EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
dated as of
November 12, 1999
among
XXXXXXXXXXX.XXX, INC.,
COLLEGE MEDIA, INC.
and
XXX.XXX, INC.
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
SECTION 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Conversion Of Shares . . . . . . . . . . . . . . . . . 3
SECTION 1.3 Surrender And Payment . . . . . . . . . . . . . . . . 4
SECTION 1.4 Stock Options and Equity Awards . . . . . . . . . . . 6
SECTION 1.5 Adjustments to Merger Consideration . . . . . . . . . 7
SECTION 1.6 Fractional Shares . . . . . . . . . . . . . . . . . 11
SECTION 1.7 Withholding Rights . . . . . . . . . . . . . . . . . 11
SECTION 1.8 Appraisal Rights . . . . . . . . . . . . . . . . . . 11
ARTICLE II
CERTAIN GOVERNANCE MATTERS
SECTION 2.1 Certificate of Incorporation and Bylaws of XXX.xxx . 12
SECTION 2.2 XXX.xxx Board of Directors; Officers . . . . . . . . 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CMJ
SECTION 3.1 Corporate Existence and Power . . . . . . . . . . . 13
SECTION 3.2 Corporate Authorization . . . . . . . . . . . . . . 13
SECTION 3.3 Governmental Authorization . . . . . . . . . . . . . 14
SECTION 3.4 Non-Contravention . . . . . . . . . . . . . . . . . 14
SECTION 3.5 Capitalization . . . . . . . . . . . . . . . . . . . 15
SECTION 3.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.7 Financial Statements . . . . . . . . . . . . . . . . 17
SECTION 3.8 Absence of Certain Changes . . . . . . . . . . . . . 17
SECTION 3.9 No Undisclosed Material Liabilities . . . . . . . . 18
SECTION 3.10 Litigation . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.12 Employee Benefit Plans . . . . . . . . . . . . . . 22
SECTION 3.13 Compliance with Laws . . . . . . . . . . . . . . . 24
SECTION 3.14 Finders' or Advisors' Fees . . . . . . . . . . . . 24
SECTION 3.15 Environmental Matters . . . . . . . . . . . . . . . 25
SECTION 3.16 Intellectual Property Matters . . . . . . . . . . . 25
SECTION 3.17 Year 2000 Compliance Matters . . . . . . . . . . . 28
SECTION 3.18 Related-Party Transactions . . . . . . . . . . . . 29
SECTION 3.19 Title to Property and Assets . . . . . . . . . . . 29
SECTION 3.20 Insurance . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXXXXXXXXXX.XXX
SECTION 4.1 Corporate Existence and Power . . . . . . . . . . . 30
SECTION 4.2 Corporate Authorization . . . . . . . . . . . . . . 31
SECTION 4.3 Governmental Authorization . . . . . . . . . . . . . 31
SECTION 4.4 Non-Contravention . . . . . . . . . . . . . . . . . 32
SECTION 4.5 Capitalization . . . . . . . . . . . . . . . . . . . 33
SECTION 4.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.7 Financial Statements . . . . . . . . . . . . . . . . 34
SECTION 4.8 Absence of Certain Changes . . . . . . . . . . . . . 35
SECTION 4.9 No Undisclosed Material Liabilities . . . . . . . . 36
SECTION 4.10 Litigation . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.12 Employee Benefit Plans . . . . . . . . . . . . . . 39
SECTION 4.13 Compliance with Laws . . . . . . . . . . . . . . . 42
SECTION 4.14 Finders' or Advisors' Fees . . . . . . . . . . . . 42
SECTION 4.15 Environmental Matters . . . . . . . . . . . . . . . 42
SECTION 4.16 Intellectual Property Matters . . . . . . . . . . . 42
SECTION 4.17 Year 2000 Compliance Matters . . . . . . . . . . . 44
SECTION 4.18 Related-Party Transactions . . . . . . . . . . . . 45
SECTION 4.19 Title to Property and Assets . . . . . . . . . . . 45
SECTION 4.20 Insurance . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF XXX.XXX
SECTION 5.1 Corporate Existence and Power . . . . . . . . . . . 46
SECTION 5.2 Corporate Authorization . . . . . . . . . . . . . . 47
SECTION 5.3 Governmental Authorization . . . . . . . . . . . . . 47
SECTION 5.4 Non-Contravention . . . . . . . . . . . . . . . . . 47
SECTION 5.5 Capitalization . . . . . . . . . . . . . . . . . . . 48
ARTICLE VI
COVENANTS OF CMJ
SECTION 6.1 Conduct of CMJ . . . . . . . . . . . . . . . . . . . 49
ARTICLE VII
COVENANTS OF XXXXXXXXXXX.XXX
SECTION 7.1 Conduct of Xxxxxxxxxxx.xxx . . . . . . . . . . . . . 51
ARTICLE VIII
COVENANTS OF XXX.XXX
SECTION 8.1 Conduct of XXX.xxx . . . . . . . . . . . . . . . . . 53
SECTION 8.2 Director and Officer Liability . . . . . . . . . . . 54
SECTION 8.3 Establishment of Option Plan . . . . . . . . . . . . 54
SECTION 8.4 Employment Agreements . . . . . . . . . . . . . . . 54
ARTICLE IX
COVENANTS OF XXX.XXX, CMJ AND XXXXXXXXXXX.XXX
SECTION 9.1 Best Efforts . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.2 Access to Information . . . . . . . . . . . . . . . 55
SECTION 9.3 Public Announcements . . . . . . . . . . . . . . . . 55
SECTION 9.4 Further Assurances . . . . . . . . . . . . . . . . . 56
SECTION 9.5 Notices of Certain Events . . . . . . . . . . . . . 56
SECTION 9.6 No Solicitation . . . . . . . . . . . . . . . . . . 57
SECTION 9.7 Takeover Statutes . . . . . . . . . . . . . . . . . 57
SECTION 9.8 Headquarters . . . . . . . . . . . . . . . . . . . . 57
ARTICLE X
CONDITIONS TO THE MERGER
SECTION 10.1 Conditions to the Obligations of Each Party . . . . 58
SECTION 10.2 Conditions to the Obligations of Xxxxxxxxxxx.xxx . 59
SECTION 10.3 Conditions to the Obligations of CMJ . . . . . . . 60
SECTION 10.4 Conditions to the Obligations of XXX.xxx . . . . . 61
ARTICLE XI
TERMINATION
SECTION 11.1 Termination . . . . . . . . . . . . . . . . . . . . 61
SECTION 11.2 Survival . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Notices . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 12.2 Survival of Representations and Warranties . . . . 64
SECTION 12.3 Amendments; No Waivers . . . . . . . . . . . . . . 65
SECTION 12.4 Expenses . . . . . . . . . . . . . . . . . . . . . 65
SECTION 12.5 Successors and Assigns . . . . . . . . . . . . . . 65
SECTION 12.6 Governing Law . . . . . . . . . . . . . . . . . . . 66
SECTION 12.7 Jurisdiction . . . . . . . . . . . . . . . . . . . 66
SECTION 12.8 Waiver of Jury Trial . . . . . . . . . . . . . . . 66
SECTION 12.9 Counterparts; Effectiveness . . . . . . . . . . . . 66
SECTION 12.10 Entire Agreement . . . . . . . . . . . . . . . . . 66
SECTION 12.11 Captions . . . . . . . . . . . . . . . . . . . . . 67
SECTION 12.12 Severability . . . . . . . . . . . . . . . . . . . 67
Exhibit A - Escrow Agreement
Exhibit B-1 - Employment Agreement of Xxxxxx Xxxxx
Exhibit B-2 - Employment Agreement of Xxxx Xxxxxxxx
Exhibit C - Stockholders Agreement
Exhibit D - Investment Letter
Exhibit E - Registration Rights Agreement
DEFINITIONS
Section
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AAA SECTION 1.5(c)
Agreement Preamble
Arbitrator SECTION 1.5(c)
Audits SECTION 3.11(e)
Certificate SECTION 1.2(c)
Xxxxxxxxxxx.xxx Preamble
Xxxxxxxxxxx.xxx Balance Sheet SECTION 4.7
Xxxxxxxxxxx.xxx Balance Sheet Date SECTION 4.7
Xxxxxxxxxxx.xxx Closing Date Balance Sheet SECTION 1.5(c)
Xxxxxxxxxxx.xxx Common Stock SECTION 1.2(a)(ii)
Xxxxxxxxxxx.xxx Convertible Security SECTION 4.5
Xxxxxxxxxxx.xxx Disclosure Schedules Introduction to
Article IV
Xxxxxxxxxxx.xxx Employee Plans SECTION 4.12(a)
Xxxxxxxxxxx.xxx Merger Consideration SECTION 1.2(b)
Xxxxxxxxxxx.xxx Subsidiary Convertible Security SECTION 4.6(b)
Closing SECTION 1.1(d)
Closing Date SECTION 1.1(d)
Closing Date Balance Sheets SECTION 1.5(c)
Code Recitals
Common Stock Purchase Agreement Recitals
Content SECTION 3.16(a)
Copyrights SECTION 3.16(a)
CMJ Preamble
CMJ Balance Sheet SECTION 3.7
CMJ Balance Sheet Date SECTION 3.7
CMJ Closing Date Balance Sheet SECTION 1.5(c)
CMJ Common Stock Recitals
CMJ Content SECTION 3.16(a)
CMJ Convertible Security SECTION 3.5
CMJ Disclosure Schedules Introduction to
Article III
CMJ Employee Plans SECTION 3.12(a)
CMJ Exchange Ratio SECTION 1.2(a)(iii)
CMJ Intellectual Property SECTION 3.16(b)
CMJ License Agreements SECTION 3.16(b)
CMJ Merger Consideration SECTION 1.2(b)
CMJ Stock Option SECTION 1.4(a)
CMJ Stock Plans SECTION 1.4(a)
CMJ Subsidiary Convertible Security SECTION 3.6(b)
Date Data SECTION 3.17
Date Sensitive System SECTION 3.17
Delaware Law SECTION 1.1(a)
Disputed Item(s) SECTION 1.5(c)
Effective Time SECTION 1.1(a)
Xxxxxxxx Option SECTION 1.4(a)
End Date SECTION 11.1(b)
Environmental Laws SECTION 3.15(b)
ERISA SECTION 3.12(a)
Escrow Agent SECTION 1.3(b)
Escrow Agreement SECTION 1.3(b)
Escrow Fund SECTION 13(b)
Exchange Act SECTION 3.6(b)
GAAP SECTION 1.5(b)
Hazardous Materials SECTION 3.15(b)
Implied Value SECTION 1.5(b)
Intellectual Property SECTION 3.16(a)
Investment Letter SECTION 10.1(h)
Lien SECTION 3.4
LTC SECTION 3.14
Material Adverse Effect SECTION 3.1
Merger Recitals
Merger Consideration SECTION 1.2(b)
Net Liabilities SECTION 1.5(b)
Net Liability Adjustment SECTION 1.5(b)
XXX.xxx Preamble
XXX.xxx Common Stock SECTION 1.2(a)(i)
XXX.xxx Convertible Security SECTION 5.5
New York Law SECTION 1.1(a)
Non-Disclosure Agreement SECTION 9.2
Notice of Dispute SECTION 1.5(c)
Patents SECTION 3.16(a)
Person SECTION 1.3(c)
Preferred Stock Purchase Agreement Recitals
Registration Rights Agreement SECTION 10.2(c)
RMG Recitals
Series A Preferred Stock Recitals
Significant Subsidiary SECTION 3.6(b)
Software SECTION 3.16(a)
Stockholders SECTION 10.1(g)
Stockholders Agreement SECTION 10.1(d)
Subsidiary SECTION 3.6(a)
Tax Indemnification Agreements SECTION 3.11(n)
Tax Law SECTION 3.11(s)
Tax Period SECTION 3.11(s)
Tax Return SECTION 3.11(s)
Taxes SECTION 3.11(s)
Trademarks SECTION 3.16(a)
Trade Secrets SECTION 3.16(a)
Year 2000 Compliant SECTION 3.17
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
November 12, 1999, by and among Xxxxxxxxxxx.xxx, Inc., a Delaware
corporation originally incorporated under the name MP3Park, Inc.
("Xxxxxxxxxxx.xxx"), College Media, Inc., a New York corporation ("CMJ"),
and XXX.xxx, Inc., a Delaware corporation ("XXX.xxx").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Xxxxxxxxxxx.xxx, CMJ
and XXX.xxx have approved this Agreement, and deem it advisable and in the
best interests of their respective stockholders to consummate the merger of
each of Xxxxxxxxxxx.xxx and CMJ with and into XXX.xxx on the terms and
conditions set forth in this Agreement (collectively, the "Merger");
WHEREAS, for United States federal income tax purposes, it is intended
that the Merger qualify as a tax free "reorganization" within the meaning
of Section 368 of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder (the "Code") or as an exchange
under Section 351 of the Code; and
WHEREAS, as a condition and inducement to each of the parties'
willingness to enter into this Agreement, concurrently with the execution
and delivery of this Agreement, (i) Rare Medium Group, Inc., a Delaware
corporation and the 96% parent corporation of Xxxxxxxxxxx.xxx ("RMG"), CMJ
and certain stockholders of CMJ are entering into a stock purchase
agreement dated as of the date of this Agreement (the "Common Stock
Purchase Agreement"), pursuant to which RMG will, immediately prior to the
Merger, acquire, under certain circumstances, from such stockholders an
aggregate number of shares of common stock, no par value per share, of CMJ
("CMJ Common Stock") that equals 25% of the outstanding CMJ Common Stock on
a fully diluted basis immediately prior to the Merger and (ii) RMG and
XXX.xxx are entering into a securities purchase agreement dated as of the
date of this Agreement (the "Preferred Stock Purchase Agreement") pursuant
to which RMG will, contemporaneous with or immediately following the
Merger, acquire, under certain circumstances, shares of Series A
Convertible Preferred Stock, par value $.01 per share, of XXX.xxx ("Series
A Preferred Stock") and warrants to acquire additional Series A Preferred
Stock for an aggregate purchase price of $7.0 million.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
(a) On the Closing Date (as hereinafter defined), (i)
Xxxxxxxxxxx.xxx, CMJ and XXX.xxx will file a certificate of merger with the
Secretary of State of the State of Delaware and make all other filings or
recordings required by the General Corporation Law of the State of Delaware
("Delaware Law") to be made in connection with the Merger and (ii)
Xxxxxxxxxxx.xxx, CMJ and XXX.xxx will file a certificate of merger with the
Secretary of State of the State of New York and make all other filings or
recordings required by the Business Corporation Law of the State of New
York ("New York Law") to be made in connection with the Merger. The Merger
shall become effective at such time as is specified in such certificates of
merger (such effective time being the "Effective Time", which time shall be
identical in each of such certificates of merger and which shall not be
later than the close of business on the business day following the Closing
Date).
(b) At the Effective Time, each of Xxxxxxxxxxx.xxx and CMJ shall be
merged with and into XXX.xxx in accordance with the requirements of
Delaware Law and New York Law, whereupon the separate existence of each of
Xxxxxxxxxxx.xxx and CMJ shall cease, and XXX.xxx shall be the surviving
corporation in the Merger.
(c) From and after the Effective Time, XXX.xxx shall possess all the
rights, privileges, powers and franchises and be subject to all of the
restrictions, disabilities and duties of each of Xxxxxxxxxxx.xxx and CMJ
and all assets and property, real, personal and mixed, and all debts due on
whatever account, liabilities and all and every other interest of or
belonging to or due each of Xxxxxxxxxxx.xxx and CMJ shall be deemed
transferred to XXX.xxx, all as provided under Delaware Law and New York
Law.
(d) The closing of the Merger (the "Closing") shall take place
(i) at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, as soon as practicable, but in any event within
three business days after the day on which the last to be fulfilled or
waived of the conditions set forth in Article 10 (other than those
conditions that by their nature are to be fulfilled at the Closing, but
subject to the fulfillment or waiver of such conditions) shall be fulfilled
or waived in accordance with this Agreement or (ii) at such other place and
time or on such other date as XXX.xxx, Xxxxxxxxxxx.xxx and CMJ may agree in
writing (the "Closing Date").
SECTION 1.2 Conversion Of Shares.
(a) At the Effective Time by virtue of the Merger and without any
action on the part of any stockholder of XXX.xxx, Xxxxxxxxxxx.xxx or CMJ:
(i) each share of the common stock, par value $.01 per share
("XXX.xxx Common Stock"), of XXX.xxx issued and outstanding
immediately prior to the Effective Time shall be canceled immediately
prior to the Effective Time, and no payment shall be made with respect
thereto;
(ii) each share of common stock, par value $.01 per share, of
Xxxxxxxxxxx.xxx ("Xxxxxxxxxxx.xxx Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted
into and become 4,931.109794 shares of XXX.xxx Common Stock (the
"Xxxxxxxxxxx.xxx Exchange Ratio"), such that the common stockholders
of Xxxxxxxxxxx.xxx will collectively receive an aggregate of
511,508.95 shares of XXX.xxx Common Stock, representing 55.932322% of
the XXX.xxx Common Stock to be outstanding immediately following the
Effective Time (or 51.150895% assuming exercise of the Xxxxxxxx
Options) (subject to adjustment pursuant to Sections 1.5(b) and (d));
(iii) each share of CMJ Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into and
become 4,030.05116 shares of XXX.xxx Common Stock (the "CMJ Exchange
Ratio"), such that the common stockholders of CMJ will collectively
receive an aggregate of 403,005.12 shares of XXX.xxx Common Stock,
representing 44.0676785% of the XXX.xxx Common Stock to be outstanding
immediately following the Effective Time (or 48.849105% assuming
exercise of the Xxxxxxxx Options) (subject to adjustment pursuant to
Sections 1.5(b), (d) and (e)); and
(iv) the shares of XXX.xxx Common Stock received by the
respective common stockholders of Xxxxxxxxxxx.xxx and CMJ at the
Effective Time shall constitute the only outstanding shares of the
capital stock of XXX.xxx (other than the Series A Preferred Stock to
be purchased by RMG pursuant to the Preferred Stock Purchase
Agreement).
(b) All XXX.xxx Common Stock issued as provided in Sections
1.2(a)(ii) and (iii) shall be of the same class and shall have the same
terms as the currently outstanding XXX.xxx Common Stock. The shares of
XXX.xxx Common Stock to be received as consideration pursuant to the Merger
with respect to shares of Xxxxxxxxxxx.xxx Common Stock are referred to
herein as the "Xxxxxxxxxxx.xxx Merger Consideration." The shares of
XXX.xxx Common Stock to be received as consideration pursuant to the Merger
with respect to shares of CMJ Common Stock, together with the Xxxxxxxx
Options at the Effective Time, are collectively referred to herein as the
"CMJ Merger Consideration" and, together with the Xxxxxxxxxxx.xxx Merger
Consideration, the "Merger Consideration").
(c) From and after the Effective Time, all shares of each of
Xxxxxxxxxxx.xxx Common Stock and CMJ Common Stock converted in accordance
with Sections 1.2(a)(ii) and (iii), respectively, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares (a
"Certificate") shall cease to have any rights with respect thereto, except
the right to receive the Xxxxxxxxxxx.xxx Merger Consideration or the CMJ
Merger Consideration (as the case may be) and any dividends payable
pursuant to Section 1.3(e).
SECTION 1.3 Surrender And Payment.
