ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 31st day of March 2004, by and among SD&A Teleservices, Inc., a
Georgia corporation and wholly-owned subsidiary of the Xxxxxx X. Xxxxxxxx Arts
Center, Inc. ("Purchaser"), Media Services Group, Inc., a Nevada corporation
("MSGI"), and MKTG Teleservices, Inc., a California corporation ("Teleservices"
and, together with MSGI, the "Sellers").
W I T N E S S E T H:
WHEREAS, MSGI, through Teleservices, engages in the telemarketing and
telefundraising business (the "Business");
WHEREAS, MSGI owns all of the issued and outstanding shares of capital
stock of Teleservices;
WHEREAS, in reliance on and subject to the terms and conditions
contained herein, Purchaser desires to purchase, and the Sellers desire to
sell, all of their respective assets and business operations related to or
used in the Business, other than the Excluded Assets (as defined in
Paragraph 1.2); and
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Article 8 hereof;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. PURCHASE AND SALE OF ASSETS
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1.1. Purchase and Sale of Assets. Subject to the terms and conditions
hereinafter set forth, at the Closing provided for in Paragraph 2.1, the Sellers
shall sell, assign, transfer, convey, and deliver to Purchaser, and Purchaser
shall purchase and acquire from the Sellers, for the Final Purchase Price (as
defined in Paragraph 1.4), all of the business, assets, properties and rights of
the Sellers (other than the Excluded Assets) that are used in or related to the
Business, of every kind and nature, whether tangible or intangible, and whether
real, personal or mixed, wherever located, and whether or not carried or
reflected on the books and records of the Sellers, and whether or not carried in
the name of the Sellers (all of such business, assets, properties and rights
being referred to collectively herein as the "Assets"), free and clear of all
Liens, except for Permitted Liens.
The Assets specifically include:
(a) all of the Sellers' right, title and interest to all Contracts related
to the Business, other than any Contracts listed on Schedule 1.2 and
other than any Contracts with customers for which acknowledgement of
assignment in form and substance reasonably satisfactory to
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Purchaser is not received by Purchaser from the customer within
fourteen (14) days after the Closing Date (the "Assigned Contracts"),
all of which shall be, except as otherwise disclosed on Schedule
1.1(a), as of the Closing in full force and effect without any
existing defaults (or events or conditions which, with notice or lapse
of time or both, would constitute a default) thereunder (all of which
Assigned Contracts are listed on Schedule 1.1(a) hereto);
(b) all databases and all tangible and intangible personal property used in
connection with or relating to the Business regardless of where such
assets are located, including all software (including data and related
documentation), machinery, equipment, terminals and other computer
hardware and systems of the Sellers used in the Business;
(c) all customer lists, account records and other information and
documentation relating to the Business and all goodwill related to the
Business;
(d) all of the Intellectual Property Rights which are owned by, issued or
licensed to, or used by either Seller in connection with the Business,
other than any Intellectual Property Rights listed on Schedule 1.2,
including all trade and service names, trademarks, service marks (and
any abbreviations or variations of such names or marks) and copyrights
(whether registered or unregistered) associated with the Business, and
other proprietary rights, and all copies and tangible embodiments of
such Intellectual Property Rights (in whatever form or medium), along
with all income, royalties, damages and payments due or payable to a
Seller, including damages and payments for past, present or future
infringement or misappropriation and the right to xxx and recover for
past infringement or misappropriation), and any and all corresponding
rights (including applications for and licenses concerning any of the
foregoing) that, now or hereafter, may be secured throughout the world
(all of which are listed or summarized on Schedule 1.1(d) hereto or
Schedule 4.13 hereto);
(e) all inventory, office supplies, forms, labels, spare parts, and other
miscellaneous supplies and tangible personal property of either Seller
that relate to the Business;
(f) any insurance proceeds received by MSGI or Teleservices that relate to
claims of the Business or damages incurred to any of the Assets;
(g) such rights as the Sellers have to use and to assign their present
telephone numbers related to the Business, and the right to receive
mail and other communications relating to the Business (including mail
and communications from customers, suppliers, agents and others and
mail relating to payments or accounts receivable);
(h) all lists and records pertaining to suppliers, personnel, and agents
and all other books, ledgers, files, documents, promotional materials,
correspondence, drawings, specifications, computer programs and
business records of every kind and nature of the Sellers or their
Affiliates, in each case relating to the Business;
(i) all warranties and guaranties by, and rights, choses in action, and
claims, known or unknown, matured or unmatured, accrued or contingent
against third parties relating to any other Assets, including rights in
and to insurance and indemnity claims of the Sellers relating to any
such other Assets;
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(j) all franchises, certificates, licenses, permits, orders, approvals and
other authorizations from any Government or self-regulatory
organization (collectively, "Permits") of or used by the Sellers that
relate to the Business;
(k) all refunds relating to the payment of State Taxes, other than income
Taxes, to the extent provided in Paragraph 3.4;
(l) all accounts receivable of the Business, including those accounts
receivable that are listed on Schedule 1.1(l);
(m) Teleservices' bank accounts, prepaid deposits and similar items and all
other assets and properties identified on Schedule 1.1(m); and
(n) all cash, cash deposits, other cash equivalent investments, cash
refunds, security bonds or deposits of Teleservices related to the
Assets or the Business.
1.2. Excluded Assets.
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Notwithstanding anything to the contrary herein or
otherwise, Purchaser expressly understands and agrees that the
following assets and properties of the Sellers (the "Excluded Assets")
shall be excluded from the Assets:
(a) the insurance policies of the Sellers; provided, that Purchaser shall
be entitled to receive as a part of the Assets any insurance proceeds
received by a Seller that relate to claims of the Business or damages
incurred to any of the Assets;
(b) the capital stock of MSGI and Teleservices and agreements related
thereto;
(c) the minute and stock books of MSGI and Teleservices and any other
documents relating to the organization, maintenance and existence of
MSGI and Teleservices as corporations; and
(d) the specific assets or properties listed on Schedule 1.2.
1.3. Base Purchase Price.
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(a) In consideration of the sale of all of the Assets, Purchaser shall pay
to Teleservices the aggregate sum of Three Million Three Hundred
Thousand Dollars ($3,300,000) (the "Base Purchase Price"), subject to
Paragraph 1.5 below and subject to, as the case may be, either a
dollar-for-dollar downward adjustment for any amount that Adjusted Net
Tangible Assets as of the Closing Date are less than Two Million
Dollars ($2,000,000) or a dollar-for-dollar upward adjustment for any
amount that Adjusted Net Tangible Assets as of the Closing Date are
greater than Two Million Dollars ($2,000,000), each as provided in
paragraph 1.3(b) below.
(b) The parties acknowledge that, prior to the date hereof, the Sellers
have caused to be prepared and delivered to Purchaser an estimated
closing date balance sheet (in the form attached hereto as Schedule
1.3(b), the "Preliminary Closing Date Balance Sheet") setting forth the
Adjusted Net Tangible Assets (and each line item included in the
calculation thereof) of the Business as of February 29, 2004, together
with documentation supporting the calculation of
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Adjusted Net Tangible Assets set forth therein. The Sellers hereby
represent and warrant that the Preliminary Closing Date Balance Sheet
was prepared in good faith from the books and records of the Sellers
kept in accordance with GAAP, consistent with past practice and
consistent with the financial statements of the Business previously
provided by the Sellers to Purchaser. Solely for purposes of effecting
the Closing hereunder, and subject to Paragraphs 1.4 and 1.5 below,
the parties agree to utilize the Adjusted Net Tangible Assets of
$1,654,801.00 set forth in the Preliminary Closing Date Balance Sheet,
resulting in a payment to be paid by Purchaser to Seller on the date
hereof of $2,954,801.00, which shall be paid by (i) wire transfer of
$2,190,735.81 in immediately available funds to an account designated
by MSGI in the wire transfer instructions previously provided by the
Sellers to Purchaser; (ii) wire transfer of $464,065.19 in immediately
available funds to an account designated by Xxxxxxx Factors, Inc.
("Xxxxxxx") against release of the Liens held by Xxxxxxx and described
in Schedule 4.8 hereto; and (iii) delivery of the Holdback Promissory
Note described in Paragraph 1.5 below. The payment provided for in
clause (i) of the immediately preceding sentence shall be reduced by
the amount of any Taxes apportioned to the Sellers pursuant to
Paragraphs 3.4(b) and (d) below).
1.4. Determination of Final Purchase Price.
(a) As soon as reasonably practicable after the Closing Date, but in no
event later than the sixtieth (60th) day following the Closing Date,
the Sellers (with the cooperation of Purchaser) shall prepare and
deliver to Purchaser a schedule (the "Adjustment Schedule") in
substantially the form of Schedule 1.4 attached hereto, prepared in the
same manner as the Preliminary Closing Date Balance Sheet and showing
the Adjusted Net Tangible Assets as of the Closing Date, as well as the
difference between Adjusted Net Tangible Assets as of the Closing Date
and Adjusted Net Tangible Assets set forth in the Preliminary Closing
Date Balance Sheet (which is $1,654,801.00).
(b) Purchaser shall promptly review the Adjustment Schedule and, not later
than ten (10) Business Days after receipt thereof, shall either inform
the Sellers in writing either that it is satisfied with the Adjustment
Schedule as so prepared or communicate to the Sellers in writing any
comments or questions it may have regarding the calculation of Adjusted
Net Tangible Assets set forth therein. The Sellers shall promptly
respond to any such questions or comments and the parties shall use all
reasonable efforts to agree in good faith upon the final calculation of
Adjusted Net Tangible Assets. In the event the parties are not able to
agree upon the final calculation of Adjusted Net Tangible Assets within
twenty (20) Business Days following receipt by Purchaser of the
Adjustment Schedule, then the parties shall execute a joint letter of
representation engaging the Independent Accountant (defined below) to
hear the parties' respective proposed calculations of Adjusted Net
Tangible Assets within ten (10) Business Days of such engagement, and
to resolve the dispute within twenty (20) Business Days of such
engagement in a manner consistent with this Agreement by delivery of a
written letter to Purchaser and the Sellers setting forth the
Independent Accountant's determination of the item or items in dispute
(which may be the amount as submitted by either party, or may be a
different amount). The written determination so delivered by the
Independent Accountant shall be final and binding on the parties and
shall be used to calculate the Adjusted Net Tangible Assets as of the
Closing Date in accordance with the definition thereof. For purposes
hereof, "Independent Accountant" shall mean BDO Xxxxxxx, LLP, or if the
services of BDO Xxxxxxx, LLP are not available, then X.X. Xxxx LLP.
