seller or any of its properties or assets. For purposes of this Agreement:
"Security Interest" means any mortgage, pledge, security interest, encumbrance,
charge or other lien (whether arising by contract or by operation of law), other
than (i) mechanic's, materialmen's, and similar liens, (ii) liens arising under
worker's compensation, unemployment insurance, social security, retirement, and
similar legislation and (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the Ordinary Course of
Business (as defined below) of the Seller and not material to the Seller.
"Ordinary Course of Business" means the ordinary course of business of the
Seller's business, consistent with past custom and practice (including with
respect to frequency and amount).
2.5 SUBSIDIARIES. The Seller has no subsidiaries nor any equity or other
beneficial interest in any corporation, partnership, limited liability company,
joint venture or other entity.
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2.6 FINANCIAL INFORMATION.
(a) The Seller has provided to the Buyer the unaudited balance sheets
and statements of income of the Seller as of and for the period from inception
through December 31, 2000 and the two months ended February 28, 2001 (the "Most
Recent Balance Sheet Date"). Such financial statements (collectively, the
"Financial Statements") have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods covered thereby, fairly present the financial condition,
results of operations of the Seller as of the respective dates thereof and for
the periods referred to therein and are consistent with the books and records of
the Seller; provided, however, that the two-month Financial Statements above are
subject to normal recurring year-end adjustments (which will not be material)
and do not include footnotes.
(b) Section 2.6(b) of the Disclosure Schedule contains a complete and
accurate list of all liabilities of the Seller on the date hereof (including
without limitation all claims of employees for wages, fringe benefits, severance
payments or other amounts) and a complete and accurate accounting of all cash
and cash-equivalent items of the Seller on the date hereof.
2.7 ABSENCE OF CERTAIN CHANGES. Since the Most Recent Balance Sheet Date,
except as provided in Section 2.7 of the Disclosure Schedule, (a) there has
occurred no event or development which has had, or could reasonably be expected
to have in the future, a Seller Material Adverse Effect, and (b) the Seller has
not taken any of the following actions:
(i) created, incurred or assumed any indebtedness (including
obligations in respect of capital leases); assumed, guaranteed, endorsed or
otherwise became liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity; or made any loans,
advances or capital contributions to, or investments in, any other person or
entity;
(ii) entered into, adopted or amended any Employee Benefit Plan
or any employment or severance agreement or arrangement of the type described in
Section 2.20(d) or increased in any manner the compensation or fringe benefits
of, or modified the employment terms of, or paid any bonus or other benefit to,
its directors, officers, employees or consultants, generally or individually;
(iii) acquired, encumbered, sold, leased, licensed or disposed of
any assets or property, other than (i) purchases and sales of assets in the
Ordinary Course of Business, and (ii) entered into or amended any marketing
agreement, license agreement, web-linking agreement, or sponsor agreement to
improve and extend the business of the Seller which involves a duration of less
than two months and the total expenditure by the Seller of less than $5,000 of
cash, products or services and does not involve any exclusivity, most favored
third-party status, partnership or joint venture status, revenue sharing or cost
sharing provisions;
(iv) mortgaged or pledged any of its property or assets or
subjected any such property or assets to any Security Interest;
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(v) discharged or satisfied any Security Interest or paid any
obligation or liability other than in the Ordinary Course of Business;
(vi) entered into, amended, terminated, taken or omitted to take
any action that would constitute a violation of or default under, or waive any
rights under, any material contract or agreement;
(vii) made or committed to make any capital expenditure in excess
of $2,500 per item or $10,000 in the aggregate or as set forth in Section
2.7(b)(vii) of the Disclosure Schedule;
(viii) instituted or settled any Legal Proceedings (as defined
below);
(ix) made or revoked any material Tax election or settled or
compromised any material claim in respect of any Taxes; and
(x) agreed in writing or otherwise to take any of the foregoing
actions.
2.8 UNDISCLOSED LIABILITIES. Except as described in Section 2.8 of the
Disclosure Schedule, the Seller has no liability (whether known or unknown,
whether absolute or contingent, whether liquidated or unliquidated and whether
due or to become due), except for (a) liabilities shown on the February 28, 2001
balance sheet of the Seller referred to in Section 2.6 (the "Most Recent Balance
Sheet"), (b) liabilities which have arisen since the Most Recent Balance Sheet
Date in the Ordinary Course of Business and which are similar in nature and
amount to the liabilities which arose during the comparable period of time in
the immediately preceding fiscal period and (c) contractual and other
liabilities (other than claims for breach of contract, breach of warranty or
tort) incurred in the Ordinary Course of Business which are not required by GAAP
to be reflected on a balance sheet. Section 2.6(b) of the Disclosure Schedule
contains a complete and accurate list of all liabilities, whether absolute or
contingent, liquidated or unliquidated and whether due or to become due, as of
the date hereof.
2.9 TAX MATTERS.
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Taxes" means all taxes, charges, fees, levies or other
similar assessments or liabilities, including without limitation income, gross
receipts, ad valorem, premium, value-added, excise, real property, personal
property, sales, use, transfer, withholding, employment, unemployment insurance,
social security, business license, business organization, environmental, workers
compensation, payroll, profits, license, lease, service, service use, severance,
stamp, occupation, windfall profits, customs, duties, franchise and other taxes
imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the United
States or any such government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof.
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(ii) "Tax Returns" means all reports, returns, extensions,
declarations, statements or other information required to be supplied to a
taxing authority in connection with Taxes.
(b) The Seller has filed on a timely basis all Tax Returns that it
was required to file, and all such Tax Returns were complete and accurate in all
material respects. The Seller is not and has never been a member of a group of
corporations with which it has filed (or been required to file) consolidated,
combined or unitary Tax Returns. The Seller has paid on a timely basis all Taxes
that were due and payable. The unpaid Taxes of the Seller do not exceed the
reserves for Taxes reflected as of the Most Recent Balance Sheet Date. The
Seller has no actual or potential liability for any Tax obligation of any
taxpayer (including without limitation any affiliated group of corporations or
other entities that included the Seller during a prior period) other than the
Seller. All Taxes that the Seller is or was required by law to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Entity.
(c) The Seller has not yet been required to file any federal income
Tax Returns. The federal income Tax Returns of the Seller have not been audited
by the Internal Revenue Service. The Seller has delivered or made available to
the Buyer complete and accurate copies of all other Tax Returns of the Seller
together with all related examination reports and statements of deficiency for
all periods from and after inception of the Seller. No examination or audit of
any Tax Return of the Seller by any Governmental Entity is currently in progress
or, to the knowledge of the Seller, threatened or contemplated. The Seller has
not been informed by any jurisdiction that the jurisdiction believes that the
Seller was required to file any Tax Return that was not filed. The Seller has
not waived any statute of limitations with respect to Taxes or agreed to an
extension of time with respect to a Tax assessment or deficiency.
2.10 OWNERSHIP AND CONDITION OF ASSETS.
(a) The Seller is the true and lawful owner, and has good title to,
all of the Acquired Assets, free and clear of all Security Interests except for
Security Interests held by the Buyer. Upon execution and delivery by the Seller
to the Buyer of the instruments of conveyance referred to in Section 1.4(b)(vi),
the Buyer will become the true and lawful owner of, and will receive good title
to, the Acquired Assets, free and clear of all Security Interests except for
Security Interests held by the Buyer.
(b) The Acquired Assets, together with the Contracts and other assets
which the Buyer has elected not to assume or receive, are entirely sufficient
for the conduct of the Seller's businesses as presently conducted and constitute
all assets used or useful in such businesses. Each tangible Acquired Asset is
free from material defects, has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear) and is suitable for the purposes for which it presently is used.
Except as described in Section 2.10(b) of the Disclosure Schedule, all tangible
Acquired Assets are located at the offices of the Seller at 000 Xxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000.
(c) Section 2.10(c) of the Disclosure Schedule lists individually (i)
all Acquired Assets which are fixed assets (within the meaning of GAAP),
indicating the cost,
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accumulated book depreciation (if any) and the net book value of each such fixed
asset as of the Most Recent Balance Sheet Date, and (ii) all other Acquired
Assets of a tangible nature (other than inventories) whose book value exceeds
$2,500.
2.11 BOOKS AND RECORDS. The minute books and other similar records of the
Seller contain complete and accurate records of all actions taken at any
meetings of the Seller's stockholders, Board of Directors or any committee
thereof and of all written consents executed in lieu of the holding of any such
meeting. The books and records of the Seller accurately reflect in all material
respects the assets, liabilities, business, financial condition and results of
operations of the Seller and have been maintained in accordance with good
business and bookkeeping practices.
