EXHIBIT 10.3
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LLC INTEREST PURCHASE AGREEMENT
BY AND BETWEEN
INTEGRITY MEDIA, INC.
AND
XXXXXXX XXXXXXX
XXXXXX XXXXXXX
XXXX AND XXXXXX XXXXXXX CHARITABLE REMAINDER UNITRUST
DATED AS OF JUNE 28, 2002
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TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS.....................................................................................1
SECTION 1.1 CERTAIN DEFINITIONS..........................................................................1
SECTION 1.2 SINGULAR AND PLURAL..........................................................................6
ARTICLE 2 PURCHASE AND SALE OF INTERESTS..................................................................6
SECTION 2.1 PURCHASE AND SALE OF INTERESTS...............................................................6
SECTION 2.2 PURCHASE PRICE...............................................................................6
SECTION 2.3 CASH DISTRIBUTION............................................................................7
SECTION 2.4 PLACE AND DATE OF CLOSING; CLOSING DELIVERIES................................................7
SECTION 2.5 WIRE TRANSFERS...............................................................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLERS.......................................................8
SECTION 3.1 TITLE TO INTERESTS; CAPITAL CONTRIBUTION; CORPORATE EXISTENCE AND POWER......................8
SECTION 3.2 AUTHORITY....................................................................................8
SECTION 3.3 GOVERNMENTAL AUTHORIZATION...................................................................8
SECTION 3.4 NON-CONTRAVENTION............................................................................9
SECTION 3.5 OWNERSHIP OF INTERESTS.......................................................................9
SECTION 3.6 OWNERSHIP OF ASSETS..........................................................................9
SECTION 3.7 FINANCIAL STATEMENTS........................................................................10
SECTION 3.8 ABSENCE OF CERTAIN CHANGES..................................................................10
SECTION 3.9 ABSENCE OF UNDISCLOSED LIABILITIES..........................................................11
SECTION 3.10 MATERIAL CONTRACTS..........................................................................11
SECTION 3.11 LITIGATION..................................................................................13
SECTION 3.12 COMPLIANCE WITH APPLICABLE LAWS.............................................................14
SECTION 3.13 ENVIRONMENTAL COMPLIANCE....................................................................14
SECTION 3.14 PERSONAL PROPERTY...........................................................................14
SECTION 3.15 REAL PROPERTY...............................................................................15
SECTION 3.16 INTELLECTUAL PROPERTY.......................................................................15
SECTION 3.17 EMPLOYEE BENEFIT PLANS; ERISA...............................................................16
SECTION 3.18 LABOR AND EMPLOYMENT MATTERS................................................................17
SECTION 3.19 TAX MATTERS.................................................................................17
SECTION 3.20 BROKERAGE AND FINANCIAL ADVISERS............................................................18
SECTION 3.21 CONSENTS AND APPROVALS......................................................................18
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER........................................................18
SECTION 4.1 CORPORATE EXISTENCE AND POWER...............................................................19
SECTION 4.2 AUTHORITY...................................................................................19
SECTION 4.3 GOVERNMENTAL AUTHORIZATION..................................................................19
SECTION 4.4 NON-CONTRAVENTION...........................................................................19
SECTION 4.5 BROKERAGE AND FINANCIAL ADVISERS............................................................20
SECTION 4.6 SUFFICIENT FUNDS............................................................................20
ARTICLE 5 COVENANTS......................................................................................20
SECTION 5.1 CONDUCT OF BUSINESS.........................................................................20
SECTION 5.2 CERTAIN TRANSACTIONS........................................................................21
SECTION 5.3 INVESTIGATIONS; PRE-CLOSING ACCESS..........................................................21
SECTION 5.4 POST-CLOSING ACCESS.........................................................................21
SECTION 5.5 FILINGS; OTHER ACTIONS; NOTIFICATIONS.......................................................22
SECTION 5.6 FURTHER ASSURANCES..........................................................................22
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SECTION 5.7 EXPENSES....................................................................................22
SECTION 5.8 TAX MATTERS.................................................................................23
SECTION 5.9 DISCLOSURE SUPPLEMENTS......................................................................24
SECTION 5.10 CERTAIN EMPLOYEE MATTERS....................................................................25
SECTION 5.11 NEGOTIATION OF MARKETING DISTRIBUTION AGREEMENT.............................................25
SECTION 5.12 PUBLICITY...................................................................................25
SECTION 5.13 COMPANY HEADQUARTERS........................................................................25
SECTION 5.14 ABANDONMENT OF TRADEMARK....................................................................25
ARTICLE 6 CONDITIONS TO CLOSING..........................................................................25
SECTION 6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY.....................................................26
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF SELLERS........................................................26
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF BUYER..........................................................26
ARTICLE 7 TERMINATION....................................................................................28
SECTION 7.1 TERMINATION BY MUTUAL CONSENT...............................................................28
SECTION 7.2 TERMINATION BY EITHER SELLERS OR BUYER......................................................28
SECTION 7.3 TERMINATION BY SELLERS......................................................................28
SECTION 7.4 TERMINATION BY BUYER........................................................................28
SECTION 7.5 EFFECT OF TERMINATION AND ABANDONMENT.......................................................28
ARTICLE 8 INDEMNIFICATION................................................................................29
SECTION 8.1 SURVIVAL....................................................................................29
SECTION 8.2 OBLIGATION OF SELLERS TO INDEMNIFY..........................................................29
SECTION 8.3 OBLIGATION OF BUYER TO INDEMNIFY............................................................29
SECTION 8.4 NOTICE OF LOSS, ASSERTED LIABILITY..........................................................30
SECTION 8.5 OPPORTUNITY TO CONTEST......................................................................30
SECTION 8.6 SETTLEMENT..................................................................................31
SECTION 8.7 PROCEDURES FOR INDEMNIFICATION..............................................................31
SECTION 8.8 LIMITATIONS ON INDEMNIFICATION..............................................................31
SECTION 8.9 SOLE REMEDY.................................................................................32
SECTION 8.10 CERTAIN REDUCTIONS; SUBROGATION RIGHTS......................................................32
SECTION 8.11 EFFECT OF INDEMNIFICATION...................................................................32
SECTION 8.12 ARBITRATION.................................................................................32
ARTICLE 9 MISCELLANEOUS..................................................................................33
SECTION 9.1 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES..............................................33
SECTION 9.2 AMENDMENTS..................................................................................33
SECTION 9.3 WAIVERS.....................................................................................33
SECTION 9.4 ASSIGNMENT..................................................................................34
SECTION 9.5 NOTICES.....................................................................................34
SECTION 9.6 GOVERNING LAW...............................................................................35
SECTION 9.7 COUNTERPARTS................................................................................35
SECTION 9.8 CAPTIONS....................................................................................35
SECTION 9.9 INTERPRETATIONS.............................................................................35
SECTION 9.10 SEVERABILITY................................................................................35
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EXHIBITS
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Exhibit A Xxxxxxx Employment Agreement
Exhibit B Employee Retention and Severance Agreement
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LLC INTEREST PURCHASE AGREEMENT
THIS LLC INTEREST PURCHASE AGREEMENT (this "Agreement"), dated as of
June 28, 2002, is entered into by and between INTEGRITY MEDIA, INC., a Delaware
corporation ("Buyer"), and Xxxxxxx Xxxxxxx, an individual resident of the State
of Tennessee, Xxxxxx Xxxxxxx, an individual resident of the State of Tennessee,
and the Xxxx and Xxxxxx Xxxxxxx Charitable Remainder Unitrust (collectively,
"Sellers").
RECITALS:
WHEREAS, Sellers own all of the limited liability company interests
(the "Interests") of M2 Communications, L.L.C., a Tennessee limited liability
company ("Company"); and
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase
from Sellers, all of the Interests of the Company.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 CERTAIN DEFINITIONS.
(a) The following capitalized terms shall have the respective
meanings set forth below:
"Affiliate" means, with respect to a specified Person, at the time in
question, any other Person controlling, controlled by or under common control
with the specified Person.
"Applicable Law" means any domestic or foreign federal, state or local
constitution, statute, law, ordinance, rule, administrative interpretation,
regulation, order, judgment or decree applicable to the parties hereto.
"Artists" means the featured performers or artists whose performances
are embodied in or on the Master Recordings.
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"Available Cash" means, using the accrual basis of accounting, the sum
of (1) the current cash balance on May 31, 2002 as shown on the May Balance
Sheet and (2) the amount of any accounts receivable on the May Balance Sheet
that are collected between May 31, 2002 and the date two (2) Business Days
before the Closing Date; less, as reflected on the May Balance Sheet, the sum of
(1) all unpaid invoices for Liabilities incurred; (2) all unpaid payroll or
bonuses due to employees; (3) all accrued or unpaid Taxes, including without
limitation payroll taxes and sales taxes; (4) any balance due to banks or
lending institutions; and (5) all accrued royalties required to be accrued under
GAAP due under provisions of any Contract pursuant to which the Company or any
of its subsidiaries has any rights or benefits or undertakes any obligations or
Liabilities.
"Books and Records" means the books of accounts, minute books,
membership interest record books and other records of the Company and its
subsidiaries.
"Business" means the business of the Company or any of its subsidiaries
as presently conducted and as proposed to be conducted.
"Business Day" means any day other than a Saturday, Sunday, or a day on
which banking institutions in the State of Tennessee are permitted or obligated
by Applicable Law to be closed.
"Buyer Material Adverse Effect" means any circumstances, change in, or
effect on the Buyer or its business that, individually or when taken together
with all other related circumstances, changes in or effects on the Buyer or its
business is materially adverse to the condition (financial or otherwise),
results of operations, earnings, business, assets (including intangible assets)
or prospects of the Buyer.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Closing Date" means the date on which the Closing actually occurs.
"Code" means the Internal Revenue Code of 1986, as amended. Any
citation to a provision of the Code includes a citation to any successor
provision.
"Contract" means any written or oral agreement, arrangement,
commitment, contract, indenture, instrument, lease or obligation of any kind or
character to which any Person is a party or that is binding on any Person or its
assets or business.
"December Balance Sheet" means an unaudited internally prepared
consolidated balance sheet of the Company and Magnificat Music, L.L.C. as of
December 31, 2001, using the accrual basis of accounting and mutually agreed
upon by Sellers and Buyer.