(a) At the Effective Time, each holder of shares of Xxxxxxxxxxx.xxx
Common Stock and CMJ Common Stock that have been converted into a right to
receive the Merger Consideration, upon surrender to XXX.xxx of a
Certificate, shall be entitled to receive the Merger Consideration in
respect of the shares of common stock represented by such Certificate,
subject to the escrow arrangements described in Section 1.3(b) and in the
Escrow Agreement. Until so surrendered, each such Certificate shall, after
the Effective Time, represent for all purposes only the right to receive
such Merger Consideration. Notwithstanding the foregoing, no stockholder
of CMJ or Xxxxxxxxxxx.xxx shall be entitled to receive any certificates
representing XXX.xxx Common Stock unless and until such stockholders shall
have executed and delivered to XXX.xxx the Stockholders Agreement (as
hereinafter defined).
(b) Notwithstanding the foregoing paragraph (a), a number of shares
of XXX.xxx Common Stock (and, in the case of the Xxxxxxxx Options, option
certificates representing the right to acquire 30% of the underlying shares
of XXX.xxx Common Stock) equal to 30% of each of the Xxxxxxxxxxx.xxx Merger
Consideration and the CMJ Merger Consideration (without giving effect to
any potential adjustment to the Merger Consideration pursuant to Sections
1.5(b), (d) or (e) hereof) issued on the Closing Date (the "Escrow Fund")
in the name of the respective stockholders and optionholders of
Xxxxxxxxxxx.xxx and CMJ entitled thereto, shall be delivered to The Chase
Manhattan Bank, a New York State Chartered Bank (the "Escrow Agent") on the
Closing Date, together with executed but undated stock powers and other
proper instruments of assignments signed by such stockholders and
optionholders transferring to XXX.xxx all of such stockholders' and
optionholders' rights, title and interest in and to the subject shares of,
and options to purchase, XXX.xxx Common Stock, to be held in accordance
with the terms of the escrow agreement (the "Escrow Agreement") attached
hereto as Exhibit A. The Escrow Fund shall be maintained as security for
the possible adjustments to the Merger Consideration pursuant to Sections
1.5(b), (d) and (e) hereof; provided, however, that notwithstanding
anything to the contrary herein, in the event that any adjustments to the
Xxxxxxxxxxx.xxx Merger Consideration or the CMJ Merger Consideration
pursuant to Section 1.5(b) and (d) hereof exceed the amount of
Xxxxxxxxxxx.xxx Merger Consideration or CMJ Merger Consideration (as the
case may be) being held in the Escrow Fund, such Merger Consideration
shall, nevertheless, be reduced by the amount of such excess; provided,
further, that the foregoing proviso shall not apply to any adjustment
required by Section 1.5(d) hereof to the extent that such adjustment
relates to or arises out of a breach of any of the representations or
warranties contained in Sections 3.15, 3.17, 3.18, 3.20, 4.15, 4.17, 4.18
or 4.20 hereof.
(c) If any portion of the Merger Consideration is to be registered
in the name of a Person other than the Person in whose name the applicable
surrendered Certificate is registered, it shall be a condition to the
registration of the Merger Consideration that the surrendered Certificate
shall be properly endorsed or otherwise be in proper form for transfer and
that the Person requesting such delivery of the Merger Consideration shall
pay to XXX.xxx any transfer or other taxes required as a result of such
registration in the name of a Person other than the registered holder of
such Certificate or establish to the reasonable satisfaction of XXX.xxx
that such tax has been paid or is not payable. The XXX.xxx Common Stock
issued to the stockholders of Xxxxxxxxxxx.xxx and CMJ entitled thereto, the
Xxxxxxxx Options and the shares of XXX.xxx Common Stock issuable upon
exercise of the Xxxxxxxx Option shall be subject to the restrictions on
transfer set forth in the Investment Letter, and the certificates
evidencing such XXX.xxx Common Stock and options shall bear the restrictive
legends set forth in the Investment Letter. For purposes of this
Agreement, "Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency
or instrumentality thereof.
(d) After the Effective Time, the stock transfer books of
Xxxxxxxxxxx.xxx and CMJ shall be closed and there shall be no further
registration of transfers of shares of Xxxxxxxxxxx.xxx Common Stock or CMJ
Common Stock. If, after the Effective Time, Certificates are presented to
XXX.xxx, they shall be canceled and exchanged for the Merger Consideration
provided for, and in accordance with the procedures set forth, in this
Article 1.
(e) No dividends or other distributions declared or made with
respect to shares of XXX.xxx Common Stock shall be paid to the holder of
any unsurrendered Certificates until such Certificates are surrendered as
provided in this Section 1.3.
(f) In the event any Certificates shall have been lost, stolen or
destroyed, XXX.xxx shall issue in exchange for such lost, stolen or
destroyed certificates, upon delivery to XXX.xxx of (i) an affidavit of
that fact by the holder thereof and (ii) such indemnity as may be required
by XXX.xxx to hold XXX.xxx and any agent of XXX.xxx harmless, the Merger
Consideration in respect of the shares of common stock represented by such
Certificates.
SECTION 1.4 Stock Options and Equity Awards.
(a) At the Effective Time, the option held by Xx. Xxxx Xxxxxxxx to
purchase 21.21 shares of CMJ Common Stock (the "CMJ Stock Option"), which
CMJ represents will constitute all outstanding options, warrants or other
rights to purchase CMJ Common Stock immediately prior to the Effective
Time, shall be deemed cancelled and the holder thereof shall receive in
exchange therefor options to purchase 85,485.93375 shares of XXX.xxx Common
Stock (the "Xxxxxxxx Options") (subject to adjustment pursuant to Sections
1.5(b), (d) and (e)) at an exercise price of $ 5.865 per share; provided
that such options to purchase XXX.xxx Common Stock shall be granted
pursuant to an option agreement which shall provide that the right to
exercise such options shall be evidenced only by one or more option
certificates to be issued to Xx. Xxxxxxxx at the Effective Time.
(b) Notwithstanding the foregoing paragraph (a), one or more option
certificates representing the right to purchase 30% of the shares of
XXX.xxx Common Stock underlying the Xxxxxxxx Options shall constitute part
of the Escrow Fund, shall be maintained as security for the possible
adjustments to the CMJ Merger Consideration pursuant to Sections 1.5(b),
(d) and (e) hereof and shall be delivered to the Escrow Agent at the
Effective Time to be held in accordance with the terms of the Escrow
Agreement.
(c) XXX.xxx shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of XXX.xxx Common Stock for delivery
upon exercise of the Xxxxxxxx Options.
SECTION 1.5 Adjustments to Merger Consideration.
(a) If at any time during the period between the date of this
Agreement and the Effective Time, any change in the outstanding shares of
capital stock of XXX.xxx or Xxxxxxxxxxx.xxx or CMJ shall occur by reason of
any reclassification, recapitalization, stock split or combination,
exchange or readjustment of shares, or any similar transaction, or any
stock dividend thereon with a record or effective date during such period,
the Merger Consideration shall be appropriately adjusted to provide the
holders of shares of each of Xxxxxxxxxxx.xxx Common Stock and CMJ Common
Stock the same economic effect as contemplated by this Agreement prior to
such event.
(b) If the aggregate amount of Net Liabilities immediately prior to
the Closing exceeds $1,800,000 (subject to adjustment as set forth in the
proviso below) with respect to CMJ or $100,000 with respect to
Xxxxxxxxxxx.xxx, the Xxxxxxxxxxx.xxx Merger Consideration and/or the CMJ
Merger Consideration, as the case may be, shall be decreased, dollar for
dollar (utilizing an implied $39.1 million valuation for the XXX.xxx Common
Stock to be issued as Merger Consideration before giving effect to the
adjustments contemplated by this Section 1.5 and before giving effect to
the Series A Preferred Stock investment under the Preferred Stock Purchase
Agreement (the "Implied Value")) by the amount of such excess; provided,
however, that in the event that the aggregate amount of Net Liabilities of
Xxxxxxxxxxx.xxx immediately prior to the Closing exceeds $0, the foregoing
reference to $1,800,000 of Net Liabilities of CMJ immediately prior to the
Closing shall be increased, dollar for dollar, by the amount of such
excess, up to, but not exceeding, an increase of $100,000. If the
aggregate amount of Net Liabilities of CMJ immediately prior to Closing is
less than $1,800,000, the CMJ Merger Consideration shall be increased, by
$0.50 for each dollar (utilizing the Implied Value) by the amount of such
difference. Any adjustment required to be made pursuant to this Section
1.5(b), or as a result of any account receivable reflected on the CMJ
Closing Date Balance Sheet or Xxxxxxxxxxx.xxx Closing Date Balance Sheet
proving to be a Disqualified Receivable, is referred to herein as a "Net
Liability Adjustment". "Net Liabilities" means the sum of (i) total
liabilities as they would appear on a consolidated balance sheet prepared
in accordance with U.S. generally accepted accounting principles ("GAAP"),
plus (ii) the amount of liabilities of any third person that are guaranteed
whether or not such liabilities would appear on a consolidated balance
sheet of the guarantor prepared in accordance with GAAP less cash and
accounts receivable (other than Disqualified Receivables) that would appear
(net of proper reserves and allowances) on a consolidated balance sheet
prepared in accordance with GAAP. "Disqualified Receivables" means any
account receivable reflected in the CMJ Closing Date Balance Sheet (in the
case of CMJ) or the Xxxxxxxxxxx.xxx Closing Date Balance Sheet (in the case
of Xxxxxxxxxxx.xxx) that shall not have been collected within 180 days
following the Closing Date.
(c) Promptly following the Closing, there shall be prepared and
delivered to XXX.xxx a consolidated balance sheet reflecting the Net
Liabilities of each of CMJ (the "CMJ Closing Date Balance Sheet") and
Xxxxxxxxxxx.xxx (the "Xxxxxxxxxxx.xxx Closing Date Balance Sheet" and,
together with the CMJ Closing Date Balance Sheet, the "Closing Date Balance
Sheets") as of the Closing Date. Such Closing Date Balance Sheets shall
present fairly, in all material respects, the respective Net Liabilities of
CMJ and Xxxxxxxxxxx.xxx and shall be prepared in accordance with GAAP and
shall be accompanied by a report of the parties' respective independent
auditors that they have performed such review procedures with respect to
such Closing Date Balance Sheet that have enabled them to state that based
on such procedures, nothing has come to their attention that has led them
to believe that any adjustments thereto are required in order for such
Closing Date Balance Sheet to be prepared in accordance with GAAP. The
Closing Date Balance Sheets shall be delivered to XXX.xxx not later than 45
days after the Closing Date in order to determine what adjustments, if any,
must be made to the CMJ Merger Consideration and/or the Xxxxxxxxxxx.xxx
Merger Consideration, as the case may be, pursuant to Section 1.5 (b)
hereof. XXX.xxx shall have 30 days from the date that XXX.xxx receives the
Closing Date Balance Sheets to notify the former stockholders of CMJ and/or
Xxxxxxxxxxx.xxx in writing if XXX.xxx objects to any item in either or
both of the CMJ Closing Date Balance Sheet or the Xxxxxxxxxxx.xxx Closing
Date Balance Sheet. Any such notice (a "Notice of Dispute") shall specify
in detail the item or items in dispute (a "Disputed Item" or "Disputed
Items"). In the event that XXX.xxx and the former stockholders of CMJ
and/or Xxxxxxxxxxx.xxx are unable to resolve the Disputed Item(s) within 60
days after delivery of a Notice of Dispute, XXX.xxx and either or both of
the former stockholders of CMJ and Xxxxxxxxxxx.xxx shall together appoint a
representative from the New York office of an independent nationally
recognized accounting firm (the "Arbitrator") to arbitrate the dispute and,
if XXX.xxx and either or both of CMJ and Xxxxxxxxxxx.xxx are unable to
agree on an Arbitrator, at the request of either such party made within 10
days after the end of such 60-day period, the Arbitrator shall be chosen by
the American Arbitration Association (the "AAA") in New York City. XXX.xxx
and the former stockholders of CMJ and/or Xxxxxxxxxxx.xxx (as applicable)
shall present their positions with respect to the Disputed Item or Disputed
Items to the Arbitrator, together with such other materials as the
Arbitrator deems appropriate, within 20 days after the appointment of the
Arbitrator. XXX.xxx and the former stockholders of CMJ and/or
Xxxxxxxxxxx.xxx (as applicable) (or an attorney-in-fact acting on behalf of
such stockholders) shall provide written instructions to the Arbitrator to
submit a written decision on each Disputed Item to XXX.xxx and the former
stockholders of CMJ and/or Xxxxxxxxxxx.xxx as soon as practicable after its
receipt of such materials. Any determination with respect to any Disputed
Item shall be final and binding on all parties to this Agreement and shall
have the legal effect of an arbitral award. The Arbitrator shall comply
with, and the arbitration shall be conducted in New York City in accordance
with, the commercial arbitration rules of the AAA as in effect for
commercial arbitrations conducted in New York City by the AAA. The fees
and disbursements of the Arbitrator shall be paid 50% by the former
stockholders of CMJ and 50% by the former stockholders of Xxxxxxxxxxx.xxx
or, at the election of such stockholders, in lieu of cash payment, shall be
applied to further reduce the Merger Consideration, in which case XXX.xxx
shall make such cash payment. Notwithstanding anything to the contrary in
this Section 1.5(c), no objection need be made with respect to any account
receivable that ultimately proves to be a Disqualified Receivable.
(d) (i) In the event of any inaccuracy in or breach or
nonperformance of any of the representations, warranties, covenants or
agreements made by or of CMJ in this Agreement, the CMJ Merger
Consideration shall be reduced, dollar for dollar (utilizing the Implied
Value), by an amount equal to the lesser of (x) the objectively
determinable out-of-pocket cash amount (if any) that, if immediately
expended, would completely cure such inaccuracy, breach or non-performance
and its consequences as if such inaccuracy, breach or non-performance had
never occurred (a "Cash Cure Amount") and (y) the reduction in the Implied
Value attributable to CMJ after giving effect to such inaccuracy, breach
or non-performance; provided, however, that no adjustment with respect to
CMJ's Net Liabilities as of the Closing Date shall be made pursuant to
this section 1.5(d)(i) and, in lieu thereof, the Net Liability Adjustment
shall apply; and provided, further, that no claim for an adjustment to the
Merger Consideration under this Section 1.5(d)(i) shall be asserted unless
and until the cumulative total of the proposed adjustment exceeds $50,000.
(ii) In the event of any inaccuracy in or breach or
nonperformance of any of the representations, warranties, covenants or
agreements made by or of Xxxxxxxxxxx.xxx in this Agreement, the
Xxxxxxxxxxx.xxx Merger Consideration shall be reduced, dollar for dollar
(utilizing the Implied Value), by an amount equal to the lesser of (x) the
Cash Cure Amount (if any) with respect to such inaccuracy, breach or
non-performance and (y) the reduction in the Implied Value attributable to
Xxxxxxxxxxx.xxx after giving effect to such inaccuracy, breach or
non-performance; provided, however, that no adjustment with respect to
Xxxxxxxxxxx.xxx's Net Liabilities as of the Closing Date shall be made
pursuant to this Section 1.5(d)(ii) and, in lieu thereof, the Net
Liability Adjustment shall apply; and provided, further, that no claim for
an adjustment to the Merger Consideration under this Section 1.5(d)(ii)
shall be asserted unless and until the cumulative total of the proposed
adjustment exceeds $50,000.
(iii) The parties hereto acknowledge that the original Implied
Value of $39.1 million was arrived at assuming the accuracy of all
representations and warranties and due performance of all covenants and
agreements contained herein. The reduction in the Implied Value referred
to in the foregoing clauses (i) and (ii) shall be determined with reference
to the methodologies originally employed in arriving at such original
Implied Value of $39.1 million.
(iv) Notwithstanding anything to the contrary herein, XXX.xxx
may seek damages from any of the former stockholders of CMJ or
Xxxxxxxxxxx.xxx (as the case may be) in the event of any inaccuracy in or
breach or nonperformance of any of the representations, warranties,
covenants or agreements made by or of CMJ or Xxxxxxxxxxx.xxx (as the case
may be) that would otherwise require an adjustment to the CMJ Merger
Consideration or the Xxxxxxxxxxx.xxx Merger Consideration, respectively, if
such adjustment is impracticable because such stockholder shall have since
transferred all or a portion of the shares of XXX.xxx Common Stock such
stockholder shall have received as Merger Consideration.
(e) In the event that XXX.xxx is enjoined or restrained from
using CMJ Content by reason of any contract, agreement, understanding or
other arrangement (i) entered into by or on behalf of CMJ or (ii) binding
upon CMJ, in each case, prior to the Effective Time, the CMJ Merger
Consideration payable to the former stockholders and optionholders of CMJ
(other than RMG) will be subject to a liquidated adjustment as follows:
(i) if XXX.xxx is enjoined or materially restrained from displaying or
otherwise using more than 1,000 CMJ Music Reviews (as hereinafter defined)
on or over the Internet either (A) on XXX.xxx's own Internet sites or (B)
on other Internet sites so long as such other sites are not the sites of
online retail sellers of recorded music, the entire amount of the CMJ
Merger Consideration payable to such former CMJ stockholders and
optionholders which is being held in the Escrow Fund in accordance with the
terms of the Escrow Agreement; (ii) if XXX.xxx is enjoined or materially
restrained from displaying or otherwise using more than 1,000 CMJ Music
Reviews in connection with the online retail sale of recorded music on or
over its own Internet sites, other than CMJ branded products, the entire
amount of the CMJ Merger Consideration payable to such former CMJ
stockholders and optionholders which is being held in the Escrow Fund in
accordance with the terms of the Escrow Agreement; and (iii) if CMJ is
enjoined or materially restrained from displaying or otherwise using the
CMJ Music Reviews or any other CMJ Content in any manner, other than as set
forth in subsection (i) and (ii) of this Section 1.5(e) or other than
pursuant to the CDnow Agreement Rights (as hereinafter defined), then
reasonable compensatory damages will be based on the nature of the
restraint or injunction and with reference to the amounts set forth in
subsections (i) and (ii) as baselines; provided, however, that
notwithstanding the foregoing, in the event that any such injunction or
restraint referred to in subsection (i), (ii) or (iii) above is cured
within 21 days after the date upon which XXX.xxx initially became subject
to such injunction or restraint (the "Cure Period"), the CMJ Merger
Consideration payable to such former CMJ stockholders and optionholders
will not be subject to a liquidated adjustment, but in lieu thereof the CMJ
Merger Consideration payable to such former CMJ stockholders and
optionholders shall be reduced by the amount of any damages incurred by
XXX.xxx (including all reasonable fees and expenses of counsel) by reason
of such injunction or restraint during the Cure Period. Notwithstanding
anything to the contrary herein, the cumulative amount of the liquidated
adjustment to the CMJ Merger Consideration payable to such former CMJ
stockholders and optionholders under this Section 1.5(e) shall not exceed
the entire amount of the CMJ Merger Consideration payable to such former
CMJ stockholders and optionholders which is being held in the Escrow Fund
in accordance with the terms of the Escrow Agreement.
(f) All references herein to adjustments to the Merger
Consideration utilizing, based on, or determined with reference to, the
Implied Value shall be calculated as if the exercise price of the Xxxxxxxx
Options was $0 and therefor has no effect on the Implied Value or the
value of the Merger Consideration consisting of the Xxxxxxxx Options.
