1
EXHIBIT 2.1
NEW LAUNCH MEDIA, INC.
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT is made as of January 15, 1999, by and among New
Launch Media, Inc., a Delaware corporation (the "Company"), Launch Media, Inc.,
a Delaware corporation ("Launch") and the undersigned partners (each a "Partner"
and collectively the "Partners") of AreohveeOnline Partnership, a California
partnership ("AO").
R E C I T A L S
A. The current respective percentage interest of each Partner in AO (the
"Interests"), is set forth opposite such Partner's name on Exhibit A hereto.
B. The Company was formed with the object and purpose, and the nature of
business to be conducted and promoted by the Company is, to exchange along with
the outstanding shares of Launch, the Interests, all in a transaction intended
to qualify as tax free under Section 351 of the Internal Revenue Code of 1986,
as amended (the "Section 351 Transaction"). The Company is also expected to
operate the business currently operated by AO and Launch.
C. It is intended by the parties that, as of the date on which the
transactions contemplated hereby close (the "Closing Date"), the Partners of AO
will have agreed, according to the terms of their respective partnership
agreement, to enter into this Agreement as part of the Section 351 Transaction
in which the Interests of the Partners in AO will be transferred to the Company
in exchange for (i) an aggregate of 4,377,782 shares of Company Stock of the
Company ("collectively, the Company Stock"), and (ii) an aggregate of $301,994
in cash as more fully set forth on Exhibit A hereto.
D. The stockholders of Launch have agreed to enter into a similar
exchange agreement as part of the Section 351 Transaction in which their
respective shares of Launch common stock, Launch preferred stock and other
Launch securities will be exchanged for equal amounts of Common Stock and/or
Preferred Stock and/or other Launch securities of the Company (the "Shares").
The exchange of securities by the Launch securityholders will occur
simultaneously with the Exchange (as defined below) and is an express condition
to the closing of the Exchange (as defined below).
1
2
A G R E E M E N T
The parties hereto hereby agree as follows:
1. Exchange.
1.1 Issuance of the Shares. Subject to the terms and conditions
hereof, the Company will, in the Section 351 Transaction, (i) issue to each of
the Partners that number of shares of Company Common Stock and (ii) a check
representing the amount of cash set forth opposite his or her name on Exhibit A
hereto in exchange for the transfer by the Partner of his or her Interest to the
Company (the "Exchange").
2. Closing Date; Delivery.
2.1 Closing Date.
(a) The closing of the Exchange shall be held at the
office of Xxxx Xxxx Xxxx & Freidenrich LLP, 000 Xxxxxxxx Xxxxxx, Xxxx Xxxx,
Xxxxxxxxxx, on the Closing Date, which shall be January 29, 1999, or at such
other time and place as the Company and a majority of the Partners may agree in
writing.
(b) The closing referred to in subsection (a) above is
hereinafter referred to as the "Closing."
(c) Subject to the terms of this Agreement, at the
Closing, the Company will deliver to each Partner (i) a certificate representing
the number of shares of Company Common Stock and (ii) a check representing the
amount of cash set forth opposite his or her name on Exhibit A hereto, against
delivery and exchange of documentation reasonably satisfactory to the Company
representing the transfer of such Partner's Interest to the Company.
(d) Despite anything in this Agreement to the contrary,
the rights and obligations of the parties to this Agreement under Section 2.1(c)
are conditional upon the occurrence of the Closing and satisfaction or waiver of
all conditions of Closing set forth in Section 7 of this Agreement and are and
will be of no force and effect until the occurrence of the Closing.
2.2 Escrow. At the Closing, the Company will deduct from the
number of shares of Company Common Stock deliverable to the Partners pursuant to
Section 2.1(c), and will deposit into escrow (the "Escrow") a certificate
representing twenty percent (20%) of the shares of Company Common Stock issuable
in the Exchange to such Partners rounded down to the nearest whole share (the
"Escrow Shares"). The Escrow Shares shall be held by Xxxx Xxxx Xxxx &
Freidenrich LLP (or such other institution as shall be agreed upon by the
Company and the Partner Representative (as defined in Section 9.7)) as escrow
agent (the "Escrow Agent"), in accordance with and subject to the provisions of
an Escrow Agreement substantially in the form of Annex 2.2 (the "Escrow
Agreement"). The Escrow Shares shall be held as collateral for the
indemnification obligations under Section 9 hereof.
2
3
3. Representations and Warranties of AO. Except as set forth in the
disclosure schedule (which disclosure shall be organized into numbered sections
corresponding with the section numbers of this Agreement) delivered by AO to the
Company on or before the date of this Agreement and attached hereto as Annex 0
(xxx "XX Xxxxxxxxxx Xxxxxxxx") AO and the Partners hereby represent and warrant
to the Company that:
3.1 Organization, Standing and Power; Qualification;
Subsidiaries. AO is a general partnership duly organized, validly existing and
in good standing under the laws of the State of California; has all requisite
power to own, lease and operate its properties and to carry on its business as
currently being conducted and as currently proposed to be conducted; is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified would have a material adverse effect on the
business, assets (including intangible assets), properties, liabilities
(contingent or otherwise), financial condition, operations, or results of
operation (a "Material Adverse Effect") of AO; and AO does not directly or
indirectly own any equity or similar interest in, or any interest convertible or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
Notwithstanding the foregoing sentence, the cancellation or the restriction of
the right to use up to four hundred (400) of the music videos in AO's tape
library as of the Closing shall not be a Material Adverse Effect as defined
herein. AO has delivered true and correct copies of its partnership formation
and partnership rights related documentation to the Company (the "Partnership
Documentation"). The Partners are not in violation of any of the provisions of
such documentation.
3.2 AO Partnership Structure.
(a) All of the outstanding interests in AO are held by
those persons set forth in Section 3.2 of the AO Disclosure Schedule (which list
sets forth the interests held by each such person). All interests have been duly
authorized and validly issued, were issued in compliance with state and federal
securities laws, and are subject to no preemptive rights or rights of first
refusal created by statute, or any agreement to which AO or any Partner is a
party or by which it or they are bound.
(b) Except as set forth in Section 3.2(a) or Section 3.2
of the AO Disclosure Schedule there are no securities or interests in any type
of AO nor are there any outstanding subscriptions, options, puts, calls, rights,
or other commitments or agreements of any character to which AO or any Partner
is a party or by which it or they are obligating AO or any Partner to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any interest in AO or obligating AO or any Partner to
grant, extend, change the price of, or otherwise amend or enter into any such
option, call, right, commitment or agreement. There are no contracts,
commitments or agreements relating to voting, purchase or sale of the Interests
(i) between or among AO and any of its Partners or the holders of any interest
in AO, or (ii) between or among any Partner or the holders of any interest in
AO.
3.3 Authority; No Conflict; Required Filings and Consents.
3
4
(a) The Partners have all requisite power and authority
to enter into this Agreement and the other documents required to be executed and
delivered by AO hereunder, (collectively, the "AO Transaction Documents"), and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the other AO Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Partners. This Agreement
and the other AO Transaction Documents have been duly executed and delivered by
the Partners and constitute the valid and binding obligations of AO and the
Partners, enforceable against AO and the Partners in accordance with their
respective terms, except as such enforceability may be limited (i) by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to creditors' rights generally and (ii) general principles of equity, regardless
of whether asserted in a proceeding in equity or at law.
(b) The execution and delivery by the Partners of this
Agreement and the other AO Transaction Documents do not, and the consummation of
the transactions contemplated hereby and thereby will not, (i) conflict with, or
result in any violation or breach of any provision of any partnership documents,
(ii) result in any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss of
any material benefit under, any note, bond, mortgage, indenture, lease, contract
or other agreement or obligation to which AO or the Partners are a party or by
which AO or any of its properties or assets may be bound, or (iii) conflict with
or violate any permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to AO or any of its
properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which would not be reasonably likely to have a Material Adverse Effect on AO or
to interfere with the consummation by AO of its obligations under this Agreement
and the other AO Transaction Documents.
(c) The Interests are the only interests entitled to
vote with respect to the Exchange being required. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity (as defined in Section 10.2) is required by or with respect to AO in
connection with the execution and delivery of this Agreement or the other AO
Transaction Documents or the consummation of the transactions contemplated
hereby or thereby except for items described in Section 3.3 of the AO Disclosure
Schedule, and such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be reasonably likely to
have a Material Adverse Effect on AO or materially and adversely affect the
ability of AO to consummate the transactions contemplated by this Agreement in
accordance with its terms.
3.4 Financial Statements. AO has delivered to the Company copies
unaudited financial statements as of, and for the partial year ended, December
31, 1997 and its interim financial statements as of, and for the year ended
December 31, 1998 (collectively the "AO Financial Statements"). The AO Financial
Statements present, and will present, fairly in all material respects the
financial position of AO as of the respective dates and the results of AO's
4
5
operations and cash flows for the periods indicated, except that the AO
Financial Statements are subject to audit adjustments which will not be material
in amount.