"Environmental Laws" means any federal, state or local laws, rules or
regulations, and any orders or decrees, relating to the regulation or protection
of the natural environment or to releases or threatened releases of Hazardous
Materials into the
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soil, land surface or subsurface strata, surface waters (including navigable
waters, ocean waters, streams, ponds, drainage basins, and wetlands), ground
waters, drinking water supply, stream sediments, ambient air (including indoor
air) and any other environmental medium or natural resource.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all final and temporary regulations thereunder.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Governmental Authority" means any federal, state, county, local,
foreign or other governmental or public agency, instrumentality, commission,
authority, board or body.
"Guaranteed Indebtedness" of any Person means all Indebtedness of any
Person that is either (i) guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (a) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (b) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (c) to
supply funds to or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of whether or not such
property is received or such services are rendered and any agreement to maintain
working capital or other balance sheet condition) or (d) otherwise to assure the
holder of such Indebtedness against loss, or (ii) secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any lien, security interest or other charge or encumbrance upon
or in property (including without limitation accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness.
"Hazardous Materials" means any waste or other substance that is
listed, defined, designated or classified as, or otherwise determined to be,
hazardous, radioactive or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"Indebtedness" means, for any Person without double counting, (a) all
indebtedness or other obligations of such Person for borrowed money or for the
deferred purchase price of property or services, (b) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (c) all obligations under leases that
are or should be, in accordance with GAAP, recorded
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as capital leases in respect of which such Person is liable as lessee, (d)
liabilities in respect of unfunded vested benefits under any Plan, (e) all
obligations owed pursuant to any interest rate hedging arrangement and (f) all
Guaranteed Indebtedness.
"Knowledge" means, with respect to Sellers, those facts that are known
or should reasonably have been known after due inquiry by each of the following
individuals: Xxxxxxx Xxxxxxx and Xxxxxx Xxxxxxx; and with respect to Buyer,
those facts that are known or should reasonably have been known after due
inquiry by each of the following individuals: P. Xxxxxxx Xxxxxxx, Xxxxx X.
Xxxxxx, Xxxxxx X. Xxxxxxxxx, Xxx Xxxxx and Xxxx XxXxxxxxx.
"Liabilities" means obligations of any nature, whether absolute,
accrued, contingent or otherwise, whether due or to become due and whether or
not required to be reflected or reserved against on a balance sheet under GAAP.
"Lien" means any claim, charge, conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, security interest or other security arrangement,
on or with respect to any asset or property.
"Loss" means any loss, damage, liability, claim, diminution in value,
cost or expense, including, but not limited to, reasonable attorneys' fees.
"Master Recordings" means the original material object in which sounds,
with or without visual images, are fixed by any method now known or hereafter
developed and from which sounds, with or without visual images, can be
perceived, reproduced or otherwise communicated, either directly or with the aid
of a machine, device or process including outtakes, unused portions and similar
material relating to the above.
"May Balance Sheet" means an unaudited internally prepared consolidated
balance sheet of the Company and Magnificat Music, L.L.C. as of May 31, 2002,
using the accrual basis of accounting and mutually agreed upon by Sellers and
Buyer.
"Xxxxxxx Employment Agreement" means the employment agreement entered
into between Xxxxxxx Xxxxxxx and Integrity Media, Inc. dated June 28, 2002,
which contains a reasonable covenant not to compete and is attached to this
Agreement as Exhibit A.
"Order" means any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling, or writ of any
Governmental Authority, or any binding determination pursuant to arbitration or
other similar alternative dispute resolution forum.
"Permits" means all licenses, permits, orders, approvals,
registrations, authorizations, qualifications and filings with and under all
federal, state, local or foreign laws or governmental or regulatory bodies.
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"Permitted Liens" means (i) Liens for Taxes not yet due and payable,
(ii) any minor imperfection of title that does not materially interfere with the
present use or the continuation of such present use in the Business, (iii)
materialmen's or similar liens or obligations arising in the ordinary course of
business securing accrued obligations not yet due and payable, (iv) purchase
money Liens arising in the ordinary course of business, and (v) Liens reflected
in the December Balance Sheet and May Balance Sheet.
"Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company, trust,
estate, unincorporated organization, governmental, judicial or regulatory body,
business unit, division or other entity.
"Sellers Material Adverse Effect" means any circumstances, change in,
or effect on the Company, any of its subsidiaries or its Business that,
individually or when taken together with all other related circumstances,
changes in or effects on the Company, any of its subsidiaries or its Business is
materially adverse to the condition (financial or otherwise), results of
operations, earnings, business, assets (including intangible assets) or
prospects of the Company or any of its subsidiaries.
"Tax" means any federal, state, local or foreign income, premium,
payroll, withholding, excise, sales, use, gains, transfer, real and personal
property, use and occupation, capital stock, franchise or other tax, assessment
or governmental charge, including interest and penalties thereon.
"Tax Dispute Resolution Mechanism" shall mean the following procedure:
The parties will in good faith attempt to negotiate a settlement of the dispute.
If the parties are unable to negotiate a resolution of the dispute within
fifteen (15) days, the dispute will be submitted to any independent accounting
firm of nationally recognized standing reasonably satisfactory to the Buyer and
the Sellers (the "Tax Dispute Accountants"). The parties will present their
arguments to the Tax Dispute Accountants within five (5) days after submission
of the dispute to the Tax Dispute Accountants. The Tax Dispute Accountants will
resolve the dispute, in a fair and equitable manner and in accordance with the
applicable Tax law and this Agreement, within fifteen (15) days after the
parties have presented their arguments to the Tax Dispute Accountants, but in no
case later than ten (10) days prior to the due date of the applicable Tax
Return. The fees and expenses of the Tax Dispute Accountants in resolving a
dispute will be borne by the party whose position is determined to be the least
correct by the Tax Dispute Accountants.
(b) The capitalized terms set forth below shall have the meanings
ascribed thereto in the referenced sections:
TERM SECTION
---- -------
Agreement 1st Paragraph
Asserted Liability 8.4
Benefit Plans 3.17(a)
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TERM SECTION
---- -------
Buyer 1st Paragraph
Cash Distribution 2.3
Claims Notice 8.4
Company 2nd Paragraph
Contest Notice 8.5
Distribution Releases 6.3(g)Indemnified Party
8.4
Indemnifying Party 8.4
Intellectual Property 3.16(a)
Interests 2nd Paragraph
Leased Real Property 3.15(b)
Material Contracts 3.10(a)
Owned Personal Property 3.14(b)
Personal Property Leases 3.14(a)
Pre-Closing Tax Returns 5.8(a)(i)
Pre-Signing Matter 5.9
Post-Signing Matter 5.9
Purchase Price 2.2
Real Property Leases 3.15(b)
Released Parties 8.2(c)
Sellers 1st Paragraph
Straddle Period Tax Returns 5.8(b)(i)
Tax Returns 3.19(a)
Termination Date 7.2
Threshold Amount 8.7(a)
Trademark Litigation 8.2(c)
Trademark Opposition 8.2(c)
SECTION 1.2 SINGULAR AND PLURAL. Any singular term in this
Agreement shall be deemed to include the plural, and any plural term the
singular.
ARTICLE 2
PURCHASE AND SALE OF INTERESTS
SECTION 2.1 PURCHASE AND SALE OF INTERESTS. On the Closing Date,
upon the terms and subject to the conditions of this Agreement, Sellers shall
sell to Buyer, and Buyer shall purchase from Sellers, the Interests.
SECTION 2.2 PURCHASE PRICE. On the Closing Date, upon the terms
and subject to the conditions of this Agreement, Buyer shall pay to Sellers the
aggregate amount of $4,878,786 in cash (the "Purchase Price") for the Interests.
SECTION 2.3 CASH DISTRIBUTION. On the Closing Date, upon the
terms and subject to the conditions of this Agreement, Sellers may cause the
Company to distribute to Xxxxxxx Xxxxxxx up to $1,500,000 from Available Cash
(the "Cash Distribution").
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SECTION 2.4 PLACE AND DATE OF CLOSING; CLOSING DELIVERIES.
(a) The Closing shall take place at the offices of Xxxxxx & Bird LLP,
0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx, at 10:00 a.m. Eastern Time on June
28, 2002, or on such other date as the parties may agree to in writing. Subject
to completion, the Closing shall be deemed effective as of 12:01 a.m. on the
Closing Date.
(b) At the Closing, Sellers shall execute and/or deliver to Buyer, the
following:
(i) assignment of membership interest in the Company executed
by Xxxxxxx Xxxxxxx;
(ii) assignment of membership interest in the Company executed
by Xxxxxx Xxxxxxx;
(iii) assignment of membership interest in the Company
executed by the Xxxx and Xxxxxx Xxxxxxx Charitable Remainder Unitrust;
(iv) the documents and instruments specified in Section 6.3;
(v) the Xxxxxxx Employment Agreement, executed by Xxxxxxx
Xxxxxxx;
(vi) evidence of receipt of all consents identified on
SCHEDULE 6.3; and
(vii) the Distribution Releases executed by Xxxxxx Xxxxxxx and
the Xxxx and Xxxxxx Xxxxxxx Charitable Remainder Unitrust.
(c) At the Closing, Buyer shall execute and/or deliver to Sellers the
following:
(i) a cash payment equal to the amount of the Purchase Price
paid in accordance with the instructions listed on SCHEDULE 2.4;
(ii) the documents and instruments specified in Section 6.2;
and
(iii) the Xxxxxxx Employment Agreement executed by Buyer.