2.12 REAL ESTATE. The Seller does not own any interest in any real property
(other than the leasehold interests disclosed in Section 2.12 of the Disclosure
Schedule). Section 2.12 of the Disclosure Schedule lists all real property
leased or subleased to the Seller. The Seller has delivered complete and
accurate copies of the leases and subleases listed in Section 2.12 of the
Disclosure Schedule.
2.13 INTELLECTUAL PROPERTY.
(a) The Seller owns or has the right to use all Intellectual Property
necessary (i) to use, develop, market and distribute the products developed,
marketed, sold or licensed, and to provide the services provided, by the Seller
to other parties (together, the "Customer Deliverables") or (ii) to operate the
Seller's internal systems that are material to the business or operations of the
Seller, including, without limitation, computer hardware systems, software
applications and embedded systems (the "Internal Systems"; the Intellectual
Property owned by or licensed to the Seller and incorporated in or underlying
the Customer Deliverables or the Internal Systems is referred to herein as the
"Seller Intellectual Property"). Each item of Seller Intellectual Property will
be owned or available for use by the Buyer immediately following the Closing on
substantially identical terms and conditions as it was immediately prior to the
Closing. The Seller has taken all reasonable measures to protect the proprietary
nature of each item of Seller Intellectual Property, and to maintain in
confidence all trade secrets and confidential information that it owns or uses.
To the knowledge of the Seller, (a) no other person or entity has any rights to
any of the Seller Intellectual Property (except pursuant to agreements or
licenses specified in Section 2.13(c) of the Disclosure Schedule), and (b) no
other person or entity is infringing, violating or misappropriating any of the
Seller Intellectual Property.
(b) None of the Customer Deliverables, or the marketing,
distribution, provision or use thereof, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any person or entity;
PROVIDED, HOWEVER, that the foregoing representation is limited to the knowledge
of the Seller with respect to infringements or violations of patents or patent
applications of third parties. To the knowledge of the Seller, none of the
Internal Systems, or the use thereof, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any person or entity.
Section 2.13(b) of the Disclosure Schedule lists any complaint, claim or notice,
or written threat thereof, received by the Seller alleging any such
infringement, violation or misappropriation; and the Seller has provided to the
Buyer complete and accurate copies of all written documentation in the
possession of the Seller
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relating to any such complaint, claim, notice or threat. The Seller has provided
to the Buyer complete and accurate copies of all written documentation in the
Seller's possession relating to claims or disputes known to the Seller
concerning any Seller Intellectual Property.
(c) Section 2.13(c) of the Disclosure Schedule identifies each
license or other agreement (or type of license or other agreement) pursuant to
which the Seller has licensed, distributed or otherwise granted any rights to
any third party with respect to, any Seller Intellectual Property.
(d) Section 2.13(d) of the Disclosure Schedule identifies each item
of Seller Intellectual Property that is owned by a party other than the Seller,
and the license or agreement pursuant to which the Seller uses it (excluding
off-the-shelf software programs licensed by the Seller pursuant to "shrink wrap"
or "click wrap" licenses, such exclusion only extending to programs used by the
Seller solely for non-revenue generating administrative functions).
(e) The Seller has not disclosed the source code for any of the
software owned by the Seller (the "Software") or other confidential information
constituting, embodied in or pertaining to the Software to any person or entity,
except pursuant to the agreements listed in Section 2.13(e) of the Disclosure
Schedule, and the Seller has taken reasonable measure to prevent disclosure of
such source code and other trade secrets.
(f) All of the copyrightable materials (including Software)
incorporated in or bundled with the Customer Deliverables have been created by
employees of the Seller within the scope of their employment by the Seller or by
independent contractors of the Seller who have executed agreements expressly
assigning all right, title and interest in such copyrightable materials to the
Seller. No portion of such copyrightable materials was jointly developed with
any third party.
(g) To the knowledge of the Seller, the Customer Deliverables and the
Internal Systems are free from significant defects or programming errors and
conform in all material respects to the written documentation and specifications
therefor.
(h) Attached as Section 2.13(h) of the Disclosure Schedule is the
Seller's privacy policy which restricts the sale, assignment, transfer or other
use of the Seller's customer lists and other databases.
2.14 INVENTORY. Seller's inventory, if it has any, is saleable in the
Ordinary Course Of Business, conforms to applicable specifications and is free
of defects.
2.15 CONTRACTS.
(a) Section 2.15(a) of the Disclosure Schedule lists all agreements
(written or oral) to which the Seller is a party as of the date of this
Agreement, including without limitation:
(i) any agreement (or group of related agreements) for the lease
of personal property from or to third parties;
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(ii) any agreement (or group of related agreements) for the
purchase or sale of products or for the furnishing or receipt of services,
including without limitation those in which the Seller has granted manufacturing
rights, "most favored nation" pricing provisions or exclusive marketing or
distribution rights relating to any products or territory or has agreed to
purchase a minimum quantity of goods or services or has agreed to purchase goods
or services exclusively from a certain party;
(iii) any agreement establishing a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed or guaranteed (or may create, incur, assume or
guarantee) indebtedness (including capitalized lease obligations) under which it
has imposed (or may impose) a Security Interest on any of its assets, tangible
or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any employment or consulting agreement;
(vii) any agreement involving any officer, director or
stockholder of the Seller or any affiliate (an "Affiliate"), as defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), thereof;
(viii) any agreement under which the consequences of a default or
termination would reasonably be expected to have a Seller Material Adverse
Effect;
(ix) any agreement which contains any provisions requiring the
Seller to indemnify any other party thereto (excluding indemnities contained in
agreements for the purchase, sale or license of products entered into in the
Ordinary Course of Business);
(x) all Assigned Contracts; and
(xi) any other agreement (or group of related agreements) either
involving more than $1,000 or not entered into in the Ordinary Course Of
Business.
(b) The Seller has delivered to the Buyer a complete and accurate
copy of each agreement listed in Section 2.13 or Section 2.15(a) of the
Disclosure Schedule. With respect to each agreement so listed: (i) assuming due
authorization and execution by all parties other than the Seller, the agreement
is legal, valid, binding and enforceable and in full force and effect; (ii)
assuming due authorization and execution by all parties other than the Seller,
the agreement will continue to be legal, valid, binding and enforceable and in
full force and effect immediately following the Closing in accordance with the
terms thereof as in effect immediately prior to the Closing; and (iii) neither
the Seller nor, to the knowledge of the Seller, any other party, is in breach or
violation of, or default under, any such agreement, and no event has occurred,
is pending or, to the knowledge of the Seller, is threatened, which, after the
giving of notice, with lapse of time, or otherwise, would constitute a breach or
default by the Seller or, to the knowledge of the Seller, any other party under
such contract.
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(c) The Buyer has elected to categorize each of the contracts listed
in Section 2.15(a) of the Disclosure Schedule as either an Acquired Asset or an
Excluded Asset. All consents required for the valid assignment of the Assigned
Contracts to the Buyer are listed in Section 2.15(c) of the Disclosure Schedule.
2.16 INSURANCE. Section 2.16 of the Disclosure Schedule lists any insurance
policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) to which the
Seller is a party which covers the Acquired Assets and can be assigned to the
Buyer. Such insurance policies are of the type and in amounts customarily
carried by organizations at a similar stage of development conducting businesses
or owning assets similar to those of the Seller. There is no material claim
pending under any such policy as to which coverage has been questioned, denied
or disputed by the underwriter of such policy. All premiums due and payable
under all such policies have been paid, the Seller is not liable for retroactive
premiums or similar payments, and the Seller is otherwise in compliance in all
material respects with the terms of such policies. The Seller has no knowledge
of any threatened termination of, or material premium increase with respect to,
any such policy.
2.17 LITIGATION. There is no action, suit, proceeding, claim, arbitration
or investigation before any Governmental Entity or before any arbitrator (a
"Legal Proceeding") which is pending or has been threatened in writing against
the Seller which (a) seeks either damages in excess of $5,000 or equitable
relief or (b) in any manner challenges or seeks to prevent, enjoin, alter or
delay the transactions contemplated by this Agreement.
2.18 WARRANTIES. No product or service manufactured, sold, leased, licensed
or delivered by the Seller is subject to any guaranty, warranty, right of
return, right of credit or other indemnity other than manufacturers' warranties
for which the Seller has no liability. The Seller has incurred no expenses in
fulfilling its obligations under any guaranty, warranty, right of return and
indemnity provisions during each of the fiscal years and the interim period
covered by the Financial Statements; and the Seller does not know of any reason
why such expenses should be incurred in the future.