Each of the parties hereby represents and warrants to the
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other that neither of the foregoing accounting firms has any prior
material relationship with it or any of its respective Affiliates, and
that neither such accounting firm has performed any services for it or
any of its Affiliates within the thirty-six (36) months prior to the
date of this Agreement. The costs of the Independent Accountant in
connection with any such dispute shall be paid by the party whose
proposed calculation of Adjusted Net Tangible Assets submitted to the
Independent Accountant deviated most from the amount finally
determined by the Independent Accountant. Adjusted Net Tangible Assets
as determined either by agreement of the parties or by the Independent
Accountant pursuant to this subparagraph (b) of Paragraph 1.4 is
referred to as the "Final Adjusted Net Tangible Assets."
(c) If the Final Adjusted Net Tangible Assets exceeds Adjusted Net Tangible
Assets as set forth in the Preliminary Closing Date Balance Sheet, then
Purchaser shall pay to Teleservices by certified check or wire transfer
of immediately available funds the amount of such excess. If the
Adjusted Net Tangible Assets as set forth in the Preliminary Closing
Date Balance Sheet exceeds the Final Adjusted Net Tangible Assets, then
the Sellers shall pay to Purchaser by certified check or wire transfer
of immediately available funds the amount of such excess. Any such
payment to be made under this paragraph (c) shall be made within three
(3) Business Days of determination of Final Adjusted Net Tangible
Assets pursuant to paragraph (b) above. The Base Purchase Price, as
adjusted pursuant to Paragraphs 1.3 (excluding the last sentence
thereof) and 1.4 hereof, is referred to herein as the "Final Purchase
Price."
1.5. Holdback; Promissory Note. At the Closing, Purchaser shall deliver to
Teleservices a promissory note in substantially the form of Exhibit A
(the "Holdback Promissory Note") in the principal amount of Three
Hundred Thousand Dollars ($300,000.00) (the "Holdback Amount"), with a
maturity date of eighteen (18) months from the Closing Date (the
"Holdback Period"), and which shall provide for interest payable
semi-annually on the unpaid principal amount thereof that is not setoff
by Purchaser pursuant to Article 6 hereof. The Holdback Promissory Note
shall be guaranteed by the Xxxxxx X. Xxxxxxxx Arts Center, Inc. Each of
the Sellers acknowledges that the Holdback Promissory Note is being
issued and delivered in reliance upon the exemptions contained in the
Securities Act of 1933, as amended, and the General Rules and
Regulations thereunder, and applicable state "Blue Sky" laws, which
depend upon, among other things, the investment intent of the Sellers.
Each of the Sellers acknowledges and agrees that the Holdback
Promissory Note is being acquired hereunder by the Sellers for
investment for its own account and not with a view to subsequent resale
and, consequently, the Holdback Promissory Note shall not be
transferred without the prior written consent of Purchaser.
1.6. Assumption of Liabilities. As additional consideration for the sale of
the Assets, Purchaser shall assume and become responsible for (a) the
obligations of Teleservices under the Assigned Contracts first accruing
after the Closing, including the obligation to perform services with
respect to the unapplied monetary portion thereof heretofore paid to
the Sellers of all retainers in respect of such Assigned Contracts; (b)
provided that they are included as "Trade Payables" of the Business as
of the Closing Date for purposes of the Adjustment Schedule, the trade
payables of the Business as of March 27, 2004 as listed on Schedule 1.6
up to the amounts so listed, and the trade payables of the Business for
supplies and services provided by third parties to the Business in the
ordinary course of the Business consistent with past practice during
the period of March 28, 2004 through the Closing Date; (c) the accrued
payroll liabilities
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(including, but not limited to, accrued payroll, accrued payroll taxes
and 401(k) pensions payable) of the Business for current pay periods
(i.e., for managers, callers and Los Angeles call center employees,
the pay period beginning March 14, 2004 and ending March 27, 2004 and
the pay period beginning on March 28, 2004 and ending on the Closing
Date), and, for administrative employees (or employees in the ES
facility) who are not Los Angeles call center employees, the pay
period beginning March 21, 2004 and ending on the Closing Date); (d)
accrued vacation and short-term disability (i.e., sick leave) pay for
the Transferred Employees, to the extent disclosed on Schedule 3.6(a)
(and, for the avoidance of doubt, not any additional amounts that may
be payable as a result of Teleservices' failure to pay accrued
vacation to its employees upon termination of employment with
Teleservices); and (e) the accrued expenses of the Business as of the
Closing Date for rent and for other supplies and services provided by
third parties to the Business in the ordinary course of the Business
consistent with past practice, it being understood that all such
accrued expenses shall be included as "Other Accrued Expenses" of the
Business as of the Closing Date for purposes of the Adjustment
Schedule (collectively, the "Assumed Liabilities"). Except for
Purchaser's assumption at the Closing of the Assumed Liabilities,
Purchaser will not assume or become liable on any other Contract of
either of the Sellers or for any other Liabilities of the Sellers
(whether related to the Business or otherwise) whatsoever. Purchaser
shall not assume any Liability for any litigation matter arising from
the conduct of the Business prior to the Closing, whether or not any
such litigation matter has been disclosed pursuant to Paragraph 4.11
hereof or otherwise. Purchaser shall not assume any Liability for any
legal fees or expenses of either of the Sellers or any other party
incurred for any reason whatsoever, and the Assets shall not be
utilized for or reduced by the amount of any such fees or expenses.
Purchaser shall not assume any Liability for federal, state or local
income, sales, use, excise, payroll, employment or other Taxes, or,
except as provided in clauses (c) and (d) above, for wages, salaries
or overtime, vacation pay, holiday pay or other employee benefits, or
other employee benefit plans on, arising out of, or attributable to
Teleservices or MSGI or to the conduct of the Business through the
close of business on the day prior to the Closing Date. The Sellers
will pay with funds that are not Assets all stamp, sales, income,
transfer or other Taxes imposed on the Sellers, and Purchaser will pay
all such Taxes imposed on it, in respect of any and all transfers
pursuant to the terms of this Agreement.
1.7. Obligations Not Assumed. Except for the Assumed Liabilities, Purchaser
shall not assume any Contract or Liability of either Seller (whether
related to the Business or otherwise) of any kind, and the Sellers
shall pay, satisfy and perform all Liabilities of MSGI and Teleservices
(including Liabilities of the Business) as and when due (collectively,
the "Excluded Liabilities"). Without limiting the generality of the
foregoing, the Excluded Liabilities shall include and the Assumed
Liabilities shall not include, and under no circumstances shall
Purchaser be deemed to assume, any Liability of either Seller or their
respective Affiliates arising out of or relating to:
(a) any Liability related in whole or in part to the businesses of MSGI,
Teleservices or any of their Affiliates other than the Business;
(b) any Liability arising from any default, breach, nonperformance,
misfeasance, malfeasance, violation of Law, or nonfeasance by or on
behalf of MSGI, Seller or any of their Affiliates, including under any
Contract and including any warranty claims or claims of breach or
default under any Assigned Contract;
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(c) any Liability for accounts or notes payable of the Business other than
the Assumed Liabilities;
(d) any litigation in process or pending as of the Closing Date, or any
litigation filed after the Closing Date that arises from or relates to
activities of the Sellers or their Affiliates relating to the Business
prior to the Closing Date, including litigation identified on Schedule
4.11;
(e) any Liability for violations of any Laws, or arising out of or
resulting from any events, circumstances, plans, programs, or
conditions occurring prior to the Closing Date;
(f) any indebtedness, obligations, duties or other Liabilities related to
or arising in connection with the Excluded Assets, including all
executory obligations under Contracts included in the Excluded Assets;
(g) any Liability arising out of the actual or alleged tortious conduct of
the Sellers, their respective Affiliates or any of their respective
representatives, whether related to the Business or otherwise; and
(h) except as otherwise expressly provided in Paragraph 3.4 and in clause
(c) of the first sentence of Section 1.6, any Liability for Taxes,
including Taxes imposed on or measured by the income, profits or sales
of a Seller, whether related to the Business or otherwise.
1.8. Allocation. The Purchase Price shall be allocated among the Assets as
set forth on Schedule 1.8, and such allocations are intended by
Purchaser and the Sellers to comply with Section 1060 of the Code and
the regulations promulgated thereunder. The Sellers, on the one hand,
and Purchaser, on the other, each shall prepare and submit to the other
for review and comment a completed Internal Revenue Service Form 8594,
in a manner consistent with Schedule 1.8, at least sixty (60) days
prior to the due date of such Forms 8594. Neither the Sellers nor
Purchaser shall (unless compelled by Government authority) take any
position on any Tax return that is inconsistent with the allocation set
forth on Schedule 1.8.
1.9. Bulk Sales. The parties have agreed not to comply with any applicable
Uniform Commercial Code "bulk sales" provisions. Any claims relating to
pre-Closing or post-Closing events or non-compliance with any such
"bulk sales" provisions made by creditors of the Business against the
Assets or the Business shall be the sole obligation and liability of
the Sellers.
1.10. Change of Name. Effective as of the Closing Date, the Sellers shall
cause the corporate name of Teleservices to be changed to a name that
is not confusingly similar to the present name of Teleservices or to
the name "MSGI Teleservices." For the avoidance of doubt, nothing
herein forbids the Sellers from using MSGI's xxxx of "MSGI" in the new
name of Teleservices, so long as it is not used in combination with the
word "Teleservices" or any abbreviation thereof. If the State of
California or any other state shall require the written consent of
Teleservices, or any other party, as a prerequisite to the registration
of the "MSGI Teleservices" name (or other name for Purchaser selected
by Purchaser) by Purchaser following the Closing, the Sellers shall
furnish such consent in the form required by said state.
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1.11. The MSGI Xxxx. Effective as of the Closing Date and in connection with
the transfer of the Intellectual Property Rights pursuant to Section
1.1(d), MSGI hereby grants to Purchaser a worldwide, fully-paid,
royalty-free, irrevocable, non-exclusive, non-transferable, perpetual
license to the use of MSGI's xxxx of "MSGI" in connection with the
Business.
2. TRANSACTIONS AND DOCUMENTS AT CLOSING
2.1. Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxxxx
Traurig, LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m.,
New York time, contemporaneously with the execution of this Agreement
(the "Closing Date"). As used herein, "Effective Time" shall mean the
time at which the Closing is consummated. For purposes of allocating
financial or accounting items between the parties only, the Closing
shall be deemed to have occurred at the close of business on the
Closing Date. The parties acknowledge and agree that the Closing shall
take place by the forwarding of signature pages via facsimile
transmission to the Sellers' counsel on the Closing Date with original
signatures to be forwarded to Sellers' counsel on the Closing Date via
overnight delivery. Sellers' counsel shall send Sellers' executed
counterpart signature pages to Purchasers' counsel via facsimile
transmission on the Closing Date. Sellers' counsel will collate
original signature pages and transaction documents and distribute them
to Purchaser and the Sellers via overnight delivery on the day
following the Closing Date.