3.5 Absence of Liabilities. AO does not have any liabilities,
either accrued or contingent (whether or not required to be reflected in
financial statements in accordance with GAAP), and whether due or to become due,
except for (i) liabilities reflected on AO's balance sheet as of December 31,
1998 ("the AO Balance Sheet"), (ii) liabilities incurred in the ordinary course
of business that either are not required to be set forth on the AO Balance Sheet
or were incurred thereafter, and (iii) other liabilities listed in Section 3.5
of the AO Disclosure Schedule.
3.6 Absence of Certain Changes or Events. Since December 31,
1998, AO has conducted its business in the ordinary course and in a manner
consistent with past practices, and has not:
(a) to its knowledge, suffered any event or occurrence
that has had or could reasonably be expected to have a Material Adverse Effect
on AO;
(b) suffered any damage, destruction or loss, whether
covered by insurance or not, adversely affecting its properties or business;
(c) granted any increase in the compensation payable or
to become payable by AO to its Partners or employees;
(d) made any distribution or distributions to its
Partners which in the aggregate exceed a total of $15,000 per month;
(e) issued any interest rights, or options for, or
entered into any commitment in AO;
(f) made any change in the accounting methods or
practices it follows, whether for general financial or tax purposes, or any
change in depreciation or amortization policies or rates;
(g) sold, leased, abandoned or otherwise disposed of any
real property or machinery, equipment or other operating property;
(h) sold, assigned, transferred, licensed or otherwise
disposed of any patent, trademark, trade name, brand name, copyright (or pending
application for any patent, trademark or copyright), invention, work of
authorship, process, know-how, formula or trade secret or interest thereunder or
other material intangible asset, except for non-exclusive licenses which were
granted in the ordinary course of business and in a manner consistent with past
practices;
(i) other than this Agreement entered into any material
commitment or transaction (including without limitation any borrowing or capital
expenditure);
5
6
(j) incurred any liability, except in the ordinary
course of business and consistent with past practice;
(k) permitted or allowed any of its property or assets
to be subjected to any mortgage, deed of trust, pledge, lien, security interest
or other encumbrance of any kind, except for liens for current taxes not yet due
and purchase money security interests incurred in the ordinary course of
business;
(l) made any capital expenditure or commitment for
additions to property, plant or equipment individually in excess of $10,000 or
in the aggregate in excess of $25,000;
(m) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets to, or entered into any agreement
or arrangement with any of its Partners or any affiliate of any of the Partners,
other than employee compensation and benefits and advances against or
reimbursement of employment related business expenses incurred in the ordinary
course of business; or
(n) agreed to take any action described in this Section
3.6 or which to its knowledge would constitute a breach of any of the
representations or warranties of AO contained in this Agreement.
3.7 Tangible Assets and Real Property.
(a) AO owns or leases all tangible assets and properties
which are reasonably necessary for the conduct of its business as currently
conducted or which are reflected on the AO Balance Sheet or acquired since the
date of the AO Balance Sheet ("the Material Tangible Assets"). The Material
Tangible Assets are in good operating condition and repair ordinary wear and
tear excepted.
(b) AO has good and marketable title to all Material
Tangible Assets that it owns, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except for liens for current
taxes not yet due and payable and purchase money security interests.
(c) Assuming the due execution and delivery thereof by
the other parties thereto, all leases of Material Tangible Assets to which AO is
a party are in full force and effect and are valid, binding and enforceable in
accordance with their respective terms, except as such enforceability may be
limited by (i) bankruptcy laws and other similar laws affecting creditors'
rights generally and (ii) general principles of equity, regardless of whether
asserted in a proceeding in equity or at law. True and correct copies of all
such leases have been provided to the Company.
(d) AO owns no real property. The AO Disclosure Schedule
sets forth a true and complete list of all real property leased by AO.
6
7
3.8 Intellectual Property.
(a) AO owns, or is licensed or otherwise possesses
legally enforceable rights to use, only the intellectual property described in
Section 3.8(a) of the AO Disclosure Schedule (all of which are referred to as
the "AO Intellectual Property Rights").
(b) Section 3.8 of the AO Disclosure Schedule contains
an accurate and complete description of (i) all registered trademarks, trade
names, service marks and copyrights included in the AO Intellectual Property
Rights, including the jurisdictions in which each such AO Intellectual Property
Right has been issued or registered or in which any such application for such
issuance and registration has been filed, (ii) all licenses, sublicenses,
distribution agreements and other agreements to which AO is a party and pursuant
to which any person is granted rights with respect to any AO Intellectual
Property Rights or has the right to manufacture, reproduce, market or exploit
any product of AO (an "AO Product") or any adaptation, translation or derivative
work based on any AO Product or any portion thereof, (iii) all licenses,
sublicenses and other agreements to which AO is a party and pursuant to which AO
is authorized to use any third party technology, trade secret, know-how,
process, patent, trademark or copyright, including software ("Licensed
Intellectual Property"), except for freely transferable "shrink wrap" software
for which no royalties are currently owed or in the future may be owed, and (iv)
all joint development agreements to which AO is a party.
(c) AO is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the AO Intellectual Property Rights or Licensed Intellectual
Property.
(d) AO (i) has not received notice that it has been sued
in any suit, action or proceeding which involves a claim of infringement of any
patent, trademark, service xxxx, copyright, trade secret or other proprietary
right of any third party; (ii) has not received any communications alleging that
the Company has violated, or by conducting its business as proposed, would
violate any patent, trademark, service xxxx, copyright, trade secret or other
proprietary right of any third party; (iii) has no reason to believe that the
manufacturing, marketing, licensing or sale of any AO Product or the provision
of services in the course of AO's business infringes any patent, trademark,
service xxxx, copyright, trade secret or other proprietary right of any third
party; and (iv) has no knowledge of any claim challenging or questioning the
validity or effectiveness of any license or agreement relating to any AO
Intellectual Property Rights or Licensed Intellectual Property.
(e) All designs, drawings, specifications, source code,
object code, documentation, flow charts and diagrams incorporating, embodying or
reflecting any AO Product at any stage of its development or created in the
course of providing services to customers of AO (the "AO Components") were
written, developed and created solely and exclusively by Partners or employees
of AO without the assistance of any third party or were created by third parties
who assigned ownership of their rights with respect thereto to AO by
7
8
means of valid and enforceable agreements, copies of which have been provided to
the Company.
3.9 Bank Accounts. Section 3.9 of the AO Disclosure Schedule
sets forth the names and locations of all banks and other financial institutions
at which AO presently maintains accounts of any nature, the type of accounts
maintained at each such institution and the names of all persons authorized to
draw thereon or make withdrawals therefrom.
3.10 Contracts.
(a) Except as set forth in Section 3.10 of the AO
Disclosure Schedule, AO is not a party or subject to any agreement, obligation
or commitment, written or oral:
(i) that calls for any fixed and/or contingent
payment or expenditure or any related series of fixed and/or contingent payments
or expenditures by or to AO totaling more than $25,000 in any calendar year;
(ii) with agents, advisors, salesmen, sales
representatives, independent contractors or consultants that are not cancelable
by it on no more than thirty (30) days' notice and without liability, penalty or
premium;
(iii) that restricts AO from carrying on anywhere
in the world its business or any portion thereof as currently conducted;
(iv) to provide funds to or to make any investment
in any other person or entity (in the form of a loan, capital contribution or
otherwise);
(v) with respect to obligations as guarantor,
surety, co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any other person or entity;
(vi) for any line of credit, standby financing,
revolving credit or other similar financing arrangement;
(vii) with any distributor, original equipment
manufacturer, value added remarketer or other person for the distribution of any
of the AO Products; or
(viii) that is otherwise material to the business
or financial results of operations of AO.
(b) To AO's knowledge, no party to any contract,
agreement or instrument described in Section 3.7((c)), 3.7((d)) or 3.10((a)) has
expressed its intention to cancel, withdraw, modify or amend such contract,
agreement or instrument.
(c) AO is not in material default under or in material
breach or violation of, nor is there any valid basis for any claim of material
default by AO under, or material breach or violation by AO of, any contract,
commitment or restriction to which AO is a
8
9
party or by which AO or any of its properties or assets is bound or affected. To
AO's knowledge, no other party is in material default under or in material
breach or violation of, nor, to AO's knowledge, is there any valid basis for any
claim of material default by any other party under, or any material breach or
violation by any other party of, any contract, commitment, or restriction to
which AO is a party or by which AO or any of its properties or assets is bound
or affected.
3.11 Employee Benefit Plans. AO has no employee benefit plans,
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance or other similar employee benefit plans.