2.19 EMPLOYEES.
(a) Section 2.19(a) of the Disclosure Schedule contains a list of all
employees of the Seller, along with the position and the annual rate of
compensation of each such person. Each such employee has entered into a
Confidentiality, Inventions Assignment and Non-Competition Agreement with the
Seller, a copy of which has previously been made available to the Buyer. Section
2.19(a) of the Disclosure Schedule contains a list of all employees of the
Seller who are a party to a non-competition agreement with the Seller; copies of
such agreements have previously been delivered to the Buyer. To the knowledge of
the Seller, no key employee or group of employees has any plans to terminate
employment with the Seller.
(b) Except as set forth on Section 2.19(b) of the Disclosure
Schedule, none of the employees of the Seller holds a temporary work
authorization, including without limitation H-1B, F-1 or J-1 visas or work
authorizations.
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(c) The Seller is not a party to or bound by any collective
bargaining agreement, nor has any of them experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. The
Seller has no knowledge of any organizational effort made or threatened, either
currently or within the past two years, by or on behalf of any labor union with
respect to employees of the Seller.
2.20 EMPLOYEE BENEFITS.
(a) Section 2.20(a) of the Disclosure Schedule contains a complete
and accurate list of all Employee Benefit Plans maintained, or contributed to by
the Seller. Complete and accurate copies of all Employee Benefit Plans have been
delivered to the Buyer. The Seller has complied in all material respects, in the
administration and operation of each Employee Benefit Plan, with the terms of
any such plans and the requirements of applicable law (including without
limitation ERISA and the Internal Revenue Code of 1986, as amended (the "Code"),
and the regulations thereunder).
(b) Section 2.20(b) of the Disclosure Schedule discloses each: (i)
agreement with any stockholder, consultant, director, officer or other employee
and the Seller (A) the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving the
Seller of the nature of any of the transactions contemplated by this Agreement,
(B) providing any term of employment or compensation guarantee or (C) providing
severance benefits or other benefits after the termination of employment of such
consultant, director, officer or employee; (ii) agreement, plan or arrangement
under which any person may receive payments from the Seller that may be subject
to the tax imposed by Section 4999 of the Code or included in the determination
of such person's "parachute payment" under Section 280G of the Code; and (iii)
agreement or plan binding the Seller, including without limitation any stock
option plan, stock appreciation right plan, restricted stock plan, stock
purchase plan, severance benefit plan or Employee Benefit Plan, any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
(c) Section 2.20(c) of the Disclosure Schedule sets forth the policy
of the Seller regarding accrued vacation, accrued sick time and earned time-off
and the amount of such liabilities as of the date hereof.
(d) As used herein, the term "Employee Benefit Plan" means all
liabilities and obligations of the Seller under any "employee pension benefit
plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), any "employee welfare benefit plan" (as defined
in Section 3(1) of ERISA), and any other written or oral plan, agreement or
arrangement involving direct or indirect compensation, including without
limitation insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation.
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2.21 ENVIRONMENTAL MATTERS.
(a) The Seller has complied with all applicable Environmental Laws
(as defined below), except for violations of Environmental Laws that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Seller Material Adverse Effect. There is no pending or, to
the knowledge of the Seller, threatened civil or criminal litigation, written
notice of violation, formal administrative proceeding, or investigation, inquiry
or information request by any Governmental Entity, relating to any Environmental
Law involving the Seller, except for litigation, notices of violations, formal
administrative proceedings or investigations, inquiries or information requests
that, individually or in the aggregate, have not had and would not reasonably be
expected to have a Seller Material Adverse Effect. For purposes of this
Agreement, "Environmental Law" means any federal, state or local law, statute,
rule or regulation or the common law relating to the environment or occupational
health and safety, including without limitation any statute, regulation,
administrative decision or order pertaining to (i) treatment, storage, disposal,
generation and transportation of industrial, toxic or hazardous materials or
substances or solid or hazardous waste; (ii) air, water and noise pollution;
(iii) groundwater and soil contamination; (iv) the release or threatened release
into the environment of industrial, toxic or hazardous materials or substances,
or solid or hazardous waste, including without limitation emissions, discharges,
injections, spills, escapes or dumping of pollutants, contaminants or chemicals;
(v) the protection of wild life, marine life and wetlands, including without
limitation all endangered and threatened species; (vi) storage tanks, vessels,
containers, abandoned or discarded barrels, and other closed receptacles; (vii)
health and safety of employees and other persons; and (viii) manufacturing,
processing, using, distributing, treating, storing, disposing, transporting or
handling of materials regulated under any law as pollutants, contaminants, toxic
or hazardous materials or substances or oil or petroleum products or solid or
hazardous waste. As used above, the terms "release" and "environment" shall have
the meaning set forth in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA").
(b) The Seller has not released any Materials of Environmental
Concern (as defined below) into the environment at any parcel of real property
or any facility formerly or currently owned, operated or controlled by the
Seller. With respect to any such releases of Materials of Environmental Concern,
the Seller has given all required notices to Governmental Entities (copies of
which have been provided to the Buyer). The Seller is not aware of any releases
of Materials of Environmental Concern at parcels of real property or facilities
other than those owned, operated or controlled by the Seller that could
reasonably be expected to have an impact on the real property or facilities
owned, operated or controlled by the Seller. For purposes of this Agreement,
"Materials of Environmental Concern" means any chemicals, pollutants or
contaminants, hazardous substances (as such term is defined under CERCLA), solid
wastes and hazardous wastes (as such terms are defined under the Resource
Conservation and Recovery Act), toxic materials, oil or petroleum and petroleum
products or any other material subject to regulation under any Environmental
Law.
(c) Set forth in Section 2.21(c) of the Disclosure Schedule is a list
of all documents (whether in hard copy or electronic form) that contain any
environmental reports, investigations and audits relating to premises currently
or previously owned or operated by the Seller (whether conducted by or on behalf
of the Seller or a third party, and whether done at the
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initiative of the Seller or directed by a Governmental Entity or other third
party) which were issued or conducted during the past five years and which the
Seller has possession of or access to. A complete and accurate copy of each such
document has been provided to the Buyer.
(d) The Seller is not aware of any material environmental liability
of any solid or hazardous waste transporter or treatment, storage or disposal
facility that has been used by the Seller.
2.22 LEGAL COMPLIANCE. The Seller and the conduct and operations of its
business are in compliance with each applicable law (including rules and
regulations thereunder) of any federal, state, local or foreign government, or
any Governmental Entity, except for any violations or defaults that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Seller Material Adverse Effect.
2.23 CUSTOMERS AND SUPPLIERS. Section 2.23 of the Disclosure Schedule sets
forth a list of (a) each customer that accounted for more than 5% of the
revenues of the Seller during the last full fiscal year or the interim period
through the Most Recent Balance Sheet Date and the amount of revenues accounted
for by such customer during each such period and (b) each supplier that is the
sole supplier of any significant product to the Seller. No such customer or
supplier has indicated within the past year that it will stop, or decrease the
rate of, buying products or supplying products, as applicable, to the Seller. No
unfilled customer order or commitment obligating the Seller to process,
manufacture or deliver products or perform services will result in a loss to the
Seller upon completion of performance. No purchase order or commitment of the
Seller is in excess of normal requirements, nor are prices provided therein in
excess of current market prices for the products or services to be provided
thereunder.
2.24 PERMITS. Section 2.24 of the Disclosure Schedule sets forth a list of
all Permits issued to or held by the Seller. Such listed Permits are the only
Permits that are required for the Seller to conduct its businesses as presently
conducted or as proposed to be conducted, except for those the absence of which,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Seller Material Adverse Effect. Each such Permit is in full
force and effect and, to the knowledge of the Seller, no suspension or
cancellation of such Permit is threatened and there is no basis for believing
that such Permit will not be renewable upon expiration. Each such Permit will
continue in full force and effect immediately following the Closing.
2.25 CERTAIN BUSINESS RELATIONSHIPS WITH AFFILIATES. No Affiliate of the
Seller (a) owns any property or right, tangible or intangible, which is used in
the business of the Seller, (b) has any claim or cause of action against the
Seller, or (c) owes any money to, or is owed any money by, the Seller. Section
2.25 of the Disclosure Schedule describes any transactions or relationships
between the Seller and any Affiliate thereof which have occurred or existed
since January 1, 1999.
2.26 BROKERS' FEES. Except as described in Section 2.26 of the Disclosure
Schedule, the Seller has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
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2.27 INVESTMENT REPRESENTATION. With respect to the Securities:
(a) The Seller (and, if and to the extent any of them may receive any
of the Securities, each of the Stakeholders) is receiving the Securities for its
own account for investment only, and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling the same, in violation of the Securities Act of 1933, as
amended (the "Securities Act"). Any transfer of Securities from the Seller to
the Stakeholders will be made only in accordance with the requirements of the
Securities Act.