SECTION 1.6 Fractional Shares.
Fractional shares of XXX.xxx Common Stock may be issued in the Merger,
such fractions to be carried out to 6 decimal places.
SECTION 1.7 Withholding Rights.
XXX.xxx shall be entitled to deduct and withhold from the
consideration otherwise payable to any Person pursuant to this Article 1
such amounts as it is required to deduct and withhold with respect to the
making of such payment under any provision of federal, state, local or
foreign tax law. To the extent that amounts are so withheld by XXX.xxx,
such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holders of the shares of Xxxxxxxxxxx.xxx Common
Stock and CMJ Common Stock in respect of which such deduction and
withholding was made by XXX.xxx.
SECTION 1.8 Appraisal Rights.
In accordance with Section 262 of the Delaware Law, since each
stockholder of XXX.xxx shall have voted in favor of the Merger or consented
thereto in writing, no appraisal rights shall be available to holders of
shares of XXX.xxx Common Stock in connection with the Merger. In
accordance with Section 910 of New York Law, since each Stockholder of CMJ
shall have assented to the Merger, no appraisal rights shall be available
to holders of shares of CMJ Common Stock in connection with the Merger.
Notwithstanding anything in this Agreement to the contrary, the
stockholders of Xxxxxxxxxxx.xxx who did not vote in favor of the Merger and
who comply with all of the relevant provisions of Section 262 of the
Delaware Law (the "Dissenting Stockholders") shall not receive the
Xxxxxxxxxxx.xxx Merger Consideration, unless and until such holders shall
have failed to perfect or shall have effectively withdrawn or lost their
rights to appraisal under the Delaware Law. As a condition to closing
hereunder, RMG shall have agreed in its Investment Letter to reimburse
XXX.xxx for all appraisal payments made and all expenses incurred in
connection with any Dissenting Stockholder's demand for appraisal, and the
Xxxxxxxxxxx.xxx Merger Consideration that such Dissenting Stockholders
would have received in the absence of such demand for appraisal will be
paid to RMG in consideration thereof.
ARTICLE II
CERTAIN GOVERNANCE MATTERS
SECTION 2.1 Certificate of Incorporation and Bylaws of XXX.xxx.
At the Effective Time, the certificate of incorporation and the bylaws
of XXX.xxx, as in effect immediately prior to the Effective Time, shall be
the certificate of incorporation and the bylaws of XXX.xxx, as the
surviving corporation.
SECTION 2.2 XXX.xxx Board of Directors; Officers.
(a) At the Effective Time, the Board of Directors of XXX.xxx shall
consist, as of the Effective Time, of 5 directors, (x) two of whom shall be
persons designated by the holders of a majority of the Xxxxxxxxxxx.xxx
Common Stock outstanding immediately prior to the Effective Time, (y) two
of whom shall be persons designated by the holders of a majority of the CMJ
Common Stock (which shall for the purposes of this clause (y) assume
exercise of outstanding options to purchase shares of CMJ Common Stock held
by Xxxx Xxxxxxxx) outstanding immediately prior to the Effective Time, and
(z) one of whom shall be designated by the holders of a majority of the
Series A Preferred Stock outstanding at or immediately following the
Effective Time.
(b) XXX.xxx shall take all action necessary to cause, as of the
Effective Time, Xxxxx X. Xxxxxx to be appointed as Chairman of XXX.xxx;
Xxxxxx Xxxxx to be appointed as Chief Executive Officer, President,
Publisher and Founder of XXX.xxx; Xxxxxxxxx Xxxxxxxx to be appointed as
Executive Vice President and Chief Operating Officer; Xxxx Xxxxxx to be
appointed as Executive Vice President; Xxxx Xxxxxx to be appointed as
Executive Vice President, Chief Financial Officer and Treasurer; and Xxxxxx
Xxxxx to be appointed as Vice President, General Counsel and Secretary,
respectively, of XXX.xxx.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CMJ
CMJ represents and warrants to Xxxxxxxxxxx.xxx and XXX.xxx that
(except as set forth in the disclosure schedules delivered by CMJ to
Xxxxxxxxxxx.xxx and XXX.xxx simultaneously with the execution of this
Agreement and attached hereto (the "CMJ Disclosure Schedules")):
SECTION 3.1 Corporate Existence and Power.
CMJ is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of New York, and has all corporate
power and authority and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted,
except for those the absence of which would not, individually or in the
aggregate, have a Material Adverse Effect on CMJ. CMJ is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on CMJ.
For purposes of this Agreement, a "Material Adverse Effect" with respect to
any Person means a material adverse effect on the financial condition,
business, liabilities, properties, assets or results of operations, taken
as a whole, of such Person and its Subsidiaries, taken as a whole. CMJ has
heretofore made available to Xxxxxxxxxxx.xxx and XXX.xxx true and complete
copies of the CMJ certificate of incorporation and by-laws as currently in
effect. As of the date hereof, neither CMJ nor any of its Subsidiaries
owns any shares of Xxxxxxxxxxx.xxx Common Stock.
SECTION 3.2 Corporate Authorization.
(a) The execution, delivery and performance by CMJ of this Agreement
and the consummation by CMJ of the transactions contemplated hereby are
within CMJ's corporate powers and, have been duly authorized by all
necessary corporate action, including required approval by CMJ's
stockholders in accordance with New York Law. Assuming due authorization,
execution and delivery of this Agreement by Xxxxxxxxxxx.xxx and XXX.xxx,
this Agreement constitutes a valid and binding agreement of CMJ enforceable
against CMJ in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights,
and to general equity principles.
(b) CMJ's Board of Directors has (i) determined that this Agreement
and the transactions contemplated hereby (including the Merger) are fair to
and in the best interests of CMJ's stockholders, (ii) approved and adopted
this Agreement and the transactions contemplated hereby (including the
Merger), and (iii) resolved to recommend that CMJ stockholders vote for the
approval and adoption of this Agreement and the Merger and has submitted
this Agreement and the Merger to such stockholders for their approval and
adoption.
(c) The holders of all of the outstanding capital stock of CMJ have
voted for, or consented in writing to, the approval and adoption of this
Agreement and the Merger.
SECTION 3.3 Governmental Authorization.
The execution, delivery and performance by CMJ of this Agreement and
the consummation by CMJ of the transactions contemplated hereby require no
action by or in respect of, or filing with, any governmental body, agency,
official or authority other than (a) the filing of certificates of merger
in connection with the Merger in accordance with Delaware Law and New York
Law, and (b) other actions or filings which if not taken or made would not,
individually or in the aggregate, have a Material Adverse Effect on CMJ or
prevent or materially delay CMJ's consummation of the Merger in accordance
with this agreement.
SECTION 3.4 Non-Contravention.
The execution, delivery and performance by CMJ of this Agreement and
the consummation by CMJ of the transactions contemplated hereby do not and
will not (a) contravene or conflict with the certificate of incorporation
or by-laws of CMJ, (b) assuming compliance with the matters referred to in
Section 3.3, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to CMJ or any of its Subsidiaries, (c)
constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of CMJ or any of
its Subsidiaries or a loss, in whole or in part, of any benefit or right to
which CMJ or any of its Subsidiaries is entitled under any provision of any
agreement, contract or other instrument binding upon CMJ or any of its
Subsidiaries or any license, franchise, permit or other similar
authorization held by CMJ or any of its Subsidiaries, or (d) result in the
creation or imposition of any Lien on any asset of CMJ or any of its
Subsidiaries, except, in the case of clauses (b), (c) and (d), for such
contraventions, conflicts, violations, defaults, rights of termination,
cancellation or acceleration, or losses or Liens that would not,
individually or in the aggregate, have a Material Adverse Effect on CMJ.
For purposes of this Agreement, "Lien" means, with respect to any
properties or assets, any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset other than any such
mortgage, lien, pledge, charge, security interest or encumbrance (i) for
Taxes (as defined in Section 3.11) not yet due or being contested in good
faith and for which adequate provision has been made or (ii) which is a
carriers', warehousemen's, mechanics', materialmen's, repairmen's or other
like lien arising in the ordinary course of business. Except as set forth
on Schedule 3.4, neither CMJ nor any Subsidiary of CMJ is a party to any
agreement that expressly limits the ability of CMJ or any Subsidiary of CMJ
to compete in or conduct any line of business or compete with any Person or
in any geographic area or during any period of time except to the extent
that any such limitation, individually or in the aggregate, would not have
a Material Adverse Effect on CMJ or on XXX.xxx immediately after the
Effective Time. Schedule 3.4 sets forth a true, accurate and complete list
of all material contracts, instruments, agreements, judgments, orders and
decrees to which CMJ or any of its Subsidiaries is a party or by which any
of them or their properties is bound or affected, copies of all of which
have been provided to Xxxxxxxxxxx.xxx and XXX.xxx. There has not occurred
any breach, violation or default or any event that, with the lapse of time,
the giving of notice or the election of any person, or any combination
thereof, would constitute a breach, violation or default by the CMJ under
any such contract or, to the knowledge of CMJ, by any other person to any
such contract nor has there occurred any event giving others (with notice
or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or
instrument to which CMJ is a party. CMJ has not been notified that any
party to any material contract intends to cancel, terminate, not renew or
exercise an option under any material contract, whether in connection with
the transactions contemplated hereby or otherwise.
SECTION 3.5 Capitalization.
The authorized capital stock of CMJ consists of two hundred (200)
shares of CMJ Common Stock without par value. As of the date hereof there
are outstanding one hundred (100) shares of CMJ Common Stock, and no other
shares of capital stock or other voting securities of CMJ are outstanding.
All outstanding shares of capital stock of CMJ have been duly authorized
and validly issued and are fully paid and nonassessable. Except for the
Common Stock Purchase Agreement and options to purchase 21.21 shares of CMJ
Common Stock held by Xxxx Xxxxxxxx, there are no outstanding options,
warrants or other rights to acquire from CMJ, and no preemptive or similar
rights, subscription or other rights, convertible or exchangeable
securities, agreements, arrangements or commitments of any character,
relating to the capital stock of CMJ, obligating CMJ to issue, transfer or
sell, any capital stock, voting securities or securities convertible into
or exchangeable for capital stock or voting securities of CMJ or obligating
CMJ to grant, extend or enter into any such option, warrant, subscription
or other right, convertible or exchangeable security, agreement,
arrangement or commitment (each of the foregoing, a "CMJ Convertible
Security"). There are no outstanding obligations of CMJ or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of CMJ or any CMJ Convertible Securities.
SECTION 3.6 Subsidiaries.
(a) Each Subsidiary of CMJ is duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization, has
all power and authority and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted,
except for those the absence of which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on CMJ.
For purposes of this Agreement, the word "Subsidiary" when used with
respect to any Person means any other Person, whether incorporated or
unincorporated, of which (i) more than fifty percent of the securities or
other ownership interests or (ii) securities or other interests having by
their terms ordinary voting power to elect more than fifty percent of the
board of directors or others performing similar functions with respect to
such corporation or other organization, is directly owned or controlled by
such Person or by any one or more of its Subsidiaries. Each Subsidiary of
CMJ is duly qualified to do business and is in good standing in each
jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on CMJ.
(b) All of the outstanding capital stock of, or other ownership
interests in, each Significant Subsidiary (as such term is defined in rule
12b-2 under the Securities Exchange Act of 1934 ("Exchange Act")) of CMJ is
owned, directly or indirectly, by CMJ. All shares of capital stock of, or
other ownership interests in, Subsidiaries of CMJ, directly or indirectly,
owned by CMJ are owned free and clear of any Lien and free of any other
limitation or restriction (including any restriction on the right to vote,
sell or otherwise dispose of such capital stock or other ownership
interests), except as would not, individually or in the aggregate, have a
Material Adverse Effect on CMJ. There are no outstanding options, warrants
or other rights to acquire from CMJ or any of its Subsidiaries, and, except
as may be required by applicable foreign corporate laws, no preemptive or
similar rights, subscriptions or other rights, convertible or exchangeable
securities, agreements, arrangements or commitments of any character,
relating to the capital stock of any Subsidiary of CMJ, obligating CMJ or
any of its Subsidiaries to issue, transfer or sell, any capital stock,
voting securities or other ownership interests in, or any securities
convertible into or exchangeable for any capital stock, voting securities
or ownership interests in, any Subsidiary of CMJ or obligating CMJ or any
Subsidiary of CMJ to grant, extend or enter into any such option, warrant,
subscription or other right, convertible or exchangeable security,
agreement, arrangement or commitment (each of the foregoing, a "CMJ
Subsidiary Convertible Security"). There are no outstanding obligations of
CMJ or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any outstanding shares of capital stock of any Subsidiary of CMJ or any CMJ
Subsidiary Convertible Securities.
SECTION 3.7 Financial Statements.
The unaudited consolidated annual financial statements for 1998 and
1997 and unaudited consolidated interim financial statements for the first
nine months of 1999 of CMJ (including any related notes and schedules)
present fairly, in all material respects, the financial position of CMJ and
its Subsidiaries as of the dates thereof and their results of operations
and cash flows for the periods then ended (subject to normal year-end
adjustments and the absence of notes in the case of any unaudited interim
financial statements), in each case in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto). For
purposes of this Agreement, "CMJ Balance Sheet" means the consolidated
balance sheet of CMJ as of September 30, 1999 and "CMJ Balance Sheet Date"
means September 30, 1999.
SECTION 3.8 Absence of Certain Changes.
Since the CMJ Balance Sheet Date and, prior to the date hereof, CMJ
and its Subsidiaries have conducted their respective businesses in the
ordinary course, consistent with past practice, and there has not been:
(a) any event, occurrence or development which, individually or in
the aggregate, would have a Material Adverse Effect on CMJ;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of CMJ or
any repurchase, redemption or other acquisition by CMJ or any of its
Subsidiaries of any outstanding shares of their capital stock or any CMJ
Convertible Securities or CMJ Subsidiary Convertible Securities;
(c) any amendment of any term of any outstanding security of CMJ or
any of its Subsidiaries;
(d) any transaction or commitment made, or any contract, agreement
or settlement entered into, by (or judgment, order or decree affecting) CMJ
or any of its Subsidiaries relating to its assets or business (including
the acquisition or disposition of any material amount of assets) or any
relinquishment by CMJ or any of its Subsidiaries of any contract or other
right, other than transactions, commitments, contracts, agreements,
settlements or relinquishments in the ordinary course of business and those
contemplated by this Agreement;
(e) any change in any method of accounting or accounting practice by
CMJ or any of its Subsidiaries, except for any such change which is not
material or which is required by reason of a concurrent change in GAAP;
(f) except as set forth on Schedule 3.8, any (i) grant of any
severance or termination pay to (or amendment to any such existing
arrangement with) any director, officer or employee of CMJ or any of its
Subsidiaries, (ii) entering into of any employment, deferred compensation,
supplemental retirement or other similar agreement (or any amendment to any
such existing agreement) with any director, officer or employee of CMJ or
any of its Subsidiaries, (iii) increase in, or accelerated vesting and/or
payment of, benefits under any existing severance or termination pay
policies or employment agreements or (iv) increase in or enhancement of any
rights or features related to compensation, bonus or other benefits payable
to directors, officers or senior employees of CMJ or any of its
Subsidiaries, in each case, other than in the ordinary course of business
consistent with past practice; or
(g) any material Tax election made or changed, any material audit
settled or any material amended Tax Returns filed.
SECTION 3.9 No Undisclosed Material Liabilities.
There are no material liabilities of CMJ or any Subsidiary of CMJ,
whether accrued, contingent, absolute, determined, determinable or
otherwise, that would be required to be reflected in a consolidated balance
sheet of CMJ prepared in accordance with GAAP or required to be disclosed
on the face thereof or in the notes thereto in accordance with Statement of
Financial Accounting Standards No. 5 of the Financial Accounting Standards
Board, other than:
(a) liabilities disclosed or provided for in the CMJ Balance Sheet
or in the notes thereto;
(b) liabilities incurred since such date in the ordinary course of
business; and
(c) liabilities under this Agreement.
SECTION 3.10 Litigation.
There is no action, suit, investigation or proceeding pending against
or affecting, or to the knowledge of CMJ threatened against or affecting,
CMJ or any of its Subsidiaries or any of their respective properties or any
of their respective officers or directors before any court or arbitrator or
any governmental body, agency or official except as would not, individually
or in the aggregate, have a Material Adverse Effect on CMJ or prevent or
materially delay the consummation of the Merger.
SECTION 3.11 Taxes.