3.12 Compliance with Laws. AO has complied in all material
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any statute, law or regulation applicable to the
ownership or operation of its business, including, without limitation, United
States statutes, laws and regulations governing the license and delivery of
technology and products abroad by persons subject to the jurisdiction of the
United States.
3.13 Employees and Consultants. Section 3.13 of the AO
Disclosure Schedule contains a list of the names of all present employees and
consultants of AO, their salaries or wages, other compensation and dates of
employment and positions.
3.14 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending before any agency, court or tribunal, or to
AO's knowledge, threatened, against AO or any of its properties or Partners.
There is no judgment, decree or order against AO or, to AO's knowledge, any of
its Partners that could prevent, enjoin or materially alter or delay any of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on AO.
3.15 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon AO which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any current business practice of AO, any acquisition of property by AO, or the
conduct of business by AO as currently conducted or as currently proposed to be
conducted.
3.16 Governmental Authorization. AO has obtained each
governmental consent, license, permit, grant or other authorization of a
Governmental Entity that is required for the operation of the business of AO as
currently conducted (collectively, the "AO Authorizations"), and all such AO
Authorizations are in full force and effect.
3.17 Insurance. Section 3.17 of the AO Disclosure Schedule
contains a list and description of all insurance policies of AO. There is no
material claim pending under any of such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies. All
premiums due and payable under all such policies have been paid, and AO is
otherwise in compliance with the terms of such policies. AO has no knowledge of
any threatened termination of, or material premium increase with respect to, any
of such policies.
9
10
3.18 Indemnification Claims. Section 3.17 of the AO Disclosure
Schedule sets forth a list of all persons who are parties to Partner and/or AO
employee indemnification agreements with AO (the "Indemnification Agreements").
Except as set forth in Section 3.17 of the AO Disclosure Schedule, there are no
outstanding claims under any of the Indemnification Agreements or under any
indemnification rights granted pursuant to any partnership related documentation
of AO (as currently in effect); and to AO's knowledge, there are no facts or
circumstances that either now, or with the passage of time, could reasonably be
expected to provide a basis for a claim under any such Indemnification Agreement
or under any indemnification rights granted pursuant to any partnership related
documentation of AO.
3.19 No Brokers. Except as set forth in Section 3.19 of the AO
Disclosure Schedule, AO is not obligated for the payment of fees or expenses of
any broker, finder or other person in connection with the origination,
negotiation or execution of this Agreement or the other AO Transaction Documents
or any transaction contemplated hereby or thereby. AO agrees to indemnify and
hold the Company and its affiliates harmless from and against any and all
claims, liabilities or obligations with respect to any such fees, commissions or
expenses.
3.20 Payments Resulting from Exchanges. Neither the consummation
nor announcement of any transaction contemplated by this Agreement will (either
alone or upon the occurrence of any additional or further acts or events) result
in any material payment (whether of severance pay or otherwise) becoming due
from AO to any Partner, employee or former employee thereof under (i) any
management, employment, deferred compensation, severance (including any payment,
right or benefit resulting from a change in control), bonus or other contract
for personal services with any Partner or employee or any plan, agreement or
understanding similar to any of the foregoing, or any "rabbi trust" or similar
arrangement, or (ii) a material benefit under any AO Employee Plan being
established or becoming accelerated, vested or payable.
3.21 Interested Party Transactions. To the knowledge of AO, no
Partner or employee of AO has any interest in (i) any material equipment or
other property or asset, real or personal, tangible or intangible, including,
without limitation, any of the AO Intellectual Property Rights, used in
connection with or pertaining to the business of AO, (ii) any creditor,
supplier, customer, manufacturer, agent, representative, or distributor of any
of the AO Products, (iii) any entity that competes with AO, or with which AO is
affiliated or has a business relationship, or (iv) any agreement, obligation or
commitment, written or oral, to which AO is a party; provided, however, that no
such person shall be deemed to have any interest described in clauses (i)
through (iv) of this Section 3.21 solely by virtue of such person's ownership of
less than five percent (5%) of the outstanding stock or debt securities of any
publicly held company, the stock or debt securities of which are traded on a
recognized stock exchange or on any of the Nasdaq Stock Markets.
3.22 No Existing Discussions. As of the date hereof, AO is not
engaged, directly or indirectly, in any existing discussions or negotiations
with any other party with respect to an Acquisition Proposal (as defined in
Section 6.1).
10
11
3.23 No Misrepresentation. No representation or warranty by AO
in this Agreement, and no statement, certificate or schedule furnished or to be
furnished by or on behalf of AO pursuant to this Agreement, when taken together,
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make such
statements, in light of the circumstances under which they were made, not
misleading.
4. Representations And Warranties Of the Company and Launch.
Except as set forth in the disclosure schedule delivered by the Company
to AO on or before the date of the Closing and attached hereto as Annex 4 (the
"The Company Disclosure Schedule"), the Company and Launch jointly and severally
represents and warrants to AO and each of its Partners as follows:
4.1 Organization. The Company is a Delaware corporation duly
organized, validly existing and in good standing under the laws of Delaware, has
all requisite corporate power to own, lease and operate its property and to
carry on its business as now being conducted and as proposed to be conducted,
and is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have a Material Adverse Effect on the Company.
4.2 The Company Capital Structure.
(a) The entire duly authorized capital stock of the
Company consists of 75,000,000 shares of Common Stock, $0.001 par value, and
32,902,029 shares of Preferred Stock, $0.001 par value, of which 1,900,800
shares have been designated Series A Stock, 3,064,102 shares have been
designated Series B Stock, 7,900,117 shares have been designated Series C Stock
and 20,037,010 shares have been designated Series D Stock.
(b) As of the Closing, 4,671,663 shares of Common Stock,
1,900,800 shares of Series A Stock, 3,064,102 shares of Series B Stock,
7,900,117 shares of Series C Stock and 16,726,133 shares of Series D Stock will
be issued and outstanding.
(c) Except for (i) the conversion privileges of the
Series A, Series B, Series C and Series D stock (ii) 5,401,512 shares of Common
Stock reserved for issuance pursuant to the Company's 1994 and 1998 Stock Option
Plans, as amended (the "Incentive Plans"), of which 2,647,500 shares are subject
to outstanding options and 2,754,012 shares are available for future grant,
(iii) options to purchase 47,000 shares of Common Stock of the company issued
separately from the Incentive Plans, (iv) warrants to purchase 2,901,028 shares
of Common Stock issued pursuant to an Agreement with Xxxxx & Company,
Incorporated (the "Xxxxx & Co. Warrants"), (v) warrants to purchase 2,072,163
shares of Series D Stock to NBC and warrants to purchase 300,000 shares of
Series D Stock to GE Capital, respectively and (vi) the rights provided in the
Investors Rights Agreement, there are not other outstanding shares of capital
stock, options, warrants or rights or outstanding rights of first refusal,
preemptive rights or other rights, options, warrants, conversion rights, or
other agreements either directly or indirectly of the purchase or acquisition
from the Company of any shares of its capital stock. The rights, privileges and
preferences of the Series A, Series B, Series C and Series D Stock will
11
12
be as set forth in the Company's Certificate of Incorporation. Assuming all of
the interests described in 4.2(b) and 4.3(c)(i)-(vi) inclusive are converted to
Common Stock, the total number of shares of the Company's issued and outstanding
Common Stock is 44,984,518. To the knowledge of the Company, there are no voting
trusts, proxies or other agreements or understanding with respect to the shares
of capital stock of the Company.
(d) The shares of the Company Common Stock to be issued
pursuant to the Exchange, when issued, will be duly authorized, validly issued,
fully paid, and nonassessable, and free of and not subject to any preemptive
rights or rights of first refusal and (subject to the accuracy of
representations and warranties to be obtained from AO shareholders) will be
issued in compliance with all state and federal securities laws.
4.3 Authority; No Conflict; Required Filings and Consents.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and the other documents required to be
executed and delivered by the Company hereunder (collectively, the "The Company
Transaction Documents") and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the other Company
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company. This Agreement and the Company Transaction Documents
to which they are parties have been duly executed and delivered by the Company
and constitute the valid and binding obligations of the Company, enforceable in
accordance with their terms, except as such enforceability may be limited by (i)
bankruptcy laws and other similar laws affecting creditors' rights generally and
(ii) general principles of equity, regardless of whether asserted in a
proceeding in equity or at law.
(b) The execution and delivery by the Company of this
Agreement and the other the Company Transaction Documents do not, and the
consummation of the transactions contemplated hereby or thereby will not, (i)
conflict with, or result in any violation or breach of any provision of the
Certificate of Incorporation or Bylaws of the Company , (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit under, any note,
bond, mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which the Company is a party or by which either of them or any of
their properties or assets may be bound, or (iii) conflict with or violate any
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its or their
properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which would not be reasonably likely to have a Material Adverse Effect on the
Company, taken as a whole, and that would not interfere with the consummation by
the Company of its obligations under this Agreement and the other the Company
Transaction Documents.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to the
12
13
Company or any of its subsidiaries in connection with the execution and delivery
of this Agreement or the other the Company Transaction Documents or the
consummation of the transactions contemplated hereby or thereby, except for such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws
and the laws of any foreign country, and such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
be reasonably likely to have a Material Adverse Effect on the Company.