(b) The Seller and each such Stakeholder has had such opportunity as
it has deemed adequate to obtain from representatives of the Buyer such
information as is necessary to permit him, her or it to evaluate the merits and
risks of its investment in the Buyer.
(c) The Seller and each such Stakeholders has sufficient experience
in business, financial and investment matters to be able to evaluate the risks
involved in the issuance of the Securities and to make an informed investment
decision with respect to such investment.
(d) The Seller and each such Stakeholder can afford a complete loss
of the value of such shares and are each able to bear the economic risk of
holding the Securities for an indefinite period.
(e) The Seller an each such Stakeholder understands that (i) the
Securities have not been registered under the Securities Act and are "restricted
securities" within the meaning of the Rule 144 under the Securities Act, (ii)
the Securities cannot be sold, transferred or otherwise disposed of unless they
are subsequently registered under the Securities Act or an exemption from
registration is then available, (iii) in any event, the exemption from
registration under Rule 144 or otherwise may not be available for at least one
year and even then will not be available unless a public market then exists for
the common stock of the Buyer, adequate information concerning the Buyer is then
available to the public, and other terms and conditions of Rule 144 are complied
with, and (iv) there is now no registration statement on file with the
Securities and Exchange Commission ("SEC") with respect to any capital stock of
the Buyer has no obligation or current intention to register the Securities
under the Securities Act.
(f) A legend substantially in the following form will be placed on
the certificates or other documents representing the Securities:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the absence of an effective
registration statement under such Act or an opinion of counsel
satisfactory to the corporation to the effect that such registration
is not required."
2.28 DISCLOSURE. No representation or warranty by the Seller contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered or to be delivered by
or on behalf of the Seller pursuant to this Agreement, contains or will contain
any untrue statement of a material fact or omits or
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will omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein or
therein not misleading. The Seller has disclosed to the Buyer all material
information relating to the business of the Seller or the transactions
contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
3.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation. The Buyer is duly qualified to conduct
business and is in corporate and tax good standing under the laws of each
jurisdiction in which the nature of its businesses or the ownership or leasing
of its properties requires such qualification, except where the failure to be so
qualified or in good standing would not have a Buyer Material Adverse Effect (as
defined below). The Buyer has all requisite corporate power and authority to
carry on the businesses in which it is engaged and to own and use the properties
owned and used by it. The Buyer has furnished or made available to the Seller
complete and accurate copies of its Certificate of Incorporation and By-laws. As
used in this Agreement, the term "Buyer Material Adverse Effect" means a
material adverse effect on the business, financial condition, results of
operations or prospects of the Buyer and its subsidiaries, taken as a whole,
PROVIDED, HOWEVER, that none of the following shall be deemed by itself or by
themselves, either alone or in combination, to constitute a Buyer Material
Adverse Effect:
(a) any change arising out of conditions affecting the economy or the
industry of the Buyer in general which does not affect the Buyer in a materially
disproportionate manner relative to other participants in the economy or such
industry, respectively,
(b) any change in or in effect on the business of the Buyer and its
subsidiaries caused by, relating to or resulting from, directly or indirectly,
the transactions contemplated by this Agreement or the announcement thereof,
(c) any failure by the Buyer to meet internal projections or
forecasts or published revenue or earnings predictions, or
(d) any decrease in the trading price of the Common Stock.
3.2 CAPITALIZATION. The authorized capital stock of the Buyer consists of
(a) 150,000,000 shares of Common Stock, of which 39,674,915 shares were issued
and outstanding as of April 3, 2001, and (b) 5,000,000 shares of Preferred
Stock, $.01 par value per share, of which no shares are issued or outstanding.
All of the issued and outstanding shares of Common Stock are duly authorized,
validly issued, fully paid, nonassessable and free of all preemptive rights. All
of the Securities will be, when issued in accordance with this Agreement, the
Buyer Warrant I, the Buyer Warrant II and the Performance Warrant, duly
authorized, validly issued, fully paid, nonassessable and free of all preemptive
rights.
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3.3 AUTHORIZATION OF TRANSACTION. The Buyer has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by the Buyer of this Agreement and the
consummation by the Buyer of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer. This Agreement has been duly and validly executed and delivered by the
Buyer and constitutes a valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms.
3.4 NONCONTRAVENTION. Neither the execution and delivery by the Buyer of
this Agreement or the Ancillary Agreements, nor the consummation by the Buyer of
the transactions contemplated hereby or thereby, will (a) conflict with or
violate any provision of the charter or By-laws of the Buyer, (b) require on the
part of the Buyer any filing with, or permit, authorization, consent or approval
of, any Governmental Entity, (c) conflict with, result in breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of obligations under, create in any party any right to
terminate, modify or cancel, or require any notice, consent or waiver under, any
contract or instrument to which the Buyer is a party or by which it is bound or
to which any of its assets is subject, except for (i) any conflict, breach,
default, acceleration, termination, modification or cancellation which would not
adversely affect the consummation of the transactions contemplated hereby or
(ii) any notice, consent or waiver the absence of which would not adversely
affect the consummation of the transactions contemplated hereby, or (d) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Buyer or any of its properties or assets.
3.5 REPORTS AND FINANCIAL STATEMENTS. The Buyer has previously furnished
or made available to the Seller complete and accurate copies, as amended or
supplemented, of (a) its Annual Report on Form 10-K for the fiscal year ended
December 31, 2000, as filed with the SEC on April 2, 2001 and (b) all other
reports filed by the Buyer under Section 13 or subsections (a) or (c) of Section
14 of the Exchange Act with the SEC between December 31, 2000 and the date of
this Agreement (such reports are collectively referred to herein as the "Buyer
Reports"). The Buyer Reports constitute all of the documents required to be
filed by the Buyer under Section 13 or subsections (a) or (c) of Section 14 of
the Exchange Act with the SEC from December 31, 2000 through the date of this
Agreement. The Buyer Reports complied in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder when
filed. As of their respective dates, the Buyer Reports did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of the Buyer included in
the Buyer Reports (i) complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto when filed, (ii) were prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto, and in the case of
quarterly financial statements, as permitted by Form 10-Q under the Exchange
Act), (iii) fairly present the consolidated financial condition, results of
operations and cash flows of the Buyer as of the respective dates thereof and
for the periods referred to therein, and (iv) are consistent with the books and
records of the Buyer.
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3.6 ABSENCE OF MATERIAL ADVERSE CHANGE. Since December 31, 2000, there has
occurred no event or development which has had, or could reasonably be expected
to have in the future, a Buyer Material Adverse Effect.
3.7 BROKERS' FEES. The Buyer has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
3.8 DISCLOSURE. No representation or warranty by the Buyer contained in
this Agreement, and no statement contained in the any document, certificate or
other instrument delivered or to be delivered by or on behalf of the Buyer
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
ARTICLE IV
INDEMNIFICATION
4.1 INDEMNIFICATION BY THE STAKEHOLDERS.
(a) The Seller and each of the Stakeholders (to the extent that they
now or hereafter receive any of the Securities or any interest therein pursuant
to Section 5.8) (the "Indemnifying Persons") shall indemnify the Buyer and each
of its Affiliates, directors, officers, employees, agents and representatives in
respect of, and hold it harmless against, any and all debts, obligations and
other liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether known or unknown, or due or to become due or otherwise), monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including without limitation amounts paid in settlement, interest,
court costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation) ("Damages") incurred or suffered by the Buyer or any Affiliate,
director, officer, employee, agent or representative thereof arising from, in
connection with or otherwise with respect to (a) any misrepresentation, breach
of warranty or failure to perform any covenant or agreement of the Seller
contained in this Agreement and (b) any payment of Satisfaction Consideration
(as defined in Section 5.9(b)). The individual liability of each Stakeholder for
Damages under this Article IV shall not exceed the fair market value of the
Securities owned beneficially or of record by such Stakeholder. The liability of
the Indemnifying Persons shall be several and not joint and no Stakeholder shall
have any liability which exceeds the value of the Securities which such
Stakeholder (which is an Indemnifying Person) shall own. Notwithstanding
anything in this Article VI to the contrary, the rights of Indemnified Persons
hereunder are limited to recourse against the Securities pursuant to the terms
of the Pledge Agreement and as provided in Section 4.2(c). Each Stakeholder, by
acceptance of the consideration to be received from the Buyer hereunder, hereby
releases and discharges the Buyer and the Seller, and their respective officers,
directors, employees, agents, successors and assigns from any claims, damages,
liabilities or other obligations it may have against the Seller or the Buyer on
or prior to the date hereof, whether fixed or contingent, known or unknown.