SECTION 2.5 WIRE TRANSFERS. Any payment of cash required under
this Agreement shall be paid to the recipient in immediately available funds,
United States Dollars, by means of a wire transfer, if the recipient provides to
the payer appropriate wire transfer instructions at least two Business Days
prior to the required date of payment, and otherwise by means of a certified
check.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby represent and warrant to Buyer as follows:
SECTION 3.1 TITLE TO INTERESTS; CAPITAL CONTRIBUTION; CORPORATE
EXISTENCE AND POWER. Sellers represent, warrant and covenant to Buyer that: (i)
Sellers are the lawful owners of the Interests, and Sellers have hereby
transferred to Buyer good and marketable title thereto, free and clear of any
and all liens, claims or encumbrances; (ii) the Interests represent all
outstanding limited liability company interests in the Company; and (iii) no
Person has any agreement or option or any right or privilege (whether
pre-emptive or contractual) capable of becoming an agreement or option for the
purchase of the Interests. Sellers represent, warrant and covenant to Buyer that
as of the date hereof any and all of the capital contributions to the Company or
any of its subsidiaries required to be made by the holders of the Interests have
been made. The Company and Magnificat Music, L.L.C. are limited liability
companies duly organized, validly existing and in good standing under the laws
of the State of Tennessee and have all corporate powers required to carry on
their businesses as now conducted. The Xxxx and Xxxxxx Xxxxxxx Charitable
Remainder Unitrust was validly formed and is validly existing under Applicable
Law, and Xxxxxxx Xxxxxxx and Xxxxxx Xxxxxxx are the only two trustees of the
Xxxx and Xxxxxx Xxxxxxx Charitable Remainder Unitrust, and thus, have the
authority to act on behalf of and bind the Xxxx and Xxxxxx Xxxxxxx Charitable
Remainder Unitrust.
SECTION 3.2 AUTHORITY. Sellers have all requisite power and
authority to execute and deliver, and to perform their obligations under this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Sellers and, subject to the due
execution and delivery by Buyer, will be a valid and binding obligation of
Sellers, enforceable against Sellers in accordance with its terms, except as (i)
the enforceability hereof may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting the enforcement of creditors' rights generally,
and (ii) the availability of equitable remedies may be limited by equitable
principles of general applicability.
SECTION 3.3 GOVERNMENTAL AUTHORIZATION. Except as set forth on
SCHEDULE 3.3, the execution, delivery and performance by Sellers of this
Agreement and the consummation of the transactions contemplated hereby do not
require Sellers to obtain any consent, approval or action of, make any filing
with, or give any notice to, any Governmental Authority.
SECTION 3.4 NON-CONTRAVENTION. Except as disclosed on SCHEDULE
3.4, the execution, delivery and performance by Sellers of this Agreement and
the consummation of the transactions contemplated hereby will not (a) violate
any provision of the articles of organization, operating agreement or bylaws of
the Company or any of its subsidiaries, (b) violate, conflict with, result in
the breach of or default under (or with notice, lapse of time, or both would
result in such a breach or default), result in any modification of the effect
of, provide the other contracting party the right to terminate or materially
amend,
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or require the other contracting party to consent to the assignment or
continuation of, any Material Contract to which the Company or any of its
subsidiaries is a party, (c) violate any Order against or binding upon Sellers,
the Company or any of its subsidiaries, (d) violate any agreement with, or
condition imposed by, any Governmental Authority upon Sellers, the Company or
any of its subsidiaries, (e) subject to obtaining the governmental
authorizations referred to in Section 3.3 hereof, violate any Applicable Law, or
(f) result in a breach or violation of any of the terms or conditions of,
constitute a default under, or otherwise cause an impairment or a revocation of,
any Permit of the Company or any of its subsidiaries, except for such breaches,
violations, defaults, impairments or revocations that would not have a Sellers
Material Adverse Effect.
SECTION 3.5 OWNERSHIP OF INTERESTS. Sellers are the owners of the
Interests, free and clear of any Liens and any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such Interests) and such Interests constitute all of the limited liability
company interests of the Company. Sellers will transfer and deliver to Buyer at
the Closing valid title to the Interests free and clear of any Liens and any
such limitation or restriction. The Company owns all of the outstanding limited
liability company interests in Magnificat Music, L.L.C.. Other than the
Company's ownership interests in Magnificat Music, L.L.C., neither the Company
nor any of its subsidiaries owns, directly or indirectly, any equity or voting
interest in, or otherwise controls, any Person, or has any agreement or
commitment to acquire any such interest.
SECTION 3.6 OWNERSHIP OF ASSETS. Except as set forth on SCHEDULE
3.6(A), the Company and its subsidiaries have good and indefeasible or
marketable, as appropriate, title to, or a valid leasehold interest in, or valid
license to use, the properties and assets it uses, including the Master
Recordings listed on SCHEDULE 3.6(B), the properties and assets shown on the
December Balance Sheet or May Balance Sheet or acquired thereafter and all
assets necessary for the conduct of its Business as presently conducted and as
presently proposed to be conducted, except for properties and assets disposed of
in the ordinary course of business since the date of the December Balance Sheet
and subject to no Liens except for Permitted Liens. Except as described on
SCHEDULE 3.6(A), buildings, equipment and other tangible assets of the Company
or any of its subsidiaries necessary for the operation of the Business are in
good operating condition in all material respects and are fit for use in the
ordinary course of business.
SECTION 3.7 FINANCIAL STATEMENTS. SCHEDULE 3.7 contains complete
and correct copies of the December Balance Sheet and the related unaudited
statement of income from operations for the twelve months then ended. The
December Balance Sheet and May Balance Sheet (i) are in accordance with the
books and records of the Company and Magnificat Music, L.L.C., and (ii) present
fairly the financial position of the Company and Magnificat Music, L.L.C. as of
the dates indicated. The Quickbook transactions and data files and the artist
royalty statements for the period from January 1, 2000 through May 31, 2002,
which have been delivered to the Buyer, are complete, accurate and in accordance
with the books and records of the Company and Magnificat Music, L.L.C.
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SECTION 3.8 ABSENCE OF CERTAIN CHANGES. Since December 31, 2001,
except (i) as disclosed on SCHEDULE 3.8 and (ii) for the transactions
contemplated hereby, Sellers, the Company and its subsidiaries have conducted
the Business in the ordinary course of business consistent with past practices
and there has not been:
(a) any change in the Company's or any of its subsidiaries' limited
liability company interests except for transfers by Xxxxxxx Xxxxxxx to the Xxxx
and Xxxxxx Xxxxxxx Charitable Remainder Unitrust and transfers by Xxxxxxx
Xxxxxxx and/or Xxxxxx Xxxxxxx of their limited liability company interests in
Magnificat Music, L.L.C. to the Company; any assignment of any member's
governing rights; any grant of any option or right to purchase limited liability
company interests of the Company or any of its subsidiaries; any issuance of any
security convertible into such limited liability company interests; any grant of
any registration rights with respect to such limited liability company
interests; any purchase, redemption, retirement, or other acquisition by the
Company or any of its subsidiaries of any of its limited liability company
interests.
(b) any amendment to the articles of organization, operating agreement
or bylaws of the Company or any of its subsidiaries;
(c) any Lien placed on, or any sale or transfer of the Company's or any
of its subsidiaries' assets, except for sales or transfers of products and
services made in the ordinary course of business consistent with past practice
and except for Permitted Liens;
(d) any capital expenditure except in the ordinary course of business
consistent with past practice;
(e) any material adverse change in the Company's or any of its
subsidiaries' business affairs, condition (financial or otherwise) or prospects,
or in the Company's or any of its subsidiaries' relationship with any Artist,
singer, musician, publisher, producer, customer, supplier, employee or other
Person having a business relationship with the Company or any of its
subsidiaries;
(f) any employment, deferred compensation, severance, retirement or
other similar agreement (or any amendment to any such existing agreement)
offered to or entered into with any employee, any grant of any severance or
termination pay or "stay" bonus to any employee, or any change in compensation
or other benefits payable to any employee other than merit or tenure increases
granted in the ordinary course of business;
(g) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees, or any lockouts, strikes, slowdowns, work stoppages or any
threats thereof by or with respect to any employees; or
(h) any loans to any employee other than loans to employees in
accordance with the terms of the Benefit Plans.
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SECTION 3.9 ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Neither the Company nor any of its subsidiaries has any
Liabilities, contingent or otherwise, or any unrealized or anticipated losses,
except (a) Liabilities that are fully reflected or reserved against in the May
Balance Sheet, which reserves are appropriate and reasonable, and (b)
Liabilities incurred by the Company or any of its subsidiaries in the ordinary
course of business consistent with past practices that are not required by GAAP
to be reflected or reserved against on a balance sheet.
(b) Neither the Company nor any of its subsidiaries is directly or
indirectly liable, by guarantee, indemnity or otherwise, upon or with respect
to, or obligated, by discount or repurchase agreement or in any other way, to
provide funds with respect to, or obligated to guarantee or assume, any
Liability for any person.
(c) All cash received by the Company and its subsidiaries and held in
trust for the benefit or on the account of an Artist or a customer of the
Company or any of its subsidiaries has at all times and is currently properly
accounted for in accordance with the Contract of each Artist or customer. There
has been no violation or breach by the Company, any of its subsidiaries or
Sellers, of any law, statute, regulation, fiduciary obligation or agreement with
respect to any such cash.
(d) Neither the Company nor any of its subsidiaries has any long term
Indebtedness outstanding as of the date hereof and as of the Closing Date.
SECTION 3.10 MATERIAL CONTRACTS.
(a) SCHEDULE 3.10 contains a correct and complete list of all Contracts
(other than the Personal Property Leases and Real Property Leases) pursuant to
which the Company or any of its subsidiaries has any rights or benefits or
undertakes any obligations or liabilities, in each case that requires or could
require any party thereto to pay $10,000 or more annually, that is:
(i) an agreement, contract, or commitment with any present or
former employee or consultant or for the employment of any person,
including any consultant, who is engaged in the conduct of the
Business;
(ii) an agreement, contract, or commitment for the future
purchase of, or payment for, supplies or products, or for the
performance of services by a third party which supplies, products or
services are used in the conduct of the Business;
(iii) an agreement, contract or commitment of the Company or
any of its subsidiaries to perform collection services or similar
duties in connection with the Business;
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(iv) an agreement with any Artist, singer, musician, publisher
or producer who renders services or otherwise participates in the
preparation or production of any sound recordings in which the Company
or any of its subsidiaries owns, licenses or otherwise controls the
copyright, in whole or in part, exclusively or non-exclusively, under
federal and foreign copyright law;
(v) any distribution agreement, any contract, or other
commitment related to the Business including agreements with any
Artist, singer, musician, publisher or producer;
(vi) a lease under which the Company or any of its
subsidiaries is the lessor;
(vii) a note, debenture, bond, equipment trust agreement,
letter of credit agreement, loan agreement, or other contract or
commitment for the borrowing or lending of money relating to the
Business or agreement or arrangement for a line of credit or guarantee,
pledge, or undertaking of the indebtedness of any other person relating
to the Business;
(viii) an agreement, contract, or commitment for any
charitable or political contribution relating to the Business;
(ix) an agreement, contract, or commitment limiting or
restraining the Business or any successor thereto from engaging or
competing in any manner or in any business, nor, to the Knowledge of
Sellers, is any employee of the Company or any of its subsidiaries
subject to any such agreement, contract, or commitment; or
(x) a material agreement, contract, or commitment relating to
the Business not made in the ordinary course of business;
(xi) an agreement, contract or commitment between the Company
or any of its subsidiaries and any officer, director or Affiliate; or
(xii) any surety, fidelity or performance bonds of the Company
or any of its subsidiaries required by any entity.