4.4 Financial Statements.
The Company and Launch have delivered to each Purchaser balance sheets
and statement of stockholder's equity of Launch at December 31, 1996 and at
December 31, 1997, audited statements of operations and cash flows of Launch for
the years ended December 31, 1996 and December 31, 1997, an unaudited balance
sheet and statement of stockholder's equity of Launch at October 31, 1998 and
unaudited statements of operations and cash flows of Launch for the ten-month
period ended October 31, 1998 (collectively, the "Launch Financial Statements").
The Launch Financial Statements are set forth as Attachment 4.4 to the Company
Disclosure Schedule. The Launch Financial Statements are complete and correct in
all material respects, have been prepared from, and are consistent with, the
books and records of Launch, fairly present the financial condition of Launch on
such dates and the results of operations for the periods designated therein and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated. The Launch
Financial Statements accurately set out and describe the financial conditions
and operating results of Launch as of the dates, and during the periods,
indicated therein (subject, in the case of unaudited financial statements, to
normal non-material year-end audit adjustments and the omission of footnotes).
Since October 31, 1998, there has been no material adverse change in the
business, financial condition or results of operations of Launch.
4.5 Absence of Undisclosed Liabilities. Except as disclosed in
writing to AO or as otherwise disclosed in the Launch Financial Statements,
Launch and its Subsidiaries do not have any liabilities, either accrued or
contingent (whether or not required to be reflected in financial statements in
accordance with GAAP), and whether due or to become due, which individually or
in the aggregate would be reasonably likely to have a Material Adverse Effect on
Launch other than (i) liabilities reflected in the Launch Balance Sheet, (ii)
liabilities specifically described in this Agreement, and (iii) normal or
recurring liabilities incurred since October 31, 1998, in the ordinary course of
business consistent with past practices.
4.6 Absence of Certain Changes or Events. Since October 31,
1998, Launch has conducted its business only in the ordinary course and in a
manner consistent with past practice and, since such date, there has not been:
(i) any event or occurrence that has had a Material Adverse Effect on Launch;
(ii) any damage, destruction or loss (whether or not covered by insurance) with
respect to Launch having a Material Adverse Effect on Launch; (iii) any material
change by Launch in its accounting methods, principles or practices to which AO
has not previously consented in writing; or (iv) any revaluation by Launch of
any of its assets having a Material Adverse Effect on Launch.
13
14
4.7 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or to the knowledge of Launch, threatened,
against Launch which is reasonably likely to have a Material Adverse Effect on
Launch, or which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay any of the transactions contemplated by this Agreement.
4.8 Organization, Standing and Power; Qualification;
Subsidiaries. Launch is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware; has all requisite power
to own, lease and operate its properties and to carry on its business as
currently being conducted and as currently proposed to be conducted; is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified would have a Material Adverse Effect on Launch
(other than New York); and Launch does not directly or indirectly own any equity
or similar interest in, or any interest convertible or exchangeable or
exercisable for any equity or similar interest in, any corporation, partnership,
joint venture or other business association or entity. Launch has delivered true
and correct copies of its corporate formation and stockholder rights related
documentation to AO (the "Stockholder Documentation"). Launch is not in
violation of any of the provisions of such documentation.
4.9 Authority; No Conflict; Required Filings and Consents.
(a) Launch has all requisite power and authority to
enter into this Agreement and the other documents required to be executed and
delivered by Launch hereunder, (collectively, the "Launch Transaction
Documents"), and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the other Launch Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of Launch.
This Agreement and the other Launch Transaction Documents have been duly
executed and delivered by Launch and constitute the valid and binding
obligations of Launch, enforceable against Launch in accordance with their
respective terms, except as such enforceability may be limited (i) by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to creditors' rights generally and (ii) general principles of equity, regardless
of whether asserted in a proceeding in equity or at law.
(b) The execution and delivery by Launch of this
Agreement and the other Launch Transaction Documents do not, and the
consummation of the transactions contemplated hereby and thereby will not, (i)
conflict with, or result in any violation or breach of any provision of any
Launch Transaction Documents, (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default under,
or give rise to a right of termination, cancellation or acceleration of any
material obligation or loss of any material benefit under, any note, bond,
mortgage, indenture, lease, contract or other agreement or obligation to which
Launch is a party or by which Launch or any of its properties or assets may be
bound, or (iii) conflict with or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Launch or any of its properties or assets, except in the case of
(ii) and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which would not be reasonably likely to have a
14
15
Material Adverse Effect on Launch or to interfere with the consummation by
Launch of its obligations under this Agreement and the other Launch Transaction
Documents.
(c) The Launch securityholders are the only
securityholders entitled to vote with respect to the Exchange being required. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity (as defined in Section 10.2) is required by
or with respect to Launch in connection with the execution and delivery of this
Agreement or the other Launch Transaction Documents or the consummation of the
transactions contemplated hereby or thereby except for items described in
Section 4.9 of the Launch Disclosure Schedule, and such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not be reasonably likely to have a Material Adverse Effect on Launch
or materially and adversely affect the ability of Launch to consummate the
transactions contemplated by this Agreement in accordance with its terms.
4.10 Compliance with Laws. Launch has complied in all material
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any statute, law or regulation applicable to the
ownership or operation of its business, including, without limitation, United
States statutes, laws and regulations governing the license and delivery of
technology and products abroad by persons subject to the jurisdiction of the
United States.
4.11 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon Launch which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any current business practice of Launch, any acquisition of property by Launch,
or the conduct of business by Launch as currently conducted or as currently
proposed to be conducted.
4.12 No Brokers. Neither the Company nor Launch is obligated for
the payment of fees or expenses of any broker, finder or other person in
connection with the origination, negotiation or execution of this Agreement or
the other Launch Transaction Documents or any transaction contemplated hereby or
thereby. The Company agrees to indemnify and hold Launch harmless from and
against any and all claims, liabilities or obligations with respect to any such
fees, commissions or expenses.
4.13 No Misrepresentation. No misrepresentation or warranty by
Launch in this Agreement, and no statement, certificate or schedule furnished or
to be furnished by or on behalf of the Company or Launch pursuant to this
Agreement, when taken together, contains any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make such statements, in light of the circumstances under which they
were made, not misleading.
4.14 Registration Rights. No current holders of Common Stock
have registration rights for such Common Stock.
15
16
5. Conduct of Business.
5.1 Covenants of AO by AO. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, AO agrees (except to the extent that the Company shall
otherwise consent or request, in each case in writing) to carry on its business
in the usual, regular and ordinary course in substantially the same manner as
previously conducted, to pay its debts and taxes when due, subject to good faith
disputes over such debts or taxes, to pay or perform its other obligations when
due, and, to the extent consistent with such business, to use all reasonable
efforts consistent with past practices and policies to (i) preserve intact its
present business organization, (ii) keep available the services of its present
Partners and employees; provided, however, that with the prior written consent
of the Company, which shall not be unreasonably withheld, AO may reduce its
workforce, so long as AO does not terminate any of the Partners listed on Annex
7.2(e) hereto, which Partners the Company desires to retain after the Closing
Date, and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees and others having business dealings with it.