2.2. Deliveries at the Closing.
(a) At the Closing:
(i) Purchaser shall deliver a duly executed Holdback Promissory Note in the
form of Exhibit A;
(ii) the Sellers shall unconditionally sell, assign, transfer, convey, and
deliver to Purchaser all of the Assets, free and clear of any and all
Liens, except for Permitted Liens, and in furtherance thereof, the
Sellers shall deliver to Purchaser (A) an Assignment and Xxxx of Sale
in substantially the form of Exhibit B, and (B) such other deeds, bills
of sale, assignments, certificates of title, documents and other
instruments of transfer and conveyance as Purchaser shall reasonably
request;
(iii) Purchaser shall make the Closing Date payment provided for in Paragraph
1.3(b) and Purchaser shall assume the Assumed Liabilities by delivering
to MSGI and Teleservices an Assumption Agreement in substantially the
form of Exhibit C (the "Assumption Agreement"). As between Purchaser
and the Sellers, in the event of any conflict between the terms of the
Assumption Agreement and any consent to assignment of an Assigned
Contract, the Assumption Agreement shall prevail;
(iv) without limiting any other obligation of the Sellers under this
Agreement, Teleservices shall deliver to Purchaser the written consent,
in form and substance reasonably satisfactory to Purchaser, of each of
the other parties to any Assigned Contract identified on Schedule
1.1(a) (other than Assigned Contracts with customers), or each issuer
of any Permit used in the Business, whose consent is required to permit
the assignment of such Assigned Contract or Permit to Purchaser, with
effect from the Effective Time and without change in the respective
terms and conditions of such Assigned Contract or Permit;
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(v) MSGI shall deliver duly adopted resolutions of the Board of Directors
of MSGI and the Board of Directors of Teleservices and from MSGI (as
the sole shareholder of Teleservices), certified by MSGI's and
Teleservices' Secretary, and such other evidence of incumbency and
corporate authorizations as Purchaser may reasonably request, showing
the authorization and approval of the execution, delivery and
performance by the Sellers of this Agreement, and of the taking of any
and all other actions necessary to enable the Sellers to comply with
the terms of this Agreement and to consummate the transactions
contemplated by this Agreement;
(vi) the Sellers shall deliver to Purchaser all authorizations, consents and
approvals reasonably required in connection with the consummation of
the transactions contemplated by this Agreement, including the consents
identified on Schedule 1.1(a), except as may be provided in Section
3.9;
(vii) Purchaser shall have received the legal opinion of Xxxxxxxxx Traurig
LLP, legal counsel for the Sellers, in substantially the form of
Exhibit D;
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(viii) Purchaser shall have received duly executed Employment and
Nonsolicitation and Nondisclosure Agreements, in form and substance
satisfactory to Purchaser, from each of Xxxx Xxxxxx and Xxxxxx Xxxxxx,
and shall have obtained key-man life insurance policies with respect to
both such individuals, and shall have received executed Non-Compete
Agreements from each of Jefferson Berlin, Xxxxx Xxxxxx, Xxxx Xxxxxxxxx,
Xxxxx Xxxxxxxx and Xxxxxxxx Xxxxx;
(ix) Purchaser shall have received a duly executed Non-Compete Agreement
with Xxxxxx Xxxxxxx, in substantially the form of Exhibit E;
(x) Purchaser shall deliver to MSGI duly adopted resolutions of the Board
of Directors of Purchaser, certified by the Secretary or an Assistant
Secretary of Purchaser as of the date of the Closing, and such other
evidence of incumbency and corporate authorizations as the Sellers may
reasonably request, showing the authorization and approval of the
execution, delivery and performance by Purchaser of this Agreement and
the taking of any and all other actions necessary to enable Purchaser
to comply with the terms of this Agreement and to consummate the
transactions contemplated by this Agreement;
(xi) Purchaser shall have received an estoppel certificate, in substantially
the form of Exhibit F, from each landlord party to any real estate
lease agreement included within the Assigned Contracts; and
(xii) Purchaser shall have received a letter from Xxxxxxx demonstrating the
release of any Liens on Assets contemporaneously with receipt by wire
transfer of that portion of the Closing Date payment provided for in
Paragraph 1.3(b) that is sent to Xxxxxxx in accordance with the wire
transfer instructions previously provided by the Sellers to Purchaser.
(b) All deliveries, payments and other transactions and documents relating
to the Closing shall be interdependent and none shall be effective
unless and until all are effective (except to the extent that the party
entitled to the benefit thereof has waived in writing satisfaction or
performance thereof as a condition precedent to Closing).
3. ADDITIONAL AGREEMENTS AND COVENANTS
3.1. Expenses. Except as otherwise provided in this Agreement, all expenses
incurred by Purchaser in connection with the negotiations among the
parties, and the authorization, preparation, execution and performance
of this Agreement and the transactions contemplated by this Agreement
shall be paid by Purchaser. Except as otherwise provided in this
Agreement, all expenses incurred by either Seller in connection with
the negotiations among the parties, and the authorization, preparation,
execution and performance of this Agreement and the transactions
contemplated by this Agreement shall be paid by a Seller (and not out
of any assets of the Sellers that would constitute Assets).
3.2. Brokers. Purchaser shall indemnify the Sellers and hold them harmless
from and against all claims or demands for commissions or other
compensation by any broker, finder, or similar agent claiming to have
been employed by or on behalf of Purchaser. The Sellers shall, jointly
and severally, indemnify Purchaser and hold it harmless from and
against all claims or demands for commissions or other compensation by
any broker, finder, or similar agent claiming to have been employed by
or on behalf of either Seller.
3.3. Publicity. All press releases and other public announcements respecting
the subject matter hereof shall be made only with the mutual written
agreement of Purchaser and the Sellers; provided, however, that any
party hereto may make any disclosure required to be made under
applicable Law or stock exchange rule if such party has determined in
good faith that it is necessary to do so and uses its best efforts,
prior to making the disclosure, to provide the other parties with a
copy of the proposed disclosure and to discuss the proposed disclosure
with the other parties.
3.4. Tax Matters.
(a) The Sellers shall make all federal, state, local and foreign filings
with respect to income Taxes for the Business for the Tax period (or
partial period) ending on the Closing Date. All Liabilities with
respect to income Taxes under federal, state, local and foreign income
Tax laws attributable to the operation of the Business through the
Closing Date shall be borne by the Sellers, and any refunds or credits
or rights to refunds or credits with respect thereto (including
interest and penalties) shall be the property of the Sellers.
(b) All Tax Liabilities attributable to the operation of the Business
through the Closing Date shall be borne by the Sellers.
(c) All Taxes attributable to the operation of the Business subsequent to
the Closing shall be the responsibility of Purchaser.
(d) All real property Taxes, personal property Taxes and similar ad valorem
obligations levied with respect to the Business for a Tax period that
includes (but does not end
10
on) the Closing Date shall be apportioned between Paragraph 3.4(b) and
Paragraph 3.4(c) as of the Closing Date based upon the number of days
of such Tax period included in the pre-Closing period and the number
of days of such Tax period included in the post-Closing period. If the
actual amount of any such item is not known as of the Closing Date,
the aforesaid proration shall be based on the previous year's
assessment of such item and the parties agree to adjust said proration
and pay any underpayment or reimburse for any overpayment within
thirty (30) days after the actual amount become known.
(e) If either party pays any Taxes to be borne by the other party under
this Paragraph 3.4, the other party shall promptly reimburse such party
for the Taxes paid. If, in preparing Tax returns or payments after the
Closing, it appears to Purchaser that either Seller will be asked to
pay additional Taxes, Purchaser shall so notify MSGI, and provide MSGI
a reasonable opportunity to review and comment upon any related Tax
returns prior to filing them and paying the Tax. If either party
receives any refunds or credits that are the property of the other
party under this Paragraph 3.4, such party shall promptly pay the
amount of such refunds or credits to the other party.
(f) The parties agree to cooperate with each other and to provide each
other with all information and documentation reasonably necessary to
permit the preparation and filing of all federal, state, local and
foreign Tax returns and Tax elections with respect to the Business.
Purchaser shall make available to the Sellers and their representatives
all records and materials reasonably required by them to pursue or
contest any Tax matters and shall provide reasonable cooperation to the
Sellers in such case, including having personnel of the Business
provide reasonable assistance to the Sellers, consistent with the
manner in which such matters would have been dealt with prior to the
Closing. The Sellers shall make available to Purchaser and its
representatives those records and materials reasonably required by them
to prepare, pursue or contest any Tax matters arising after the Closing
which have factual reference to the pre-Closing periods.
(g) Purchaser and the Sellers agree that the Sellers shall prepare and file
2004 Forms W-2 for employees of the Business for the period during 2004
up to the Closing Date and Purchaser shall prepare and file 2004 Forms
W-2 for employees of the Business hired by Purchaser for the period
commencing on the Closing Date.
(h) No new elections with respect to Taxes, or changes in current elections
with respect to Taxes, affecting the Assets shall be made after the
date of this Agreement without the prior written consent of Purchaser.
3.5. Agent. Teleservices hereby irrevocably appoints MSGI (the "Agent") as
its agent and attorney-in-fact, with full power to negotiate and settle
claims for indemnification under Article 6 hereof, and to perform any
other act arising under or pertaining to this Agreement, and the
transactions contemplated hereby, including to waive any right or
remedy of, or make any election or give any instructions on behalf of
Teleservices, or to settle or compromise any dispute between the
Sellers, on the one hand, and Purchaser, on the other hand. The
appointment of the Agent being coupled with an interest, it shall be
irrevocable and shall be binding upon Teleservices and its successors
and assigns, and shall not be revoked by the dissolution of
Teleservices. The Agent shall be authorized to receive service of
process on behalf of
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Teleservices in any Action before any Forum, and any such service of
process shall have the same effect as if served upon all Teleservices.
Any notice or communication to the Agent provided in accordance with
this Agreement shall be effective as notice upon or communication to
MKTG Teleservices for all purposes of this Agreement. Without limiting
any other provision of this Paragraph 3.5, Teleservices shall be
obligated at all times during the term of this Agreement to designate
and maintain an Agent with the powers and authorities described in
this Paragraph 3.5.