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4.2 INDEMNIFICATION CLAIMS.
(a) A party entitled, or seeking to assert rights, to indemnification
under this Article IV (an "Indemnified Party") shall give written notification
to the party from whom indemnification is sought (an "Indemnifying Party") of
the commencement of any suit or proceeding relating to a third party claim for
which indemnification pursuant to this Article IV may be sought. Such
notification shall be given within 5 business days after receipt by the
Indemnified Party of notice of such suit or proceeding, and shall describe in
reasonable detail (to the extent known by the Indemnified Party) the facts
constituting the basis for such suit or proceeding and the amount of the claimed
damages; PROVIDED, HOWEVER, that no delay on the part of the Indemnified Party
in notifying the Indemnifying Party shall relieve the Indemnifying Party of any
liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnifying Party may, upon written notice
thereof to the Indemnified Party, assume control of the defense of such suit or
proceeding with counsel reasonably satisfactory to the Indemnified Party;
PROVIDED that (i) the Indemnifying Party may only assume control of such defense
if (A) it acknowledges in writing to the Indemnified Party that any damages,
fines, costs or other liabilities that may be assessed against the Indemnified
Party in connection with such suit or proceeding constitute Damages for which
the Indemnified Party shall be indemnified pursuant to this Article IV and (B)
the ad damnum is less than or equal to the amount of Damages for which the
Indemnifying Party is liable under this Article IV and (ii) the Indemnifying
Party may not assume control of the defense of a suit or proceeding involving
criminal liability or in which equitable relief is sought against the
Indemnified Party. If the Indemnifying Party does not so assume control of such
defense, the Indemnified Party shall control such defense. The party not
controlling such defense (the "Non-controlling Party") may participate therein
at its own expense; PROVIDED that if the Indemnifying Party assumes control of
such defense and the Indemnified Party reasonably concludes that the
Indemnifying Party and the Indemnified Party have conflicting interests or
different defenses available with respect to such suit or proceeding, the
reasonable fees and expenses of counsel to the Indemnified Party shall be
considered "Damages" for purposes of this Agreement. The party controlling such
defense (the "Controlling Party") shall keep the Non-controlling Party advised
of the status of such suit or proceeding and the defense thereof and shall
consider in good faith recommendations made by the Non-controlling Party with
respect thereto. The Non-controlling Party shall furnish the Controlling Party
with such information as it may have with respect to such suit or proceeding
(including copies of any summons, complaint or other pleading which may have
been served on such party and any written claim, demand, invoice, billing or
other document evidencing or asserting the same) and shall otherwise cooperate
with and assist the Controlling Party in the defense of such suit or proceeding.
The Indemnifying Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnified Party, which shall not be unreasonably withheld or
delayed. The Indemnified Party shall not agree to any settlement of, or the
entry of any judgment arising from, any such suit or proceeding without the
prior written consent of the Indemnifying Party, which shall not be unreasonably
withheld or delayed.
(b) In order to seek indemnification under this Article IV for
matters not involving Satisfaction Consideration, an Indemnified Party shall
give written notification (a "Claim Notice") to the Indemnifying Party which
contains (i) a description and the amount (the
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"Claimed Amount") of any Damages incurred or reasonably expected to be incurred
by the Indemnified Party, (ii) a statement that the Indemnified Party is
entitled to indemnification under this Article IV for such Damages and a
reasonable explanation of the basis therefor, and (iii) a demand for payment (in
the manner provided in paragraph (c) below) in the amount of such Damages.
(c) Within 20 days after delivery of a Claim Notice, the Indemnifying
Party shall deliver to the Indemnified Party a written response (the "Response")
in which the Indemnifying Party shall: (i) agree that the Indemnified Party is
entitled to receive all of the Claimed Amount (in which case the Indemnified
Party shall have recourse against pledged Securities equal in value to the
Claimed Amount); (ii) agree that the Indemnified Party is entitled to receive
part, but not all, of the Claimed Amount (the "Agreed Amount") (in which case
the Indemnified Party shall have recourse against pledged Securities equal in
value to such part of the Claimed Amount); or (iii) dispute that the Indemnified
Party is entitled to receive any of the Claimed Amount. If the Indemnifying
Party in the Response disputes its liability for all or part of the Claimed
Amount, the Indemnifying Party and the Indemnified Party shall follow the
procedures set forth in Section 4.2(d) for the resolution of such dispute (a
"Dispute"). For purposes of this Section 4.2(c), the value of the pledged
Securities shall be deemed to be as follows: Shares shall be valued at the
average closing price of shares of the Buyer's Common Stock on the Nasdaq
National Market for the 20 trading days (the "Average Trading Price") ending on
the date on which Satisfaction Consideration is paid or the Indemnified Persons
incur Damages other than Satisfaction Consideration, and Buyer Warrant I, Buyer
Warrant II and the Performance Warrant shall each be valued at the same amount
per underlying share, based on a calculation to be performed by Xxxxxxxx LLP, of
the value per underlying share of Buyer Warrant I using (i) the Black-Scholes
model of valuation, (ii) the Average Trading Price and (iii) the methodology and
assumptions consistent with the Buyer's past practices in determining warrant
values with the exception that the volatility factor shall be 40%.
(d) Any Dispute shall be resolved as provided in Section 7.13.
(e) For purposes of this Section 4.2 and the last two sentences of
Section 4.3, any references to the Indemnifying Party (except provisions
relating to an obligation to make or a right to receive any payments provided
for in Section 4.2 or Section 4.3) shall be deemed to refer to the
Indemnification Representatives named in the Pledge Agreement. The
Indemnification Representatives shall have full power and authority on behalf of
each Indemnifying Stakeholder to take any and all actions on behalf of, execute
any and all instruments on behalf of, and execute or waive any and all rights
of, the Indemnifying Persons under this Article IV. The Indemnification
Representatives shall have no liability to any Indemnifying Stakeholder for any
action taken or omitted on behalf of the Indemnifying Persons pursuant to this
Article IV.
4.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Seller contained in this Agreement shall (a) survive the
Closing and any investigation at any time made by or on behalf of an Indemnified
Party and (b) shall expire on the first anniversary of the Closing Date (except
for the representations and warranties contained in Section 2.9, which shall
expire three months after the expiration of the applicable statute of
limitations). If an Indemnified Party delivers to an Indemnifying Party, before
expiration of a representation or
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warranty, either a Claim Notice based upon a breach of such representation or
warranty, or a notice that, as a result of a legal proceeding instituted by or
written claim made by a third party, the Indemnified Party reasonably expects to
incur Damages as a result of a breach of such representation or warranty (an
"Expected Claim Notice"), then such representation or warranty shall survive
until, but only for purposes of, the resolution of the matter covered by such
notice. If the legal proceeding or written claim with respect to which an
Expected Claim Notice has been given is definitively withdrawn or resolved in
favor of the Indemnified Party, the Indemnified Party shall promptly so notify
the Indemnifying Party. All representations and warranties of the Buyer
contained in this Agreement shall terminate at the Closing.
4.4 LIMITATIONS.
(a) Except with respect to claims based on fraud, the rights of the
Indemnified Parties under this Article IV shall be the exclusive remedy of the
Indemnified Parties with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement contained in this Agreement. Furthermore, notwithstanding any other
provision of this Agreement to the contrary, such rights may be enforced only by
recourse to the Securities pursuant to the terms of the Pledge Agreement and as
provided in Section 4.2(c).
(b) Notwithstanding anything to the contrary herein, (i) the
aggregate liability of the Indemnifying Persons for Damages under this Article
IV (except for Damages arising out of fraud on the Seller's part, which shall
not be limited hereby) shall not exceed the value of the Securities, determined
pursuant to this Article IV, (ii) the individual liability of each Stakeholder
for Damages under this Article IV shall not exceed the value of the Securities,
determined pursuant to this Article IV, owned beneficially or of record by such
Stakeholder and (iii) the Indemnifying Persons shall not be liable under this
Article IV (except for Damages relating to Satisfaction Consideration paid prior
to November 9, 2001, which shall not be limited by this Section 4.4(b)(iii))
unless and until the Damages arising out of any claim arising out of the same
event or series of events or events of a similar nature exceed $5,000 (a "Minor
Claim") (it being agreed that such Minor Claims are immaterial in nature and
accordingly not subject to indemnification hereunder) and unless and until the
aggregate Damages for which they or it would otherwise be liable exceed $100,000
(at which point the Indemnifying Persons shall become liable for the aggregate
Damages in excess of $100,000). For purposes solely of this Article IV, all
representations and warranties of the Seller in Article II shall be construed as
if the term "material" and any reference to "Seller Material Adverse Effect"
(and variations thereof) were omitted from such representations and warranties.