Except as set forth in Schedule 3.11 of the CMJ Disclosure Schedule:
(a) Each of CMJ and its Subsidiaries has (x) duly and timely filed
(or there has been filed on its behalf) with the appropriate governmental
authorities all Tax Returns required to be filed by it, and all such Tax
Returns are true, correct and complete except to the extent any failure to
file or any inaccuracies in any filed Tax Return would not be reasonably
likely to have a Material Adverse Effect on CMJ and (y) timely paid (or
properly accrued on CMJ's books) or there has been paid on its behalf all
Taxes due from it or claimed to be due from it by any tax authority
(whether or not set forth on any Tax Return) except to the extent that any
failure to pay would not be reasonably likely to have a Material Adverse
Effect on CMJ;
(b) CMJ and each of its Subsidiaries have complied in all material
respects with all applicable Tax Laws relating to the payment and
withholding of Taxes (including, without limitation, withholding of Taxes
pursuant to sections 1441 and 1442 of the Code and employment withholding
Taxes) and have, within the time and manner prescribed by law, withheld and
paid over to the proper governmental entities all amounts required to be
withheld and paid over under all applicable Tax Laws except for amounts
that would not be reasonably likely to have a Material Adverse Effect on
CMJ;
(c) There are no material Liens for Taxes upon the assets or
properties of CMJ or any of its Subsidiaries except for statutory Liens for
current Taxes not yet due or that are being contested in good faith in
appropriate proceedings and for which adequate reserves have been
maintained in accordance with GAAP;
(d) None of CMJ or any of its Subsidiaries has requested any
extension of time within which to file any Tax Return in respect of any
taxable year which has not since been filed, and no outstanding waivers or
comparable consents regarding the application of the statute of limitations
with respect to any Taxes or Tax Returns has been given by or on behalf of
CMJ or any of its Subsidiaries except for such waiver or consent that would
not be reasonably likely to have a Material Adverse Effect on CMJ;
(e) None of CMJ or any of its Subsidiaries has received any written
notice of any federal, state, local or foreign audits, review, suits,
investigations, actions, claims, or other administrative proceedings or
court proceedings ("Audits") with regard to any Taxes or Tax Returns of CMJ
or any of its Subsidiaries, and to CMJ's and its Subsidiaries' knowledge no
such Audits are currently being conducted;
(f) All Tax deficiencies which have been claimed, proposed or
asserted against CMJ or any of its Subsidiaries by any taxing authority
have been fully paid except for such deficiency that would not be
reasonably likely to have a Material Adverse Effect on CMJ. No issue has
been raised by any taxing authority in any current or prior examination
which, by application of the same principles, would reasonably be expected
to result in a proposed deficiency for any subsequent Taxable Period;
(g) None of CMJ or any of its Subsidiaries is required to include in
income any adjustment pursuant to Section 481(a) of the Code, by reason of
any voluntary or involuntary change in accounting method (nor has any tax
authority notified CMJ or any of its Subsidiaries in writing of any such
adjustment or change of accounting method);
(h) To the knowledge of CMJ and its Subsidiaries, no power of
attorney has been granted by or with respect to CMJ or any of its
Subsidiaries with respect to any matter relating to Taxes;
(i) None of CMJ or any of its Subsidiaries has filed a consent
pursuant to Section 341(f) of the Code (or any predecessor provision) or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the
Code);
(j) The reserves for Taxes (determined in accordance with generally
accepted accounting principles consistently applied) reflected in the CMJ
Balance Sheet are adequate for the payment of all Taxes payable by CMJ or
any of its Subsidiaries through the date of the CMJ Balance Sheet;
(k) None of CMJ or any of its Subsidiaries is a party to any
agreement, contract or arrangement that could result, separately or in the
aggregate, in the payment of any payments that will not be deductible by
operation of Section 162(m) of the Code;
(l) None of CMJ or any of its Subsidiaries has requested or received
a ruling or determination from any tax authority or signed a closing or
other agreement with any tax authority which would be reasonably likely to
have a Material Adverse Effect on CMJ;
(m) The Federal income Tax Returns of the Company and its
Subsidiaries for the Tax Periods ending before January 1, 1995 have been
examined by the appropriate Governmental authority (or the applicable
statue of limitations for the assessment of such taxes has expired);
(n) None of CMJ or any of its Subsidiaries is a party to, is bound
by, or has any obligation under, any Tax sharing agreement, Tax
indemnification agreement or similar contract or arrangement (collectively,
"Tax Indemnification Agreements"). Any such Tax Indemnification Agreement
set forth in the Disclosure Schedule will terminate as of the Closing Date
and be of no further force or effect for any Tax Period after the Closing
Date. As of the date of this Agreement, none of CMJ or any of its
Subsidiaries is aware of any potential liability or obligation to any
person as a result of, or pursuant to, any such Tax Indemnification
Agreement;
(o) CMJ and each of its Subsidiaries has previously delivered or made
available to Xxxxxxxxxxx.xxx complete and accurate copies of each of (a)
all audit reports, letter rulings, technical advice memoranda and similar
documents issued by a Governmental authority relating to the United States
federal, state, local or foreign Taxes due from or with respect to CMJ and
its Subsidiaries, (b) the United States federal income Tax Returns, and
those state, local and foreign income Tax Returns filed by CMJ and its
Subsidiaries (or on their behalf) and (c) any closing agreements entered
into by CMJ or any of its Subsidiaries with any tax authority. CMJ will
deliver to Xxxxxxxxxxx.xxx all materials with respect to the foregoing for
all matters arising after the date hereof;
(p) None of CMJ or any of its Subsidiaries has any or could have any
liability for Taxes of another person under Section 1.1502-6 of the
Treasury Regulations (or any similar provision under state, local or
foreign law), by contract or otherwise;
(q) None of CMJ or any of its Subsidiaries has any deferred
intercompany gain or loss arising as a result of a deferred intercompany
transaction within the meaning of Section 1.1502-13 of the Treasury
Regulations (or similar provision under state, local or foreign law);
(r) No written notice of a claim by a taxing authority in a
jurisdiction where either CMJ or any of its Subsidiaries does not file Tax
Returns has been received by CMJ or any of its Subsidiaries to the effect
that CMJ or any of such Subsidiaries is or may be subject to taxation by
that jurisdiction;
(s) None of CMJ or any of its Subsidiaries is a "United States real
property holding corporation" within the meaning of Section 897 of the
Code;
For the purposes of this Agreement, the following terms shall have the
meanings set forth below: "Taxes" means all federal, state, local and
foreign taxes, levies, deficiencies or other assessments and other charges
of whatever nature, whether or not disputed (including income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, back-up withholding, social
security, unemployment, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum and
other taxes or escheat liability), imposed by any taxing authority
including any interest, penalty (civil or criminal), or addition thereto.
"Tax Law" means the law (including any applicable regulations or any
administrative pronouncement) of any governmental authority relating to any
Tax. "Tax Period" means with respect to any Tax, the period for which the
Tax is reported as provided under the applicable Tax Law. "Tax Return"
means any federal, state, local or foreign return, declaration, report,
claim for refund, amended return, declaration of estimated Tax or
information return or statement relating to Taxes, and any schedule,
exhibit, attachment or other materials submitted with any of the foregoing,
and any amendment thereto.
SECTION 3.12 Employee Benefit Plans.
(a) For purposes of this Agreement, the term "CMJ Employee Plans"
shall mean and include: each management, consulting, non-compete,
employment, severance or similar contract, plan, including, without
limitation, all CMJ Stock Plans, arrangement or policy applicable to any
director, former director, employee or former employee of CMJ and each
plan, program, policy, agreement or arrangement (written or oral),
providing for compensation, bonuses, profit-sharing, stock option or other
stock related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage (including any self-insured
arrangements), health or medical benefits, disability benefits, workers'
compensation, supplemental unemployment benefits, severance benefits and
post-employment or retirement benefits (including compensation, pension,
health, medical or life insurance benefits) or other employee benefits of
any kind, whether funded or unfunded, which is maintained, administered or
contributed to by CMJ or any Subsidiary and covers any employee or director
or former employee or director of CMJ or any Subsidiary, or under which CMJ
has any liability contingent or otherwise (including but not limited to
each material "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), but
excluding any such plan that is a "multiemployer plan," as defined in
Section 3(37) of ERISA). Neither CMJ nor any of its affiliates contributes
to, or is required to contribute to, any "multiemployer plan" as defined in
Section 3(37) of ERISA. Schedule 3.12 sets forth a true, accurate and
complete list of all CMJ Employee Plans.
(b) Each CMJ Employee Plan has been established and maintained in
compliance with its terms and with the requirements prescribed by any and
all statutes, orders, rules and regulations (including but not limited to
ERISA and the Code) which are applicable to such Plan, except where failure
to so comply would not, individually or in the aggregate, have a Material
Adverse Effect on CMJ.
(c) Neither CMJ nor any affiliate of CMJ has incurred a liability
under Title IV of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to CMJ or any affiliate of
CMJ of incurring any such liability. All contributions required to be made
under the terms of any CMJ Employee Plan have been made, and, where
applicable to a CMJ Employee Plan, CMJ and its affiliates have complied
with the minimum funding requirements under Section 412 of the Code and
Section 302 of ERISA with respects to each such CMJ Employee Plan.
(d) Each CMJ Employee Plan which is intended to be qualified under
section 401(a) of the Code is so qualified and has been so qualified during
the period from its adoption to date, and each trust forming a part thereof
is exempt from federal income tax pursuant to section 501(a) of the Code
and, to CMJ's knowledge, no circumstances exist which will adversely affect
such qualification or exemption.
(e) No director or officer or other employee of CMJ or any of its
Subsidiaries will become entitled to any retirement, severance or similar
benefit or enhanced or accelerated benefit (including any acceleration of
vesting or lapse of repurchase rights or obligations with respect to any
CMJ Stock Plans or other benefit under any compensation plan or arrangement
of CMJ) solely as a result of the transactions contemplated hereby; and
(ii) no payment made or to be made to any current or former employee or
director of CMJ or any of its affiliates by reason of the transactions
contemplated hereby (whether alone or in connection with any other event,
including, but not limited to, a termination of employment) will constitute
an "excess parachute payment" within the meaning of Section 280G of the
Code.
(f) No CMJ Employee Plan provides material post-retirement health
and medical, life or other insurance benefits for retired employees of CMJ
or any of its Subsidiaries nor has CMJ or any Subsidiary represented or
promised to provide such benefits.
(g) There has been no amendment to, or change in employee
participation or coverage under, any CMJ Employee Plan which would increase
materially the expense of maintaining such CMJ Employee Plan above the
level of the expense incurred in respect thereof for the 12 months ended on
CMJ Balance Sheet Date.
(h) CMJ and its Subsidiaries are in compliance with all applicable
federal, state, local and foreign statutes, laws (including without
limitation, common law), judicial decisions, regulations, ordinances,
rules, judgments, orders and codes respecting employment, employment
practices, labor, terms and conditions of employment and wages and hours,
and no work stoppage or labor strike against CMJ and its Subsidiaries are
pending or threatened, nor are CMJ and its Subsidiaries involved in or
threatened with any labor dispute, grievance, or litigation relating to
labor matters involving any employees, in each case except as would not,
individually or in the aggregate, have a Material Adverse Effect on CMJ.
There are no suits, actions, disputes, claims (other than routine claims
for benefits), investigations or audits pending or, to the knowledge of
CMJ, threatened in connection with any CMJ Employee Plan, but excluding any
of the foregoing which would not have a Material Adverse Effect on CMJ.
SECTION 3.13 Compliance with Laws.
Neither CMJ nor any of its Subsidiaries has violated or is in
violation of any applicable provisions of any laws, statutes, ordinances or
regulations except for any violations that, individually or in the
aggregate, have not and would not have a Material Adverse Effect on CMJ.
SECTION 3.14 Finders' or Advisors' Fees.
Except for Ladenburg, Xxxxxxxx & Co. Inc. ("LTC"), a copy of whose
engagement agreement has been provided to Xxxxxxxxxxx.xxx, there is no
investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of CMJ or any of its
Subsidiaries who might be entitled to any compensation, fee or commission
in connection with the transactions contemplated by this Agreement. CMJ or
its stockholders (excluding RMG) shall be responsible for the fees and
expenses of LTC in connection with such engagement letter; they shall
discharge any and all such obligations to LTC prior to the Effective Time,
and XXX.xxx shall have no responsibility therefor.
SECTION 3.15 Environmental Matters.
(a) Except for matters which, individually or in the aggregate,
would not have a Material Adverse Effect on CMJ, (i) no written notice,
notification, demand, request for information, citation, summons, complaint
or order has been received by, and no investigation, action, claim, suit,
proceeding or review is pending or, to the knowledge of CMJ or any of its
Subsidiaries, threatened by any Person against, CMJ or any of its
Subsidiaries, and no penalty has been assessed against CMJ or any of its
Subsidiaries, in each case, with respect to any matters relating to or
arising out of any Environmental Law; (ii) CMJ and its Subsidiaries are in
compliance with all Environmental Laws; and (iii) to the knowledge of CMJ,
there are no liabilities of or relating to CMJ or any of its Subsidiaries
relating to or arising out of any Environmental Law and there is no
existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability.
(b) For purposes of this Agreement, the term "Environmental Laws"
means federal, state, local and foreign statutes, laws, judicial decisions,
regulations, ordinances, rules, judgments, orders, codes, injunctions,
permits and governmental agreements relating to human health and the
environment, including, but not limited to, Hazardous Materials; and the
term "Hazardous Material" means all substances or materials regulated as
hazardous, toxic, explosive, dangerous, flammable or radioactive under any
Environmental Law including, but not limited to: (i) petroleum, asbestos,
or polychlorinated biphenyls and (ii) in the United States, all substances
defined as Hazardous Substances, Oils, Pollutants or Contaminants in the
National Oil and Hazardous Substances Pollution Contingency Plan.
SECTION 3.16 Intellectual Property Matters.
(a) For purposes of this Agreement, "Intellectual Property" means
any United States, foreign, international and state: patents and patent
applications, industrial design registrations, certificates of invention
and utility models (collectively, "Patents"); trademarks, service marks,
and trademark or service xxxx registrations and applications, trade names,
logos, designs, slogans, and general intangibles of like nature, together
with all goodwill related to the foregoing (collectively, "Trademarks");
Internet domain names; copyrights, copyright registrations, renewals and
applications for copyrights, including without limitation for the Content
and the Software (each as defined below in this Section 3.16)
(collectively, "Copyrights"); Content; Software, technology, trade secrets
and other confidential information, know-how, proprietary processes,
formulae, algorithms, models and methodologies (collectively, "Trade
Secrets"), rights of privacy and publicity, including but not limited to,
the names, likenesses, voices and biographical information of real persons,
and all license agreements and other agreements granting rights relating to
any of the foregoing. "Software" means any and all (i) computer programs,
including any and all software implementations of algorithms, models and
methodologies, whether in source code or object code form, (ii) databases,
compilations, and any other electronic data files, including any and all
collections of data, whether machine readable or otherwise, (iii)
descriptions, flow-charts, technical and functional specifications, and
other work product used to design, plan, organize, develop, test,
troubleshoot and maintain any of the foregoing, (iv) without limitation to
the foregoing, the software technology supporting any functionality
contained on Internet site(s), and (v) all documentation, including
technical, end-user, training and troubleshooting manuals and materials,
relating to any of the foregoing. "Content" means any and all information,
pictures, images, graphics, video, audio, text and any other content or
information, in whatever form and on any media. "CMJ Content" means any
and all Content published or displayed in any form, including
electronically, by or on behalf of CMJ, including but not limited to all
Content contained in CMJ publications and events (such as, but not limited
to, the CMJ New Music Monthly, the CMJ New Music Report and the CMJ Music
Marathon MusicFest and FilmFest).
(b) CMJ owns or has the valid right to use all material Intellectual
Property, as currently used in connection with the business of CMJ,
including without limitation all license agreements and other agreements
granting rights relating to any such Intellectual Property ("CMJ License
Agreements") to which CMJ is a party or is otherwise bound (such
Intellectual Property, together with the CMJ License Agreements the "CMJ
Intellectual Property").
(c) Schedule 3.16(c) sets forth, for the material Intellectual
Property owned by CMJ, a complete and accurate list of all United States,
foreign, international and state (i) patents and patent applications, (ii)
Trademark registrations and applications and material unregistered
Trademarks, (iii) Internet domain names, and (iv) Copyright registrations
and applications, and material unregistered Copyrights, including Content
and Software, indicating for each, the applicable jurisdiction,
registration number (or application number), and date issued (or date
filed).
(d) Except as set forth on Schedule 3.16(d), the CMJ Intellectual
Property owned by CMJ is solely and exclusively owned by CMJ free and clear
of all Liens, and CMJ is listed in the records of the appropriate United
States, state or foreign agency as the sole owner of record for each
registration and application for any Patent, Trademark, Internet domain
name and Copyright that it owns. Except as set forth on Schedule 3.16(d),
all of the items set forth on Schedule 3.16(c) are valid and subsisting, in
full force and effect, and have not been cancelled, expired, or abandoned.
There is no pending or, to CMJ's knowledge, threatened opposition,
interference or cancellation proceeding before any court or registration
authority in any jurisdiction against the items set forth on Schedule
3.16(c) or any other CMJ Intellectual Property owned by CMJ or, to CMJ's
knowledge, against any CMJ Intellectual Property not owned by CMJ.
(e) Except as set forth on Schedule 3.16(e), there are no
settlements, forebearances to xxx, consents, judgments, or orders or
similar obligations to which CMJ is a party or is otherwise bound, which
(i) materially restrict CMJ's rights to use any CMJ Intellectual Property,
(ii) materially restrict CMJ's business in order to accommodate a third
party's Intellectual Property rights or (iii) permit third parties to use
any Intellectual Property which would otherwise materially infringe any CMJ
Intellectual Property. CMJ has not materially licensed or sublicensed its
rights in any CMJ Intellectual Property other than pursuant to the CMJ
License Agreements set forth on Schedule 3.16(e) and no royalties,
honoraria or other fees are payable by for the use of or right to use any
CMJ Intellectual Property in connection with CMJ's business as currently
conducted, except pursuant to the CMJ License Agreements set forth on
Schedule 3.16(e).
(f) The CMJ License Agreements are valid and binding obligations of
CMJ and, to CMJ's knowledge, any other parties thereto, enforceable in
accordance with their terms, and there exists no event or condition which
will result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default by CMJ under any such CMJ
License Agreement.
(g) To CMJ's knowledge, no Trade Secret material to the business of
CMJ as currently operated has been disclosed or authorized to be disclosed
to any third party, including any employee, agent, contractor or other
entity, other than pursuant to a non-disclosure agreement that adequately
protects CMJ's proprietary interests in and to such Trade Secrets. To
CMJ's knowledge, no party to any non-disclosure agreement relating to such
Trade Secrets is in breach thereof.
(h) To CMJ's knowledge, the conduct of CMJ's business as currently
conducted and the CMJ Content do not materially infringe upon any
Intellectual Property owned or controlled by any third party (either
directly or indirectly such as through contributory infringement or
inducement to infringe) and is not materially libelous, slanderous,
defamatory, violative in any way of publicity or privacy rights, or
obscene. Except as set forth on Schedule 3.16(h), there are no claims or
suits pending or, to CMJ's knowledge, threatened, and CMJ has not received
any notice of a third party claim or suit, (i) alleging that CMJ's
activities or the conduct of its businesses infringes upon or constitutes
the unauthorized use of the Intellectual Property rights of any third
party, nor alleging libel, slander, defamation, or other violation of a
personal right, or (ii) challenging the ownership, use, validity or
enforceability of any CMJ Intellectual Property.
(i) To CMJ's knowledge, no third party is materially
misappropriating, infringing, diluting, or otherwise violating any CMJ
Intellectual Property, and, except as set forth on Schedule 3.16(i), no
such claims are pending against a third party by CMJ.
(j) Without limitation to the representations and warranties set
forth above in this Section 3.16, CMJ represents and warrants that there
are no material restrictions on the CMJ Content owned by CMJ.
(k) CMJ represents and warrants that (i) CMJ has, and XXX.xxx will
have as of the Effective Time, (other than as set forth in the following
clause (ii)) the unrestricted right to use, copy, distribute, create
derivative works from, perform, display, transmit and otherwise exploit the
CMJ Content, including, but not limited to, all past, current and future
music reviews published by or on behalf of CMJ on whatever media (the "CMJ
Music Reviews") and (ii) no other person or entity will have any rights
whatsoever in or to any CMJ Content, except for (A) any rights set forth in
the contracts (other than the Linking Agreement, dated as of April 20,
1998, between CMJ and CDnow, Inc., a Pennsylvania corporation (the "CDnow
Agreement")) listed on Schedule 3.16(k) and (B) the right of CDnow, Inc.,
pursuant to the CDnow Agreement, (x) to be the only online retail seller of
recorded music licensed to use, copy or display the CMJ Music Reviews over
the Internet and (y) to have the right of first refusal to license any
other CMJ Content appearing in either CMJ New Music Report or CMJ New Music
Monthly, except for any chart or chart related data appearing in either CMJ
New Music Report or CMJ New Music Monthly (the rights in the foregoing
clause (B) collectively referred to herein as the "CDnow Agreement
Rights"). Notwithstanding subsection (A) above and notwithstanding the
CDnow Agreement Rights, CMJ has, and as of the Effective Time XXX.xxx will
have, the right to place any and all CMJ Content, including the CMJ Music
Reviews, on its Internet sites, including in connection with its online
retail sale of recorded music. None of the agreements listed on Schedule
3.16(e) hereto conflict with or violate any provisions of any of the other
agreements listed on Schedule 3.16(e).
SECTION 3.17 Year 2000 Compliance Matters.