3.6. Seller Employees.
(a) At the Closing, Purchaser will offer employment to those employees of
MSGI and Teleservices listed on Schedule 3.6(a). Any such offer of
employment made by Purchaser which is not accepted on or prior to the
Closing Date shall be revocable at Purchaser's option. Each employee
employed by Purchaser (a "Transferred Employee") will be hired as an
employee at will, subject to termination in the discretion of
Purchaser. After the Closing, each Transferred Employee will be
eligible to participate in such Employee Benefit Plans and programs
established and maintained by Purchaser or an Affiliate of Purchaser as
may be determined by Purchaser in its sole discretion and in accordance
with the terms and conditions of such Employee Benefit Plans.
Notwithstanding the preceding sentence, for purposes of eligibility to
participate in, and the vesting of benefits under, Purchaser's vacation
and sick leave policies, each Transferred Employee will receive credit
for all years of service with MSGI or Teleservices prior to the
Closing; provided, however, that, with respect to accrued vacation, the
Transferred Employee may opt to receive on the Closing Date the cash
value of such accrued vacation in lieu of receiving credit for years of
service with MSGI or Teleservices and, in such case, Teleservices shall
cause any resulting cash payment to be paid to the employee on the
Closing Date. For purposes of effecting the Closing, the Assumed
Liabilties shall include all accrued vacation liabilities set forth in
Schedule 3.6(a); however, the Adjustment Schedule shall increase the
Final Purchase Price by the amount of any cash payments so paid by
Teleservices to employees in lieu of carrying over accrued vacation.
Schedule 3.6(a) also sets forth with respect to each Transferred
Employee the number of paid vacation and short-term disability (i.e.,
sick leave) days to which such individual is entitled as of the Closing
Date for the remainder of calendar year 2004.
(b) Unless otherwise set forth on Schedule 1.6, the Sellers shall be
jointly and severally liable for, and shall indemnify and hold
Purchaser, or any Affiliate of Purchaser employing Transferred
Employees, harmless from and against any liabilities or obligations
relating to employees of either of the Sellers used in the Business,
independent contractors used in the Business, or their dependents,
including reasonable fees and disbursements of attorneys, resulting
from, and including, (i) any and all claims for life insurance,
disability and medical benefits, and any workers' compensation claims
(including claims under California labor code Section 132(a)), based on
occurrences prior to the Closing or in connection with the transactions
contemplated hereby), whether such claims are asserted before, on or
after the Closing Date, (ii) any and all other welfare and fringe
benefit claims based on occurrences prior to the Closing, whether such
claims are asserted before, on or after the Closing Date, (iii) any and
all life insurance, disability, severance (including severance claims
based upon the transactions contemplated hereunder), medical or other
welfare and fringe benefit claims of any individual (or his or her
covered dependents) who retired from or terminated employment or
independent
12
contractor status with MSGI and/or Teleservices prior to the Closing
or who died prior to the Closing, whether such claim is asserted
before, on or after the Closing Date, (iv) any and all claims related
to any severance or other termination benefits provided for by federal
or state statute or otherwise and arising out of a claim of actual or
constructive termination resulting from the consummation of the
transactions contemplated hereunder if the termination occurred, or is
claimed to have occurred, before or in connection with the Closing
(including the United States federal and the California Workers
Adjustment and Retraining Notification Act and the California labor
code), and (v) any and all claims related to any compensation
arrangement or benefit plan sponsored by either Seller including, but
not limited to, any liability for any amounts payable thereunder as a
result of the execution or performance of this Agreement or on the
termination of any employees of either of the Sellers used in the
Business or the services of independent contractors after the Closing
in connection therewith.
(c) As to any Tranferred Employee or independent contractor of either of
the Sellers who is employed by Purchaser or an Affiliate of Purchaser
or with whom Purchaser contracts for services, the Sellers agree to
cause the release of such employee or independent contractor from any
contractual provision with either of the Sellers which would impair the
utility of such employee's or independent contractor's services to
Purchaser or which would impose upon such employee or independent
contractor any monetary or other obligation to either of the Sellers
which would otherwise be occasioned by the termination of such
individual's employment or independent contractor status with either of
the Sellers, including any agreements of noncompetition or
confidentiality.
(d) Nothing in this Agreement shall be construed as conferring any right,
as third party beneficiary or otherwise, on any individual or entity
not a party to this Agreement as to the matters described in this
Paragraph 3.6.
3.7. Noncompetition.
(a) Each of MSGI and Teleservices covenant and agree that, for a period of
three (3) years from the date of this Agreement, neither MSGI nor
Teleservices will, within the United States (the "Territory"), directly
or indirectly, compete with Purchaser by carrying on a business which
is substantially similar to the Business. MSGI and Teleservices each
represent and warrant to Purchaser that the Sellers have conducted or
had sought to conduct the Business, subject to applicable law, on a
nationwide basis.
(b) For the purposes of this Paragraph 3.7, the term "compete" shall mean
with respect to the Business: (i) managing, supervising or otherwise
participating in a management or sales capacity in the telemarketing or
telefundraising business; (ii) calling on, soliciting, taking away,
accepting as a telemarketing or telefunding client or customer or
attempting to call on, solicit, take away or accept as a telemarketing
or telefunding client or customer any individual, partnership,
corporation or association that was a client or customer of the
Business during the twelve (12) calendar month period immediately
preceding any such act; (iii) hiring, soliciting, taking away or
attempting to hire, solicit or take away any employee of the Business
either on an affiliate's or a Seller's behalf or on behalf of any other
person or entity; or (iv) entering into or attempting to enter into any
business substantially similar to the Business within the Territory,
either alone or with any individual, partnership, corporation or
association.
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(c) For the purposes of this Paragraph 3.7, the words "directly or
indirectly" as they modify the word "compete" shall mean (i) acting as
an agent, representative, consultant, officer, director, independent
contractor, or employee of any entity or enterprise which is competing
with the Business; (ii) participating in any such competing entity or
enterprise as an owner, partner, limited partner, joint venturer,
creditor or stockholder (except as a stockholder holding less than a
five percent (5%) interest in a corporation whose shares are actively
traded on a regional or national securities exchange or in the
over-the-counter market); and (iii) communicating to any such competing
entity or enterprise any Confidential Data (as defined below)
concerning any past, present, or identified prospective client or
customer of the Business.
(d) Each of MSGI and Teleservices further agree that MSGI and Teleservices
will keep confidential and not, directly or indirectly, divulge to
anyone nor use or otherwise appropriate for such party's own benefit,
any pricing information, marketing information, sales technique of the
Business, or any other of the following confidential information or
documents of or relating to the Business: confidential records,
computer software programs or any portions or logic comprising said
programs, client and customer lists, information about client
requirements, terms of license agreements, terms of contracts with
clients and customers, and planning and financial information of the
Business (hereinafter referred to as the "Confidential Data"). The
Sellers each hereby acknowledge and agree that the prohibitions against
disclosure of Confidential Data recited herein are in addition to, and
not in lieu of, any rights or remedies which the Purchaser may have
available pursuant to the laws of any jurisdiction or at common law to
prevent the disclosure of trade secrets or proprietary information, and
the enforcement by the Purchaser of its rights and remedies to this
Agreement shall not be construed as a waiver of any other rights or
available remedies which it may possess in law or equity absent this
Agreement.
3.8. Bank Accounts; Powers of Attorney. With respect to each bank account
listed in Schedule 1.1(m), the Sellers shall cause any signatory or
holder of a power of attorney with respect to any such bank account who
is not listed in Schedule 1.1(m) to be removed as such a signatory or
holder of a power of attorney prior to the Closing. Each of the Sellers
hereby appoints each of the officers of Purchaser as its attorney for
the purpose of collecting the accounts receivable of the Sellers hereby
included in the Assets and assigned to Purchaser, and for the purpose
of endorsing for deposit by Purchaser any checks made payable to either
of the Sellers in respect of any such accounts receivable or in respect
of any refunds, security bonds or deposits and similar items included
in the Assets. The power of attorney granted hereunder by the Sellers
is acknowledged by the Sellers to be coupled with an interest and
irrevocable.
3.9. Post-Closing Cooperation; Further Assurances. From and after the date
hereof, each of the Sellers covenant and agree to deliver and
acknowledge (or cause to be executed, delivered and acknowledged) from
time to time, at the request of Purchaser and without further
consideration, all such further instruments and to take all such
further actions as may be reasonably necessary or reasonably
appropriate to transfer more effectively to Purchaser, or to enable
Purchaser to use, the Assets, or to otherwise confirm or carry out the
provisions and intent of this Agreement, including, to the extent same
is not so delivered on or prior to the Closing Date, delivery of
documentation to transfer of record to Purchaser at the U.S. Patent and
Trademark Office or other applicable office title to any Intellectual
Property Rights being conveyed hereunder. Purchaser shall use
commercially reasonable efforts to assist the Sellers in
14
obtaining the return of all Seller corporate-issued credit cards
issued to employees of Teleservices, provided the foregoing shall not
be construed to render Purchaser liable for any employee's failure to
return any such credit cards or for any charges thereon. Purchaser
covenants and agrees that Purchaser will not use the Teleservices
Federal Express account.
4. REPRESENTATIONS and WARRANTIES OF SELLERS
MSGI and Teleservices each hereby, jointly and severally, represents
and warrants to, and for the benefit of, Purchaser as follows:
4.1. Organization and Standing. MSGI and Teleservices are corporations duly
organized, validly existing, and in good standing under the laws of the
respective jurisdictions of their incorporation, and have all the necessary
corporate power and authority to carry on the Business in the places and as it
is now being conducted, and to own and lease the Assets that each now owns or
leases in connection with the Business. MSGI and Teleservices are now, and will
be at Closing, duly qualified or licensed to transact business and in good
standing as foreign corporations in all jurisdictions in which the character of
the property owned or leased and used in the Business and the nature of the
Business require such qualification or licensing.
4.2. Authority and Status. MSGI and Teleservices each have the capacity and
authority to execute and deliver this Agreement, to perform their obligations
hereunder, and to consummate the transactions to be performed and consummated by
them as contemplated hereby without the necessity of any act or consent of any
other person whomsoever. The execution, delivery and performance by MSGI and
Teleservices of this Agreement and each and every agreement, document and
instrument provided for herein to which it is indicated as a party have been
duly authorized and approved by all necessary corporate action of MSGI and
Teleservices. This Agreement and each and every agreement, document and
instrument to be executed, delivered and performed by MSGI and Teleservices in
connection herewith, constitutes or will, when executed and delivered,
constitute the valid and legally binding obligation of MSGI and Teleservices
enforceable against them in accordance with their respective terms, except as
enforceability may be limited by applicable equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws from time to
time in effect affecting the enforcement of creditors' rights generally
(collectively, the "Enforceability Limitations").