(c) The liability of the Indemnifying Persons shall be several and
not joint and no Stakeholder shall have any liability which exceeds the value of
the Securities which such Stakeholder (which is an Indemnifying Person) shall
own. Notwithstanding anything in this Article IV to the contrary, the rights of
the Indemnified Persons hereunder are limited to recourse against the Securities
pursuant to the terms of the Pledge Agreement and as provided in Section 4.2(c).
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ARTICLE V
POST-CLOSING AGREEMENTS
5.1 PROPRIETARY INFORMATION. From and after the Closing, each of the
Seller and the Stakeholders shall hold in confidence, and shall use its best
efforts to have each of its Affiliates hold in confidence, all knowledge,
information and documents of a confidential nature or not generally known to the
public (including without limitation financial information, technical
information and data relating to the products, names of customers and software)
and shall not disclose or make use of the same.
5.2 NO SOLICITATION OR HIRING OF FORMER EMPLOYEES. Except as provided by
law, for a period of three years after the Closing Date, neither the Seller nor
any Affiliate thereof shall not directly or indirectly solicit or attempt to
induce any person who was an employee of the Seller on the Closing Date and who
then or thereafter becomes a full-time employee of the Buyer (until he is
terminated by the Buyer without cause or until three months after he voluntarily
terminates such employment) to terminate his employment with the Buyer or to
become an employee of the Seller or hire any such person.
5.3 NON-COMPETITION AGREEMENT.
(a) For a period of three years after the Closing Date, neither the
Seller nor any Affiliate thereof shall directly or indirectly (i) design,
develop, market or sell any product or service which has the same or
substantially the same form, function and primary application as any existing or
proposed product or service designed, developed, marketed or sold by the Seller
on or prior to the Closing Date or (ii) engage in any business competitive with
the business of the Seller as conducted on the date hereof or on the Closing
Date, in the United States or any other country in which the Seller conducted
its business during the two years prior to the Closing Date; PROVIDED, that with
respect to Xxxxxxx X. Xxxxxx, such period shall be one year following the date
hereof and PROVIDED, FURTHER, that the foregoing shall not apply to any person
or entity which is an Affiliate of any Stakeholder if the principal business of
such Stakeholder is to develop or invest in other businesses, or to any director
of the Seller who is not an employee of the Seller.
(b) The parties hereto agree that the duration and geographic scope
of the non-competition provision set forth in this Section 5.3 are reasonable.
In the event that any court determines that the duration or the geographic
scope, or both, are unreasonable and that such provision is to that extent
unenforceable, the parties hereto agree that the provision shall remain in full
force and effect for the greatest time period and in the greatest area that
would not render it unenforceable. The parties intend that this non-competition
provision shall be deemed to be a series of separate covenants, one for each and
every county of each and every state of the United States of America and each
and every political subdivision of each and every country outside the United
States of America where this provision is intended to be effective. The Seller
agrees that damages are an inadequate remedy for any breach of this provision
and that the Buyer shall, whether or not it is pursuing any potential remedies
at law, be entitled to equitable relief in the form of preliminary and permanent
injunctions without bond or other security upon any actual or threatened breach
of this non-competition provision.
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5.4 SHARING OF DATA.
(a) The Seller shall have the right for a period of three years
following the Closing Date to have reasonable access to such books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other similar information as are transferred to
the Buyer pursuant to the terms of this Agreement for the purposes of winding
down the Seller's business and for complying with its obligations under
applicable securities, tax, environmental, employment or other laws and
regulations. The Buyer shall have the right for a period of three years
following the Closing Date to have reasonable access to those books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other records which are retained by the Seller
pursuant to the terms of this Agreement to the extent that any of the foregoing
relates to the business of the Seller transferred to the Buyer hereunder or is
otherwise needed by the Buyer in order to comply with its obligations under
applicable securities, tax, environmental, employment or other laws and
regulations. The Seller shall cooperate with the Buyer in taking all steps
necessary to permit and facilitate the audit by the Buyer's accountants of the
Seller's historical financial condition and results of operations (the fees and
expenses of which accountants shall be paid solely by the Buyer).
(b) The Seller and the Buyer agree that from and after the Closing
Date they shall cooperate fully with each other to facilitate the transfer of
the Acquired Assets from the Seller to the Buyer and the operation thereof by
the Buyer.
(c) Xxxxxxx X. Xxxxxx (one of the Stakeholders) agrees to provide all
management letters and other documents and take all other steps required by the
Buyer's independent certified public accountants in order for them to (i) audit
and provide an unqualified report, except with respect to the Seller's status as
a "going concern," on the Seller's financial statements (prepared in accordance
with GAAP and Regulation S-X under the Securities Act) for the two years ended
December 31, 2000, (ii) to review, in accordance with the requirements of GAAP
and the SEC, the Seller's financial statements (prepared in accordance with GAAP
and Regulation S-X under the Securities Act) for the period from January 1, 2001
through the date hereof, and (iii) review the Buyer's pro forma financial
statements for such periods.
5.5 NASDAQ LISTING. The Buyer shall use its best efforts to cause the
Shares and the Common Stock underlying the Securities to be authorized for
quotation on the Nasdaq National Market within 90 days after the Closing Date.
5.6 USE OF NAME. The Seller agrees (i) to change its corporate name to a
name other than and not similar to "xxx.xxx, Inc." within two business days
after the Closing Date and (ii) not to use the name "xxx.xxx" or any derivation
thereof after the Closing Date in connection with any business related to,
competitive with, or an outgrowth of, the business conducted by the Seller on
the date hereof.
5.7 EXPENSES. Except as set forth in Article IV, each of the Parties shall
bear its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
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5.8 RESTRICTIONS ON TRANSFER.
(a) "Restricted Securities" means (i) the Shares, (ii) Buyer Warrant
I, (iii) Buyer Warrant II, (iv) the Performance Warrant and (v) any shares of
Common Stock issued or issuable upon the full or partial exercise of Buyer
Warrant I, Buyer Warrant II or the Performance Warrant.
(b) Until the first anniversary of the date of this Agreement, the
interests of the Seller and any permitted transferee hereunder in the Restricted
Securities shall be transferable only by operation of law or to a Stakeholder
which is an accredited investor within the meaning of Rule 501 under the
Securities Act or to any other debtholder or stockholder of the Seller which is
an accredited investor, and which agrees in writing to become a Stakeholder and
to be bound by the provisions of this Agreement (including without limitation
those of Article IV) and the Pledge Agreement. Restricted Securities shall not
be sold or transferred unless either (i) they first shall have been registered
under the Securities Act, or (ii) the Buyer first shall have been furnished, at
the Seller's (or the Stakeholders') sole expense, with an opinion of legal
counsel reasonably satisfactory to the Buyer, which opinion is reasonably
satisfactory in form and substance to the Buyer and the Buyer's legal counsel,
to the effect that such sale or transfer is exempt from the registration
requirements of the Securities Act. Notwithstanding the foregoing, no
registration or opinion of counsel shall be required for a transfer made in
accordance with Rule 144 under the Securities Act.
(c) Each certificate representing Restricted Shares shall bear
legends substantially in the following form:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be offered, sold
or otherwise transferred, pledged or hypothecated unless and until such
shares are registered under such Act or an opinion of counsel satisfactory
to the Company is obtained to the effect that such registration is not
required."
"The securities represented by this certificate are pledged to Student
Advantage, Inc. pursuant to the terms of a Pledge Agreement dated May 10,
2001."
The first foregoing legend shall be removed from the certificates representing
any Restricted Securities, at the request of the holder thereof, at such time as
they become eligible for resale pursuant to Rule 144(k) under the Securities
Act. The second foregoing legend shall be removed from such certificate upon
expiration or termination of the Pledge Agreement.