AO shall promptly notify the Company of any event or occurrence not in the
ordinary course of business of AO where such event or occurrence would result in
a breach of any covenant of AO set forth in this Agreement or cause any
representation or warranty of AO set forth in this Agreement to be untrue as of
the date of, or giving effect to, such event or occurrence. Except as expressly
contemplated by this Agreement, AO shall not, without the prior written consent
of the Company:
(a) transfer or license to any person or entity or
otherwise extend, amend or modify any rights to the AO Intellectual Property
Rights other than in the ordinary course of business consistent with past
practices;
(b) make any distributions which in the aggregate exceed
$15,000 per month (whether in cash, property or otherwise), or issue any
additional partnership interests;
(c) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership or other business organization or division, or
otherwise acquire or agree to acquire any assets other than acquisitions
involving aggregate consideration of not more than $10,000 and inventory
purchased in the ordinary course of business consistent with past practices;
(d) sell, lease, license or otherwise dispose of any of
its properties or assets except for transactions entered into in the ordinary
course of business consistent with past practice;
(e) revalue any of its assets, including writing down
the value of inventory or writing off notes or accounts receivable other than in
the ordinary course of business;
(f) incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or warrants
or rights to acquire any debt
16
17
securities or guarantee any debt securities of others, other than indebtedness
incurred under outstanding lines of credit in the ordinary course of business
consistent with past practice;
(g) amend or propose to amend its partnership related
documentation;
(h) incur or commit to incur any individual capital
expenditure other than the existing commitments set forth in the AO Disclosure
Schedule;
(i) enter into or amend any agreements pursuant to which
any third party is granted exclusive marketing or manufacturing rights with
respect to any AO Product;
(j) amend or terminate any material contract, agreement
or license to which it is a party except in the ordinary course of business;
(k) waive or release any material right or claim, except
in the ordinary course of business;
(l) initiate any litigation or arbitration proceeding;
(m) compromise or otherwise settle or adjust any
assertion or claim of a deficiency in taxes (or interest thereon or penalties in
connection therewith), extend the statute of limitations with any tax authority
or file any pleading in court in any tax litigation or any appeal from an
asserted deficiency;
(n) change any of AO's accounting policies and
practices, except such changes as may be required in the reasonable opinion of
AO's management to respond to economic or market conditions or as may be
required by the rules of the Institute of Certified Public Accountants or
Financial Accounting Standards Board or by applicable governmental authorities;
(o) change its personnel policies;
(p) grant any person a power of attorney or similar
authority; or
(q) agree in writing or otherwise to take, any of the
actions described in subsections (a) through (q) above, or any action which is
reasonably likely to make any of its representations or warranties contained in
this Agreement untrue or incorrect in any material respect on the date made (to
the extent so limited) or as of the Closing.
5.2 Covenants of Launch. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Closing, Launch agrees (except to the extent that AO shall otherwise
consent or request, in each case in writing) to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
previously conducted, and, to the extent consistent with such business, to use
all reasonable efforts consistent with past practices and policies to (i)
preserve intact its present business organization and (ii) keep available the
services of its present offices and employees. Launch shall promptly notify the
Company of any event or occurrence not in the ordinary course of
17
18
business of Launch where such event or occurrence would result in a material
breach of any covenant of Launch as set forth in this Agreement or cause any
representation or warranty of Launch set forth in this Agreement to be untrue as
of the date of, or giving effect to, such event or occurrence. Except as
expressly contemplated by this Agreement, Launch shall not, without the prior
written consent of AO:
(a) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership or other business organization or division in which
the total consideration paid by Launch in such transaction is greater than ten
percent (10%) of Launch's then fully diluted shares;
(b) sell, lease, license or otherwise dispose of any of
its properties or assets except for transactions entered into in the ordinary
course of business consistent with past practice;
(c) amend or terminate any material contract, agreement
or license to which it is a party except in the ordinary course of business; or
(d) agree in writing or otherwise to take, any of the
actions described in subsections (a) through (c) above, or any action which is
reasonably likely to make any of its representations or warranties contained in
this Agreement untrue or incorrect in any material respect on the date made (to
the extent so limited) or as of the Closing.
5.3 Cooperation. Subject to compliance with applicable law, from
the date hereof until the Closing, each of the Company and the Partners shall
confer on a regular and frequent basis with one or more representatives of the
other party to report operational matters of materiality and the general status
of ongoing operations and shall promptly provide the other party or its counsel
with copies of all filings made by such party with any Governmental Entity
whether or not in connection with this Agreement, the Exchange and the other
transactions contemplated hereby.
6. Additional Covenants and Agreements.
6.1 No Solicitation.
(a) From and after the date of this Agreement until the
earlier of the termination of this Agreement or the Closing, AO shall not,
directly or indirectly through any Partner or employee, representative or agent
of AO or otherwise, (i) solicit, initiate, or encourage any inquiries or
proposals that constitute, or could reasonably be expected to lead to, a
proposal or offer for a merger, consolidation, exchange, business combination,
sale of all or substantially all assets, sale of Interests (including without
limitation by way of a tender offer) or similar transactions involving AO other
than the transactions contemplated by this Agreement (any of the foregoing
inquiries or proposals being referred to in this Agreement as an "Acquisition
Proposal"), (ii) engage or participate in negotiations or discussions
concerning, or provide any non-public information to any person or entity
relating to, any Acquisition Proposal, or (iii)
18
19
agree to, enter into, accept, approve or recommend any Acquisition Proposal.
6.2 Consents. Each of the Company and AO shall use all
reasonable efforts to obtain all necessary consents, waivers and approvals under
its respective material agreements, contracts, licenses and leases as may be
necessary or advisable to consummate the Exchange and the other transactions
contemplated by this Agreement.
6.3 Access to Information. Upon reasonable notice, AO shall
afford to the officers, employees, accountants, counsel and other
representatives of the Company, reasonable access, during normal business hours
during the period prior to the earlier of the termination of this Agreement or
the Closing, to all its properties, books, contracts, commitments and records
and, during such period, AO shall furnish promptly to the Company (i) a copy of
each report, schedule, registration statement and other document filed by it
with or received by it from any Governmental Entity and (ii) all other
information concerning its business, properties and personnel as the Company may
reasonably request. No information or knowledge obtained in any investigation
pursuant to this Section 6.3 shall affect or be deemed to modify any
representation or warranty contained in this Agreement or the conditions to the
obligations of the parties to consummate the Exchange.
6.4 Legal Conditions to Exchange. Each of the Company and AO
will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on itself with respect to the Exchange (which
actions shall include, without limitation, furnishing all information in
connection with approvals of or filings with any Governmental Entity) and will
promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon either of them in connection with the
Exchange. Each of the Company and AO will take all reasonable actions necessary
to obtain (and will cooperate with each other in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity or other third party, required to be obtained or made by AO or the
Company in connection with the Exchange or the taking of any action contemplated
thereby or by this Agreement.
6.5 Public Disclosure. Except with the prior written consent of
the other party, which consent shall not be unreasonably withheld or delayed,
neither AO nor the Company shall issue any press release or other public
statement with respect to the Exchange or this Agreement. Prior to the Effective
Time, neither the Company nor AO shall make, or cause to be made, any press
release or public announcement in respect of this Agreement or the transaction
contemplated hereby without prior consultation with and the prior written
consent of the other party, which consent shall not be unreasonably withheld or
delayed.
6.6 Additional Agreements; Reasonable Efforts. Subject to the
terms and conditions of this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including cooperating fully with the other party, including by
provision of information. In case at any time after the Closing any further
action is
19
20
necessary or desirable to carry out the purposes of this Agreement or to vest
the Company with full title to all properties, assets, rights, approvals,
immunities and franchises of either Launch or AO, the proper officers and
directors of Launch or Partners of AO shall take all such necessary action.
6.7 Expenses. Whether or not the Exchange is completed, the
parties shall each pay their own legal, accounting and financial advisory fees
and other out-of-pocket expenses related to the negotiation, preparation and
carrying out of this Agreement and the transactions herein contemplated.
Notwithstanding the foregoing sentence, however, the Company will pay the
reasonable legal, accounting and financial advisory fees and other out-of-pocket
expenses of AO related to the carrying out of this Agreement and the
transactions herein contemplated if and only if (i) the Exchange fails to close
due to a failure to occur of any of the conditions set forth in Section 7.3
(other than subsection (g)) or (ii) this Agreement is rightfully terminated by
AO pursuant to Section 8.1(d) hereof.
6.8 Notification of Certain Matters. AO shall give prompt notice
to the Company, and the Company shall give prompt notice to AO, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur, if uncured, would be likely to cause the failure of any of the conditions
set forth in Section 7 of this Agreement.
7. Conditions To Exchange.
7.1 Conditions to Each Party's Obligation to Effect the
Exchange. The respective obligations of each party to this Agreement to effect
the Exchange shall be subject to the satisfaction prior to the Closing Date of
the following conditions:
(a) Partner Approval. This Agreement and the Exchange
shall have been approved and adopted by the requisite vote of the Partners of AO
as required by AO's Partnership Documentation and the partnership law of the
State of California.
(b) Governmental Approvals. All authorizations,
consents, orders or approvals of, or declarations or filings with, or
expirations of waiting periods imposed by, any Governmental Entity shall have
been obtained or filed, or shall have occurred as the case may be.
(c) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Exchange or limiting
or restricting the Company's conduct or operation of the business of the Company
or AO after the Exchange shall have been issued, nor shall any proceeding
brought by a domestic administrative agency or commission or other domestic
Governmental Entity, seeking any of the foregoing be pending; nor shall there be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Exchange which makes the consummation of
the Exchange illegal or prevents or prohibits the Exchange.
20
21
7.2 Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Exchange are subject to the
satisfaction of each of the following additional conditions, any of which may be
waived in writing exclusively by the Company:
(a) Representations and Warranties. The representations
and warranties of AO set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, except for changes
contemplated by this Agreement, and the Company shall have received a
certificate signed on behalf of the Partners to such effect.