Except as set forth on Schedule 3.17, to CMJ's knowledge after
reasonable investigation, all material Date Data and Date-Sensitive Systems
used by CMJ in connection with its business as currently conducted, or in
development or on order, are Year 2000 Compliant, or are reasonably
expected to be Year 2000 Compliant in a timely manner. "Date Data" means
any data of any type that includes date information or which is otherwise
derived from, dependent on or related to date information. "Date-Sensitive
System" means any Software, microcode or hardware system or component,
including any electronic or electronically controlled system or component,
that processes any Date Data (other than those licensed from third party
providers). "Year 2000 Compliant" means (i) with respect to Date Data,
that such data is in proper format and accurate for all dates in, or
spanning, the twentieth and twenty-first centuries, and (ii) with respect
to Date-Sensitive Systems, that each such system accurately processes all
Date Data, including for the twentieth and twenty-first centuries, without
loss of any functionality, interoperability or performance, including but
not limited to calculating, comparing, sequencing, storing and displaying
such Date Data (including all leap year considerations), when used as a
stand-alone system, or in combination with other Software, hardware, or
Content that is Year 2000 Compliant and properly interfaces with that Date-
Sensitive System.
SECTION 3.18 Related-Party Transactions.
Except as set forth on Schedule 3.18, no employee, officer, or
director of CMJ or any of its Subsidiaries or member of his or her
immediate family is currently indebted to CMJ or any of its Subsidiaries,
nor is CMJ or any of its Subsidiaries indebted (or committed to make loans
or extend or guarantee credit) to any of such individuals. Except as set
forth on Schedule 3.18, to CMJ's knowledge, as of the date hereof none of
such persons has any direct or indirect ownership interest in any firm or
corporation with which CMJ or any of its Subsidiaries is affiliated or any
firm or corporation that competes with CMJ or any of its Subsidiaries,
except that employees, officers, or directors of CMJ or any of its
Subsidiaries and members of their immediate families may own stock in an
amount not to exceed 5% of the outstanding capital stock of publicly traded
companies that may compete with CMJ or any of its Subsidiaries or XXX.xxx.
As of the date hereof, except as set forth on Schedule 3.18, and other than
with respect to agreements for employment, copies of which have been
provided to Xxxxxxxxxxx.xxx, no employee, director or officer of CMJ or any
of its Subsidiaries and no member of the immediate family of any employee,
officer, or director of CMJ or any of its Subsidiaries is directly or
indirectly interested in any material contract with CMJ or any of its
Subsidiaries.
SECTION 3.19 Title to Property and Assets.
As of the date hereof, CMJ and its Subsidiaries own their property and
assets free and clear of all Liens, except such Liens that arise in the
ordinary course of business and do not materially impair CMJ's or its
Subsidiaries' ownership or use of such property or assets. With respect to
the property and assets it leases, CMJ and each of its Subsidiaries
currently is in compliance with such leases and, to CMJ's knowledge, holds
a valid leasehold interest free of any Liens.
SECTION 3.20 Insurance.
CMJ has, and its Subsidiaries have, in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow CMJ and its Subsidiaries to
replace any material assets or properties of CMJ and its Subsidiaries that
might be damaged or destroyed. Set forth on Schedule 3.20 is a list of all
insurance policies maintained by or for the benefit of CMJ and its
Subsidiaries and their respective directors, officers, employees or agents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXXXXXXXXXX.XXX
Xxxxxxxxxxx.xxx represents and warrants to CMJ and XXX.xxx that
(except as set forth in the disclosure schedules delivered by
Xxxxxxxxxxx.xxx to CMJ simultaneously with the execution of this Agreement
(the "Xxxxxxxxxxx.xxx Disclosure Schedules"):
SECTION 4.1 Corporate Existence and Power.
Xxxxxxxxxxx.xxx is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has all
corporate powers and all governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted, except
for those the absence of which would not, individually or in the aggregate,
have a Material Adverse Effect on Xxxxxxxxxxx.xxx. Xxxxxxxxxxx.xxx is duly
qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by
it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect on
Xxxxxxxxxxx.xxx. Xxxxxxxxxxx.xxx has heretofore made available to CMJ and
XXX.xxx true and complete copies of Xxxxxxxxxxx.xxx's certificate of
incorporation and by-laws as currently in effect. As of the date hereof,
neither Xxxxxxxxxxx.xxx nor any of its Subsidiaries owns any shares of CMJ
Common Stock (except pursuant to the Common Stock Purchase Agreement).
SECTION 4.2 Corporate Authorization.
(a) The execution, delivery and performance by Xxxxxxxxxxx.xxx of
this Agreement, and the consummation by Xxxxxxxxxxx.xxx of the transactions
contemplated hereby are within the corporate powers of Xxxxxxxxxxx.xxx and
have been duly authorized by all necessary corporate action, including the
required approval of Xxxxxxxxxxx.xxx's stockholders. Assuming due
authorization, execution and delivery of this Agreement by CMJ and XXX.xxx,
this Agreement constitutes a valid and binding agreement of Xxxxxxxxxxx.xxx
enforceable against Xxxxxxxxxxx.xxx in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) Xxxxxxxxxxx.xxx's Board of Directors has (i) determined that
this Agreement and the transactions contemplated hereby (including the
Merger) are fair to and in the best interests of its stockholders,
(ii) approved and adopted this Agreement and the transactions contemplated
hereby (including the Merger), and (iii) resolved to recommend that its
stockholders vote for the approval and adoption of this Agreement and the
Merger and has submitted this Agreement to such Stockholders for their
approval and adoption.
(c) The holders of a majority of the outstanding voting stock of
Xxxxxxxxxxx.xxx have voted for the approval and adoption of this Agreement
and the Merger.
SECTION 4.3 Governmental Authorization.
(a) The execution, delivery and performance by Xxxxxxxxxxx.xxx of
this Agreement, and the consummation by Xxxxxxxxxxx.xxx of the transactions
contemplated hereby and thereby require no action by or in respect of, or
filing with, any governmental body, agency, official or authority other
than (a) the filing of a certificate of merger in connection with the
Merger in accordance with Delaware Law and (b) other actions or filings
which if not taken or made would not, individually or in the aggregate,
have a Material Adverse Effect on Xxxxxxxxxxx.xxx or prevent or materially
delay Xxxxxxxxxxx.xxx's consummation of the Merger.
SECTION 4.4 Non-Contravention.
The execution, delivery and performance by Xxxxxxxxxxx.xxx of this
Agreement, and the consummation by Xxxxxxxxxxx.xxx of the transactions
contemplated hereby and thereby do not and will not (a) contravene or
conflict with the certificate of incorporation or by-laws of
Xxxxxxxxxxx.xxx, (b) assuming compliance with the matters referred to in
Section 4.3, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to Xxxxxxxxxxx.xxx or any of its Subsidiaries,
(c) constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Xxxxxxxxxxx.xxx
or any of its Subsidiaries or to a loss, in whole or in part, of any
benefit or right to which Xxxxxxxxxxx.xxx or any of its Subsidiaries is
entitled under any provision of any agreement, contract or other instrument
binding upon Xxxxxxxxxxx.xxx or any of its Subsidiaries or any license,
franchise, permit or other similar authorization held by Xxxxxxxxxxx.xxx or
any of its Subsidiaries or (d) result in the creation or imposition of any
Lien on any asset of Xxxxxxxxxxx.xxx or any of its Subsidiaries, except in
the case of clauses (b), (c) and (d), for such contraventions, conflicts,
violations, defaults, rights of termination, cancellation or acceleration,
or losses or Liens that would not, individually or in the aggregate, have a
Material Adverse Effect on Xxxxxxxxxxx.xxx. Neither Xxxxxxxxxxx.xxx nor
any Subsidiary of Xxxxxxxxxxx.xxx is a party to any agreement that
expressly limits the ability of Xxxxxxxxxxx.xxx or any Subsidiary of
Xxxxxxxxxxx.xxx to compete in or conduct any line of business or compete
with any Person or in any geographic area or during any period of time
except to the extent that any such limitation, individually or in the
aggregate, would not have a Material Adverse Effect on Xxxxxxxxxxx.xxx or
on XXX.xxx immediately after the Effective Time. Schedule 4.4 sets forth a
true, accurate and complete list of all material contracts, instruments,
agreements, judgements, orders and decrees to which Xxxxxxxxxxx.xxx or any
of its Subsidiaries is a party or by which any of them or their properties
is bound or affected, copies of all of which have been provided to CMJ and
XXX.xxx. There has not occurred any breach, violation or default or any
event that, with the lapse of time, the giving of notice or the election of
any person, or any combination thereof, would constitute a breach,
violation or default by the Xxxxxxxxxxx.xxx under any such contract or, to
the knowledge of the Xxxxxxxxxxx.xxx, by any other person to any such
contract nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration
or cancellation of, any material agreement, indenture or instrument to
which Xxxxxxxxxxx.xxx is a party. Xxxxxxxxxxx.xxx has not been notified
that any party to any material contract intends to cancel, terminate, not
renew or exercise an option under any material contract, whether in
connection with the transactions contemplated hereby or otherwise.
SECTION 4.5 Capitalization.
The authorized capital stock of Xxxxxxxxxxx.xxx consists of 100,000
shares of Xxxxxxxxxxx.xxx Common Stock, par value $.01 per share, and
100,000 shares of preferred stock, par value $.01 per share. As of the
date hereof there are outstanding 103.731 shares of Xxxxxxxxxxx.xxx Common
Stock and no other shares of capital stock or voting securities of
Xxxxxxxxxxx.xxx are outstanding. All outstanding shares of capital stock
of Xxxxxxxxxxx.xxx have been duly authorized and validly issued and are
fully paid and nonassessable. As of the date hereof there are no
outstanding options, warrants or other rights to acquire from
Xxxxxxxxxxx.xxx, and no preemptive or similar rights, subscription or other
rights, convertible or exchangeable securities, agreements, arrangements,
or commitments of any character, relating to the capital stock of
Xxxxxxxxxxx.xxx obligating Xxxxxxxxxxx.xxx to issue, transfer or sell any
capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Xxxxxxxxxxx.xxx or
obligating Xxxxxxxxxxx.xxx to grant, extend or enter into any such option,
warrant, subscription or other right, convertible or exchangeable security,
agreement, arrangement or commitment (each of the foregoing, a
"Xxxxxxxxxxx.xxx Convertible Security"). There are no outstanding
obligations of Xxxxxxxxxxx.xxx or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of Xxxxxxxxxxx.xxx
or any Xxxxxxxxxxx.xxx Convertible Securities.
SECTION 4.6 Subsidiaries.
(a) Each Subsidiary of Xxxxxxxxxxx.xxx is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, has all powers and all governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted, except for those the absence of which would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect
on Xxxxxxxxxxx.xxx. Each Subsidiary of Xxxxxxxxxxx.xxx is duly qualified
to do business and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its
activities makes such qualifications necessary, except for those
jurisdictions where failure to be so qualified would not, individually or
in the aggregate, have a Material Adverse Effect on Xxxxxxxxxxx.xxx.
(b) All of the outstanding capital stock of, or other ownership
interests in, each Significant Subsidiary of Xxxxxxxxxxx.xxx is owned,
directly or indirectly, by Xxxxxxxxxxx.xxx. All shares of capital stock
of, or other ownership interests in, Subsidiaries of the Xxxxxxxxxxx.xxx,
directly or indirectly, owned by the Xxxxxxxxxxx.xxx are owned free and
clear of any Lien and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose
of such capital stock or other ownership interests), except as would not,
individually or in the aggregate, have a Material Adverse Effect on
Xxxxxxxxxxx.xxx. There are no outstanding options, warrants or other
rights to acquire from Xxxxxxxxxxx.xxx or any of its Subsidiaries, and no
preemptive or similar rights, subscriptions or other rights, convertible or
exchangeable securities, agreements, arrangements or commitments of any
character, relating to the capital stock of any Subsidiary of
Xxxxxxxxxxx.xxx, obligating Xxxxxxxxxxx.xxx or any of its Subsidiaries to
issue, transfer or sell, any capital stock, voting securities or other
ownership interests in, or any securities convertible into or exchangeable
for any capital stock, voting securities or ownership interests in, any
Subsidiary of Xxxxxxxxxxx.xxx or obligating Xxxxxxxxxxx.xxx or any
Subsidiary of Xxxxxxxxxxx.xxx to grant, extend or enter into any such
option, warrant, subscription or other right, convertible or exchangeable
security, agreement, arrangement or commitment (each of the foregoing, a
"Xxxxxxxxxxx.xxx Subsidiary Convertible Security"). There are no
outstanding obligations of Xxxxxxxxxxx.xxx or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding shares of capital
stock of any Subsidiary of Xxxxxxxxxxx.xxx or any Xxxxxxxxxxx.xxx
Subsidiary Convertible Securities.
SECTION 4.7 Financial Statements.
The unaudited consolidated interim financial statements of the first
nine months of 1999 of Xxxxxxxxxxx.xxx (including any related notes and
schedules) present fairly, in all material respects, the financial position
of Xxxxxxxxxxx.xxx and its Subsidiaries as of the dates thereof and their
results of operations and cash flows for the periods then ended (subject to
normal year-end adjustments and the absence of notes in the case of any
unaudited interim financial statements) in each case in conformity with
GAAP applied on a consistent basis (except as may be indicated in the notes
thereto). For purposes of this Agreement, "Xxxxxxxxxxx.xxx Balance Sheet"
means the consolidated balance sheet of Xxxxxxxxxxx.xxx as of September 30,
1999 and "Xxxxxxxxxxx.xxx Balance Sheet Date" means September 30, 1999.
SECTION 4.8 Absence of Certain Changes.
Since the Xxxxxxxxxxx.xxx Balance Sheet Date, and, prior to the date
hereof, Xxxxxxxxxxx.xxx and its Subsidiaries have conducted their
respective businesses in the ordinary course, consistent with past
practice, and there has not been:
(a) any event, occurrence or development which, individually or in
the aggregate, would have a Material Adverse Effect on Xxxxxxxxxxx.xxx;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of
Xxxxxxxxxxx.xxx or any repurchase, redemption or other acquisition by
Xxxxxxxxxxx.xxx or any of its Subsidiaries of any outstanding shares of its
capital stock or any Xxxxxxxxxxx.xxx Convertible Securities or
Xxxxxxxxxxx.xxx Subsidiary Convertible Securities;
(c) any amendment of any term of any outstanding security of
Xxxxxxxxxxx.xxx or any of its Subsidiaries;
(d) any transaction or commitment made, or any contract, agreement
or settlement entered into, by (or judgment, order or decree affecting)
Xxxxxxxxxxx.xxx or any of its Subsidiaries relating to its assets or
business (including the acquisition or disposition of any material amount
of assets) or any relinquishment by Xxxxxxxxxxx.xxx or any of its
Subsidiaries of any contract or other right, other than transactions,
commitments, contracts, agreements or settlements (including without
limitation settlements of litigation and tax proceedings) in the ordinary
course of business and those contemplated by this Agreement;
(e) any change in any method of accounting or accounting practice by
Xxxxxxxxxxx.xxx or any of its Subsidiaries, except for any such change
which is not material or which is required by reason of a concurrent change
in GAAP;
(f) except as set forth on Schedule 4.8 any (i) grant of any
severance or termination pay to (or amendment to any such existing
arrangement with) any director, officer or employee of Xxxxxxxxxxx.xxx or
any of its Subsidiaries, (ii) entering into of any employment, deferred
compensation, supplemental retirement or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of Xxxxxxxxxxx.xxx or any of its Subsidiaries, (iii) increase in,
or accelerated vesting and/or payment of, benefits under any existing
severance or termination pay policies or employment agreements or
(iv) increase in or enhancement of any rights or features related to
compensation, bonus or other benefits payable to directors, officers or
senior employees of Xxxxxxxxxxx.xxx or any of its Subsidiaries, in each
case, other than in the ordinary course of business consistent with past
practice; or
(g) any material Tax election made or changed, any material audit
settled or any material amended Tax Returns filed.
SECTION 4.9 No Undisclosed Material Liabilities.
There are no material liabilities of Xxxxxxxxxxx.xxx or any Subsidiary
of Xxxxxxxxxxx.xxx, whether accrued, contingent, absolute, determined,
determinable or otherwise, that would be required to be reflected in a
consolidated balance sheet of Xxxxxxxxxxx.xxx prepared in accordance with
GAAP or required to be disclosed on the face thereof or in the notes
thereto in accordance with Statement of Financial Accounting Standards No.
5 of the Financial Accounting Standards Board, other than:
(a) liabilities disclosed or provided for in the Xxxxxxxxxxx.xxx
Balance Sheet or in the notes thereto;
(b) liabilities incurred since such date in the ordinary course of
business;
(c) liabilities under this Agreement.
SECTION 4.10 Litigation.
There is no action, suit, investigation or proceeding pending against,
or to the knowledge of Xxxxxxxxxxx.xxx threatened against or affecting,
Xxxxxxxxxxx.xxx or any of its Subsidiaries or any of their respective
properties or any of their respective officers or directors before any
court or arbitrator or any governmental body, agency or official except as
would not, individually or in the aggregate, have a Material Adverse Effect
on Xxxxxxxxxxx.xxx or prevent or materially delay the consummation of the
Merger.
SECTION 4.11 Taxes.
Except as set forth in Schedule 4.11 of the Xxxxxxxxxxx.xxx Disclosure
Schedule
(a) Each of Xxxxxxxxxxx.xxx and its Subsidiaries has (x) duly and
timely filed (or there has been filed on its behalf) with the appropriate
governmental authorities all Tax Returns required to be filed by it, and
all such Tax Returns are true, correct and complete except to the extent
any failure to file or any inaccuracies in any filed Tax Return would not
be reasonably likely to have a Material Adverse Effect on Xxxxxxxxxxx.xxx
and (y) timely paid (or properly accrued on Xxxxxxxxxxx.xxx's books) or
there has been paid on its behalf all Taxes due from it or claimed to be
due from it by any tax authority (whether or not set forth on any Tax
Return) except to the extent that any failure to pay would not be
reasonably likely to have a Material Adverse Effect on Xxxxxxxxxxx.xxx;
(b) Xxxxxxxxxxx.xxx and each of its Subsidiaries have complied in all
material respects with all applicable Tax Laws relating to the payment and
withholding of Taxes (including, without limitation, withholding of Taxes
pursuant to sections 1441 and 1442 of the Code and employment withholding
Taxes) and have, within the time and manner prescribed by law, withheld and
paid over to the proper governmental entities all amounts required to be
withheld and paid over under all applicable Tax Laws except for amounts
that would not be reasonably likely to have a Material Adverse Effect on
Xxxxxxxxxxx.xxx;
(c) There are no material Liens for Taxes upon the assets or
properties of Xxxxxxxxxxx.xxx or any of its Subsidiaries except for
statutory Liens for current Taxes not yet due or that are being contested
in good faith in appropriate proceedings and for which adequate reserves
have been maintained in accordance with GAAP;
(d) None of Xxxxxxxxxxx.xxx or any of its Subsidiaries has requested
any extension of time within which to file any Tax Return in respect of any
taxable year which has not since been filed, and no outstanding waivers or
comparable consents regarding the application of the statute of limitations
with respect to any Taxes or Tax Returns has been given by or on behalf of
Xxxxxxxxxxx.xxx or any of its Subsidiaries except for such waiver or
consent that would not be reasonably likely to have a Material Adverse
Effect on Xxxxxxxxxxx.xxx;
(e) None of Xxxxxxxxxxx.xxx or any of its Subsidiaries has received
any written notice of any Audits with regard to any Taxes or Tax Returns of
Xxxxxxxxxxx.xxx or any of its Subsidiaries, and to Xxxxxxxxxxx.xxx's and
its Subsidiaries' knowledge, no such Audits are currently being conducted;
(f) All Tax deficiencies which have been claimed, proposed or
asserted against Xxxxxxxxxxx.xxx or any of its Subsidiaries by any taxing
authority have been fully paid, except for such deficiency that would not
be reasonably likely to have a Material Adverse Effect on Xxxxxxxxxxx.xxx.