The Contracts listed on SCHEDULE 3.10 are collectively the "Material
Contracts." A true and correct copy of each Material Contract (or, if oral, a
written description thereof) has been made available to Buyer.
(b) Each of the Material Contracts was entered into by the Company or
any of its subsidiaries in the ordinary course of business consistent with past
practice, is in full force and effect and there exists no breach or violation of
or default under any of such Material Contracts by the Company, any of its
subsidiaries, or, to the Knowledge of Sellers, any other party to such Material
Contracts or any event which, with notice or the
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lapse of time, or both, to the Knowledge of Sellers, will create a breach or
violation thereof or default thereunder by the Company, any of its subsidiaries,
or any other party to such Material Contracts.
(c) Except as set forth in SCHEDULE 3.10, there exists no actual or, to
the best Knowledge of Sellers, any threatened termination, cancellation, or
limitation of, or any amendment, modification, or change to any Material
Contract, which would alter the business or condition, financial or otherwise,
of the Business, including without limitation, (i) the business relationship of
the Company or any of its subsidiaries with any Artist, singer, musician,
publisher, producer, customer, distributor, or related group of customers or
distributors whose transactions with the Company or any of its subsidiaries,
individually or in the aggregate, are material to the operations and financial
condition of the Business, (ii) the requirements of any customer or related
group of customers of the Company or any of its subsidiaries whose purchases
individually or in the aggregate are material to the operations and financial
condition of the Business, or (iii) the business relationship of the Company or
any of its subsidiaries with any material supplier to the Business.
(d) The Company and its subsidiaries have made accurate and timely
payment of the royalties and/or other payments required by any Material
Contract.
(e) Neither the Company nor any of its subsidiaries has granted any
power of attorney affecting or with respect to the Business that remains
outstanding.
(f) The Company and its subsidiaries have paid off the loan dated
November 11, 2001 with SunTrust Bank, including the repayment of the $200,000.00
outstanding balance and there are no further Liabilities associated therewith.
SECTION 3.11 LITIGATION. Except as set forth on SCHEDULE 3.11, (a)
there are no outstanding Orders that relate to the Company or any of its
subsidiaries; and (b) there are no claims, actions, suits or proceedings pending
or, to the Knowledge of Sellers, threatened against Sellers, the Company or any
of its subsidiaries, or any of their properties or assets that (i) relate to the
Company or any of its subsidiaries, or (ii) are reasonably likely to have a
Sellers Material Adverse Effect.
SECTION 3.12 COMPLIANCE WITH APPLICABLE LAWS.
(a) Except as listed on SCHEDULE 3.12, the Company and its subsidiaries
are in compliance in all material respects with all Applicable Laws, and has not
received any written notice alleging any violation of any such Applicable Law.
(b) Except as listed on SCHEDULE 3.12, the Company and its subsidiaries
have all material Permits necessary to conduct the Business in the manner it is
presently being conducted, and all such Permits are valid and in full force and
effect. Except as listed on SCHEDULE 3.12, neither the Company nor any of its
subsidiaries has engaged in any activity that is reasonably likely to cause
revocation or suspension of any such Permit and
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no action or proceeding looking to or contemplating the revocation or suspension
of any such Permit is pending or, to Sellers' Knowledge, threatened.
SECTION 3.13 ENVIRONMENTAL COMPLIANCE. (a) The Company and its
subsidiaries are in compliance with all applicable Environmental Laws; (b) the
Company and its subsidiaries have all material Permits required under any
applicable Environmental Laws and is in compliance with their respective
requirements; and (c) there are no pending or, to Sellers' Knowledge, threatened
claims under Environmental Laws against the Company or any of its subsidiaries.
SECTION 3.14 PERSONAL PROPERTY.
(a) SCHEDULE 3.14 contains a true and correct list of each lease by the
Company or any of its subsidiaries pursuant to which the Company or any of its
subsidiaries leases tangible personal property (the "Personal Property Leases").
True and correct copies of each lease listed on SCHEDULE 3.14 and any
amendments, extensions, and renewals thereof are attached thereto. Each of the
leases described on SCHEDULE 3.14 is in full force and effect, and there are no
existing defaults or events of default, real or claimed, or events which with
notice or lapse of time or both would constitute defaults. No rights of the
Company or any of its subsidiaries under such leases have been assigned or
otherwise transferred as security for any obligation of the Company or any of
its subsidiaries. The consummation of the transactions provided for herein will
not create or constitute a default or event of default under any such lease or
require the consent of any other party to any such lease in order to avoid a
default or event of default.
(b) SCHEDULE 3.14 contains a complete and correct list of all items of
tangible personal property that are owned by the Company or any of its
subsidiaries (collectively, the "Owned Personal Property"). The Company and its
subsidiaries have good, valid and marketable title to each item of Owned
Personal Property, free and clear of all Liens other than Permitted Liens.
(c) Except as disclosed on SCHEDULE 3.14, the Owned Personal Property
and the personal property subject to the Personal Property Leases constitute all
of the tangible personal property required to conduct the Business.
(d) All of the Owned Personal Property and the Personal Property Leases
used in the Business are in the name of the Company as of the date hereof.
SECTION 3.15 REAL PROPERTY.
(a) Neither the Company nor any of its subsidiaries owns any real
property.
(b) SCHEDULE 3.15 contains a true and correct list of each lease (the
"Real Property Leases") by the Company or any of its subsidiaries of any real
property (the "Leased Real Property") and a summary description of all plants
and structures located on each such parcel of Leased Real Property. Each of the
Real Property Leases listed on
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SCHEDULE 3.15 is in full force and effect and there is no existing default or
event of default, real or claimed, or event which with notice or lapse of time
or both would constitute a default thereunder by the Company or any of its
subsidiaries, or, to the Knowledge of Sellers, any other party to such Real
Property Leases. Except for Permitted Liens, the interest of the Company or any
of its subsidiaries in the Real Property Leases is free and clear of any Liens
or rights of any third parties. The consummation of the transactions provided
for herein will not create or constitute a default or event of default under any
Real Property Lease or require the consent of any other party to any Real
Property Lease in order to avoid a default or event of default.
(c) There is no default or breach by the Company or any of its
subsidiaries, nor, to the Knowledge of Sellers, any other party thereto, under
any covenants, conditions, restrictions or easements which may affect the Leased
Real Property or any portion or portions thereof which are to be performed or
complied with by the owner of the Leased Real Property, and no condition or
circumstance exists which, with the giving of notice or the passage of time, or
both, would constitute a default or breach by the Company or any of its
subsidiaries, nor, to the Knowledge of Sellers, any other party thereto, under
any such covenants, conditions, restrictions, rights-of-way or easements.
(d) All of the Real Property Leases used in the Business are in the
name of the Company as of the date hereof.
SECTION 3.16 INTELLECTUAL PROPERTY.
(a) SCHEDULE 3.16 sets forth a complete and accurate list of all
patents, trademarks, trade names, service marks, domain names, copyrights and
computer software used in the Business. Except as set forth on SCHEDULE 3.16,
the Company owns or has the uncontested right to use all Intellectual Property
necessary for the conduct of its Business as presently conducted. For purposes
of this Agreement, the term "Intellectual Property" shall mean, collectively,
patents, designs, inventions, trademarks, trade names, domain names, service
marks, copyrights, computer software, manufacturing processes and confidential
or proprietary information.
(b) Except for the Trademark Opposition listed on SCHEDULE 3.16, no
claim is pending, or to the Knowledge of Sellers threatened, and neither the
Company nor any of its subsidiaries has received any written notice that the
conduct of its Business (including without limitation, its use of any
Intellectual Property) infringes upon, misappropriates or conflicts with any
rights in Intellectual Property claimed by any third party. No claim is pending,
or to the Knowledge of Sellers threatened, which alleges that any Intellectual
Property owned or licensed by or to the Company or any of its subsidiaries or
which the Company or any of its subsidiaries otherwise has the right to use is
invalid or unenforceable by the Company or any of its subsidiaries.
(c) Except as set forth on SCHEDULE 3.16 and as of the date identified
therein, no royalties or fees are payable by the Company or any of its
subsidiaries to anyone for use of the Intellectual Property. Correct and
complete copies of all agreements pursuant
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to which the Company or any of its subsidiaries licenses any Intellectual
Property have been delivered to Buyer. Except as set forth on SCHEDULE 3.16, all
such agreements are in full force and effect, and, to the Knowledge of Sellers,
there are no existing defaults or events of default, real or claimed, or events
which with or without notice or lapse of time, or both, would constitute
defaults under such agreements that would give the non-defaulting party a right
to terminate such agreement or a right to receive any payment pursuant to such
agreement.
SECTION 3.17 EMPLOYEE BENEFIT PLANS; ERISA.
(a) SCHEDULE 3.17 sets forth a correct and complete list of all
pension, retirement, profit sharing, deferred compensation, severance pay,
vacation, bonus or other incentive plan, all other written employee programs,
arrangements or agreements, all medical, vision, dental or other health plans,
all life insurance plans, and all other employee benefit plans or fringe benefit
plans, including "employee benefit plans" as that term is defined in Section
3(3) of ERISA, currently providing benefits to any of the current employees of
the Company or any of its subsidiaries and/or their dependents (collectively,
the "Benefit Plans").
(b) To the Knowledge of Sellers, except as disclosed in SCHEDULE 3.17,
all the Benefit Plans and the related trusts subject to ERISA comply in all
material respects with and have been administered in substantial compliance
with, (i) the provisions of ERISA, (ii) all provisions of the Code relating to
qualification and tax exemption under Code Sections 401(a) and 501(a), and (iii)
all other Applicable Laws, and Sellers have not received any written notice from
any Governmental Authority questioning or challenging such compliance.