4.3. Capitalization. MSGI owns all of the issued and outstanding shares of
capital stock of Teleservices and no authorization or consent of any other
Person is required in order to consummate the transactions contemplated hereby
by virtue of any other Person having an equitable or beneficial interest in
Teleservices.
4.4. Financial Statements. Attached hereto as Schedule 4.4 are the following
financial statements (collectively the "Financial Statements"): (i) unaudited
consolidated balance sheets and statements of income and cash flow as of and for
the fiscal year ended June 30, 2003 for the Business; (ii) unaudited
consolidated balance sheets and statements of income and cash flow for the six
(6) months ended December 31, 2003 for the Business; (iii) unaudited
consolidated balance sheets and statements of income and cash flow of the
Business for the month ended February 29, 2004 (the "Most Recent Financial
Statements"). The Financial Statements (including any notes thereto) have been
prepared from, and are in complete
15
accordance with, the books and records of the Sellers, are true, complete and
accurate statements of the financial position of the Business as of their
respective dates, have been prepared in accordance with GAAP applied on a
consistent basis throughout the period covered thereby, and present fairly the
financial condition of the Business as of such dates and the results of
operations of the Business for such periods and, to the extent required by GAAP,
disclose all Liabilities of the Business, whether absolute, contingent, accrued
or otherwise, existing as of the respective dates thereof; provided, however,
that the Financial Statements described in the foregoing clauses (ii) and (iii)
are subject to normal year-end adjustments (which shall not, individually or in
the aggregate, be material) and lack footnotes and other presentation items. All
cash deposits, other cash equivalents, cash refunds, security bonds or deposits
of the Business are held in the name of Teleservices.
4.5. Other Liabilities. The Sellers have no liabilities or obligations related
to the Assets or the Business (whether accrued, absolute, contingent or
otherwise) which are of a nature required to be reflected in financial
statements prepared in accordance with GAAP, consistently applied, including,
any liability which might result from an audit of their respective Tax returns
by any appropriate authority, except for (i) the liabilities and obligations of
the Business which are disclosed and reserved against in the Most Recent
Financial Statements, to the extent and in the amounts so disclosed and reserved
against, or disclosed in Schedule 4.5, and (ii) liabilities incurred or accrued
in the ordinary course of the Business since the date of the balance sheet
included in the Most Recent Financial Statements (the "Most Recent Balance Sheet
Date"), which do not and will not, either individually or in the aggregate, have
a material adverse effect on the Assets or the Business. There is no known basis
for any assertion against the Assets or the Business as of the Most Recent
Balance Sheet Date of any Liability of any nature or in any amount not fully
accrued and appearing on the balance sheet as of that date. Except as disclosed
in the Most Recent Financial Statements or Schedule 4.5, neither MSGI nor
Teleservices is in default with respect to any liabilities or obligations which
are related to the Assets or Business, and all such liabilities or obligations
shown and reflected in the Most Recent Financial Statements or Schedule 4.5, and
such liabilities incurred or accrued subsequent to the Most Recent Balance Sheet
Date, have been, or are being, paid or discharged as they become due, and all
such liabilities and obligations were incurred in the ordinary course of the
Business, except as indicated on Schedule 4.5.
4.6. Taxes. No Liens (other than any Liens imposed by operation of law in
respect of Taxes for current periods not yet due and payable) for federal, state
or local income, sales, use, excise, payroll, employment or other Taxes have
been filed and no claims for Taxes have been asserted in writing (and neither of
the Sellers has any reason to believe that any claims for Taxes will be
asserted) with respect to the Assets, the Business or the Assumed Liabilities.
Each Seller has paid all federal, state and local income, sales, use, excise,
payroll, employment and other Taxes required to be paid by it with respect to
the Assets, the Business and the Assumed Liabilities arising out of, or
attributable to, the conduct of the Business through the close of business on
the Closing Date (except accrued payroll taxes for the current pay period to the
extent disclosed on Schedule 1.6). Subject to the provisions of Article 6, there
is not, and there will not be, any liability for payroll, employment or other
Taxes arising out of, or attributable to, the conduct of the operations of the
Sellers or the conduct of the Business through the close of business on the
Closing Date for which Purchaser will have any liability for payment (except
accrued payroll taxes for the current pay period to the extent disclosed on
Schedule 1.6).
16
4.7. Ownership of Assets and Leases.
(a) Schedule 4.7(a) attached hereto contains a complete and correct list of all
fixed assets owned by MSGI or Teleservices and used in the Business having a
value of at least One Thousand Dollars ($1,000), including all items of
machinery, computer and other equipment and office furniture used in the
Business, and all vehicles owned by either Seller and used in the Business, and
depreciation schedules of the assets shown thereon.
(b) MSGI and Teleservices have good and marketable title to all of the assets
shown on Schedule 4.7(a) subject to no Liens whatsoever, except as disclosed on
Schedule 4.7(a).
(c) Except as shown on Schedule 4.7(c), none of the properties or assets used by
MSGI or Seller in the Business are held under any lease, or as conditional
vendee under any conditional sale or other title retention agreement. Schedule
4.7(c) includes a list of all leases of machinery, computer and other equipment
and furniture having a value of at least One Thousand Dollars ($1,000) on the
books of, or used in connection with, the operation of the Business of which
MSGI or Teleservices is a lessee, including respective expiration dates and
monthly rentals.
(d) Except as set forth on Schedule 4.7(d), none of the property shown on
Schedules 4.7(a) or 4.7(c) is leased by MSGI or Teleservices to any other person
or entity.
(e) There are no items of machinery, computer equipment, other equipment,
furniture or vehicles employed or used in connection with the Business having a
value of One Thousand Dollars ($1,000) or more that are not described on
Schedules 4.7(a) or 4.7(c).
(f) Except as disclosed on Schedule 4.7(f), each of the leases and agreements
described on Schedule 4.7(c) is in full force and effect and constitutes a
legal, valid and binding obligation of MSGI or Teleservices and the other
respective parties thereto and is enforceable in accordance with its terms, and
there is not under any of such leases or agreements existing any default of MSGI
or Teleservices or of any other parties thereto (or event or condition which,
with notice or lapse of time, or both, would constitute a default) that would
give the non-defaulting party thereto the right to terminate such lease or
agreement, or that would require payments or services from the defaulting party
having a value in excess of One Thousand Dollars ($1,000.00) to cure such
default. Except as described on Schedule 4.7(f), neither MSGI nor Teleservices
has received any payment from a lessor in connection with or as inducement for
entering into a lease in connection with the Business.
(g) All items of machinery and equipment owned or leased by MSGI or Teleservices
and used in the Business that are required to be disclosed on Schedules 4.7(a)
or 4.7(c) are in sufficient operating condition and state of repair to enable
Purchaser to operate the Business in the manner in which it has been
historically conducted, subject only to ordinary wear and tear.
(h) Except as set forth on Schedule 4.7(h), neither of the Sellers has received
any notice of violation of any applicable ordinance or other Law relating to its
operations or properties related to the Business, whether owned or leased, and
there is no such violation or grounds therefor which could have a material
adverse effect on the operation of the Business.
17
(i) Except pursuant to this Agreement, neither Seller is a party to any Contract
whereby there has been granted to anyone an absolute or contingent right to
purchase, lease or otherwise acquire any rights in any of the Assets, properties
or operations which are used in connection with the Business.
4.8. Indebtedness of Seller. Except for the Liens set forth on Schedule 4.8
(which Liens shall be released contemporaneously with the Closing), there are no
instruments, agreements or arrangements pursuant to which either Seller or any
of their respective Affiliates has borrowed any money, incurred any
indebtedness, established any line of credit, or made any guarantees, in any
such case secured by any Lien over any Assets or pursuant to which the Assets or
the Business could otherwise be affected.
4.9. Agreement Does Not Violate Other Instruments. The execution and delivery of
this Agreement by the Sellers does not, and the consummation of the transactions
contemplated hereby will not, violate any provision of the respective charter or
bylaws of either Seller, or, except as listed on Schedule 4.9, violate or
constitute an occurrence of default under any provision of, or conflict with, or
result in acceleration of any obligation under, or give rise to a right by any
party to terminate its obligations under, any mortgage, deed of trust,
conveyance to secure debt, note, loan, lien, lease, agreement, instrument, or
any order, judgment, decree or other arrangement to which either Seller is a
party or is bound or by which the Assets or the Business are affected. With
respect to each of the matters listed on Schedule 4.9, unless expressly waived
in writing by Purchaser pursuant to Section 3.9 solely for purposes of effecting
the Closing, the requisite consents of third parties in connection therewith
have been obtained. Except as listed or described on Schedule 4.9, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any Government entity is required to be obtained or made by or with
respect to either Seller, any of the Assets or the Business in connection with
the execution and delivery by the Sellers of this Agreement or any of the
agreements, certificates or other documents delivered or to be delivered on or
after the date hereof in connection with the transactions contemplated hereby.
4.10. Absence of Changes. Since the Most Recent Balance Sheet Date, neither
Seller has, except as disclosed on Schedule 4.10:
(a) Transferred, assigned, conveyed or liquidated any of the assets historically
used in the Business or entered into any transaction or incurred any liability
or obligation that affects any such assets or the Business, other than in the
ordinary course of the Business;
(b) Suffered any change in its business, operations, or financial condition that
may have a material adverse effect on the Assets or the Business, and neither
Seller has Knowledge of any event which may result in any such material adverse
change;
(c) Suffered any material destruction, material damage or material loss relating
to any assets historically used in the Business or the Business whether or not
covered by insurance;
(d) Suffered, permitted or incurred the imposition of any Lien or claim upon any
of the Assets or the Business, except for any current year Lien with respect to
personal or real property Taxes not yet due and payable;
18
(e) Committed, suffered, permitted or incurred any default in any liability or
obligation relating to the Assets or the Business which default involves
payments or services having a value in excess of One Thousand Dollars ($1,000)
or would affect Purchaser's use of the Assets or conduct of the Business
following the Closing;
(f) Made or agreed to any change in the terms of any Contract to which it is a
party which may have a material adverse effect on the Assets or the Business;
(g) Waived, canceled, sold or otherwise disposed of, for less than the face
amount thereof, any material claim or material right relating to the Assets or
the Business which it has against others; or
(h) Has Knowledge that any supplier or customer of the Business has taken or
contemplates any steps which could disrupt the business relationship of the
Business with said supplier or customer, which could result in a material
adverse effect on the Business.