No issue has been raised by any taxing authority in any current or prior
examination which, by application of the same principles, would reasonably
be expected to result in a proposed deficiency for any subsequent Taxable
Period.
(g) None of Xxxxxxxxxxx.xxx or any of its Subsidiaries is required to
include in income any adjustment pursuant to Section 481(a) of the Code, by
reason of any voluntary or involuntary change in accounting method (nor has
any tax authority notified Xxxxxxxxxxx.xxx or any of its Subsidiaries in
writing of any such adjustment or change of accounting method);
(h) To the knowledge of Xxxxxxxxxxx.xxx and its Subsidiaries, no
power of attorney has been granted by or with respect to Xxxxxxxxxxx.xxx or
any of its Subsidiaries with respect to any matter relating to Taxes;
(i) None of Xxxxxxxxxxx.xxx or any of its Subsidiaries has filed a
consent pursuant to Section 341(f) of the Code (or any predecessor
provision) or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code);
(j) The reserves for Taxes (determined in accordance with generally
accepted accounting principles consistently applied) reflected in the
Xxxxxxxxxxx.xxx Balance Sheet are adequate for the payment of all Taxes
payable by Xxxxxxxxxxx.xxx or any of its Subsidiaries through the date of
the Xxxxxxxxxxx.xxx Balance Sheet;
(k) None of Xxxxxxxxxxx.xxx or any of its Subsidiaries is a party to
any agreement, contract or arrangement that could result, separately or in
the aggregate, in the payment of any payments that will not be deductible
by operation of Section 162(m) of the Code;
(l) None of Xxxxxxxxxxx.xxx or any of its Subsidiaries has requested
or received a ruling or determination from any tax authority or signed a
closing or other agreement with any tax authority which would be reasonably
likely to have a Material Adverse Effect on Xxxxxxxxxxx.xxx;
(m) The Federal income Tax Returns of the Company and its
Subsidiaries for the Tax Periods ending before January 1, 1995 have been
examined by the appropriate Governmental authority (or the applicable
statue of limitations for the assessment of such taxes has expired);
(n) None of Xxxxxxxxxxx.xxx or any of its Subsidiaries is a party to,
is bound by, or has any obligation under, any Tax Indemnification
Agreements. Any such Tax Indemnification Agreement set forth in the
Disclosure Schedule will terminate as of the Closing Date and be of no
further force or effect for any Tax Period after the Closing Date. As of
the date of this Agreement, none of Xxxxxxxxxxx.xxx or any of its
Subsidiaries is aware of any potential liability or obligation to any
person as a result of, or pursuant to, any such Tax Indemnification
Agreement;
(o) Xxxxxxxxxxx.xxx and each of its Subsidiaries has previously
delivered or made available to CMJ complete and accurate copies of each of
(a) all audit reports, letter rulings, technical advice memoranda and
similar documents issued by a Governmental authority relating to the United
States federal, state, local or foreign Taxes due from or with respect to
Xxxxxxxxxxx.xxx and its Subsidiaries, (b) the United States federal income
Tax Returns, and those state, local and foreign income Tax Returns filed by
Xxxxxxxxxxx.xxx and its Subsidiaries (or on their behalf) and (c) any
closing agreements entered into by Xxxxxxxxxxx.xxx or any of its
Subsidiaries with any tax authority. Xxxxxxxxxxx.xxx will deliver to CMJ
all materials with respect to the foregoing for all matters arising after
the date hereof;
(p) None of Xxxxxxxxxxx.xxx or any of its Subsidiaries has any or
could have any liability for Taxes of another person under Section 1.1502-6
of the Treasury Regulations (or any similar provision under state, local or
foreign law), by contract or otherwise;
(q) None of Xxxxxxxxxxx.xxx or any of its Subsidiaries has any
deferred intercompany gain or loss arising as a result of a deferred
intercompany transaction within the meaning of Section 1.1502-13 of the
Treasury Regulations (or similar provision under state, local or foreign
law);
(r) No written notice of a claim has been made by a taxing authority
in a jurisdiction where either Xxxxxxxxxxx.xxx or any of its Subsidiaries
does not file Tax Returns has been received by Xxxxxxxxxxx.xxx or any of
its Subsidiaries to the effect that Xxxxxxxxxxx.xxx or any of such
Subsidiaries is or may be subject to taxation by that jurisdiction;
(s) None of Xxxxxxxxxxx.xxx or any of its Subsidiaries is a "United
States real property holding corporation" within the meaning of Section 897
of the Code;
SECTION 4.12 Employee Benefit Plans.
(a) For purposes of this Agreement, the term "Xxxxxxxxxxx.xxx
Employee Plans" shall mean and include: each management, consulting, non-
compete, employment, severance or similar contract, plan, arrangement or
policy applicable to any director, former director, employee or former
employee of Xxxxxxxxxxx.xxx and each plan, program, policy, agreement or
arrangement (written or oral), providing for compensation, bonuses, profit-
sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance coverage
(including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance
benefits) or other employee benefits of any kind, whether funded or
unfunded, which is maintained, administered or contributed to by
Xxxxxxxxxxx.xxx or any Subsidiary and covers any employee or director or
former employee or director of Xxxxxxxxxxx.xxx, or under which
Xxxxxxxxxxx.xxx or any Subsidiary has any liability, contingent or
otherwise (including but not limited to each material "employee benefit
plan," as defined in Section 3(3) of ERISA, but excluding any such plan
that is a "multiemployer plan," as defined in Section 3(37) of ERISA).
Neither Xxxxxxxxxxx.xxx nor any of its affiliates contributes to, or is
required to contribute to, any "multiemployer plan" as defined in Section
3(37) of ERISA. Schedule 4.12 sets forth a true, accurate and complete
list of all Xxxxxxxxxxx.xxx Plans.
(b) Each Xxxxxxxxxxx.xxx Employee Plan has been established and
maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations
(including but not limited to ERISA and the Code) which are applicable to
such Plan, except where failure to so comply would not, individually or in
the aggregate, have a Material Adverse Effect on Xxxxxxxxxxx.xxx.
(c) Neither Xxxxxxxxxxx.xxx nor any affiliate of Xxxxxxxxxxx.xxx has
incurred a liability under Title IV of ERISA that has not been satisfied in
full, and no condition exists that presents a material risk to
Xxxxxxxxxxx.xxx or any affiliate of Xxxxxxxxxxx.xxx of incurring any such
liability. All contributions required to be made under the terms of any
Xxxxxxxxxxx.xxx Employee Plan have been made, and, where applicable to a
Xxxxxxxxxxx.xxx Employee Plan, Xxxxxxxxxxx.xxx and its affiliates have
complied with the minimum funding requirements under Section 412 of the
Code and Section 302 of ERISA with respect to each such Xxxxxxxxxxx.xxx
Employee Plan.
(d) Each Xxxxxxxxxxx.xxx Employee Plan which is intended to be
qualified under section 401(a) of the Code is so qualified and has been so
qualified during the period from its adoption to date, and each trust
forming a part thereof is exempt from federal income tax pursuant to
section 501(a) of the Code and, to Xxxxxxxxxxx.xxx's knowledge, no
circumstances exist which will adversely affect such qualification or
exception.
(e) No director or officer or other employee of Xxxxxxxxxxx.xxx or
any of its Subsidiaries will become entitled to any retirement, severance
or similar benefit or enhanced or accelerated benefit (including any
acceleration of vesting or lapse of repurchase rights or obligations with
respect to any Xxxxxxxxxxx.xxx Stock Plans or other benefit under any
compensation plan or arrangement of Xxxxxxxxxxx.xxx) solely as a result of
the transactions contemplated in this Agreement; and (ii) no payment made
or to be made to any current or former employee of director of
Xxxxxxxxxxx.xxx or any of its affiliates by reason of the transactions
contemplated hereby (whether alone or in connection with any other event,
including, but not limited to, a termination of employment) will constitute
an "excess parachute payment" within the meaning of Section 280G of the
Code.
(f) No Xxxxxxxxxxx.xxx Employee Plan provides material post-
retirement health and medical, life or other insurance benefits for retired
employees of Xxxxxxxxxxx.xxx or any of its Subsidiaries nor has
Xxxxxxxxxxx.xxx or any Subsidiary represented or promised to provide such
benefits.
(g) There has been no amendment to, or change in employee
participation or coverage under, any Xxxxxxxxxxx.xxx Employee Plan which
would increase materially the expense of maintaining such Xxxxxxxxxxx.xxx
Employee Plan above the level of the expense incurred in respect thereof
for the 12 months ended on the Xxxxxxxxxxx.xxx Balance Sheet Date.
(h) Xxxxxxxxxxx.xxx and its Subsidiaries are in compliance with all
applicable federal, state, local and foreign statutes, laws (including,
without limitation, common law), judicial decisions, regulations,
ordinances, rules, judgments, orders and codes respecting employment,
employment practices, labor, terms and conditions of employment and wages
and hours, and no work stoppage or labor strike against Xxxxxxxxxxx.xxx and
its Subsidiaries is pending or threatened, nor is Xxxxxxxxxxx.xxx or its
Subsidiaries involved in or threatened with any labor dispute, grievance or
litigation relating to labor matters involving any employees, in each case
except as would not, individually or in the aggregate, have a Material
Adverse Effect on Xxxxxxxxxxx.xxx. There are no suits, actions, disputes,
claims (other than routine claims for benefits), investigations or audits
pending or, to the knowledge of Xxxxxxxxxxx.xxx, threatened in connection
with any Xxxxxxxxxxx.xxx Employee Plan, but excluding any of the foregoing
which would not have a Material Adverse Effect on Xxxxxxxxxxx.xxx.
SECTION 4.13 Compliance with Laws.
Neither Xxxxxxxxxxx.xxx nor any of its Subsidiaries has violated or is
in violation of any applicable provisions of any laws, statutes, ordinances
or regulations except for any violations that, individually or in the
aggregate, would not have a Material Adverse Effect on Xxxxxxxxxxx.xxx.
SECTION 4.14 Finders' or Advisors' Fees.
There is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of
Xxxxxxxxxxx.xxx or any of its Subsidiaries who might be entitled to any fee
or commission in connection with the transactions contemplated by this
Agreement.
SECTION 4.15 Environmental Matters.
Except for matters which, individually or in the aggregate, would not
have a Material Adverse Effect on Xxxxxxxxxxx.xxx, (i) no written notice,
notification, demand, request for information, citation, summons, complaint
or order has been received by, and no investigation, action, claim, suit,
proceeding or review is pending or, to the knowledge of Xxxxxxxxxxx.xxx or
any of its Subsidiaries, threatened by any Person against, Xxxxxxxxxxx.xxx
or any of its Subsidiaries, and no penalty has been assessed against
Xxxxxxxxxxx.xxx or any of its Subsidiaries, in each case, with respect to
any matters relating to or arising out of any Environmental Law;
(ii) Xxxxxxxxxxx.xxx and its Subsidiaries are in compliance with all
Environmental Laws; and (iii) to the knowledge of Xxxxxxxxxxx.xxx, there
are no liabilities of or relating to Xxxxxxxxxxx.xxx or any of its
Subsidiaries relating to or arising out of any Environmental Law, and there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability.
SECTION 4.16 Intellectual Property Matters.
(a) Except as set forth in Schedule 4.16(a), Xxxxxxxxxxx.xxx owns or
has the valid right to use all material Intellectual Property, as currently
used in connection with the business of Xxxxxxxxxxx.xxx, including without
limitation all license agreements and other agreements granting rights
relating to any such Intellectual Property ("Xxxxxxxxxxx.xxx License
Agreements") to which Xxxxxxxxxxx.xxx is a party or is otherwise bound
(such Intellectual Property, together with the Xxxxxxxxxxx.xxx License
Agreements the "Xxxxxxxxxxx.xxx Intellectual Property").
(b) Schedule 4.16(b) sets forth, for the Xxxxxxxxxxx.xxx
Intellectual Property owned by Xxxxxxxxxxx.xxx a complete and accurate list
of all United States, foreign, international and state (i) patents and
patent applications, (ii) Trademark registrations and applications and
material unregistered Trademarks, (iii) Internet domain names, and (iv)
Copyright registrations and applications, and material unregistered
Copyrights including Content and Software, indicating for each, the
applicable jurisdiction, registration number (or application number), and
date issued (or date filed).
(c) Except as set forth on Schedule 4.16(c), the Xxxxxxxxxxx.xxx
Intellectual Property owned by Xxxxxxxxxxx.xxx is solely and exclusively
owned by Xxxxxxxxxxx.xxx free and clear of all Liens, and Xxxxxxxxxxx.xxx
is listed in the records of the appropriate United States, state or foreign
agency as the sole owner of record for each registration and application
for any Patent, Trademark, Internet domain name and Copyright that it owns.
Except as set forth on Schedule 4.16(c), all of the items set forth on
Schedule 4.16(b) are valid and subsisting, in full force and effect, and
have not been cancelled, expired, or abandoned. There is no pending or, to
Xxxxxxxxxxx.xxx's knowledge, threatened opposition, interference or
cancellation proceeding before any court or registration authority in any
jurisdiction against the items set forth on Schedule 4.16(b) or any other
Xxxxxxxxxxx.xxx Intellectual Property owned by Xxxxxxxxxxx.xxx or, to
Xxxxxxxxxxx.xxx's knowledge, against any Xxxxxxxxxxx.xxx Intellectual
Property not owned by Xxxxxxxxxxx.xxx.
(d) Except as set forth on Schedule 4.16(d), there are no
settlements, forebearances to xxx, consents, judgments, or orders or
similar obligations to which Xxxxxxxxxxx.xxx is a party or is otherwise
bound, which (i) materially restrict Xxxxxxxxxxx.xxx's rights to use any
Xxxxxxxxxxx.xxx Intellectual Property, (ii) materially restrict
Xxxxxxxxxxx.xxx's business in order to accommodate a third party's
Intellectual Property rights or (iii) permit third parties to use any
Intellectual Property which would otherwise materially infringe any
Xxxxxxxxxxx.xxx Intellectual Property. Xxxxxxxxxxx.xxx has not materially
licensed or sublicensed its rights in any Xxxxxxxxxxx.xxx Intellectual
Property other than pursuant to the Xxxxxxxxxxx.xxx License Agreements set
forth on Schedule 4.16(d) and no royalties, honoraria or other fees are
payable by for the use of or right to use any Xxxxxxxxxxx.xxx Intellectual
Property in connection with Xxxxxxxxxxx.xxx's business as currently
conducted, except pursuant to the Xxxxxxxxxxx.xxx License Agreements set
forth on Schedule 4.16(d).
(e) The Xxxxxxxxxxx.xxx License Agreements are valid and binding
obligations of Xxxxxxxxxxx.xxx and, to Xxxxxxxxxxx.xxx's knowledge, any
other parties thereto, enforceable in accordance with their terms, and
there exists no event or condition which will result in a violation or
breach of, or constitute (with or without due notice or lapse of time or
both) a default by Xxxxxxxxxxx.xxx under any such Xxxxxxxxxxx.xxx License
Agreement.
(f) To Xxxxxxxxxxx.xxx's knowledge, no Trade Secret material to the
business of Xxxxxxxxxxx.xxx as currently operated has been disclosed or
authorized to be disclosed to any third party, including any employee,
agent, contractor or other entity, other than pursuant to a non-disclosure
agreement that adequately protects Xxxxxxxxxxx.xxx's proprietary interests
in and to such Trade Secrets. To Xxxxxxxxxxx.xxx's knowledge, no party to
any non-disclosure agreement relating to such Trade Secrets is in breach
thereof.
(g) To Xxxxxxxxxxx.xxx's knowledge, the conduct of Xxxxxxxxxxx.xxx's
business as currently conducted and the Xxxxxxxxxxx.xxx Content do not
materially infringe upon any Intellectual Property owned or controlled by
any third party (either directly or indirectly such as through contributory
infringement or inducement to infringe) and is not libelous, slanderous,
defamatory, violative in any way of publicity or privacy rights, or
obscene. For purposes of this agreement "Xxxxxxxxxxx.xxx Content" means
any and all Content published or displayed in any form, including
electronically, by or on behalf of Xxxxxxxxxxx.xxx. Except as set forth on
Schedule 4.16(g), there are no claims or suits pending or, to
Xxxxxxxxxxx.xxx's knowledge, threatened, and Xxxxxxxxxxx.xxx has not
received any notice of a third party claim or suit, (i) alleging that
Xxxxxxxxxxx.xxx's activities or the conduct of its businesses infringes
upon or constitutes the unauthorized use of the Intellectual Property
rights of any third party, nor alleging libel, slander, defamation, or
other violation of a personal right, or (ii) challenging the ownership,
use, validity or enforceability of any Xxxxxxxxxxx.xxx Intellectual
Property.
(h) To Xxxxxxxxxxx.xxx's knowledge, no third party is materially
misappropriating, infringing, diluting, or otherwise violating any
Xxxxxxxxxxx.xxx Intellectual Property, and, except as set forth on Schedule
4.16(h), no such claims are pending against a third party by
Xxxxxxxxxxx.xxx.
(i) Without limitation to the representations and warranties set
forth above in this Section 4.16, Xxxxxxxxxxx.xxx represents and warrants
that there are no material restrictions on the Xxxxxxxxxxx.xxx Content
owned by Xxxxxxxxxxx.xxx.
SECTION 4.17 Year 2000 Compliance Matters.
Except as set forth on Schedule 4.17, to Xxxxxxxxxxx.xxx's knowledge
after reasonable investigation, all material Date Data and Date-Sensitive
Systems used by Xxxxxxxxxxx.xxx in connection with its business as
currently conducted, or in development or on order, are Year 2000
Compliant, or are reasonably expected to be Year 2000 Compliant in a timely
manner;
SECTION 4.18 Related-Party Transactions.
Except as set forth on Schedule 4.18, no employee, officer, or
director of Xxxxxxxxxxx.xxx or member of his or her immediate family is
currently indebted to Xxxxxxxxxxx.xxx or any of its Subsidiaries, nor are
Xxxxxxxxxxx.xxx or any of its Subsidiaries indebted (or committed to make
loans or extend or guarantee credit) to any of such individuals. Except as
set forth on Schedule 4.18, to Xxxxxxxxxxx.xxx's knowledge, as of the date
hereof none of such persons has any direct or indirect ownership interest
in any firm or corporation with which Xxxxxxxxxxx.xxx or any of its
Subsidiaries are affiliated or any firm or corporation that competes with
Xxxxxxxxxxx.xxx, except that employees, officers, or directors of
Xxxxxxxxxxx.xxx or any of its Subsidiaries and members of their immediate
families may own stock in an amount not to exceed 5% of the outstanding
capital stock of publicly traded companies that may compete with
Xxxxxxxxxxx.xxx or XXX.xxx. As of the date hereof, except as set forth on
Schedule 4.18, and other than with respect to agreements for employment,
copies of which have been provided to CMJ, no employee, director, or
officer of Xxxxxxxxxxx.xxx or any of its Subsidiaries and no member of the
immediate family of any employee, officer, or director of Xxxxxxxxxxx.xxx
or any of its Subsidiaries is directly or indirectly interested in any
material contract with Xxxxxxxxxxx.xxx. or any of its Subsidiaries.