(c) To the Knowledge of Sellers, except as disclosed in SCHEDULE 3.17,
there are no unresolved claims or disputes under the terms of, or in connection
with, the Benefit Plans other than claims for benefits which are payable in the
ordinary course, and no litigation has been commenced with respect to any
Benefit Plan.
(d) All contributions with respect to a Benefit Plan that is subject to
Code Section 412 or ERISA Section 302 have or will be timely made and there is
no Lien under Code Section 412(n). No "prohibited transaction" (as defined in
ERISA Section 406) or "reportable event" (as defined in ERISA 4043) has occurred
with respect to any Benefit Plan. Neither Sellers nor any Person affiliated with
Sellers (in the manner described in Code Section 414(b), (c), (m) or (o) or
Section 4001(a)(14) of ERISA) has contributed to or been obligated to contribute
to a "multiemployer plan" (within the meaning of Section 3(37) of ERISA).
SECTION 3.18 LABOR AND EMPLOYMENT MATTERS. SCHEDULE 3.18 contains
a correct and complete list of all employees of the Company and its subsidiaries
as of the Closing Date, specifying for each person his or her job title. Except
for the Xxxxxxx Employment Agreement and except as disclosed on SCHEDULE 3.18,
the employment of all employees is terminable at will by the Company or any of
its subsidiaries without any
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penalty or severance obligation of the Company or any of its subsidiaries.
Except as set forth in SCHEDULE 3.18, (i) neither the Company nor any of its
subsidiaries is a party to any union agreement or collective bargaining
agreement or work rules or practices agreed to with any labor organization or
employee association applicable to its employees and no attempt to organize any
of such employees has been made or is pending, (ii) there has been no labor
strike, dispute, slowdown, stoppage or lockout against or affecting the Company
or any of its subsidiaries, and (iii) no unfair labor practice charge or
complaint against the Company or any of its subsidiaries is pending before the
National Labor Relations Board or any similar Governmental Authority with
respect to the Company's or any of its subsidiaries' employees.
SECTION 3.19 TAX MATTERS. Except as set forth in SCHEDULE 3.19:
(a) All material tax and information reports, returns and related
documents (collectively, the "Tax Returns") required to be filed by or with
respect to the Company or any of its subsidiaries have been timely filed, all
federal, state, local, foreign and other Taxes that are shown to be due on such
Tax Returns have been timely paid, and all such Tax Returns are true, complete
and accurate in all material respects;
(b) Sellers have prior to the date hereof provided to Buyer copies of
the portions of all federal Tax Returns applicable to the Company or any of its
subsidiaries for the taxable periods ending after the date upon which Sellers
formed the Company;
(c) There are no outstanding agreements extending or waiving the
statutory period of limitation applicable to any claim for, or the period for
the collection or assessment of, Taxes due for any taxable period with respect
to any Tax for which the Company or any of its subsidiaries may be subject or
liable;
(d) No audit, assessment, collection or other proceeding by any
Governmental Authority is pending or, to the Knowledge of Sellers, threatened
with respect to (i) any Taxes due from or with respect to the Company or any of
its subsidiaries, or (ii) any Tax Return of or with respect to the Company or
any of its subsidiaries;
(e) There are no Liens for Taxes upon the assets or properties of the
Company or any of its subsidiaries, except for statutory Liens for current Taxes
not yet due;
(f) Neither the Company nor any of its subsidiaries is a party to any
agreement relating to the sharing or allocation of Taxes or indemnification
agreement with respect to Taxes or similar contract or arrangement;
(g) Neither the Company nor any of its subsidiaries has been a member
of an affiliated group filing a consolidated federal income Tax Return nor does
the Company or any of its subsidiaries have any liability for Taxes of any
Person under Treas. Reg. ss. 1.1502-6 or ss. 1.1502-78 (or similar provision of
state, local or foreign law) as a transferee or successor, by contract or
otherwise.
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(h) The Company and its subsidiaries have, at all times of their
existence, been classified either as partnerships or entities disregarded from
their owners for federal tax purposes.
SECTION 3.20 BROKERAGE AND FINANCIAL ADVISERS. No broker, finder or
financial adviser has acted directly or indirectly as such for, or is entitled
to any compensation from, the Company, any of its subsidiaries, Sellers or their
Affiliates in connection with this Agreement or the transactions contemplated
hereby.
SECTION 3.21 CONSENTS AND APPROVALS. Except as set forth on SCHEDULE
3.10 or SCHEDULE 3.21, and except for consents required under Contracts that are
not material to the Business, no consent, approval or authorization of, or
filing or registration with, any Governmental Authority or any other Person, is
required on the part of the Company, any of its subsidiaries or Sellers in
connection with Sellers' execution and delivery of this Agreement or the Xxxxxxx
Employment Agreement or the consummation by Sellers of the transactions
contemplated hereby and thereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
SECTION 4.1 CORPORATE EXISTENCE AND POWER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all corporate powers required to carry on its business as now
conducted. Buyer is duly qualified to do business as a foreign corporation and
is in good standing in the State of Alabama.
SECTION 4.2 AUTHORITY. Buyer has all requisite power and authority to
execute and deliver, and to perform its obligations under this Agreement and the
Xxxxxxx Employment Agreement and to consummate the transactions contemplated
hereby and thereby, and the performance by Buyer of its obligations under this
Agreement and the Xxxxxxx Employment Agreement have been duly authorized by all
necessary corporate action on the part of Buyer. This Agreement and the Xxxxxxx
Employment Agreement have been duly executed and delivered by Buyer, and subject
to the due execution and delivery by Sellers will, upon due execution and
delivery, be valid and binding obligations of Buyer, enforceable against Buyer
in accordance with their respective terms, except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium or other similar
Applicable Laws affecting the enforcement of creditors' rights generally, and
(ii) the availability of equitable remedies may be limited by equitable
principles of general applicability.
SECTION 4.3 GOVERNMENTAL AUTHORIZATION. Except as set forth on SCHEDULE
4.3, the consummation of the transactions contemplated hereby do not require
Buyer to
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obtain any consent, approval or action of, make any filing with, or give any
notice to, any Governmental Authority.
SECTION 4.4 NON-CONTRAVENTION. Except as disclosed on SCHEDULE 4.4, the
execution, delivery and performance by Buyer of this Agreement and the
consummation of the transactions contemplated hereby will not (a) violate any
provision of the certificate of incorporation, bylaws or any other
organizational document of Buyer, (b) violate, conflict with, result in the
breach of or default under (or with notice, lapse of time, or both would result
in such a breach or default), result in any modification of the effect of,
provide the other contracting party the right to terminate or materially amend,
or require the other contracting party to consent to the assignment or
continuation of, any material Contract to which Buyer is a party, (c) violate
any Order against or binding upon Buyer, (d) violate any agreement with, or
condition imposed by, any Governmental Authority upon Buyer, (e) subject to
obtaining the governmental authorizations referred to in Section 4.3 hereof,
violate any Applicable Law, or (f) result in a breach or violation of any of the
terms or conditions of, constitute a default under, or otherwise cause an
impairment or a revocation of, any Permit related to Buyer's business, except
for such breaches, violations, defaults, impairments or revocations that would
not have a Buyer Material Adverse Effect.
SECTION 4.5 BROKERAGE AND FINANCIAL ADVISERS. No broker, finder or
financial adviser has acted directly or indirectly as such for, or is entitled
to any compensation from, Buyer in connection with this Agreement or the
transactions contemplated hereby.
SECTION 4.6 SUFFICIENT FUNDS. Buyer has or will have at Closing
sufficient funds available to pay the Purchase Price, to pay all fees and
expenses related to the transactions contemplated hereby, and to operate the
Company and its subsidiaries as going concerns.
ARTICLE 5
COVENANTS
SECTION 5.1 CONDUCT OF BUSINESS.
(a) Prior to the Closing, except as necessary to effect the
transactions contemplated by this Agreement, Sellers shall cause the Company and
its subsidiaries to, (i) in all material respects operate the Business as
presently operated and only in the ordinary course and consistent with past
practice, (ii) use commercially reasonable efforts to preserve the value of the
Business, and (iii) use commercially reasonable efforts to preserve the
Company's and its subsidiaries' relationships with and the goodwill of its
Artists, singers, musicians, publishers, producers, customers, suppliers,
employees and other Persons having business dealings with the Company or any of
its subsidiaries.
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(b) Without limiting the generality of Section 5.1(a), and except as
otherwise disclosed in this Agreement or as necessary to effect the transactions
contemplated by this Agreement, or except with the prior approval of Buyer
(which shall not be unreasonably withheld, conditioned or delayed), Sellers will
cause the Company and its subsidiaries not to:
(i) enter into any contract that would constitute a Material
Contract, other than in the ordinary course of business consistent with
past practice;
(ii) dispose of or acquire any asset used or to be used in the
Business, other than acquisitions or dispositions in the ordinary
course of business;
(iii) enter into, adopt or (except as may be required by
Applicable Law or the terms of any such arrangement) modify or
terminate any bonus, profit sharing, severance, termination, limited
liability company interest purchase agreement, pension, retirement,
deferred compensation, employment, severance or other employee benefit
agreement, trust, plan, fund or other arrangement for the benefit or
welfare of any employee, or amend any such arrangement as it relates to
employees (except for changes in compensation payable to any employee
that is a merit or tenure increase granted in the ordinary course of
business);
(iv) change any of the accounting principles, practices,
methods or policies employed by the Company or any of its subsidiaries,
except as may be required as a result of a change in Applicable Law or
GAAP;
(v) (A) make any distribution other than the Cash
Distribution, (B) issue, sell, pledge, redeem, dispose of or encumber
any of its limited liability company interests, (C) amend its articles
of organization, operating agreement or bylaws, (D) incur or modify any
material indebtedness or other material liability, (E) make or
authorize or commit for any capital expenditures other than in amounts
not exceeding $10,000 in the aggregate, or (F) make any acquisition of,
or investment in, assets or stock of any other Person, in excess of
$10,000 in the aggregate (other than in the course of ordinary course
investment activities); or
(vi) agree in writing or otherwise to take any of the actions
described above in this Section 5.1(b).