(b) Performance Obligations. AO and the Partners shall
have performed in all material respects all obligations required to be performed
by it and them under this Agreement at or prior to the Closing Date, and the
Company shall have received a certificate signed on behalf of AO by the Partners
to such effect.
(c) Confidentiality and Inventions Agreements. The
Company shall have received Proprietary Information and Nonsolicitation
Agreements signed by each of the AO Partners that will be accepting employment
with the Company in substantially the form of Annex 7.2((c)), and each such
agreement shall be in full force and effect.
(d) Non-Competition Agreements. The Company shall have
received from each Partner other than D. Xxxxx Xxxxx and Xxxxxxx Xxxxxxxxx, a
Non-Competition Agreement in substantially the form of Annex 7.2((d))(i) and
from Xxxxxxx Xxxxxxxxx, a Non-Competition Agreement in substantially the form of
Annex 7.2(d)(ii).
(e) AO Employees. The Company shall have received from
each of Xxxxxxx Xxxxxx, Xxxxx Xxxxx and G. Xxxxx Xxxxxxx an Employment Agreement
in substantially the form attached hereto as Annex 7.2((e)).
(f) Legal Opinion. The Company shall have received a
legal opinion from XxXxxxxxx, Will & Xxxxx, counsel to AO, substantially in the
form of Annex 7.2((f)).
(g) No Material Adverse Effect. Since October 31, 1998,
there shall have been no event or occurrence that had or could reasonably be
expected to have a Material Adverse Effect on AO.
(h) Third-Party Consents and Waivers. AO shall have
provided all notices to third parties, and shall have received all third-party
consents or waivers required in connection with the consummation of the
transactions contemplated by this Agreement under any contract set forth (or
required to be set forth) in Section 3.4 of the AO Disclosure Schedule or
required to be obtained pursuant to Section 6.2.
(i) Voting Agreement. The Company shall have received
from each Partner a Voting Agreement in the form attached hereto as Annex
7.2(i).
21
22
(j) Amendment of Agreements. The AO partnership related
Agreements shall be amended as necessary to permit the Exchange and the
transactions contemplated hereunder.
(k) Fairness Hearing. The issuance of the Company's
Common Stock and Preferred Stock pursuant to this Agreement and to the
stockholders of Launch shall have been the subject of a fairness hearing by, and
shall have been approved by, the California Department of Corporations.
(l) Audited Financials. AO shall have delivered to the
Company copies of its audited financial statements for the period from inception
through December 31, 1997 and for the year ended December 31, 1998.
7.3 Additional Conditions to Obligations of AO. The obligation
of AO to effect the Exchange is subject to the satisfaction of each of the
following additional conditions, any of which may be waived, in writing,
exclusively by AO:
(a) Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except for changes
contemplated by this Agreement, and AO shall have received a certificate signed
on behalf of the Company by an executive officer of the Company to such effect.
(b) Performance Obligations. The Company and Sub shall
have performed in all material respects all obligations required to be performed
by them under this Agreement at or prior to the Closing Date, and AO shall have
received a certificate signed on behalf of the Company by an executive officer
of the Company to such effect.
(c) Legal Opinion. AO shall have received a legal
opinion from Xxxx Xxxx Xxxx & Freidenrich LLP, counsel to the Company,
substantially in the form of Annex 7.3((c)).
(d) Assumption of Liabilities. AO shall be satisfied in
its reasonable discretion that the Company has either assumed or paid off in
their entirety all of AO's liabilities (other than those relating to taxes in
connection with the Exchange and those liabilities incurred in connection with
Section 6.7 hereto).
(e) Launch Exchange. The Launch Exchange contemplated by
the Launch Exchange Agreement attached hereto as Annex 7.3(e) shall have been
closed per the terms of such agreement.
(f) Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement as to Launch
and as of the Closing Date as to the Company as though made on and as of the
Closing Date, except for changes contemplated by
22
23
this Agreement, and the Company shall have received a certificate signed on
behalf of the Company to such effect.
(g) AO Employees. Each of Xxxxxxx Xxxxxx, Xxxxx Xxxxx
and G. Xxxxx Xxxxxxx shall have received from the Company an Employment
Agreement in substantially the form attached hereto as Annex 7.2(e),
(h) No Material Adverse Effect. Since October 31, 1998,
there shall have been no event or occurrence that had or could reasonably be
expected to have a Material Adverse Effect on Launch.
(i) Third-Party Consents and Waivers. Launch shall have
provided all notices to third parties, and shall have received all third-party
consents or waivers required in connection with the consummation of the
transactions contemplated by this Agreement or required to be obtained pursuant
to Section 6.2.
(j) Fairness Hearing. The issuance of the Company's
Common Stock and Preferred Stock pursuant to this Agreement and to the
stockholders of Launch shall have been the subject of a fairness hearing by, and
shall have been approved by, the California Department of Corporations.
(k) Letter Agreement. The Company shall have provided
the Partners or their legal counsel with an executed 351 Transaction Side
Letter.
8. Termination and Amendment.
8.1 Termination. This Agreement may be terminated at any time
prior to the Closing (with respect to Sections 8.1((b)) through 8.1((f)), by
written notice by the terminating party to the other party), whether before or
after approval of the matters presented in connection with the Exchange by the
Partners of AO:
(a) by mutual written consent duly authorized by the
Board of Directors of the Company and a majority of the Partners of AO;
(b) by either the Company or AO if the Exchange shall
not have been consummated by February 28, 1999 (provided that the right to
terminate this Agreement under this Section 8.1((b)) shall not be available to
any party whose failure to fulfill any material obligation under this Agreement
has been the cause of or resulted in the failure of the Exchange to occur on or
before such date);
(c) by either the Company or AO, if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Exchange, except, if the party relying on such order, decree or ruling or other
action has not materially complied with its obligations under Section 6 of this
Agreement;
23
24
(d) by AO, if there has been a material breach of any
representation, warranty, covenant or agreement on the part of the Company,
which breach shall not have been cured within ten (10) business days following
receipt by the breaching party of written notice of such breach from AO;
(e) by the Company, if there has been a material breach
of any representation, warranty, covenant or agreement on the part of AO or any
of its Partners, which breach shall not have been cured within ten (10) business
days following receipt by the breaching party of written notice of such breach
from the Company; or
(f) by the Company, if for any reason the Partners fail
to approve this Agreement and the transactions contemplated hereby by February
28, 1999.
8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, there shall be no liability or obligation
on the part of the Company or its officers, directors, shareholders or
Affiliates or AO or its Partners, except to the extent that such termination
results from the intentional breach by a party of any of its representations,
warranties or covenants set forth in this Agreement; provided that, the
provisions of Section 6.7 shall remain in full force and effect and survive any
termination of this Agreement.
8.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their Boards of Directors (in the case
of the Company) or Partners (in the case of AO), at any time before or after
approval of the matters presented in connection with the Exchange by the
Partners of AO, but, after any such approval, no amendment shall be made which
by law requires further approval by such Partners without such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Closing, the
parties hereto, by action taken or authorized by their Boards of Directors (in
the case of the Company) or Partners (in the case of AO), may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
24
25
9. Escrow and Indemnification
9.1 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements of AO and
the Company contained in this Agreement or any instrument delivered pursuant to
this Agreement shall survive the Closing Date and shall continue in full force
and effect until the earlier of (i) first anniversary of the Closing Date or
(ii) the Company's sale of all or substantially all its assets, the merger or
consolidation of the Company into or with any other corporation or if the
holders of the outstanding shares of the Company prior to such merger or
consolidation do not retain a majority of the voting power of the surviving
corporation (the "Termination Date").
9.2 Indemnification by AO Partners.
(a) Subject to the terms and conditions contained in
this Section 9, the Partners outstanding immediately prior to the Closing Date
(the "Indemnifying Partners") shall, jointly and severally, indemnify, defend
and hold harmless the Company, its shareholders, officers, directors, employees
and attorneys, all Subsidiaries and affiliates of the Company, and the
respective officers, directors, employees and attorneys of such entities (all
such persons and entities being collectively referred to as the "Company Group")
from, against, for and in respect of any and all claims, losses, liabilities,
damages, costs and expenses (including reasonable legal fees and expenses and
expenses of investigation and defense) which any member of the Company Group may
sustain or incur (collectively, "Company Losses") which are caused by or arise
out of any inaccuracy in or breach of any of the representations, warranties,
covenants or agreements made by AO or the Partners in this Agreement, the AO
Disclosure Schedule or any certificate delivered pursuant to Section 7.2.
(b) The maximum aggregate liability of any Indemnifying
Partner pursuant to Section 9.2((a)) shall be limited to the value of the Escrow
Shares held by the Escrow Agent in the Escrow on behalf of such Indemnifying
Partner pursuant to the terms of the Escrow Agreement. Anything in this
Agreement to the contrary notwithstanding, the Indemnifying Partners shall not
be liable for indemnification under this Section 9.2 until the aggregate of all
the Company Losses for which indemnity is claimed exceeds $45,000, in which case
the Company shall be entitled to indemnification for the full amount of the
indemnification including the first $45,000.