SECTION 4.19 Title to Property and Assets.
As of the date hereof, Xxxxxxxxxxx.xxx and its Subsidiaries own their
property and assets free and clear of all Liens, except such Liens that
arise in the ordinary course of business and do not materially impair
Xxxxxxxxxxx.xxx's or its Subsidiaries' ownership or use of such property or
assets. With respect to the property and assets it leases,
Xxxxxxxxxxx.xxx and each of its Subsidiaries currently is in compliance
with such leases and, to Xxxxxxxxxxx.xxx's knowledge, holds a valid
leasehold interest free of any Liens.
SECTION 4.20 Insurance.
Xxxxxxxxxxx.xxx has, and its Subsidiaries have, in full force and
effect fire and casualty insurance policies, with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow
Xxxxxxxxxxx.xxx and its Subsidiaries to replace any material assets or
properties of Xxxxxxxxxxx.xxx and its Subsidiaries that might be damaged or
destroyed. Set forth on Schedule 4.20 is a list of all insurance policies
maintained by or for the benefit of Xxxxxxxxxxx.xxx and its Subsidiaries
and their respective directors, officers, employees or agents.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF XXX.XXX
XXX.xxx represents and warrants to Xxxxxxxxxxx.xxx and CMJ that:
SECTION 5.1 Corporate Existence and Power.
XXX.xxx is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has all corporate
powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except for
those the absence of which would not, individually or in the aggregate,
have a Material Adverse Effect on XXX.xxx. Since the date of its
incorporation, XXX.xxx has not engaged in any activities other than in
connection with or incidental to its formation and this Agreement or as
contemplated by this Agreement. XXX.xxx has heretofore made available to
each of Xxxxxxxxxxx.xxx and CMJ true and complete copies of XXX.xxx's
certificate of incorporation and by-laws as currently in effect.
SECTION 5.2 Corporate Authorization.
(a) The execution, delivery and performance by XXX.xxx of this
Agreement, and the consummation by XXX.xxx of the transactions contemplated
hereby are within the corporate powers of XXX.xxx and have been duly
authorized by all necessary corporate action, including the required
approval of XXX.xxx's stockholders. Assuming due authorization, execution
and delivery of this Agreement by each of Xxxxxxxxxxx.xxx and CMJ, this
Agreement constitutes a valid and binding agreement of XXX.xxx, enforceable
against XXX.xxx in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles. The shares of XXX.xxx Common Stock
issued pursuant to the Merger, when issued in accordance with the terms
hereof, will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights.
(b) XXX.xxx's Board of Directors has (i) determined that this
Agreement and the transactions contemplated hereby (including the Merger)
are fair to and in the best interests of its stockholders, (ii) approved
this Agreement and the transactions contemplated hereby (including the
Merger), and (iii) resolved to recommend that its stockholders vote for the
approval and adoption of this Agreement and the Merger and has submitted
this Agreement to such Stockholders for their approval and adoption.
(c) All of XXX.xxx's stockholders have voted for the approval and
adoption of this Agreement and the Merger.
SECTION 5.3 Governmental Authorization.
(a) The execution, delivery and performance by XXX.xxx of this
Agreement, and the consummation by XXX.xxx of the transactions contemplated
hereby and thereby require no action by or in respect of, or filing with,
any governmental body, agency, official or authority other than (a) the
filing of a certificate of merger in connection with the Merger in
accordance with Delaware Law and (b) other actions or filings which if not
taken or made would not, individually or in the aggregate, have a Material
Adverse Effect on XXX.xxx or prevent or materially delay XXX.xxx's
consummation of the Merger.
SECTION 5.4 Non-Contravention.
The execution, delivery and performance by XXX.xxx of this Agreement,
and the consummation by XXX.xxx of the transactions contemplated hereby do
not and will not (a) contravene or conflict with the certificate of
incorporation or by-laws of XXX.xxx, or (b) assuming compliance with the
matters referred to in Section 3.3 and 4.3, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to XXX.xxx.
SECTION 5.5 Capitalization.
The authorized capital stock of XXX.xxx consists of 3,000,000 shares
of XXX.xxx Common Stock, par value $.01 per share and 500,000 shares of
preferred stock, par value $.01 per share (of which 2,600 shares are
designated Series A Preferred Stock). As of the date hereof there are
outstanding 100 shares of XXX.xxx Common Stock and no shares of Series A
Preferred and no other shares of capital stock or other voting securities
of XXX.xxx were outstanding. Each of Xxxxxxxxxxx.xxx and CMJ owns 50 of
such outstanding shares of XXX.xxx Common Stock. All outstanding shares of
capital stock of XXX.xxx have been duly authorized and validly issued and
are fully paid and nonassessable. Except as contemplated by Section 8.3
hereof and except for shares of XXX.xxx Common Stock to be issued in
connection with the Merger, the Xxxxxxxx Options to be issued in connection
with the Merger, and the shares of Series A Preferred to be issued pursuant
to the Preferred Stock Purchase Agreement, as of the date hereof, there are
no outstanding options, warrants or other rights to acquire from XXX.xxx,
and no preemptive or similar rights, subscription or other rights,
convertible or exchangeable securities, agreements, arrangements, or
commitments of any character, relating to the capital stock of XXX.xxx,
obligating XXX.xxx to issue, transfer or sell any capital stock, voting
securities or securities convertible into or exchangeable for capital stock
or voting securities of XXX.xxx or obligating XXX.xxx to grant, extend or
enter into any such option, warrant, subscription or other right,
convertible or exchangeable security, agreement, arrangement or commitment
(each of the foregoing, a "XXX.xxx Convertible Security"). There are no
outstanding obligations of XXX.xxx or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of
XXX.xxx and of any XXX.xxx Convertible Securities, except as contemplated
by Section 1.5 hereof and the Escrow Agreement.
ARTICLE VI
COVENANTS OF CMJ
CMJ agrees that:
SECTION 6.1 Conduct of CMJ.
From the date of this Agreement until the Effective Time, CMJ and its
Subsidiaries shall, subject to the last sentence of this Section 6.1,
conduct their business in the ordinary course consistent with past practice
and shall use their commercially reasonable best efforts to preserve intact
their business organizations and relationships with third parties. Without
limiting the generality of the foregoing and subject to the last sentence
of this Section 6.1, without the prior written consent of Xxxxxxxxxxx.xxx
(which consent shall not be unreasonably withheld), from the date of this
Agreement until the Effective Time:
(a) CMJ will not, and will not permit any of its Subsidiaries to,
adopt or propose any change in its certificate of incorporation or by-laws;
(b) CMJ will not, and will not permit any Subsidiary of CMJ to,
adopt a plan or agreement of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of CMJ or any of its Subsidiaries;
(c) CMJ will not, and will not permit any of its Subsidiaries to,
issue, sell, transfer, pledge, dispose of or encumber any shares of, or
securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital
stock of any class or series of CMJ or its any of its Subsidiaries other
than issuances of CMJ Common Stock to RMG pursuant to the Stock Purchase
Agreement;
(d) CMJ will not (i) split, combine, subdivide or reclassify its
outstanding shares of capital stock, or (ii) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with
respect to its capital stock;
(e) CMJ will not, and will not permit any of its Subsidiaries to,
redeem, purchase or otherwise acquire directly or indirectly any shares of
capital stock of CMJ or any subsidiaries of CMJ (other than a wholly-owned
subsidiary);
(f) CMJ will not amend the terms (including the terms relating to
accelerating the vesting or lapse of repurchase rights or obligations) of
any employee or director stock options or other stock based awards;
(g) CMJ will not, and will not permit any of its Subsidiaries to,
(i) grant any severance or termination pay to (or amend any such existing
arrangement with) any director, officer or employee of CMJ or any of its
Subsidiaries, (ii) enter into any employment, deferred compensation or
other similar agreement (or any amendment to any such existing agreement)
with any director, officer or employee of CMJ or any of its Subsidiaries,
(iii) increase any benefits payable under any existing severance or
termination pay policies or employment agreements, (iv) increase (or amend
the terms of) any compensation, bonus or other benefits payable to
directors, officers or employees of CMJ or any of its Subsidiaries or (v)
permit any director, officer or employee who is not already a party to an
agreement or a participant in a plan providing benefits upon or following a
"change in control" to become a party to any such agreement or a
participant in any such plan;
(h) CMJ will not, and will not permit any of its Subsidiaries to,
acquire any assets or property of any other Person except in the ordinary
course of business consistent with past practice;
(i) CMJ will not, and will not permit any of its Subsidiaries to,
sell, lease, license or otherwise dispose of any assets or property except
pursuant to existing contracts or commitments and except in the ordinary
course of business consistent with past practice;
(j) Except for any such change which is required by reason of a
concurrent change in GAAP, CMJ will not, and will not permit any of its
Subsidiaries to, change any method of accounting or accounting practice
used by it;
(k) CMJ will not, and will not permit any of its Subsidiaries to,
enter into any joint venture, partnership or other similar arrangement;
(l) CMJ will not, and will not permit any of its Subsidiaries to,
take any action that would make any representation or warranty of CMJ
hereunder inaccurate in any material respect at, or as of any time prior
to, the Effective Time;
(m) CMJ will not make or change any material Tax election, settle
any material audit or file any material amended Tax Returns, except in the
ordinary course of business consistent with past practice;
(n) CMJ will not enter into, amend or waive any provisions of any
standstill agreement; and
(o) CMJ will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing.
Notwithstanding the foregoing, from the date hereof until the Effective
Time, CMJ and its Subsidiaries may (x) make acquisitions of property,
assets or any business, (y) sell, transfer or otherwise dispose of assets
or property of CMJ or any of its Subsidiaries or (z) enter into any joint
venture, partnership or other similar arrangements so long as CMJ has
obtained the prior written consent of Xxxxxxxxxxx.xxx prior to the
consummation of any transaction referred to in the foregoing clauses (x),
(y) or (z).
ARTICLE VII
COVENANTS OF XXXXXXXXXXX.XXX
Xxxxxxxxxxx.xxx agrees that:
SECTION 7.1 Conduct of Xxxxxxxxxxx.xxx.
From the date of this Agreement until the Effective Time,
Xxxxxxxxxxx.xxx and its Subsidiaries shall, subject to the last sentence of
this Section 7.1, conduct their business in the ordinary course consistent
with past practice and shall use their commercially reasonable best efforts
to preserve intact their business organizations and relationships with
third parties. Without limiting the generality of the foregoing and
subject to the last sentence of this Section 7.1, without the prior written
consent of CMJ (which consent shall not be unreasonably withheld) from the
date of this Agreement until the Effective Time:
(a) Xxxxxxxxxxx.xxx will not, and will not permit any of its
Subsidiaries to, adopt or propose any change in its certificate of
incorporation or by-laws;
(b) Xxxxxxxxxxx.xxx will not, and will not permit any of its
Subsidiaries to, adopt a plan or agreement of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of Xxxxxxxxxxx.xxx or any of its
Subsidiaries;
(c) Xxxxxxxxxxx.xxx will not, and will not permit any of its
Subsidiaries to, issue, sell, transfer, pledge, dispose of or encumber any
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares
of capital stock of any class or series of Xxxxxxxxxxx.xxx or any of its
Subsidiaries;
(d) Xxxxxxxxxxx.xxx will not (i) split, combine, subdivide or
reclassify its outstanding shares of capital stock or (ii) declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock;
(e) Xxxxxxxxxxx.xxx will not, and will not permit any of its
Subsidiaries to, redeem, purchase or otherwise acquire directly or
indirectly any shares of Xxxxxxxxxxx.xxx's capital stock of Xxxxxxxxxxx.xxx
or any subsidiary of Xxxxxxxxxxx.xxx (other than a wholly-owned subsidiary);
(f) Xxxxxxxxxxx.xxx will not amend the terms (including the terms
relating to accelerating the vesting or lapse of repurchase rights or
obligations) of any employee or director stock options or other stock based
awards;
(g) Xxxxxxxxxxx.xxx will not, and will not permit any of its
Subsidiaries to, (i) grant any severance or termination pay to (or amend
any such existing arrangement with) any director, officer or employee of
Xxxxxxxxxxx.xxx or any of its Subsidiaries, (ii) enter into any employment,
deferred compensation or other similar agreement (or any amendment to any
such existing agreement) with any director, officer or employee of
Xxxxxxxxxxx.xxx or any of its Subsidiaries, (iii) increase any benefits
payable under any existing severance or termination pay policies or
employment agreements, (iv) increase (or amend the terms of) any
compensation, bonus or other benefits payable to directors, officers or
employees of Xxxxxxxxxxx.xxx or any of its Subsidiaries or (v) permit any
director, officer or employee who is not already a party to an agreement or
a participant in a plan providing benefits upon or following a "change in
control" to become a party to any such agreement or a participant in any
such plan;
(h) Xxxxxxxxxxx.xxx will not, and will not permit any of its
Subsidiaries to, acquire a material amount of assets or property of any
other Person except in the ordinary course of business consistent with past
practice;
(i) Xxxxxxxxxxx.xxx will not, and will not permit any of its
Subsidiaries to, sell, lease, license or otherwise dispose of any material
amount of assets or property except pursuant to existing contracts or
commitments and except in the ordinary course of business consistent with
past practice;
(j) Except for any such change which is not material or which is
required by reason of a concurrent change in GAAP, Xxxxxxxxxxx.xxx will
not, and will not permit any Subsidiary of Xxxxxxxxxxx.xxx to, change any
method of accounting or accounting practice used by it;
(k) Xxxxxxxxxxx.xxx will not, and will not permit any of its
Subsidiaries to, enter into any material joint venture, partnership or
other similar arrangement;
(l) Xxxxxxxxxxx.xxx will not, and will not permit any of its
Subsidiaries to, take any action that would make any representation or
warranty of Xxxxxxxxxxx.xxx hereunder inaccurate in any material respect
at, or as of any time prior to, the Effective Time;
(m) Xxxxxxxxxxx.xxx will not make or change any material Tax
election, settle any material audit or file any material amended Tax
Returns, except in the ordinary course of business, consistent with past
practices;
(n) Xxxxxxxxxxx.xxx will not enter into, amend or waive any
provisions of any standstill agreement; and
(o) Xxxxxxxxxxx.xxx will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
Notwithstanding the foregoing, from the date hereof until the Effective
Time, Xxxxxxxxxxx.xxx and its Subsidiaries may (x) make acquisitions of
property, assets or any business, (y) sell, transfer or otherwise dispose
of assets or property of Xxxxxxxxxxx.xxx or any of its Subsidiaries or (z)
enter into any joint venture, partnership or other similar arrangement so
long as Xxxxxxxxxxx.xxx has obtained the prior written consent of CMJ prior
to the consummation of any transaction referred to in the foregoing clauses
(x), (y) or (z).
ARTICLE VIII
COVENANTS OF XXX.XXX
SECTION 8.1 Conduct of XXX.xxx.
From the date of this Agreement until the Effective Time, XXX.xxx
shall not (i) conduct any business or engage in any activities, (ii) enter
into any contract or agreement, or (iii) consummate any transaction, except
that from the date hereof until the Effective Time, XXX.xxx may (i) conduct
any business or engage in any activity incidental to its incorporation or
contemplated or required under this Agreement, (ii) enter into this
Agreement or any other contract or agreement contemplated by this
Agreement, (iii) consummate any transaction contemplated or required under
this Agreement, including, but not limited to, the Merger and the issuance
and sale of the Series A Preferred Stock. Notwithstanding anything to the
contrary contained herein, XXX.xxx may (x) make acquisitions of property,
assets or any business, (y) sell, transfer or otherwise dispose of assets
or property of XXX.xxx or any of its Subsidiaries or (z) enter into any
joint venture, partnership or other similar arrangement so long as XXX.xxx
has obtained the prior written consent of each of Xxxxxxxxxxx.xxx and CMJ
prior to the consummation of any transaction referred to in the foregoing
clauses (x), (y) or (z).
SECTION 8.2 Director and Officer Liability.
(a) XXX.xxx shall indemnify and hold harmless, to the fullest extent
permitted under applicable law, the individuals who on or prior to the
Effective Time were officers, directors and employees of XXX.xxx with
respect to all acts or omissions by them in their capacities as such or
taken at the request of XXX.xxx, CMJ or Xxxxxxxxxxx.xxx at any time on or
prior to the Effective Time. Following the Effective Time, XXX.xxx shall
indemnify its directors and officers to the fullest extent permitted by
Delaware Law.
(b) As soon as practicable following the Effective Time, XXX.xxx
shall procure an officers' and directors' liability insurance policy on
customary terms with respect to coverage and amounts.
SECTION 8.3 Establishment of Option Plan.
(a) Subject to compliance with all applicable securities laws, as
soon as practicable following the Effective Time, XXX.xxx will establish an
employee stock option plan, providing for the vesting of options over a
four-year period following the date of grant.
(b) A number of shares of XXX.xxx Common Stock equal to 13% of the
outstanding shares of XXX.xxx Common Stock on a fully diluted basis
immediately following the Closing shall be reserved for issuance upon
exercise of stock options that may be granted solely to employees and
directors of XXX.xxx.
SECTION 8.4 Employment Agreements.
At the Effective Time, XXX.xxx shall enter into employment agreements
with Xxxxxx Xxxxx and Xxxx Xxxxxxxx substantially in the form of the
agreements attached hereto as Exhibit B-1 and B-2, respectively.
ARTICLE IX
COVENANTS OF XXX.XXX, CMJ AND XXXXXXXXXXX.XXX
The parties hereto agree that:
SECTION 9.1 Best Efforts.
(a) XXX.xxx, CMJ and Xxxxxxxxxxx.xxx shall each cooperate with the
others and use (and shall cause their respective Subsidiaries to use) their
respective commercially reasonable best efforts to promptly (i) take or
cause to be taken all necessary actions, and do or cause to be done all
things, necessary, proper or advisable under this Agreement and applicable
laws to consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including, without
limitation, preparing and filing promptly and fully all documentation to
effect all necessary filings, notices, petitions, statements,
registrations, submissions of information, applications and other documents
and (ii) obtain all approvals, consents, registrations, permits,
authorizations and other confirmations required to be obtained from any
third party necessary, proper or advisable to consummate the Merger and the
other transactions contemplated by this Agreement.
SECTION 9.2 Access to Information.
Subject to the terms set forth in that certain Non-Disclosure
Agreement among RMG, Xxxxxxxxxxx.xxx, CMJ and certain stockholders of CMJ,
dated September 10, 1999 (the "Non-Disclosure Agreement"), which is
incorporated by reference herein, respecting confidentiality and certain
other matters, each of Xxxxxxxxxxx.xxx and CMJ shall upon reasonable notice
afford each other's employees, auditors, legal counsel and other authorized
representatives, all reasonable opportunity and access during normal
business hours to inspect, investigate, audit and interview the respective
assets, liabilities, contracts, each of the other's operations, business,
employees and officers before the Closing. These activities shall be
conducted in a reasonable manner during regular business hours using
reasonable efforts to minimize interference with each party's respective
business operations. Xxxxxxxxxxx.xxx and CMJ shall promptly and completely
provide all disclosures requested by the other parties or their agents.
SECTION 9.3 Public Announcements.