SECTION 5.2 CERTAIN TRANSACTIONS. From the date of this Agreement
through the Closing, neither the Sellers nor the Company or any of its
subsidiaries, or any of their respective officers, employees, representatives or
agents, will solicit, encourage, initiate or engage in any negotiations or
discussions with any Person or group (other than Buyer and its Affiliates and
their respective representatives) concerning any sale or other disposition of
the assets of the Company or any of its subsidiaries.
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SECTION 5.3 INVESTIGATIONS; PRE-CLOSING ACCESS. Prior to the Closing
Date, Buyer shall be entitled, through its employees and representatives, to
make such investigation of the assets, liabilities, business and operations of
the Company and its subsidiaries, and such examination of the books and records
of the Company and its subsidiaries, as Buyer may reasonably request; provided,
however, that Buyer shall not have any contact with any vendors or customers of
the Company or any of its subsidiaries or other similar third parties without
the prior written consent of Sellers, which consent shall not unreasonably be
withheld. Any investigation, examination or interview by Buyer of the Company's
or any of its subsidiaries' employees or access pursuant to any of the
provisions of this Section 5.3 shall only be conducted or occur at reasonable
times upon reasonable prior notice; and each of the parties hereto, and its
respective employees and representatives, including, without limitation,
counsel, investment bankers, and independent public accountants, shall cooperate
with the other's employees and representatives, as the case may be, in
connection with such review and examination.
SECTION 5.4 POST-CLOSING ACCESS.
(a) Following the Closing Date, Sellers shall allow Buyer upon
reasonable prior notice and during regular business hours, through Buyer's
employees and representatives, the right, at Buyer's expense, to examine and
make copies of any books and records retained by Sellers to the extent they
relate to the Company or any of its subsidiaries, for any reasonable business
purpose concerning the conduct of the Business prior to the Closing Date. Access
to such books and records shall be at Buyer's expense.
(b) Following the Closing Date, Buyer shall maintain the Books and
Records for a minimum period of seven years and, during such time period, shall
allow Sellers, upon reasonable prior notice and during regular business hours,
the right, at Sellers' expense, to examine and make copies of the Books and
Records transferred to Buyer at the Closing for any reasonable business purpose.
Access to such Books and Records shall be at Sellers' expense and may not
unreasonably interfere with Buyer's, the Company's or any of its subsidiaries'
or any successor company's business operations.
SECTION 5.5 FILINGS; OTHER ACTIONS; NOTIFICATIONS. Sellers and Buyer
shall cooperate with each other and use (and shall cause their respective
Affiliates to use) all commercially reasonable efforts to do or cause to be done
all things necessary, proper or advisable on its part under this Agreement and
Applicable Laws to consummate and make effective the transactions contemplated
by this Agreement as soon as practicable, including, without limitation,
preparing and filing as promptly as practicable all documentation to effect all
necessary notices, reports and other filings. Sellers and Buyer each shall keep
the other apprised of the status of matters relating to completion of the
transactions contemplated hereby, including promptly furnishing the other with
copies of notices or other communications received by Sellers or Buyer, as the
case may be, or any of their Affiliates, from any third party or Governmental
Authority with respect to the transactions contemplated by this Agreement.
Sellers and Buyer each shall give prompt notice to the other of any change that
is reasonably likely to result in a Sellers Material Adverse Effect or Buyer
Material Adverse Effect, respectively.
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SECTION 5.6 FURTHER ASSURANCES. On and after the Closing Date, Sellers
(as reasonably requested from time to time by Buyer) and Buyer (as reasonably
requested from time to time by Sellers) shall take all reasonably appropriate
action and execute any additional documents, instruments or conveyances of any
kind (not containing additional representations and warranties) which may be
reasonably necessary to carry out any of the provisions of this Agreement.
SECTION 5.7 EXPENSES. Except as otherwise specifically provided in this
Agreement, the parties to this Agreement shall bear their respective expenses
incurred in connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including, without
limitation, all fees and expenses of agents, representatives, counsel,
investment bankers, actuaries and accountants.
SECTION 5.8 TAX MATTERS.
(a) Tax Periods Ending on or Before the Closing Date.
(i) Sellers shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Company and its subsidiaries
for all periods ending on or prior to the Closing Date which are to be
filed after the Closing Date ("Pre-Closing Tax Returns"). The
Pre-Closing Tax Returns shall be prepared by Sellers in a manner that
is, to the extent permitted by law, consistent with the last Tax Return
filed by Sellers prior to the date of this Agreement in each relevant
jurisdiction with respect to the Company and its subsidiaries. A copy
of the Pre-Closing Tax Returns shall be submitted to the Buyer at least
thirty (30) days prior to their due date, including extensions.
(ii) The Sellers shall pay all Taxes of the Company and its
subsidiaries with respect to such periods ending on or prior to the
Closing Date.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
(i) Buyer shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns of the Company and its subsidiaries
for Tax periods which begin before the Closing Date and end after the
Closing Date ("Straddle Period Tax Returns"). The Straddle Period Tax
Returns shall be prepared by Buyer in a manner that is, to the extent
permitted by law, consistent with the last Tax Return filed prior to
the date of this Agreement in each relevant jurisdiction with respect
to the Company and its subsidiaries. The Straddle Period Tax Returns
shall be submitted to the Sellers at least forty-five (45) days prior
to their due date, including extensions. The Sellers shall have the
right to conduct a reasonable review of the Straddle Period Tax Returns
prepared by Buyer and Buyer shall not file such Straddle Period Tax
Returns without the prior written consent of the Sellers, which consent
shall not be unreasonably withheld or delayed. Any dispute regarding
the Straddle Period Tax Returns shall be resolved pursuant to
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the Tax Dispute Resolution Mechanism. Following the resolution of any
such dispute, Buyer shall prepare and timely file the Straddle Period
Tax Returns, as modified based on the resolution of any dispute.
(ii) The Sellers shall pay to Buyer within fifteen (15) days
after the date on which Taxes are paid with respect to such periods an
amount equal to the portion of such Taxes allocable to the portion of
such Taxable period ending on the Closing Date (based on the method
described in Section 5.8(b)(iii)).
(iii) For purposes of this Agreement, in the case of any Taxes
that are imposed on a periodic basis and are payable for a Taxable
period that includes (but does not end on) the Closing Date, the
portion of such Tax which relates to the portion of such Taxable period
ending on the Closing Date shall (x) in the case of any Taxes other
than Taxes based upon or related to income or receipts, be deemed to be
the amount of such Tax for the entire Taxable period multiplied by a
fraction the numerator of which is the number of days in the Taxable
period ending on the Closing Date and the denominator of which is the
number of days in the entire Taxable period, and (y) in the case of any
Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant Taxable period ended on
the Closing Date. Any credits relating to a Taxable period that begins
before and ends after the Closing Date shall be taken into account as
though the relevant Taxable period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations
shall be made in a manner consistent with prior practice of the Company
and its subsidiaries.
(c) Cooperation on Tax Matters. The Buyer and the Sellers shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Section and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Company, its subsidiaries and the Sellers agree
(i) to retain all books and records with respect to Tax matters pertinent to the
Company or any of its subsidiaries relating to any Taxable period beginning
before the Closing Date until the expiration of the statute of limitations (and,
to the extent notified by the Buyer or the Sellers, any extensions thereof) of
the respective Taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, the Company, its
subsidiaries or the Sellers, as the case may be, shall allow the other party to
take possession of such books and records. The Buyer and the Sellers further
agree, upon request, to use their best efforts to obtain any certificate or
other document from any governmental authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that
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could be imposed (including, but not limited to, with respect to the
transactions contemplated by this Agreement).
(d) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be borne by the
Sellers. The Company and its subsidiaries will file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by any
Applicable Law, the Sellers will, and will cause their Affiliates to, join in
the execution of any such Tax Returns and other documentation. The parties will
cooperate to the extent reasonably necessary to prepare such filings or returns
as may be required.
SECTION 5.9 DISCLOSURE SUPPLEMENTS. From time to time prior to the
Closing, and as soon as reasonably practicable following a material event,
Sellers shall supplement or amend its Schedules hereto (i) with respect to any
matter that was required to be disclosed or set forth in a Schedule on the date
of this Agreement but was omitted from such Schedule (a "Pre-Signing Matter"),
and (ii) with respect to any matter that, if existing or occurring at or prior
to the date of this Agreement, would have been required to be set forth or
described in a Schedule or that is necessary to correct any information in a
Schedule that has been rendered inaccurate thereby (a "Post-Signing Matter");
provided however, that Buyer may unilaterally extend the Closing Date to allow
Buyer five (5) Business Days to review such supplements prior to the Closing
Date.
SECTION 5.10 CERTAIN EMPLOYEE MATTERS. Buyer agrees to pay severance
benefits and/or retention bonuses to Xxx X. Xxxxxxxx, Xxxx X. Xxxxxxx and Xxxxxx
X. Xxxxxxxx in the amounts shown on SCHEDULE 5.10 and upon the terms and subject
to the conditions of Employee Retention and Severance Agreements in
substantially the form of Exhibit B hereto, provided that each individual is
employed by the Company as of the Closing Date.
SECTION 5.11 NEGOTIATION OF MARKETING DISTRIBUTION AGREEMENT. After the
Closing Date, Buyer agrees to negotiate a general retail market distribution
agreement for the products of the current Artists of the Company such that the
net proceeds (after deducting all reimbursable costs from the Artist portion of
net sales) payable to the Artist will be at least as favorable as under the
Company's current arrangement with WEA Distribution Company.
SECTION 5.12 PUBLICITY. The parties agree to consult with each other
before making any press releases or other public disclosure related to this
Agreement or the transaction contemplated hereby.
SECTION 5.13 COMPANY HEADQUARTERS. The parties agree that the Company,
its subsidiaries or other subsidiary of the Buyer conducting the Business, will
continue to be headquartered in the metropolitan Nashville, Tennessee area from
the Closing Date through the duration of the Xxxxxxx Employment Agreement.
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SECTION 5.14 ABANDONMENT OF TRADEMARK. Buyer will immediately abandon
the use of any corporate name, trade name, trademark or service xxxx that
consists in whole or in part of the terms "M2" or "M2.0" upon the direction of
Xxxxxxx Xxxxxxx, provided that Xx. Xxxxxxx will consult with Buyer and keep
Buyer apprised of any and all material developments in the Trademark Litigation.