4.11. Litigation. Except as otherwise set forth on Schedule 4.11, there is no
Action pending or, to the Knowledge of either Seller, threatened against, or
affecting, the Assets or the Business and, to the best of each Seller's
Knowledge, there exists no basis or grounds for any such Action. None of the
items described on Schedule 4.11, singly or in the aggregate, if pursued and/or
resulting in a judgment, would have an adverse effect on the Assets or the
Business, goodwill or financial condition of the Business, or the right of
either Seller to consummate the transactions contemplated hereby.
4.12. Licenses and Permits; Compliance With Law. Except as set forth on Schedule
4.12, the Sellers hold all Permits necessary for the conduct of the Business as
historically conducted and the use of the Assets as currently being used. All
such Permits are listed on Schedule 4.12. The Sellers are presently conducting
the Business so as to comply in all material respects with all applicable Law.
Neither MSGI nor Teleservices is presently charged with nor, to the Knowledge of
the Sellers, is either Seller under governmental investigation with respect to,
any actual or alleged violation of Law, nor is either Seller presently the
subject of any pending or, to the Knowledge of the Sellers, threatened adverse
proceeding by any regulatory authority in connection with the Assets or the
Business. Neither the execution nor delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will result in the
termination of any Permit held by either Seller which is to be assigned pursuant
to this Agreement, and, except as disclosed on Schedule 4.12, all Permits used
in the Business will inure to the benefit of the Purchaser after the
transactions contemplated by this Agreement.
4.13. Computer Software. Seller has sole, full and clear title to that computer
software described as "Owned Software" on Schedule 4.13 hereto (the "Owned
Software"), free of all claims, including claims or rights of employees, agents,
consultants or other parties involved in the development or creation of such
computer software. Except as set forth on Schedule 4.13 hereto, Seller has the
right and license to use, sublicense, modify and copy that software described as
"Licensed Software" on Schedule 4.13 (the "Licensed Software") free and clear of
19
any limitations or encumbrances except as may be set forth in any license
agreements listed on Schedule 4.13. Schedule 4.13 sets forth a list of all
license fees, rents, royalties or other charges that either Seller is required
or obligated to pay with respect to Licensed Software. Seller is in full
compliance with all provisions of any license, lease or other similar agreement
pursuant to which it has rights to use the Licensed Software. Except as
disclosed on Schedule 4.13, none of the Licensed Software has been incorporated
into or made a part of any Owned Software or any other Licensed Software and
none of the Owned Software is dependent on any Licensed Software in order to
freely operate in the manner in which it is intended. The Owned Software and
Licensed Software constitute all software currently being used in the Business
(together, the "Sellers' Software"). Neither Seller is infringing any
intellectual property rights of any other person or entity with respect to the
Sellers' Software, and no other person or entity is infringing any intellectual
property rights of the Sellers with respect to the Sellers' Software which
Seller leases or licenses to it.
4.14. Other Intellectual Property Rights. Schedule 1.1(d) sets forth a correct
and complete list and summary description of all Intellectual Property Rights
used in the Business and not set forth in Schedule 4.13, together with a
complete list of licenses granted by or to either of the Sellers with respect
thereto. All of such Intellectual Property Rights are owned by the Sellers free
and clear of any Liens. None of the Intellectual Property Rights used in the
Business infringe the Intellectual Property Rights of any other Person, and
neither Seller has received any notice of alleged Infringement with respect to
any of the Intellectual Property Rights used in the Business.
4.15. Contracts. Schedule 4.15 sets forth a true and complete list of all
Contracts, related to the conduct of the Business except for those Contracts
listed in Schedules 1.1(a), 1.1(d), 1.2, 4.7(c) 4.13, 4.16, 4.17 or 4.18, and
those Contracts which both (i) do not require payments or receipts of more than
Ten Thousand Dollars ($10,000) in the aggregate and (ii) which are cancelable by
the Sellers with not more than thirty (30) days' written notice without payment
or penalty. All of the Contracts described in Schedule 4.15 are valid and
binding upon the Seller party thereto and, to the Knowledge of the Sellers, the
other parties thereto, and are in full force and effect in accordance with their
terms, and neither of the Sellers nor, to the Knowledge of the Sellers, any of
the other parties thereto has breached any provision of, or is in default under,
the terms thereof (and there is no event which, with notice or lapse of time, or
both, would constitute a default thereunder).
4.16. Labor Matters. Schedule 4.16 sets forth a list of all employees of
Teleservices who are engaged in the Business and lists all independent
contractors of Teleservices who have written agreements with Teleservices and
who are engaged in the Business, and their current salaries or rates of pay.
Except as described in Schedule 4.16, within the last three (3) years, neither
Seller has been the subject of any union activity or labor dispute, nor has
there been any strike, slowdown or work stoppage of any kind called or
threatened involving employees performing services for the Business. Neither of
the Sellers is a party to any collective bargaining or other labor union
contract applicable to persons employed in the Business, and no collective
bargaining agreement or other labor contract is being negotiated by either
Seller that would cover employees performing services for the Business. Except
as set forth on Schedule 4.16, no labor union or similar organization has been
certified to represent any persons employed in the Business or, to the Knowledge
of the Sellers, has applied to represent such employees or is attempting to
organize such employees. Except as set forth on Schedule 4.16, neither of the
Sellers has committed any unfair labor practice involving any employees of the
Business and there is no charge or complaint against either Seller pending, or
to the Knowledge
20
of the Sellers, threatened, by the National Labor Relations Board or any
comparable state agency. All cases previously pending before the National Labor
Relations Board involving Teleservices are inactive and there is no affirmative
remediation ordered by the National Labor Relations Board to be performed by
either of the Sellers in connection with any of such cases that has not been so
performed or duty to recognize any union with respect to employees of the
Business. Neither Seller has violated any federal, state, or other Governmental
statutes, regulations, or ordinances relating to employment and labor matters
with regard to the Business, including the provisions of Title VII of the Civil
Rights Act of 1964 (race, color, religion, sex, and national origin
discrimination), 42 U.S.C. ss. 1981 (discrimination), 42 U.S.C. xx.xx. 621-634
(the Age Discrimination in Employment Act), 29 U.S.C. ss. 206 (equal pay), the
National Labor Relations Act, Executive Order 11141 (age discrimination), ss.
503 of the Rehabilitation Act of 1973 (handicap discrimination), 42 U.S.C.
xx.xx. 12101-12213 (Americans with Disabilities Act), 29 U.S.C. xx.xx. 2001-2654
(Family and Medical Leave Act), 29 U.S.C. xx.xx. 651-678 (occupational safety
and health) and requirements relating to the documentation of the nationality of
employees.
4.17. Benefit Plans.
(a) Schedule 4.17 lists every Employee Benefit Plan currently or previously
adopted, maintained, sponsored in whole or in part or contributed to by either
Seller or any current or former member of a commonly controlled group of trades
or businesses (as defined in Section 4001(b)(1) of ERISA) including either
Seller for the benefit of employees or retirees of either Seller who are, or
were, engaged in the Business, and dependents thereof, and under which employees
or retirees of either Seller who are, or were, engaged in the Business, and
dependents thereof, are eligible to participate or under or in connection with
which either Seller has any contingent or noncontingent Liability of any kind
whether or not probable of assertion to which the Assets or the Business could
be subject.
(b) Contemporaneously with the delivery of the Schedules to this Agreement,
Seller has delivered a true and complete copy of each Employee Benefit Plan
described in paragraph (a) above, certified as such by a duly authorized officer
of Seller.
(c) Neither the Business nor any of the Assets will be subject to any Liability
for contributions under the Employee Benefit Plans or subject to any Lien in
connection with any of the Employee Benefit Plans.
4.18. Real Property. There is no real property owned by either of the Sellers
that is used in the Business. Schedule 4.18 contains a complete and accurate
list of each lease agreement pursuant to which real property used in the
Business (the "Leased Real Property") is leased by either of the Sellers,
including a description of the leased real property and the respective
expiration dates and monthly rentals under each such lease agreement. Each of
the leases described in Schedule 4.18 is in full force and effect and
constitutes a legal, valid and binding obligation of Teleservices and, to the
Knowledge of the Sellers, the other parties thereto, and is enforceable in
accordance with its terms, subject to the Enforceability Limitations, and there
is not under any of such leases existing any default of either Seller, or to the
Knowledge of the Sellers, any other party thereto (or event or condition which,
with notice or lapse of time, or both, would constitute a default). None of the
Leased Real Property is sub-leased by either
21
of the Sellers to another Person. The Leased Real Property constitutes all real
estate necessary to conduct the Business as historically conducted. No taxes,
assessments, water charges or sewer charges relating to the Leased Real Property
are delinquent and there are no special Taxes, assessments or charges pending or
threatened against the Real Property. All water, sewer, gas, electric, telephone
and drainage facilities and other utilities required for the normal use and
operation of the Leased Real Property currently service the Leased Real Property
in such capacities as are required for the normal use and operation of the
Leased Real Property. The Sellers have obtained and maintained in full force and
effect to the date hereof all Permits required for the normal use and operation
of the Leased Real Property as currently operated. A complete and correct list
of all such Permits is included as a part of Schedule 4.12. The Sellers have
previously delivered to Purchaser complete and accurate photocopies of all
Permits. The Sellers have complied in all material respects with all such
Permits and have not received any notice that any such Permits will not be
renewed upon expiration or of any conditions which will be imposed in order to
receive any such renewal. The Leased Real Property is being operated and
maintained in full compliance with all building code, zoning and other
applicable local, state and federal ordinances, regulations and requirements
which affect the use and operation thereof and in compliance with all Permits.
Neither Seller has received any notice of violation of Law in connection with
the operation of the Leased Real Property. The zoning classification of the
Leased Real Property permits the use of the Leased Real Property for the
purposes and in the manner for which the Leased Real Property is currently used,
and neither of the Sellers has received notice of any pending or contemplated
changes in the status of the zoning for the Leased Real Property.
4.19. Environmental Matters. The Sellers have operated the Business in
compliance with all Environmental Laws.
4.20. Antitrust Matters. The Sellers have conducted and are conducting the
Business in compliance with all antitrust and trade regulation Laws, including
the Xxxxxxx Act, the Xxxxxxx Act, the Xxxxxxxx Xxxxxx Act, the Federal Trade
Commission Act, state Laws patterned after any of the above, all Laws forbidding
price-fixing, collusion, or bid-rigging, and rules or regulations issued
pursuant to authority set forth in any of the above. With respect to any of the
foregoing, neither Seller is presently directly or indirectly involved with,
charged with, or, to the Knowledge of the Sellers, under any Governmental
investigation with respect to, and there is no basis or grounds for, any charge,
claim, investigation, suit, action, proceeding or any actual or alleged
violation of any such Law in connection with the Business.