At the proper time, as determined by the parties hereto in good faith
consultation with each other, the parties hereto shall issue a press
release or make a public statement concerning the Merger and the related
transactions containing disclosure which is mutually agreeable to the
parties; provided, that prior to the issuance of a press release, none of
the parties hereto shall make any announcement of such transaction or
disclose the existence of and/or particulars of any negotiations related
thereto, including, but not limited to, the terms, conditions,
consideration to be paid or other facts related to the Merger and the
related transactions, except to the extent permitted by the Non-Disclosure
Agreement. Notwithstanding the foregoing, RMG may make such disclosures as
may be required (based on the advice of counsel) due to its status as a
public company, after good faith consultation with the other parties
hereto.
SECTION 9.4 Further Assurances.
At and after the Effective Time, the officers and directors of XXX.xxx
will be authorized to execute and deliver, in the name and on behalf of
Xxxxxxxxxxx.xxx or CMJ, any deeds, bills of sale, assignments or assurances
and to take any other actions and do any other things, in the name and on
behalf of Xxxxxxxxxxx.xxx or CMJ, reasonably necessary to vest, perfect or
confirm of record or otherwise in XXX.xxx any and all right, title and
interest in, to and under any of the rights, properties or assets of
Xxxxxxxxxxx.xxx or CMJ acquired or to be acquired by XXX.xxx as a result
of, or in connection with, the Merger.
SECTION 9.5 Notices of Certain Events.
(a) Each of CMJ and Xxxxxxxxxxx.xxx shall promptly notify the other
party of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement if the failure of
CMJ or Xxxxxxxxxxx.xxx, as the case may be, to obtain such consent
would result in a Material Adverse Effect on CMJ or Xxxxxxxxxxx.xxx,
as applicable; and
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement.
(b) CMJ and Xxxxxxxxxxx.xxx shall promptly notify the other party of
any actions, suits, claims, investigations or proceedings commenced or, to
the best of its knowledge threatened against, relating to or involving or
otherwise affecting such party or any of its Subsidiaries which relate to
the consummation of the transactions contemplated by this Agreement.
SECTION 9.6 No Solicitation.
Each of Xxxxxxxxxxx.xxx and CMJ shall not, and shall cause its
respective Subsidiaries, officers, directors, employees, investment
bankers, attorneys, accountants or other agents or affiliates not to,
directly or indirectly, initiate, solicit, encourage, negotiate, have
discussions regarding or otherwise facilitate the submission by a third
party of, or negotiate or enter into any agreement with a third party with
respect to, (i) a proposal to acquire, directly or indirectly, any of the
capital stock of Xxxxxxxxxxx.xxx or CMJ or substantially all of the assets
of Xxxxxxxxxxx.xxx or CMJ or the business of Xxxxxxxxxxx.xxx or CMJ (other
than as contemplated hereby) or (ii) any financing transaction involving or
for the benefit of Xxxxxxxxxxx.xxx or CMJ (other than (x) as contemplated
by the Preferred Stock Purchase Agreement or (y) any financing provided by
RMG or any affiliate of RMG). Each of Xxxxxxxxxxx.xxx and CMJ shall notify
in writing each of the other parties hereto if any such inquiries or
proposals are received by, any such information is requested from, or any
such negotiations or discussions are sought with, either of Xxxxxxxxxxx.xxx
or CMJ. Such written notice shall include the identity of the party
making, and the terms of (including delivery of copies thereof), any
inquiry or proposal relating to any matter set forth in this paragraph.
The parties shall develop a mutually acceptable response to any such
inquiry, proposal or request.
SECTION 9.7 Takeover Statutes.
If any anti-takeover or similar statute or regulation is or may become
applicable to the transactions contemplated hereby, each of the parties and
its Board of Directors shall grant such approvals and take all such actions
as are legally permissible so that the transactions contemplated hereby may
be consummated as promptly as practicable on the terms contemplated hereby
and otherwise act to eliminate or minimize the effects of any such statute
or regulation on the transactions contemplated hereby.
SECTION 9.8 Headquarters.
After the Effective Time, the headquarters of XXX.xxx shall be located
at 565 Fifth Avenue, 29th Floor, in New York, New York.
ARTICLE X
CONDITIONS TO THE MERGER
SECTION 10.1 Conditions to the Obligations of Each Party.
The obligations of XXX.xxx, Xxxxxxxxxxx.xxx and CMJ to consummate the
Merger are subject to the satisfaction (or, to the extent legally
permissible, waiver) of the following conditions:
(a) this Agreement and the Merger shall have been approved and
adopted by the respective stockholders of XXX.xxx, Xxxxxxxxxxx.xxx and CMJ
in accordance with Delaware Law and New York Law;
(b) all governmental approvals or notifications required to
consummate the transactions contemplated hereby shall have been obtained;
(c) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit or enjoin the
consummation of the Merger;
(d) XXX.xxx and each of the stockholders of Xxxxxxxxxxx.xxx and CMJ
immediately prior to the Merger shall enter into a stockholders agreement
(the "Stockholders Agreement") dated as of the Effective Time, in the form
attached hereto as Exhibit C;
(e) the closing of the purchase of CMJ Common Stock by RMG pursuant
to the Common Stock Purchase Agreement shall have occurred immediately
prior to the Effective Time;
(f) the closing of the purchase of $7 million aggregate liquidation
preference of Series A Preferred Stock by RMG pursuant to the Preferred
Stock Purchase Agreement shall have occurred contemporaneous with or is to
occur immediately following the Effective Time;
(g) the Escrow Agreement shall have been duly executed and
delivered by the Escrow Agent and all of the stockholders of each of CMJ
and Xxxxxxxxxxx.xxx immediately prior to the Effective Time (the
"Stockholders") and the Stockholders shall have delivered to the Escrow
Agent executed and undated stock powers transferring to XXX.xxx all of such
Stockholders' rights, title and interest in and to the subject shares of
XXX.xxx Common Stock and Alex Ellerson shall have delivered to the Escrow
Agent an option certificate evidencing the Ellerson Options, together with
an appropriate instrument of assignment transferring to XXX.xxx all of Alex
Ellerson's rights, title and interest in and to the options to purchase
XXX.xxx Common Stock, collectively representing 30% of the aggregate Merger
Consideration, as set forth in the Escrow Agreement;
(h) all of the Stockholders and Alex Ellerson shall have delivered
to XXX.xxx an Investment Letter in the form attached hereto as Exhibit D
("Investment Letter"); and
(i) neither CMJ nor Xxxxxxxxxxx.xxx shall have any reason to believe
that any conditions exist that could reasonably be expected to prevent the
Merger from qualifying as a tax-free reorganization (under Section 368 of
the Code) or exchange (under Section 351 of the Code).
SECTION 10.2 Conditions to the Obligations of Xxxxxxxxxxx.xxx.
The obligations of Xxxxxxxxxxx.xxx to consummate the Merger are
subject to the satisfaction (or, to the extent legally permissible, waiver)
of the following further conditions:
(a) (i) CMJ shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) the representations and warranties of CMJ contained in
this Agreement shall be true and correct (without giving effect to any
limitation as to "materiality" or "Material Adverse Effect" set forth
therein) at and as of the Effective Time as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case
as of such earlier date), except where the failure of such representations
and warranties to be true and correct (without giving effect to any
limitation as to "materiality" or "Material Adverse Effect" set forth
therein) would not, individually or in the aggregate, have a Material
Adverse Effect on CMJ, and (iii) Xxxxxxxxxxx.xxx shall have received a
certificate signed by an executive officer of CMJ to the foregoing effect;
(b) there shall not be any statute, rule, regulation, injunction,
order or decree, enacted, enforced, promulgated, entered, issued or deemed
applicable to the Merger and the other transactions contemplated hereby (or
in the case of any statute, rule or regulation, awaiting signature or
reasonably expected to become law), by any court, government or
governmental authority or agency or legislative body, domestic, foreign or
supranational, that would, or would reasonably be expected to, have a
Material Adverse Effect on Xxxxxxxxxxx.xxx at or after the Effective Time;
(c) XXX.xxx shall have executed and delivered to the
Xxxxxxxxxxx.xxx Stockholders a Registration Rights Agreement in the form
attached hereto as Exhibit E (the "Registration Rights Agreement");
(d) The financial information with respect to CMJ shall have been
sufficiently reviewed and/or audited by CMJ's independent auditors such
that it will enable XXX.xxx to timely provide RMG with audited financial
statements for the applicable periods (assuming such availability with
respect to the Xxxxxxxxxxx.xxx financial information) in order for RMG to
comply with its reporting obligations under the federal securities laws and
the rules and regulations promulgated thereunder; and
(e) LTC shall have executed and delivered to XXX.xxx an agreement,
in form and substance satisfactory to Xxxxxxxxxxx.xxx, whereby LTC
acknowledges and agrees that the engagement letter, dated as of January 8,
1998, shall automatically terminate and be discharged promptly following
the Effective Time and shall not be binding on and shall have no force or
effect on XXX.xxx, except to the limited extent set forth in such
agreement.
SECTION 10.3 Conditions to the Obligations of CMJ
The obligations of CMJ to consummate the Merger is subject to the
satisfaction (or, to the extent legally permissible, waiver) of the
following further conditions:
(a) (i) Xxxxxxxxxxx.xxx shall have performed in all material
respects all of its obligations hereunder required to be performed by it at
or prior to the Effective Time, (ii) the representations and warranties of
Xxxxxxxxxxx.xxx contained in this Agreement shall be true and correct
(without giving effect to any limitation as to "materiality" or "Material
Adverse Effect" set forth herein) at and as of the Effective Time as if
made at and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such earlier date, except where the
failure of such representations to be true and correct (without giving
effect to any limitation as to "materiality" or "Material Adverse Effect"
set forth herein) would not, individually as in the aggregate, have a
Material Adverse Effect on Xxxxxxxxxxx.xxx and (iii) CMJ shall have
received a certificate signed by an executive officer of Xxxxxxxxxxx.xxx to
the foregoing effect;
(b) there shall not be any statute, rule, regulation, injunction,
order or decree, enacted, enforced, promulgated, entered, issued or deemed
applicable to the Merger and the other transactions contemplated hereby (or
in the case of any statute, rule or regulation, awaiting signature or
reasonably expected to become law), by any court, government or
governmental authority or agency or legislative body, domestic, foreign or
supranational, that would, or would reasonably be expected to, have a
Material Adverse Effect on CMJ at or after the Effective Time; and
(c) XXX.xxx shall have executed and delivered to the CMJ
Stockholders the Registration Rights Agreement.
SECTION 10.4 Conditions to the Obligations of XXX.xxx.
The obligations of XXX.xxx to consummate the Merger is subject to the
satisfaction (or, to the extent legally permissible, waiver) of the
following further conditions:
(a) (i) each of CMJ and Xxxxxxxxxxx.xxx shall have performed in all
material respects all of its obligations hereunder required to be performed
by it at or prior to the Effective Time, (ii) the representations and
warranties of CMJ and Xxxxxxxxxxx.xxx contained in this Agreement shall be
true and correct (without giving effect to any limitation as to
"materiality" or "Material Adverse Effect" set forth herein) at and as of
the Effective Time as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such earlier
date, except where the failure of such representations to be true and
correct (without giving effect to any limitation as to "materiality" or
"Material Adverse Effect" set forth herein) would not, individually as in
the aggregate, have a Material Adverse Effect on CMJ and Xxxxxxxxxxx.xxx
and (iii) XXX.xxx shall have received a certificate signed by an executive
officer of CMJ and Xxxxxxxxxxx.xxx to the foregoing effect; and
(b) there shall not be any statute, rule, regulation, injunction,
order or decree, enacted, enforced, promulgated, entered, issued or deemed
applicable to the Merger and the other transactions contemplated hereby (or
in the case of any statute, rule or regulation, awaiting signature or
reasonably expected to become law), by any court, government or
governmental authority or agency or legislative body, domestic, foreign or
supranational, that would, or would reasonably be expected to, have a
Material Adverse Effect on CMJ and Xxxxxxxxxxx.xxx at or after the
Effective Time.
ARTICLE XI
TERMINATION
SECTION 11.1 Termination.
This Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time:
(a) by mutual written consent of XXX.xxx, CMJ and Xxxxxxxxxxx.xxx;
(b) by either CMJ or Xxxxxxxxxxx.xxx, if the Merger has not been
consummated as of the three-month anniversary hereof (the "End Date");
provided, however, that if (x) the Effective Time has not occurred by such
date by reason of nonsatisfaction of any of the conditions set forth in
Section 10.1(b), 10.1(c), 10.2(b), 10.3(b) and 10.4(b) and (y) all other
conditions set forth in Article 10 have heretofore been satisfied or waived
or are then capable of being satisfied, 60 days after such three- month
anniversary (which shall then be the "End Date"); provided, further that at
the End Date the right to terminate this Agreement under this Section
11.1(b) shall not be available to any party whose failure to fulfill in any
material respect any obligation under this Agreement has caused or resulted
in the failure of the Effective Time to occur on or before the End Date;
(c) by either CMJ or Xxxxxxxxxxx.xxx, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining CMJ,
XXX.xxx or Xxxxxxxxxxx.xxx from consummating the Merger is entered and such
judgment, injunction, order or decree shall become final and nonappealable;
provided that the terminating party has fulfilled its obligations under
Section 9.1; or
(d) by either CMJ or Xxxxxxxxxxx.xxx, if there shall have been a
breach by the other or of XXX.xxx of any of its representations,
warranties, covenants or obligations contained in this Agreement, which
breach would result in the failure to satisfy one or more of the conditions
set forth in Section 10.2(a) (in the case of a breach by CMJ) or Section
10.3(a) (in the case of a breach by Xxxxxxxxxxx.xxx), and in any such case
such breach shall be incapable of being cured or, if capable of being
cured, shall not have been cured within 30 days after written notice
thereof shall have been received by the party alleged to be in breach.
The party desiring to terminate this Agreement pursuant to clause (b),
(c) or (d) of this Section 11.1 shall give written notice of such
termination to the other parties in accordance with Section 12.1,
specifying the provision hereof pursuant to which such termination is
effected.
SECTION 11.2 Survival.
If this Agreement is terminated pursuant to Section 11.1, this
Agreement shall become void and of no effect with no liability on the part
of any party hereto, except that (a) the agreements contained in this
Section 11.2, and in Sections 9.2 and 12.4, shall survive the termination
hereof and (b) no such termination shall relieve any party of any liability
or damages resulting from any willful breach by that party of this
Agreement.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Notices.
All notices, requests and other communications to any party hereunder
shall be in writing (including facsimile or similar writing) and shall be
given,
if to CMJ, to:
College Media, Inc.
11 Middle Neck Road
Suite 400
Great Neck, New York 11021-2301
Attention: Alex Ellerson, Esq., General Counsel
Facsimile No.: (516) 466-7471
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: David H. Landau, Esq.
Facsimile No.: (212) 940-8776
if to Xxxxxxxxxxx.xxx, to:
Xxxxxxxxxxx.xxx, Inc.
565 Fifth Avenue, 29th Floor
New York, New York 10017
Attention: Robert C. Lewis, General Counsel
Facsimile No.: (212) 856-9122
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Gregory A. Fernicola, Esq.
Facsimile No.: (212) 735-2000
if to XXX.xxx, to:
XXX.xxx, Inc.
565 Fifth Avenue, 29th Floor
New York, New York 10017
Attention: Seth Tapper
Facsimile No.: (212) 856-9081
with copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Gregory A. Fernicola, Esq.
Facsimile No.: (212) 735-2000
and
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Attention: David H. Landau, Esq.
Facsimile No.: (212) 940-8776
or such other address or facsimile number as such party may hereafter
specify for the purpose by notice to the other parties. Each such notice,
request or other communication shall be effective (a) if given by
facsimile, when such facsimile is transmitted to the facsimile number
specified in this Section and the appropriate facsimile confirmation is
received or (b) if given by any other means, when delivered at the address
specified in this Section.
SECTION 12.2 Survival of Representations and Warranties.
The representations and warranties contained (i) in Sections 3.1
through 3.5, 3.16(k), 4.1 through 4.5 and 5.1 through 5.5 hereof shall
survive the Effective Time for the period of the statute of limitations
applicable to a claim for breach of such representations and warranties,
(ii) in Sections 3.8, 3.10, 3.13, 3.15, 3.17, 3.18, 3.20, 4.8, 4.10, 4.13,
4.15, 4.17, 4.18 and 4.20 hereof shall survive through the first
anniversary of the Effective Time and (iii) in all other sections of this
Agreement shall survive through the second anniversary of the Effective
Time.
At the end of the applicable survival period set forth above, XXX.xxx
and the former stockholders of Xxxxxxxxxxx.xxx and CMJ shall, without
further action as to such representations and warranties, be deemed to have
fully released each other from any and all responsibilities arising
thereunder unless during such period a party shall have notified another
party in writing of the nature and particulars of any claimed
misrepresentation or breach by the other party and that party's assertion
of an adjustment to the Merger Consideration.
SECTION 12.3 Amendments; No Waivers.
(a) Any provision of this Agreement (including the Exhibits and
Schedules hereto) may be amended or waived prior to the Effective Time, if,
and only if, such amendment or waiver is in writing and signed by all of
the parties hereto; provided that after the receipt of any such approval,
if any such amendment or waiver shall by law require further approval of
stockholders, the effectiveness of such amendment or waiver shall be
subject to the necessary stockholder approval.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
SECTION 12.4 Expenses.
(a) Except as otherwise provided for herein or otherwise agreed to
in writing by the parties, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated by this Agreement
shall be paid by the party incurring such cost or expense, except that
XXX.xxx shall reimburse RMG, Xxxxxxxxxxx.xxx and CMJ for their reasonable
out-of-pocket expenses (including counsel fees and expenses) in connection
with this Agreement and the transactions contemplated by this Agreement.
SECTION 12.5 Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
assigns; provided that no party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the consent
of the other parties hereto.
SECTION 12.6 Governing Law.
This Agreement shall be construed in accordance with and governed by
the law of the State of Delaware, without regard to principles of conflicts
of law.
SECTION 12.7 Jurisdiction.
Any suit, action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby may be brought in any federal or state
court located in the State of New York, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 12.1
shall be deemed effective service of process on such party.
SECTION 12.8 Waiver of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 12.9 Counterparts; Effectiveness.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement shall
become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.
SECTION 12.10 Entire Agreement.
This Agreement (including the Exhibits and Schedules) and the Non-
Disclosure Agreement constitute the entire agreement between the parties
with respect to the subject matter of this Agreement and supersede all
prior agreements and understandings, both oral and written, between the
parties with respect to the Merger. No provision of this Agreement or any
other agreement contemplated hereby is intended to confer on any Person
other than the parties hereto any rights or remedies.
SECTION 12.11 Captions.
The captions herein are included for convenience of reference only and
shall be ignored in the construction or interpretation hereof.
SECTION 12.12 Severability.
If any term, provision, covenant or restriction of this Agreement or
the application thereof becomes or is held by a court of competent
jurisdiction or arbitrator having jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the
fullest extent possible.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
XXXXXXXXXXX.XXX, INC.
By: /s/ Seth Tapper
--------------------------------
Name: Seth Tapper
Title: President
COLLEGE MEDIA, INC.
By: /s/ Robert Haber
--------------------------------
Name: Robert Haber
Title: President
XXX.XXX, INC.
By: /s/ Robert Haber
-------------------------------
Name: Robert Haber
Title: Chief Executive Officer
and President