ARTICLE 6
CONDITIONS TO CLOSING
SECTION 6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each party to consummate the transactions contemplated hereby are
subject to the fulfillment prior to or at Closing of the following conditions,
unless waived by both parties in writing:
(a) No Applicable Law or Order shall be in effect that prohibits or
enjoins, and no litigation, action or other proceeding shall be pending that
seeks to prohibit or enjoin or that seeks material monetary damages with respect
to, the consummation of the transactions contemplated hereby.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF SELLERS. The obligations of
Sellers to consummate the transactions contemplated hereby are subject to the
fulfillment prior to or at Closing of the following conditions, unless waived by
Sellers in writing:
(a) (i) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively) and each of those covenants and obligations
(considered individually) shall have been duly performed and complied with in
all material respects, (ii) each of Buyer's representations and warranties
contained in this Agreement shall be true and correct in all material respects
(ignoring, for this purpose, any materiality or material adverse effect
qualifications to such representations and warranties) as of the date of this
Agreement and as of the Closing Date as if made on the Closing Date (except as
to any representation or warranty which specifically relates to an earlier
date), and (iii) Sellers shall have received a certificate signed by a duly
authorized officer of Buyer to the effect that the foregoing conditions have
been satisfied. Compliance with covenants and obligations and accuracy of
representations and warranties shall be determined without regard to supplements
or amendments to Schedules made pursuant to Section 5.9.
(b) Sellers shall have received from Buyer a certified copy of the
resolutions duly adopted by Buyer's board of directors approving the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby.
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SECTION 6.3 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of
Buyer to consummate the transactions contemplated hereby are subject to the
fulfillment prior to or at Closing of the following conditions, unless waived by
Buyer in writing:
(a) (i) All of the covenants and obligations that Sellers are required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively) and each of those covenants and obligations
(considered individually) shall have been duly performed and complied with in
all material respects, (ii) each of Sellers' representations and warranties
contained in this Agreement shall be true and correct in all material respects
(ignoring, for this purpose, any materiality or material adverse effect
qualifications to such representations and warranties) as of the date of this
Agreement and as of the Closing Date as if made on the Closing Date (except as
to any representation or warranty which specifically relates to an earlier
date), and (iii) Buyer shall have received a certificate signed by the Sellers
to the effect that the foregoing conditions have been satisfied. Compliance with
covenants and obligations and accuracy of representations and warranties shall
be determined without regard to supplements or amendments to Schedules made
pursuant to Section 5.9.
(b) The approvals and consents listed on SCHEDULE 6.3 shall have been
received or deemed received in each case without any conditions, restrictions or
limitations.
(c) All of the Real Property Leases used in the Business and in the
name of INPOP shall have been transferred to the Company.
(d) All of the Material Contracts are in full force and effect as of
the Closing Date.
(e) There shall not have been any distributions of any kind from the
Company to any Person from May 31, 2002 through the Closing Date, provided,
however, that (i) on the Closing Date, and upon the terms and subject to the
conditions of this Agreement, Sellers may cause the Company to make the Cash
Distribution from Available Cash, and (ii) prior to the Closing Date, the
Sellers may cause the Company to make a distribution to Xxxxxxx Xxxxxxx of the
Company's equity interest in INPOP, representing the Company's initial
investment of $100,000.00 in INPOP.
(f) Magnificat Music, L.L.C. is a wholly owned subsidiary of the
Company as of the Closing Date.
(g) Xxxxxx Xxxxxxx and the Xxxx and Xxxxxx Xxxxxxx Charitable Remainder
Unitrust have executed and delivered, pursuant to Section 2.4(b)(vii) of this
Agreement, releases (the "Distribution Releases") in which they have (i)
consented to the Cash Distribution being distributed exclusively to Xxxxxxx
Xxxxxxx on the Closing Date, (ii) absolutely, unconditionally and irrevocably
released and forever discharged the Company, its subsidiaries, Buyer, and each
of their Affiliates and respective past, present and future officers, directors,
employees, agents, representatives, stockholders, successors
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and assigns from and against any and all actions, causes of action, claims,
demands, obligations, contracts, agreements, debts, liabilities, and damages
whatsoever relating to any and all rights to any distributions made by the
Company, and (iii) waived any and all provisions in the Company's Articles of
Organization and Operating Agreement relating to any distributions made by the
Company.
(h) There shall not have been any Sellers Material Adverse Effect with
respect to the Company, its subsidiaries or their assets between the date hereof
and the Closing Date, and Buyer shall have received a certificate dated as of
the Closing Date, signed by Sellers to such effect.
ARTICLE 7
TERMINATION
SECTION 7.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any time
prior to the Closing Date by mutual written consent of Sellers and Buyer.
SECTION 7.2 TERMINATION BY EITHER SELLERS OR BUYER. This Agreement may
be terminated and the transactions contemplated hereby may be abandoned (i) by
either Sellers or Buyer if the Closing shall not have occurred by July 31, 2002
(the "Termination Date"); (ii) by either Sellers or Buyer if any Order
permanently restraining, enjoining or otherwise prohibiting consummation of the
transactions contemplated by this Agreement shall become final and
non-appealable; provided, that the right to terminate this Agreement pursuant to
clause (i) above shall not be available to any party that has breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed to the occurrence of the failure of the
transactions contemplated by this Agreement to be consummated.
SECTION 7.3 TERMINATION BY SELLERS. This Agreement may be terminated
and the transactions contemplated hereby abandoned at any time prior to the
Closing Date by Sellers if there has been a material breach by Buyer of any
representation, warranty, covenant or agreement contained in this Agreement
that, together with all such breaches, would prevent any of the conditions set
forth in Article 6 from being satisfied (other than by waiver) prior to the
Termination Date and that is not curable or, if curable, is not cured within 20
days after written notice of such breach is given by Sellers to Buyer.
SECTION 7.4 TERMINATION BY BUYER. This Agreement may be terminated and
the transactions contemplated hereby abandoned at any time prior to the Closing
Date by Buyer if there has been a material breach by Sellers of any
representation, warranty, covenant or agreement contained in this Agreement
that, together with all such breaches, would prevent any of the conditions set
forth in Article 6 from being satisfied (other than by waiver) prior to the
Termination Date and that is not curable or, if curable, is not cured within 20
days after written notice of such breach is given by Buyer to Sellers.
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SECTION 7.5 EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and the abandonment of the transactions pursuant
to this Article 7, this Agreement shall become void and of no effect with no
liability on the part of any party hereto (or of any of its representatives);
provided, however, except as otherwise provided herein, no such termination
shall relieve any party hereto of any liability or damages resulting from any
breach of this Agreement.
ARTICLE 8
INDEMNIFICATION
SECTION 8.1 SURVIVAL. All representations and warranties, and all
pre-closing covenants and agreements, made or undertaken by the parties in this
Agreement shall survive the Closing for a period of eighteen (18) months
following the Closing Date.
SECTION 8.2 OBLIGATION OF SELLERS TO INDEMNIFY. Subject to the
limitations set forth in this Article 8, Sellers agree to jointly and severally
indemnify Buyer and hold Buyer harmless from and against all Losses asserted
against, imposed upon or incurred by the Company, its subsidiaries or Buyer
resulting from, arising out of, based upon or otherwise in respect of any of the
following:
(a) any breach of or inaccuracy in any representation or warranty of
Sellers contained in this Agreement;
(b) any breach of any covenant or agreement made or to be performed by
Sellers pursuant to this Agreement;
(c) the issues involved in trademark Opposition No. 124,775 filed by M2
Software, Inc. against App. Ser. No. 75/793,810 for the xxxx M2.0 & Design (the
"Trademark Opposition"), whether in connection with the Trademark Opposition or
related claims or litigation (the "Trademark Litigation"), including without
limitation all Losses incurred by Buyer resulting from the Company executing a
written settlement agreement with M2 Software, Inc., reasonably acceptable to
Buyer, that fully and finally resolves the issues involved in the Trademark
Litigation and that releases the Buyer, Sellers, Company, their subsidiaries and
officers, directors, representatives, successors and assigns (collectively the
"Released Parties") from all past, present and future claims by M2 Software,
Inc., its successors and assigns against the Released Parties arising out of or
relating in any way to the Released Parties' adoption, use, registration or
attempt to register any corporate name, trade name, trademark or service xxxx
that consists in whole or in part of the terms "M2" or "M2.0"; or
(d) the reasonable costs to Buyer of enforcing this indemnity against
Sellers.
SECTION 8.3 OBLIGATION OF BUYER TO INDEMNIFY. Subject to the
limitations contained in this Article 8, Buyer agrees to indemnify and hold
Sellers harmless from and
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against all Losses asserted against, imposed upon or incurred by Sellers
resulting from, arising out of, based upon or otherwise in respect of any of the
following:
(a) any breach of or inaccuracy in any representation or warranty of
Buyer contained in this Agreement;
(b) any breach of any covenant or agreement made or to be performed by
Buyer pursuant to this Agreement; or
(c) the reasonable costs to Sellers of enforcing this indemnity against
Buyer.
SECTION 8.4 NOTICE OF LOSS, ASSERTED LIABILITY. Promptly after (a)
becoming aware of circumstances that have resulted in a Loss for which a party
entitled to indemnification pursuant to Section 8.2 or Section 8.3 intends to
seek indemnification under such Section (the "Indemnified Party") or (b) receipt
by the Indemnified Party of written notice of any demand, claim or circumstances
which, with the lapse of time, the giving of notice or both, would give rise to
a claim or the commencement of any litigation that may result in a Loss (an
"Asserted Liability"), the Indemnified Party shall give notice thereof (the
"Claims Notice") to any other party obligated to provide indemnification
pursuant to Section 8.2 or Section 8.3 (the "Indemnifying Party"). The Claims
Notice shall describe the Loss or the Asserted Liability in reasonable detail,
and shall indicate the amount (estimated, if necessary) of the Loss or Asserted
Liability that has been or may be suffered by the Indemnified Party. If a Claims
Notice is not provided promptly as required by this Section 8.4, the Indemnified
Party nonetheless shall be entitled to indemnification by the Indemnifying Party
except to the extent that the Indemnifying Party is prejudiced by such late
receipt of the Claims Notice.