(c) The obligation of the Indemnifying Partners to
indemnify members of the Company Group for a Company Loss under this Section 9
is subject to the condition that the Indemnifying Partners or the Partner
Representative (as defined in Section 9.7) shall have received an
Indemnification Claim (as defined in Section 9.3((b))) for such Company Loss on
or before the Termination Date.
(d) The provisions of Sections 9.2((b)) and ((c)) and
Section 9.6 shall not limit, in any manner, any remedy at law or in equity to
which any member of the Company Group shall be entitled against AO or Partner or
former Partner of AO as a result of active fraud or intentional
misrepresentation by AO, any AO Partner or former Partner or any of their
respective representatives or agents.
25
26
9.3 Procedures for Indemnification.
(a) As used in this Section 9, the term "Indemnitor"
means the Indemnifying Partner or Partners against whom indemnification
hereunder is sought (and, in the case of claims made against the Escrow, shall
refer to the Partner Representative), and the term "Indemnitee" means the member
or members of the Company Group seeking indemnification hereunder.
(b) A claim for indemnification hereunder (an
"Indemnification Claim") shall be made by the Indemnitee by delivery of a
written notice. In the case of claims made against the Escrow, such notice shall
be delivered to the Partner Representative with a copy to the Escrow Agent; in
the case of other claims such notice shall be delivered to the Indemnitor. The
Indemnification Claim shall specify the basis on which indemnification is sought
in reasonable detail (and shall include relevant documentation related to the
Indemnification Claim), the amount of the asserted Company Losses and, in the
case of a Third Party Claim (as defined in Section 9.4), shall contain (by
attachment or otherwise) such other information as Indemnitee shall have
concerning such Third Party Claim.
(c) If the Indemnification Claim involves a Third Party
Claim, the procedures set forth in Section 9.4 shall be observed by Indemnitee
and Indemnitor.
9.4 Defense of Third Party Claims. Should any claim be made or
any suit or proceeding instituted by a third party against an Indemnitee which,
if prosecuted successfully, would be a matter for which such Indemnitee would be
entitled to indemnification under this Section 9 (a "Third Party Claim"), the
obligations and liabilities of the parties hereunder with respect to such Third
Party Claim shall be subject to the following terms and conditions:
(a) Indemnitee shall give Indemnitor written notice of
any such claim promptly after receipt by Indemnitee of notice thereof, and
Indemnitor may undertake control of the defense thereof by counsel of its own
choosing reasonably acceptable to Indemnitee. Indemnitee may participate in the
defense through its own counsel at its own expense. The assumption of the
defense of any Third Party Claim by Indemnitor shall be an acknowledgment by
Indemnitor that such Third Party Claim is subject to indemnification under the
provisions of this Section 9 and that such provisions are binding on Indemnitor.
If, however, Indemnitor fails or refuses to undertake the defense of such Third
Party Claim within ten (10) days after written notice of such claim has been
delivered to Indemnitor by Indemnitee, Indemnitee shall have the right to
undertake the defense, compromise and, subject to Section 9.5, settlement of
such Third Party Claim with counsel of its own choosing. Failure of Indemnitee
to furnish written notice to Indemnitor of a Third Party Claim shall not release
Indemnitor from Indemnitor's obligations hereunder, except to the extent
Indemnitor is prejudiced by such failure.
(b) Indemnitee and Indemnitor shall cooperate with each
other in all reasonable respects in connection with the defense of any Third
Party Claim, including making available records relating to such claim and
furnishing employees of Indemnitee as may be reasonably necessary for the
preparation of the defense of any such Third Party Claim or for testimony as
witness in any proceeding relating to such claim.
26
27
9.5 Settlement of Third Party Claims. Unless Indemnitor has
failed to fulfill its obligations under Section 9.4, no settlement by Indemnitee
of a Third Party Claim shall be made without the prior written consent by or on
behalf of Indemnitor, which consent shall not be unreasonably withheld or
delayed. If Indemnitor has assumed the defense of a Third Party Claim as
contemplated by Section 9.4((a)), no settlement of such Third Party Claim may be
made by Indemnitor without the prior written consent by or on behalf of
Indemnitee, unless such settlement includes a complete release of all claims
against Indemnitee.
9.6 Resolution of Indemnification Claims.1 Any Indemnification
Claim received by Indemnitor pursuant to Section 9.3 above will be resolved as
follows:
(a) To provide a fund against which members of the
Company Group may assert Indemnification Claims under this Section 9, the Escrow
Shares shall be withheld and deposited into the Escrow in accordance with the
provisions of Section 2.2. The Escrow Shares so deposited shall be held and
distributed in accordance with the Escrow Agreement. (b) Subject to the
provisions of Section 9.2((d)), all Indemnification Claims shall be made in
accordance with the Escrow Agreement against the Escrow Shares until the earlier
of (i) the termination of the Escrow Agreement or (ii) such time as pending
Indemnification Claims exceed the value of the Escrow Shares then remaining in
the Escrow.
(b) Subject to the provisions of Section 9.2(d), all
Indemnification Claims shall be made in accordance with the Escrow Agreement
against the Escrow Shares until the earlier of (i) the termination of the
Escrow Agreement or (ii) such time as pending Indemnification Claims exceed the
value of the Escrow Shares then remaining in the Escrow.
(c) In the event that Indemnitor gives written notice
contesting all, or a portion of, an Indemnification Claim to Indemnitee (a
"Contested Claim") within thirty (30) days after receipt of such Indemnification
Claim, the matter will be settled by binding arbitration pursuant to Section
9.6((d)), unless otherwise agreed by Indemnitor and Indemnitee. The final
decision of the arbitrator shall be furnished to Indemnitor and Indemnitee in
writing and will constitute a conclusive determination of the issue in question,
binding upon the Indemnitor and Indemnitee and shall not be contested or
appealed by any of them.
(d) Any Contested Claim shall be settled by arbitration
at a mutually agreeable location in Santa Monica, California and, except as
herein specifically stated, in accordance with the commercial arbitration rules
of the American Arbitration Association (the "AAA Rules") then in effect.
However, in all events, these arbitration provisions shall govern over any
conflicting rules which may now or hereafter be contained in the AAA Rules. Any
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction over the subject matter thereof. The arbitrator shall have
the authority to grant any equitable and legal remedies that would be available
in any judicial proceeding instituted to resolve a Contested Claim.
9.7 Partner Representative.
(a) Authority. For the purposes of this Agreement the
Partners, without any further action on the part of any Partner, shall be deemed
to have consented to the appointment of Xxxxxxx Xxxxxx as the representative of
such Partners (the "Partner Representative"), as the attorney-in-fact for and on
behalf of each such Partner, and the taking by the Partner Representative of any
and all actions and the making of any decisions required or
27
28
permitted to be taken by them under this Agreement or the Escrow Agreement,
including, without limitation, the exercise of the power to (i) receive or give
any notice on behalf of the Indemnifying Partners pursuant to this Agreement or
the Escrow Agreement, (ii) authorize delivery to the Company of the Escrow
Shares, or any portion thereof, in satisfaction of Indemnification Claims, (iii)
agree to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to, such Indemnification Claims, and (iv) take all other actions
necessary in the judgment of the Partner Representative for the accomplishment
of the foregoing and all of the other terms, conditions and limitations of this
Agreement and the Escrow Agreement. Accordingly, the Partner Representative has
unlimited authority and power to act on behalf of each Partner and each
Indemnifying Partner with respect to this Agreement and the Escrow Agreement and
the disposition, settlement or other handling of all claims, rights or
obligations arising from and taken pursuant to this Agreement or the Escrow
Agreement. Such Partners will be bound by all actions taken by the Partner
Representatives in connection with this Agreement and the Escrow Agreement, and
the Company shall be entitled to rely on any action or decision of the Partner
Representative as the action or decision of each Partner and each Indemnifying
Partner.
(b) Standard of Conduct. Neither the Partner
Representative nor any of his agents shall be liable to any Partner or any
Indemnifying Partner for any error of judgment, act done or omitted by him, or
mistake of fact or law in connection with his services pursuant to Section 9.7,
unless caused by his own gross negligence or willful misconduct. In taking any
action or refraining from taking any action whatsoever the Partner
Representative shall be protected in relying upon any notice, paper or other
document reasonably believed by him to be genuine, or upon any evidence
reasonably deemed by him to be sufficient. The Partner Representative shall not
be required to take any action which is contrary to this Agreement, the Escrow
Agreement or applicable law. The Partner Representative may consult with counsel
in connection with his duties and shall be fully protected in any act taken,
suffered or permitted by him in good faith in accordance with the advice of
counsel. In connection with his services under Section 9.7, the Partner
Representative shall not be responsible for determining or verifying the
authority of any person acting or purporting to act on behalf of any party to
this Agreement.