4.21. Customers. Schedule 4.21 attached hereto consists of a true and correct
list of the top thirty (30) customers (by revenue) served by the Business during
the twelve months ended December 31, 2003, setting forth as to each customer its
name, address, telephone number, and the total xxxxxxxx by dollar amounts to
each such customer during such period. Neither Seller has any Knowledge that any
such listed customer of the Business has taken or threatened to take any steps
which could disrupt the business relationship of the Business with such customer
(other than expirations of customer contracts in the ordinary course).
4.22. Related Party Relationships. No director or officer of either of the
Sellers, or either Seller, possesses, directly or indirectly, any beneficial
interest in, or is a director, officer or employee of, any Person that is a
customer, supplier, lessor, lessee or other contracting party
22
of either of the Sellers with respect to the Assets or the Business (except as a
shareholder holding less than a one percent interest in a corporation whose
shares are traded on a national or regional securities exchange or in the over
the counter market).
4.23. Sufficiency of Purchased Assets. Other than the Excluded Assets, the
Assets constitute all of the rights, properties and assets of every kind,
character and description, wherever located and whether tangible or intangible,
real or personal, fixed or contingent, that are used by the Sellers and their
respective Affiliates in connection with, and necessary for the current conduct
of, the Business. The Assets are adequate and sufficient for the conduct of the
Business as historically conducted.
4.24. Schedules; Disclosure. All Schedules attached hereto are true, correct and
complete as of the date of this Agreement. Matters disclosed on each Schedule
shall be deemed disclosed only for purposes of the matters to be disclosed on
such Schedule and shall not be deemed to be disclosed for any other purpose. No
representation or warranty by either of the Sellers hereunder or in any document
or instrument furnished by or on behalf of a Seller under this Agreement or in
connection with the transactions hereby contains or shall contain any untrue
statement of a material fact or omits, or will omit, a material fact necessary
to make the statements contained therein not misleading
4.25. Brokers' Fees. Neither of the Sellers or any of their Affiliates has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement for which
Purchaser could become liable or obligated. The only liability or obligation to
pay a fee or commission with respect to the transactions contemplated by this
Agreement that the Sellers or any of their Affiliates will have is to A.R.
Management, Inc.
4.26. No Other Representations. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN THIS AGREEMENT, THE PURCHASED ASSETS ARE SOLD AND THE ASSUMED
LIABILITIES ARE TRANSFERRED HEREBY ON AN "AS IS, WHERE IS" BASIS, AND NEITHER
SELLER MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WRITTEN OR
ORAL, AND HEREBY TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW DISCLAIMS,
ANY SUCH REPRESENTATION OR WARRANTY (INCLUDING ANY WARRANTY OF MERCHANTABILTY OR
FITNESS FOR A PARTICULAR PURPOSE), WHETHER BY SELLER, ITS AFFILIATES OR ANY OF
ITS OR THEIR OFFICERS, DIRECTORS, PARTNERS, PRINCIPALS, EMPLOYEES, AGENTS,
MEMBERS OR REPRESENTATIVES OR ANY OTHER PERSON, WITH RESPECT TO THE PURCHASED
ASSETS, AND ASSUMED LIABILITIES OR THE EXECUTION AND DELIVERY OF THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to the Sellers to enter into and perform this
Agreement, Purchaser hereby represents and warrants as follows:
23
5.1. Organization. Purchaser is a Georgia corporation duly organized, validly
existing and in good standing under the Laws of the State of Georgia.
5.2. Authorization; No Inconsistent Agreements. Purchaser has all requisite
power and authority to execute, deliver and perform this Agreement. This
Agreement has been duly and validly executed and delivered by Purchaser and
constitutes the valid and legally binding obligation of Purchaser, enforceable
in accordance with its terms, subject to the Enforceability Limitations.
5.3. Inconsistent Obligations. Neither the execution, delivery nor the
performance of this Agreement by Purchaser will or could, with the passage of
time, the giving of notice, or both: (i) result in a violation of its articles
of incorporation, bylaws or other governing documents, or any Law, or (ii)
result in a breach of, conflict with or default under any term or provision of
any indenture, note, mortgage, bond, security agreement, loan agreement,
guaranty, pledge or other Contract, or any Order to which Purchaser is a party
or by which it is bound; nor will such actions result in the creation of any
Lien on any of the assets of Purchaser or the acceleration or creation of any
Liability of Purchaser that would affect its ability to perform under this
Agreement.
5.4. Consents. The execution, delivery and performance by Purchaser of this
Agreement and the consummation by Purchaser of the transactions contemplated in
this Agreement, do not require the consent, approval or action of, or any filing
with or notice to, any Government or other Person.
5.5. Availability of Funds. Purchaser has available sufficient funds to enable
it to consummate the transactions contemplated by this Agreement.
5.6. Litigation. There are no legal, administrative, arbitration or other
proceedings or Governmental investigations pending or, to the Knowledge of
Purchaser, threatened against Purchaser or any of its Affiliates, which (i)
could reasonably be expected to impair Purchaser's ability to perform its
obligations under this Agreement, or which (ii) seek to enjoin or obtain damages
in respect of the consummation of the transactions contemplated hereby.
5.7. Brokers' Fees. Purchaser has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which either Seller could become liable or
obligated
5.8. Information Provided by the Sellers. Purchaser acknowledges that, in its
review and analysis of the assets, liabilities, financial condition and
prospects of the Business, the Sellers have provided Purchaser with access to
the properties, premises and records of the Sellers for this purpose, and have
made available written and oral information with respect to the Business.
Purchaser agrees that neither Seller, nor any of its respective agents,
representatives, employees or Affiliates, shall have any liability to Purchaser
or any of its Affiliates, agents or representatives, based upon any such
information provided or made available, or statements made, to Purchaser or its
agents or representatives in the course of Purchaser's due diligence review
(unless and to the extent any such information was provided, or statements were
made, fraudulently), in each case, except as and to the extent expressly set
forth in the representations, warranties and covenants of this Agreement and
subject to the limitations and restrictions set forth herein.
24
6. INDEMNITIES
6.1. Indemnification of Purchaser. In accordance with and subject to the
provisions of this Article 6, each of the Sellers (the "Indemnitors") shall,
jointly and severally, indemnify and hold harmless Purchaser, its Affiliates and
their respective officers, directors, agents and employees (each, an
"Indemnitee") from and against and in respect of any loss, damage, liability,
diminution in value, cost and expense, including reasonable attorneys' fees and
amounts paid in settlement, and interest thereon, whether or not arising out of
a third party claim or Action (collectively, "Losses"), suffered or incurred by
any Indemnitee by reason of, or arising out of, directly or indirectly:
(a) any misrepresentation or breach of representation or warranty contained in
this Agreement or any exhibit, certificate or other document furnished
hereunder, or any claim by a third party (regardless of whether ultimately
successful) which, if true, would be such a misrepresentation or breach;
(b) any breach by a Seller of its obligations under this Article 6;
(c) any Liability of either Seller, whether now in existence or hereafter
incurred, other than the Assumed Liabilities;
(d) any and all losses, Liabilities or damages resulting from or arising out of
any failure to comply with any "bulk sales" or similar Laws applicable to the
transactions contemplated by this Agreement;
(e) any suit, action, proceeding, claim or investigation against or affecting
the Assets or the Business from any matter or state of facts existing prior to
the Closing, regardless of whether it is disclosed in Schedule 4.11;
(f) any Action brought by any third party challenging or seeking damages in
connection with the transactions contemplated by this Agreement; and
(g) all Actions, Orders, assessments, fees and expenses incident to any of the
foregoing or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof (whether or not ultimately successful), or in
enforcing this Agreement.
In addition to any other rights or remedies that Purchaser may have,
Purchaser shall be entitled to withhold from the payments due under the Holdback
Promissory Note the amount of any and all Losses which it has sustained or that
it reasonably believes (and such belief is supported by documentation provided
by Purchaser to MSGI, subject to the parties entering into a joint defense
arrangement if necessary to protect the privileged nature of any such
documentation) that it may sustain, and to offset from such withheld amount any
amount ultimately determined to be due and owing to Purchaser, in connection
with matters that are the subject of indemnification pursuant to this Section
6.1 or arising out of any breach by either of the Sellers of this Agreement, and
Purchaser shall not be liable for principal or interest under the
25
Holdback Promissory Note on any amounts so set off. If the withholding of
payments under the Holdback Promissory Note has been based on a reasonable
belief of a future claim due to a specific allegation, Purchaser shall pay any
such withheld amount which Purchaser has not offset pursuant to the preceding
sentence within nine (9) months of the giving of the written notification of
such claim to the Agent, unless a lawsuit, arbitration or administrative
proceeding based on such claim shall have been commenced within said period and
is then pending. If such a lawsuit, arbitration or administrative proceeding has
commenced within said period, Purchaser shall pay within thirty (30) Business
Days after a final determination under such lawsuit, arbitration or
administrative proceeding, the difference, if any, between said withheld amount
and the amount of any Liabilities actually sustained, if the withheld amount is
larger.
6.2. Non-Third Party Claims Procedures. If any claim for Losses that does not
relate to a claim or Action by a third party arises after the date hereof, the
Indemnitee shall provide written notice thereof to the Indemnitor(s). The amount
and liability for such claim shall be deemed final unless the Indemnitor(s)
notify the Indemnitee in writing within fifteen (15) Business Days after such
written notice that the Indemnitor(s) dispute such claim. If any such claim is
so disputed, the parties shall use all reasonable efforts to resolve any such
disputed claim in good faith. If the parties are not able to resolve such claim
within fifteen (15) Business Days after receipt by the Indemnitor(s) from the
Indemnitee of notice of such claim, then either party may commence a proceeding
with respect to such claim in accordance with Paragraph 7.3 hereof.
6.3. Defense of Third Party Claims.
(a) The Indemnitee will give the Indemnitor(s) written notice of any third-party
claims or demands promptly after the Indemnitee receives notice thereof, and any
such notice shall provide a summary of all facts then known in support of such
third-party claim (but such recitation of facts shall not compromise the
claiming party's right to supplement such notice as additional facts become
known and available). If the Indemnitor admits in writing its obligation to
indemnify the Indemnitee for the third party claim, which admission shall
conclusively establish for purposes of this Agreement that claims asserted in
such third party claim are within the scope of, and subject to, full
indemnification under this Article 6 (without limitation by the Basket and
Reserve Amount described below), the Indemnitor(s) may conduct the defense
thereof by counsel of its or their own choosing reasonably acceptable to the
Indemnitee; provided, however, the failure to give such notice shall not relieve
the Indemnitor of its obligations hereunder except and to the extent it is
prejudiced thereby.