SECTION 8.5 OPPORTUNITY TO CONTEST. The Indemnifying Party may elect to
compromise or contest, at its own expense, any Asserted Liability. If the
Indemnifying Party elects to compromise or contest such Asserted Liability, it
shall within 30 days (or sooner, if the nature of the Asserted Liability so
requires) notify the Indemnified Party of its intent to do so by sending a
notice to the Indemnified Party (the "Contest Notice"), and the Indemnified
Party shall cooperate, at the expense of the Indemnifying Party, in the
compromise or contest of such Asserted Liability. If the Indemnifying Party
elects not to compromise or contest the Asserted Liability, fails to notify the
Indemnified Party of its election as herein provided or contests its obligation
to indemnify under this Agreement, the Indemnified Party (upon further notice to
the Indemnifying Party) shall have the right to pay, compromise or contest such
Asserted Liability on behalf of and for the account and risk of the Indemnifying
Party. In any event, the Indemnified Party and the Indemnifying Party may
participate, at their own expense, in the contest of such Asserted Liability.
Sellers and Buyer shall cooperate fully with the other as to all Asserted
Liabilities, shall make available to each other as reasonably requested all
information, records, and documents relating to all Asserted Liabilities and
shall preserve all such information, records, and documents until the
termination of any Asserted Liability. Sellers and Buyer also shall make
available to the other, as reasonably requested, its personnel, agents, and
other representatives who are responsible for
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preparing or maintaining information, records, or other documents, or who may
have particular knowledge with respect to any Asserted Liability.
SECTION 8.6 SETTLEMENT. No settlement of an Asserted Liability under
this Article 8 shall be made without the prior written consent by or on behalf
of the Indemnified Party, which consent shall not be unreasonably withheld,
conditioned or delayed. If the Indemnifying Party assumes the defense of such
Asserted Liability, (i) no compromise or settlement thereof may be effected by
the Indemnifying Party without the Indemnified Party's consent unless (A) there
is no finding or admission of any violation of Law on the part of Indemnified
Party and no effect on any other claim that may be made against the Indemnified
Party, (B) the sole relief provided is monetary damages that are paid in full by
the Indemnifying Party, and (C) the compromise or settlement includes, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
Indemnified Party of a release, in form and substance reasonably satisfactory to
the Indemnified Party, from all liability in respect of such Asserted Liability,
and (ii) the Indemnified Party shall have no liability with respect to any
compromise or settlement thereof effected without its consent.
SECTION 8.7 PROCEDURES FOR INDEMNIFICATION. Upon determination of the
amount of an Asserted Liability that is binding on both the Indemnifying Party
and the Indemnified Party, the Indemnifying Party shall pay the amount of such
Asserted Liability by wire transfer of immediately available funds within ten
(10) days of the date such amount is determined. Buyer shall have the right to
offset any unpaid amount owed by Sellers under this Article 8 hereof against the
Retention Bonus, as defined in Paragraph 3(b) of the Xxxxxxx Employment
Agreement, attached as Exhibit A hereto.
SECTION 8.8 LIMITATIONS ON INDEMNIFICATION.
(a) The Indemnifying Party shall indemnify the Indemnified Party only
when the aggregate of all such Losses or Asserted Liabilities exceeds $50,000
(the "Threshold Amount"). After the aggregate of all such Losses or Asserted
Liabilities suffered by the Indemnified Party exceeds the Threshold Amount, the
Indemnifying Party shall be required to indemnify the Indemnified Party for all
such Losses or Asserted Liabilities in excess of the Threshold Amount. In no
event shall the Indemnifying Party be required to make indemnification payments
hereunder in the aggregate exceeding the Purchase Price.
(b) No party otherwise entitled to indemnification under this Agreement
shall be indemnified pursuant to this Agreement to the extent that such party's
Losses are increased or extended by the willful misconduct, violation of
Applicable Law or bad faith of such party. Prior to the execution of this
Agreement and Closing Date, Buyer has conducted its own due diligence
investigation of the affairs of the Company. In the course of such
investigation, Buyer has not discovered any Pre-Signing Matter or any
Post-Signing Matter that was omitted from any Schedule or the existence of which
otherwise would have caused any of the representations or warranties of Sellers
to be inaccurate or untruthful in any respect that was not disclosed to Sellers.
If the Closing occurs, Sellers shall not be required to indemnify Buyer with
respect to any Pre-Signing
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Matter or Post-Signing Matter disclosed to Buyer prior to Closing in accordance
with Section 5.9, and the consummation by Buyer of the transactions contemplated
hereby shall constitute a waiver of any claim, hereunder or otherwise, against
Sellers based in any way on or arising out of any Pre-Signing Matter or
Post-Signing Matter so disclosed.
(c) The limitations of this Section 8.7 shall not apply to
indemnification under Section 8.2(c) hereof.
SECTION 8.9 SOLE REMEDY. Each party's sole and exclusive remedy for any
breach of this Agreement by the other party shall be as provided under this
Article 8.
SECTION 8.10 CERTAIN REDUCTIONS; SUBROGATION RIGHTS. All
indemnification payments payable hereunder shall be reduced by the net amount of
insurance proceeds received by, or any net Tax benefits inuring to the benefit
of, the Indemnified Party as a result of the Loss for which the Indemnified
Party is seeking indemnification. In the event that the Indemnifying Party shall
be obligated to indemnify the Indemnified Party pursuant to this Article 8, the
Indemnifying Party shall, upon payment of such indemnity in full, be subrogated
to all rights of the Indemnified Party with respect to the Loss to which such
indemnification relates; provided, however, that the Indemnifying Party shall
only be subrogated to the extent of any amount paid by it pursuant to this
Article 8 in connection with such Loss.
SECTION 8.11 EFFECT OF INDEMNIFICATION. Any indemnity payment made
hereunder shall be treated by Sellers and Buyer as an adjustment to the Purchase
Price.
SECTION 8.12 ARBITRATION. All disputes arising under this Article 8
shall be resolved by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. Arbitration shall be by a single
arbitrator experienced in the matters at issue and selected by the parties
hereto in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The arbitration shall be held in such place in Mobile,
Alabama as may be specified by the arbitrator (or any place agreed to by the
parties hereto and the arbitrator). The decision of the arbitrator shall be
final and binding as to any matters submitted under this Article 8; provided,
however, if necessary, such decision and satisfaction procedure may be enforced
by either Sellers or Buyer in any court of record having jurisdiction over the
subject matter or over either of the parties to this Agreement. All costs and
expenses incurred in connection with any such arbitration proceeding (including
reasonable attorneys fees) shall be borne by the party against which the
decision is rendered, or, if no decision is rendered, such costs and expenses
shall be borne equally by the Indemnifying Party as one party and the
Indemnified Party as the other party. If the arbitrator's decision is a
compromise, the determination of which party or parties bears the costs and
expenses incurred in connection with any such arbitration proceeding shall be
made by the arbitrator on the basis of the arbitrator's assessment of the
relative merits of the parties' positions.
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ARTICLE 9
MISCELLANEOUS
SECTION 9.1 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. Except as
otherwise expressly provided herein, this Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement between the
parties with respect to the transactions contemplated hereby and supersedes all
prior arrangements or understandings with respect thereto, written or oral.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
person or entity, other than the parties or their respective successors, any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement.
SECTION 9.2 AMENDMENTS. This Agreement may be amended only by a
subsequent writing signed by both parties. No course of performance by either
party hereto shall be deemed to modify or amend this Agreement unless the same
shall be consented to in a writing signed by both parties.
SECTION 9.3 WAIVERS.
(a) Prior to or at the Closing, Buyer shall have the right to waive any
default in the performance of any term of this Agreement by Sellers, to waive or
extend the time for the compliance or fulfillment by Sellers of any and all of
its obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Buyer under this Agreement, except any condition
which, if not satisfied, would result in the violation of any Applicable Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of Buyer.
(b) Prior to or at the Closing, Sellers shall have the right to waive
any default in the performance of any term of this Agreement by Buyer, to waive
or extend the time for the compliance or fulfillment by Buyer of any and all of
its obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Sellers under this Agreement, except any
condition which, if not satisfied, would result in the violation of any
Applicable Law. No such waiver shall be effective unless in writing signed by
Sellers.
(c) The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
SECTION 9.4 ASSIGNMENT. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any party hereto (whether by operation of law or
otherwise), in whole or in part, without the prior written consent of the other
party. Subject to the preceding sentence,
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this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
SECTION 9.5 NOTICES. All notices or other communications that are
required or permitted hereunder shall be in writing and sufficient if delivered
by hand, by facsimile transmission, by certified mail, postage pre-paid, or by
courier or overnight carrier, to the Persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
(a) If to Sellers to:
Xxxxxxx Xxxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice for purposes of
this Agreement) to:
Xxxxxxxx & Xxx
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) If to Buyer:
Integrity Media, Inc.
0000 Xxxx Xxxx
Xxxxxx, Xxxxxxx 00000
Attention: P. Xxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice for purposes of
this Agreement) to:
Xxxxxx & Bird LLP
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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SECTION 9.6 GOVERNING LAW. Notwithstanding the place where this
Agreement may be executed by any of the parties, the parties expressly agree
that this Agreement shall in all respects be governed by, and construed in
accordance with, the Applicable Laws of the State of Delaware.
SECTION 9.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
SECTION 9.8 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
SECTION 9.9 INTERPRETATIONS. No uncertainty or ambiguity herein shall
be construed or resolved against any party, whether under any rule of
construction or otherwise. No party to this Agreement shall be considered the
draftsman. The parties acknowledge and agree that this Agreement has been
reviewed, negotiated and accepted by all parties and their attorneys and shall
be construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of all parties hereto.
SECTION 9.10 SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTEGRITY MEDIA, INC.
By: /s/ P. Xxxxxxx Xxxxxxx
---------------------------------
Name: P. Xxxxxxx Xxxxxxx
-------------------------------
Title: President
------------------------------
XXXXXXX XXXXXXX
/s/ Xxxxxxx Xxxxxxx
------------------------------------
XXXXXX XXXXXXX
/s/ Xxxxxx Xxxxxxx
------------------------------------
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XXXX AND XXXXXX XXXXXXX
CHARITABLE REMAINDER UNITRUST
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------
Name: Xxxxxxx Xxxxxxx
-------------------------------
Title: Trustee
------------------------------
By: /s/ Xxxxxx Xxxxxxx
---------------------------------
Name: Xxxxxx Xxxxxxx
-------------------------------
Title: Trustee
------------------------------
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