(c) Indemnification. Each Indemnifying Partner shall
indemnify the Partner Representative, ratably in accordance with the value of
the shares of the Company Stock received by such Partner in the Exchange, for
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may at any time be imposed on, incurred by or asserted against
the Partner Representative in any way relating to or arising out of this
Agreement or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or the enforcement of any of the
terms hereof or thereof or of any such other documents; provided, however, that
no such Partner shall be liable for any of the foregoing to the extent they
arise from the Partner Representative's gross negligence or willful misconduct.
The Partner Representative shall be fully justified in refusing to take or to
continue to take any action hereunder unless it shall first be indemnified to
its reasonable satisfaction by such Partner against any and all liability and
expense which may be incurred by it by reason of taking or continuing to
28
29
take any such action.
(d) Resignation or Removal of the Partner
Representative. Subject to the appointment and acceptance of a successor Partner
Representative as provided below, the Partner Representative may resign at any
time thirty (30) days subsequent to giving notice thereof to all Indemnifying
Partners, the Company and the Escrow Agent, and the Partner Representative may
be removed at any time with or without cause by action of the Indemnifying
Partners who represent a majority of the Interests of all Indemnifying Partners.
Upon any such resignation or removal, Indemnifying Partners representing a
majority of the shares of the Indemnifying Partners shall have the right to
appoint a successor Partner Representative, which Partner Representative shall
be reasonably acceptable to the Company. If no successor Partner Representative
shall have been appointed by Indemnifying Partners and accepted such appointment
within twenty (20) days after the retiring Partner Representative gives notice
of resignation or the Partner Representative's removal, then the retiring or
removed Partner Representative may appoint a successor which shall be reasonably
acceptable to the Company. Upon the acceptance of any appointment as Partner
Representative hereunder, such successor Partner Representative shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Partner Representative, and the retiring or removed
Partner Representative shall be discharged from its duties and obligations
hereunder. After any retiring Partners Representative's resignation or removal
hereunder as the Partner Representative, the provisions of this Section 9.7
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while he was acting as the Partner Representative.
(e) Agent in its Individual Capacity. The Partner
Representative, to the extent he is an Indemnifying Partner, shall have the same
rights and powers under this Agreement as any other Indemnifying Partner and may
exercise the same as though he were not the Partner Representative, and the term
"Indemnitor," as used in this Section 9, shall refer to the Partner
Representative in his capacity as such.
9.8 Indemnification by the Company and Launch.
(a) Subject to the terms and conditions contained in
this Section 9.8 the Company and Launch shall indemnify, defend and hold
harmless AO and its Partners, employees, attorneys, agents and affiliates (the
"Partner Group") from, against, for and in respect of any and all claims,
losses, liabilities, damages, costs and expenses (including reasonable legal
fees and expenses and expenses of investigation and defense) which the Partner
Group may sustain or incur (collectively, "AO Losses") which are caused by or
arise out of any inaccuracy in or breach of any of the representations,
warranties, covenants or agreements made by the Company or Launch in this
Agreement, the Company Disclosure Schedule or any certificate delivered pursuant
to Section 7.3.
(b) The maximum aggregate liability of the Company
pursuant to Section 9.8(a) shall be limited to the greater of (i) $1,400,000 or
(ii) the fair market value of the Escrow Shares. Anything in this Agreement to
the contrary notwithstanding, the Company
29
30
shall not be liable for indemnification under this Section 9.8 until the
aggregate of all the AO Losses for which indemnity is claimed exceeds $45,000 in
which case AO shall be entitled to indemnification for the full amount of the
indemnification including the first $45,000.
(c) The obligation of the Company to indemnify AO and
its Partners for an AO Loss under this Section 9.8 is subject to the condition
that the Company shall have received a written claim for indemnification
specifying the basis on which indemnification is sought in reasonable detail
(including relevant documentation relating to such claim) and the amount of
losses asserted for such AO Loss on or before the Termination Date.
(d) The provisions of Sections 9.8(b) and (c) and shall
not limit, in any manner, any remedy at law or in equity to which any Partner
shall be entitled against the Company as a result of fraud or intentional
misrepresentation by the Company or any of its respective representatives or
agents.
10. General Provisions.
10.1 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
commercial overnight delivery service, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with confirmation of receipt)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to the Company, to:
New Launch Media, Inc.
0000 Xxxxxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxx.
Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
(b) if to AO, to
AreohveeOnline Partnership
000 Xxxxxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
30
31
Attention: Xxxx Xxxxxx
Fax: (000) 000-0000
with a copy to:
XxXxxxxxx, Will & Xxxxx
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
(c) If to the Partner Representative, to:
Xxxxxxx Xxxxxx
AreohveeOnline Partnership
000 Xxxxxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
XxXxxxxxx, Will & Xxxxx
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
10.2 Interpretation. When a reference is made in this Agreement
to an Article or Section, such reference shall be to an Article or Section of
this Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrases "the date of this Agreement," "the date
hereof," and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to the first date written above. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. In
determining whether a Material Adverse Effect exists with respect to a party,
materiality shall be determined on the basis of the applicable party and all of
its Subsidiaries, if any, taken together as a whole, and not on the basis of the
party or any single Subsidiary alone. Reference to a party's "knowledge" mean
actual knowledge after reasonable inquiry of such party's directors, officers,
Partners and other management-level employees who could reasonably be expected
to have knowledge of such matters. As used in this Agreement, the term
"Governmental Entity" means any (i) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign or other government; or (iii)
governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, official, organization,
and any court or other tribunal), and the term "Subsidiary" means, with respect
to any party, any corporation, at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
31
32
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
10.4 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
10.5 Entire Agreement. This Agreement (including the documents
and the instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
10.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of California without regard
to any applicable conflicts of law.
10.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
10.8 Third Party Beneficiary. Nothing contained in this
Agreement is intended to confer upon any person other than the parties hereto
and their respective successors and permitted assigns, any rights, remedies or
obligations under, or by reason of this Agreement.
32
33
Agreed to and accepted as of the
first date written above:
NEW LAUNCH MEDIA, INC. AREOHVEEONLINE LIMITED PARTNERSHIP
a Delaware corporation a California Partnership
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxxx Xxxxxx
--------------------------------- --------------------------------------
Xxxxxxx Xxxxxx
Title: President
---------------------------
LAUNCH MEDIA, INC. By: /s/ Xxxxx Xxxxx
a Delaware corporation --------------------------------------
Xxxxx Xxxxx
By: /s/ Xxxxxx X. Xxxxxx By: /s/ G. Xxxxx Xxxxxxx
--------------------------------- --------------------------------------
G. Xxxxx Xxxxxxx
Title: President
---------------------------
By: /s/ Xxxxxxx Xxxxxx
--------------------------------------
Xxxxxxx Xxxxxx
By: /s/ D. Xxxxx Xxxxx
--------------------------------------
D. Xxxxx Xxxxx
By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------------------
Xxxxxxx Xxxxxxxxx
33
34
EXHIBIT A
Number of Shares of
Name of Partner Company Common Stock Cash
--------------- -------------------- -----
Xxxxxxx Xxxxxx 1,028,779 $ 37,573.76
Xxxxx Xxxxx 1,028,779 $ 29,940.50
G. Xxxxx Xxxxxxx 1,028,779 $ 38,846.54
Xxxxxxx Xxxxxx 1,028,779 $188,267.02
D. Xxxxx Xxxxx 175,111 $ 2,377.45
Xxxxxxx Xxxxxxxxx 87,555 $ 4,988.73
========= ===========
TOTALS: 4,377,782 $301,994.00
35
ANNEX 2.2
ESCROW AGREEMENT
36
ANNEX 3
AO DISCLOSURE SCHEDULE
37
ANNEX 4
BUYER DISCLOSURE SCHEDULE
38
ANNEX 7.2(c)
FORM OF CONFIDENTIALITY AND INVENTIONS AGREEMENT
39
ANNEX 7.2(d)(i)
FORM OF NONCOMPETITION AGREEMENT
(ALL PARTNERS EXCEPT D. XXXXX XXXXX AND XXXXXXX XXXXXXXXX)
40
ANNEX 7.2(d)(ii)
FORM OF NONCOMPETITION AGREEMENT
(XXXXXXX XXXXXXXXX)
41
ANNEX 7.2(e)
FORM OF EMPLOYMENT AGREEMENT
42
ANNEX 7.2(f)
FORM OF LEGAL OPINION
43
ANNEX 7.2(i)
VOTING AGREEMENT
44
ANNEX 7.3(c)
FORM OF GCW&F LEGAL OPINION
45
ANNEX 7.3(e)
LAUNCH EXCHANGE AGREEMENT