5.9 SOLVENCY.
(a) The Seller shall establish a mechanism for the orderly winding up
of the business, operations and affairs of the Seller and the payment,
compromise, satisfaction, settlement, resolution, release and/or discharge of
the claims and obligations to the Seller's creditors, employees and other third
parties to whom the Seller has obligations, whether fixed or contingent (the
"Resolution Procedures"). The Seller shall set aside all of its available cash
reserves in a segregated escrow account to be managed by designated
representatives of the
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Board of Directors of the Seller for the foregoing purposes. These
representatives shall instruct Xxxxxxx X. Xxxxxx and Xxxxx Xxxxxx to make
payments to creditors or to otherwise satisfy, compromise, resolve, discharge
and seek appropriate releases from creditors, employees and such other third
parties, in the best judgement of Messrs. Xxxxxx and Xxxxxx and the designated
representatives of Seller. The Seller shall not deviate in any material way from
the Resolution Procedures set forth above or waive the requirements for
administering the claims of creditors OR amend or waive any provision of the
Consulting Agreements between the Seller and each of Xx. Xxxxxx and Xx. Xxxxxx
of even date herewith without the prior written consent of the Buyer, if such
waiver might adversely affect the Buyer in any manner.
(b) In this regard, the parties agree that if, within one year after
the date hereof, any creditor or purported creditor of the Seller, including
without limitation any party to a contract with the Seller (a "Creditor")
asserts a claim against the Buyer (a "Creditor's Claim"), within ten business
days after the Seller's receipt of written notice from the Buyer in regard to
the Creditor's Claim, the Seller shall cause such Creditor's Claim to be paid,
compromised, released, discharged, withdrawn or otherwise resolved ("Resolved")
and shall have received from such Creditor a full release of any and all claims
against the Seller and the Buyer, fully satisfactory in form and substance to
the Buyer (a "Satisfactory Release"). The Buyer shall have the right (but not
the obligation) to seek to have Resolved any Creditor's Claim which is not
otherwise Resolved within ten business days after the Seller's receipt of
written notice from the Buyer in regard to the Creditor's Claim, for such
consideration payable by the Buyer as the Buyer shall determine in its sole and
absolute discretion ("Satisfaction Consideration"), for which the Buyer shall be
entitled to indemnification pursuant to Article IV if such Satisfaction
Consideration is paid by the Buyer prior to November 9, 2001.
(c) If any Stakeholder shall elect to pay any Satisfaction
Consideration to Resolve any Claim on behalf of the Seller, it shall not be
entitled to any rights of subrogation or indemnification or any similar rights
whatsoever.
5.10 RESERVATION OF THE SHARES. The Buyer shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Common Stock
for delivery upon exercise of Buyer Warrant I, Buyer Warrant II and the
Performance Warrant.
5.11 EMPLOYEE MATTERS AND OPTION GRANTS.
(a) The Seller hereby consents to the hiring of the employees of the
Seller to be determined by the Buyer (provided the Buyer shall not be obligated
hereby to employ any of such employees or continue the employment of any such
employees after the Closing) and waives, with respect to the employment by the
Buyer of such employees, any claims or rights the Seller may have against the
Buyer or any such employee under any non-competition, confidentiality or
employment agreement.
(b) The Buyer shall grant options under its existing employee stock
option plans or substantially similar employee stock option plans ("Buyer
Options") to any employees of the Seller whom the Buyer elects to hire ("New
Employees") in amounts not inconsistent with the Buyer's policies and practices
in regard to employee stock options.
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(c) The Buyer shall also grant to the New Employees in the aggregate,
in such proportions as Buyer shall elect, Buyer Options to purchase a total of
60,000 shares of Common Stock priced at 100% of fair market value on the date of
grant as determined under the Buyer's stock option plans ("Fair Market Value"),
such options to vest and become fully exercisable if the grantee remains
employed by the Buyer for nine months following the date hereof (provided that
the grant of such options shall not change the status of any New Employee as an
employee at will). Such Buyer Options granted pursuant to this Section 5.11(c)
shall provide for immediate vesting in full upon the termination of a New
Employee's employment with the Buyer by the Buyer without cause (as that term is
defined under Buyer's existing stock option plans or standard forms of stock
option agreement). If any New Employees voluntarily terminate their employment
with the Buyer within six months following the date hereof, the Buyer shall
grant to one or more of the other New Employees in the aggregate (pro rata to
the numbers of Buyer Options theretofore issued to them under this Section
5.11(c)) new Buyer Options (priced at 100% of Fair Market Value on the date of
such grant and vesting and becoming fully exercisable if the new grantee remains
employed by the Buyer for nine months following the date hereof) in an aggregate
number equal to the number of Buyer Options granted to such terminating New
Employee pursuant to this Section 5.11(c) but not including Buyer Options
granted pursuant to Section 5.11(b) (provided that the grant of such options
shall not change the status of any New Employee as an employee at will).
ARTICLE VI
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
Defined Term Section
------------ -------
AAA 7.13(b)
Acquired Assets 1.1(a)
Affiliate 2.15(a)(vii)
Agreed Amount 4.2(c)
Ancillary Agreements 1.1(b)(ii)
Assigned Contracts 1.1(a)(iv)
Assumed Liabilities 1.2(a)
Average Closing Price 1.3
Buyer Introduction
Buyer Material Adverse Effect 3.1
Buyer Options 5.11(b)
Buyer Reports 3.5
Buyer Warrant I 1.3
Buyer Warrant II 1.3
CERCLA 2.21(a)
Claim Notice 4.2(b)
Claimed Amount 4.2(b)
Closing 1.4(a)
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Defined Term Section
------------ -------
Closing Date 1.4(a)
Code 2.20(a)
Common Stock 1.3
Controlling Party 4.2(a)
Creditor 5.9(b)
Creditor's Claim 5.9(b)
Customer Deliverables 2.13(a)
Damages 4.1
Debts 5.9
Disclosure Schedule Article II
Dispute 4.2(c)
Disputes and Other Claims 7.13
Employee Benefit Plan 2.20(d)
Environmental Law 2.21(a)
ERISA 2.20(d)
Excluded Assets 1.1(b)
Expected Claim Notice 4.3
Exchange Act 2.15(a)(vii)
Fair Market Value 5.11(c)
Financial Statements 2.6(a)
GAAP 2.6(a)
Governmental Entity 1.1(a)(vii)
Gross Margin 1.6(b)
Indemnified Party 4.2(a)
Indemnifying Party 4.2(a)
Indemnifying Persons 4.1
Intellectual Property 1.1(a)(iii)
Internal Systems 2.13(a)
Legal Proceeding 2.17
Lincoln Street Lease 1.4(b)(xvi)
Materials of Environmental Concern 2.21(b)
Minor Claim 4.4(b)
Most Recent Balance Sheet 2.8
Most Recent Balance Sheet Date 2.6(a)
New Employees 5.11(b)
Non-controlling Party 4.2(a)
Notice of Dispute 7.13(a)
Ordinary Course of Business 2.4
Outstanding Notes 2.2
Parties Introduction
Performance Warrant 1.6
Permits 1.1(a)(vii)
Pledge Agreement 1.4(b)(xi)
Premises 1.4(b)(xiv)
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Defined Term Section
------------ -------
Purchase Price 1.3
Qualifying Revenues 1.6(b)
Resolution Procedures 5.9(a)
Response 4.2(c)
Restricted Securities 5.8(a)
Retained Liabilities 1.2(b)
Resolved 5.9(b)
Revenues 1.6(b)
Satisfaction Consideration 5.9(b)
Satisfactory Release 5.9(b)
SEC 2.27(e)
Secured Promissory Note 1.3
Securities 1.3
Securities Act 2.27(a)
Security Interest 2.4
Seller Introduction
Seller Intellectual Property 2.13(a)
Seller Material Adverse Effect 2.1
Shares 1.3
Software 2.13(e)
Stakeholders Introduction
Taxes 2.9(a)(i)
Tax Returns 2.9(a)(ii)
Unknown Creditor 5.9(c)
Unknown Creditor's Claim 5.9(c)
ARTICLE VII
MISCELLANEOUS
7.1 TRANSFER AND SALES TAX. Notwithstanding any provisions of law imposing
the burden of such taxes on the Seller or the Buyer, as the case may be, the
Seller shall be responsible for and shall pay (a) all sales, use and transfer
taxes, and (b) all governmental charges, if any, upon the sale or transfer of
any of the Assets hereunder. If the Seller shall fail to pay such amounts on a
timely basis, the Buyer may pay such amounts to the appropriate governmental
authority or authorities, and the Seller shall promptly reimburse the Buyer for
any amounts so paid by the Buyer.
7.2 PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without affording the other Parties a reasonable opportunity to review and
suggest comments thereto; PROVIDED, HOWEVER, that any Party may make any public
disclosure it believes in good faith is required by applicable law, regulation
or stock market rule (in which case the disclosing Party shall use reasonable
efforts to advise the other Parties and provide them with a copy of the proposed
disclosure prior to making the disclosure).
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7.3 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
7.4 ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof.
7.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that the Buyer and the Seller may not assign their respective
obligations hereunder without the prior written consent of the other party;
PROVIDED, HOWEVER, that the Buyer may assign this Agreement, and its rights and
obligations hereunder, to a subsidiary or affiliate. Any assignment in
contravention of this provision shall be void. No assignment shall release the
Buyer from any obligation or liability under this Agreement.
7.6 COUNTERPARTS AND FACSIMILE SIGNATURE. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.
7.7 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.8 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by first class mail, postage prepaid, electronic facsimile
transmission or one business day after it is sent for next business day delivery
via a reputable nationwide overnight courier service, in each case to the
intended recipient as set forth below:
IF TO THE SELLER:
xxx.xxx, inc.
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Mr. Xxxxxxx Xxxxxx
IF TO THE BUYER: COPY TO:
Student Advantage, Inc. Xxxx and Xxxx LLP
000 Xxxxxx Xxxxxx 00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000 Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: General Counsel Attn: Xxxxxx Xxxxx, Esq.
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Either Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Either Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
7.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdictions other than those of the State of Delaware.
7.10 CERTAIN PROVISIONS REGARDING STAKEHOLDERS. The Stakeholders
acknowledge that all indebtedness of the Seller held by them is being cancelled
in consideration of their interest in the Securities (if any) to be distributed
to them pursuant to Section 5.8. Until the first anniversary of the date of this
Agreement, neither the Seller nor any Stakeholder shall sell short any
securities of the Buyer or engage in any hedging or other transaction which has
the effect of, or is equivalent to, a disposition of any securities of the
Seller. Each Stakeholder hereby agrees to vote any and all securities owned by
it in favor of any merger involving the Seller and the Buyer or any Affiliate of
the Buyer which the Buyer may subsequently propose for the purpose of
facilitating the transfer of the lease of the Premises.
7.11 AMENDMENTS AND WAIVERS. The Parties may mutually amend any provision
of this Agreement. No amendment of any provision of this Agreement shall be
valid unless the same shall be in writing and signed by the Parties. No waiver
of any right or remedy hereunder shall be valid unless the same shall be in
writing and signed by the Party giving such waiver. No waiver by any Party with
respect to either default, misrepresentation or breach of warranty or covenant
hereunder shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
7.12 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
7.13 DISPUTE RESOLUTION. Except for the right of either Party to apply to a
court of competent jurisdiction for a temporary restraining order, a preliminary
injunction, specific performance or other equitable relief, any Disputes arising
under Article IV and any and all other
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claims, disputes, ambiguities or controversies arising under, resulting from, or
related to this Agreement ("Disputes and Other Claims"), shall be resolved by
negotiation, mediation and, if necessary, arbitration, as follows:
(a) The Party raising such Disputes and Other Claims shall promptly
advise the other Party in writing describing in reasonable detail the nature of
such Disputes and Other Claims ("Notice of Dispute"). The senior management of
the Parties shall by good faith negotiations attempt to resolve the Disputes and
Other Claims within twelve (12) business days of the Notice of Dispute. In the
event the senior management negotiations shall not resolve the Disputes and
Other Claims in the twelve-day period, the Parties shall submit the Disputes and
Other Claims to mediation. By not later than five (5) business days after the
end of such twelve-day period, each Party shall select for itself a
representative having authority to bind such Party and advise the other party in
writing of the name and title of such representative. By not later than five (5)
business days thereafter, the Party against whom the Disputes and Other Claims
shall have been raised shall select a mediation organization in the Boston area
and shall notify the other Party thereof in writing. Such representatives shall
schedule a date with such organization for a mediation hearing to be held no
later than ten (10) days after such date of notice of selection of the mediation
organization. The parties shall enter into good faith mediation, and each party
shall bear its own costs and an equal share of the costs and fees of the
mediator and the mediation organization. The parties, their representatives,
other participants and the mediator shall hold in confidence the existence,
content and result of the mediation. Defenses based on the passage of time shall
be suspended upon submitting the Disputes and Other Claims to the mediator and
during the mediation, and the time period during the mediation shall be
disregarded in calculating such defenses.
(b) If the representatives of the Parties shall not have been able to
resolve the Disputes and Other Claims within fifteen (15) business days after
such mediation hearing, then any and all Disputes and Other Claims shall be
resolved by final and binding arbitration in Boston, Massachusetts under the
then current procedural rules of the American Arbitration Association (the
"AAA"); PROVIDED, HOWEVER, all substantive issues, including relief, shall be
governed by, interpreted and construed in accordance with Section 7.9 of this
Agreement. The Party submitting the Disputes and Other Claims to the AAA shall
request that the AAA appoint one (1) arbitrator who is knowledgeable in the
electronic commerce industry and who will follow substantive rules of law. The
arbitrator shall have the power to award summary judgment to the extent that any
issues may be resolved prior to the hearing based on the clear language of this
Agreement. The arbitrator shall have the power to award or compel specific
performance. The arbitrator shall have the power to add to, subtract from or
modify any of the terms and conditions of this Agreement, but not to award
punitive damages. Any award rendered in such arbitration may be enforced by
either party in any court of competent jurisdiction, to whose jurisdiction for
such purposes each party hereby irrevocably consents and submits.
(c) All costs and expenses, including attorney's fees, of both
Parties incurred in any Disputes and Other Claims which is determined and/or
settled by arbitration pursuant to this Section 7.13 shall be borne by the Party
determined to be liable in respect of such Disputes and Other Claims; PROVIDED,
HOWEVER, that if complete liability is not assessed against one Party, the
Parties shall share the total costs in proportion to their respective amounts of
liability so determined. Except where clearly prevented by the area in dispute,
both Parties agree to
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continue performing their respective obligations under this Agreement while the
dispute is being resolved. Notwithstanding any provision to the contrary
contained herein, no provision of this Agreement shall prevent either Party from
seeking appropriate injunctive relief and all other relief available in equity.
7.14 CONSTRUCTION.
(a) The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against either Party.
(b) Any reference to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
[REST OF PAGE INTENTIONALLY LEFT BLANK. COUNTERPART SIGNATURE PAGES FOLLOW.]
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[COUNTERPART SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT DATED AS OF MAY 10,
2001]
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
BUYER:
STUDENT ADVANTAGE, INC.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
------------------------------------
Title: President
SELLER:
XXX.XXX, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Title: President
STAKEHOLDERS:
INFORMATION TECHNOLOGY VENTURES II, LP
By: /s/ Xxxxxxxx Xxxxxxx
------------------------------------
Its: Managing Director
ITV AFFILIATES FUND II, LP
By: /s/ Xxxxxxxx Xxxxxxx
------------------------------------
Its: Managing Director
XXXXXXXX IX
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Its: General Partner
XXXXXXXX ASSOCIATES FUND IV
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
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Its: General Partner
[COUNTERPART SIGNATURE PAGE TO AGREEMENT DATED AS OF MAY 10, 2001]
HARBOURVEST PARTNERS VI-DIRECT FUND,
L.P.
By: HarbourVest VI - Direct Associates
L.L.C.
By: Its Managing General Partner
By: HarbourVest Partners, LLC
Its Managing Member
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Its: Principal
GENERAL CATALYST, LLC
By: /s/ Xxxxxxx X. Xxxxxxxxxx
------------------------------------
Its: Senior Vice President and Chief
Financial Officer
DHM ARCADIA PARTNERS, L.P.
By: /s/ Xxxx Xxxxxxx
------------------------------------
Its: Member
WATERVIEW PARTNERS, L.P.
By: Waterview Capital Management LLC,
General Partner
By: /s/ Xxxxxxxx X. Xxxxxx
------------------------------------
Its: Managing Member
D&DF WATERVIEW PARTNERS, L.P.
By: Waterview Capital Management LLC,
General Partner
By: /s/ Xxxxxxxx X. Xxxxxx
------------------------------------
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Its: Managing Member
[COUNTERPART SIGNATURE PAGE TO AGREEMENT DATED AS OF MAY 10, 2001]
FIRST CHICAGO EQUITY CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Its: Duly Authorized Signatory
CROSS CREEK PARTNERS X-A
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Its: Member
COMDISCO, INC.
By: /s/ Xxxxxx Xxxxx
------------------------------------
Its: Vice President
/s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxx
/s/ Xxxxxxx Xxxxxxx
----------------------------------------
Xxxxxxx Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxx
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[The following schedules and exhibits to this Asset Purchase Agreement have been
omitted and will be provided to the Commission upon request to the Company:
Exhibit A-1 - Form of Buyer Warrant I
Exhibit A-2 - Form of Buyer Warrant II
Exhibit A-3 - Form of Performance Warrant
Exhibit B - Form of Sublease]
Disclosure Schedule
42