(b) In the event that the Indemnitor, within a reasonable time after notice of
any such claim, fails to defend against such claim or demand or fails to admit
its obligation to indemnify as provided above, the Indemnitee (upon further
written notice to the Indemnitor) will have the right to undertake the defense,
compromise or settlement of such claim or demand on behalf of and for the
account and risk of the Indemnitor.
(c) Notwithstanding anything to the contrary in this Paragraph 6.3, and assuming
the Indemnitor is assuming the defense of any claim in good faith, (i) if the
Indemnitee shall so elect, the Indemnitee shall have the right, at its sole cost
and expense, to defend, compromise or settle such claim or demand or to
participate in the defense of any such claim or demand being defended by the
Indemnitor, (ii) the Indemnitor shall not, without the Indemnitee's written
consent, settle or compromise
26
any such claim or demand or consent to entry of any judgment which does not
include an unconditional release of the Indemnitee from all liability in respect
of such claim or demand by the claimant or the plaintiff, and (iii) the
Indemnitor agrees to act in good faith with due regard to the Indemnitee's
on-going business interests to the extent compatible with an efficient and cost
effective resolution of the dispute.
(d) Notwithstanding anything in this Paragraph 6.3 to the contrary, the
Indemnitor shall not be entitled to participate in, and the Indemnitee shall be
entitled to sole and absolute control over the defense, compromise or settlement
of, any claim to the extent that the claim seeks an injunction or other similar
equitable or nonmonetary relief against the Indemnitee.
6.4. Survival. All representations and warranties made by the parties in this
Agreement or in any document executed and delivered pursuant hereto are
material, have been relied upon by the other parties hereto, shall survive any
investigation heretofore or hereafter made by the other parties hereto, and
shall survive the Closing for a period of eighteen (18) months from the date
hereof, provided that the representations and warranties made in Paragraphs 4.3,
4.6, 4.7(b) and 4.8 hereof shall survive for the longest period under applicable
law. Any claim hereunder for a breach of a representation or warranty must be
initiated within the foregoing applicable periods, after which time the claiming
party's right to bring a claim for breach of a representation or warranty shall
expire. The covenants and agreements of the parties hereto contained herein
shall survive the Closing and continue in effect in accordance with their terms
and shall not merge with the Closing.
6.5. Limitations on Right to Indemnification. Notwithstanding anything to the
contrary set forth in this Agreement, the Sellers, on the one hand, and
Purchaser, on the other, shall have no obligation to indemnify the other
hereunder (i) unless and until the aggregate amount of all Losses associated
with such indemnification claims made by the Sellers or Purchaser, as the case
may be, exceeds Twenty-Five Thousand Dollars ($25,000.00) (the "Basket"), after
which time indemnification claims may be made for amounts above and below the
Basket; and (ii) Purchaser, on the one hand, and the Sellers, on the other,
shall have no obligation for any Losses that, when aggregated with all other
amounts or Losses paid by Purchaser or the Sellers, as the case may be,
hereunder, exceeds the Final Purchase Price (the "Reserve Amount"). The
limitations set forth in the foregoing clauses (i) and (ii) shall not apply to
(a) Losses proximately related to a breaching party's fraud or intentionally
wrongful acts, (b) Losses relating to a breach of the representations and
warranties set forth in Paragraphs 4.2, 4.3, 4.6, 4.7(b), 4.8, 4.25 or 5.7
hereof or (c) for the avoidance of doubt, Losses relating to a party's breach of
any covenant herein.
6.6. Indemnification by Purchaser. In accordance with and subject to the
provisions of this Article 6, Purchaser shall indemnify and hold harmless the
Sellers from and against and in respect of any loss, damage, Liability, cost and
expense, including reasonable attorneys' fees and amounts paid in settlement,
and interest thereon, whether or not arising out of a third party claim or
Action suffered or incurred by either Seller by reason of or arising out of (a)
any misrepresentation, or breach of any representation or warranty of Purchaser
contained in this Agreement; (b) Purchaser's failure to pay or perform any of
the Assumed Liabilities, (c) any Liability that arises after the Closing Date
from Purchaser's operation of the Business; provided,
27
however, that nothing contained in this Paragraph 6.6 shall obligate Purchaser
to indemnify either Seller with respect to any matter as to which a Seller is
obligated to indemnify an Indemnitee pursuant to Paragraph 6.1; and (d)
Purchaser's breach of its obligations under this Article 6. The procedures
governing indemnification in Paragraphs 6.2 and 6.3, and the limitations set
forth in Paragraphs 6.4 and 6.5, shall also apply to claims brought under this
Paragraph 6.6 and, for such purposes, Purchaser shall be deemed to be the
"Indemnitor" referred to therein and each Seller shall be deemed the
"Indemnitee."
7. MISCELLANEOUS
7.1. Notices. All notices and other communications required or permitted to be
given or made hereunder shall be in writing and delivered personally or sent by
overnight delivery with a nationally recognized service, with receipt
acknowledged; by pre-paid, first class certified or registered mail, return
receipt requested; or by facsimile transmission, to the intended recipient
thereof at the applicable address or facsimile number set out below. If
delivered personally, the date on which a notice or other communication is
delivered shall be the date on which such notice or communication is deemed
given. If delivered by confirmed facsimile and on the date thereof a copy is
dispatched by personal delivery, certified mail or overnight delivery service,
the date on which the notice or other communication is deemed given shall be the
date on which such delivery was made by facsimile. If delivered by mail, by
overnight delivery service or by any means not expressly covered above, the date
on which such notice or other communication is received shall be the date it is
deemed given. The addresses and facsimile numbers of the parties for purposes of
this Agreement are as follows:
(i) If to Purchaser:
SD&A Teleservices, Inc.
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxx Xxx
Facsimile No.: (000) 000-0000
(ii) If to the Sellers:
Media Services Group, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn.: Xxxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxxxx Xxxxxxx, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxx X. Annex, Esq.
Facsimile No.: (000) 000-0000
Any party may change the address or facsimile number to which notices
or other communications to such party shall be delivered, mailed or transmitted
by giving notice thereof to the other parties in the manner provided herein.
28
7.2. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
7.3. Governing Law. This document shall be governed by and construed in
accordance with the laws of the State of Georgia, without reference to any
conflicts of law principles that would cause the laws of another state to apply.
The parties hereto irrevocably agree that the state or federal courts located in
Georgia shall have exclusive jurisdiction to hear and determine any claims or
controversies arising out of this document or in connection with the
transactions contemplated hereby and hereby irrevocably consent to the exclusive
jurisdiction of such court, agree to accept service of process by mail in
connection with any such matter, hereby waive any objection or defense based on
lack of personal jurisdiction, improper venue, forum non conveniens or similar
objection or defense, and hereby consent to the granting of legal or equitable
relief as deemed appropriate by such court.
7.4. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that no Seller may assign, delegate or otherwise transfer any
of its rights or obligations under this Agreement without the written consent of
Purchaser.
7.5. Partial Invalidity and Severability. All rights and restrictions contained
herein may be exercised and shall be applicable and binding only to the extent
that they do not violate any applicable Laws and are intended to be limited to
the extent necessary to render this Agreement legal, valid and enforceable. If
any term of this Agreement, or part thereof, not essential to the commercial
purpose of this Agreement shall be held to be illegal, invalid or unenforceable
by a forum of competent jurisdiction, it is the intention of the parties that
the remaining terms hereof, or part thereof, shall constitute their agreement
with respect to the subject matter hereof and all such remaining terms, or parts
thereof, shall remain in full force and effect. To the extent legally
permissible, any illegal, invalid or unenforceable provision of this Agreement
shall be replaced by a valid provision which will implement the commercial
purpose of the illegal, invalid or unenforceable provision.
7.6. Waiver. Any term or condition of this Agreement may be waived at any time
by the party which is entitled to the benefit thereof, but only if such waiver
is evidenced by a writing signed by such party which makes specific reference to
this Agreement. No failure on the part of any party hereto to exercise, and no
delay in exercising, any right, power or remedy created hereunder, shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or remedy by any party preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. No waiver by any party hereto
of any breach of or default in any term or condition of this Agreement shall
constitute a waiver of or assent to any succeeding breach of or default in the
same or any other term or condition hereof.
29
7.7. Headings. The headings of particular provisions of this Agreement are
inserted for convenience only and shall not be construed as a part of this
Agreement or serve as a limitation or expansion on the scope of any term or
provision of this Agreement.
7.8. Number; Gender; Construction. Where the context requires, the use of the
singular form herein shall include the plural, the use of the plural shall
include the singular, and the use of any gender shall include any and all
genders. The use of the word "including" in this Agreement shall be deemed to
mean "including, without limitation."
7.9. Entire Agreement. This Agreement (together with the Schedules and Exhibits
to this Agreement, which are incorporated in and are an integral part of this
Agreement) supersedes all prior discussions and agreements between or among the
parties with respect to the subject matter hereof, and this Agreement
constitutes and contains the sole and entire agreement between or among the
parties with respect to the matters covered hereby and thereby. This Agreement
shall not be altered or amended except by an instrument in writing signed by or
on behalf of the party entitled to the benefit of the provision against whom
enforcement is sought. Nothing expressed to or referred to in this Agreement
will be construed to give any Person other than the parties to this Agreement
any legal or equitable right, remedy or claim under or with respect to this
Agreement, or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns permitted under Paragraph
7.4.
8. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings specified with respect thereto below:
"Action" shall mean any action, suit, litigation, complaint,
counterclaim, claim, petition, investigation, mediation contest, or
administrative proceeding, whether at Law, in equity, in arbitration or
otherwise, and whether conducted by or before any Government or other Person.
"Adjusted Net Tangible Assets" shall mean the value of the total
Tangible Assets of the Business (as of the Most Recent Balance Sheet Date, in
the case of the Preliminary Closing Date Balance Sheet, and as of the Closing
Date, in the case of the Adjustment Schedule), less the aggregate of the lines
items "Trade Payables," "Accrued Payroll Liabilities," "Accrued Vacation Pay,"
and "Other Accrued Expenses" as derived from the balance sheet of the Business
(as of the Most Recent Balance Sheet Date, in the case of the Preliminary
Closing Date Balance Sheet, and as of the Closing Date, in the case of the
Adjustment Schedule), in each case, per the books and records of the Sellers
kept in accordance with GAAP, consistent with past practice and consistent with
manner in which the Most Recent Financial Statements were prepared.
"Adjustment Schedule" has the meaning set forth in Paragraph 1.4(a).
"Affiliate" of any specified Person shall mean any other Person
directly or indirectly Controlling, Controlled by, or under direct or indirect
common Control with such specified Person, or with respect to any natural
person, any present or former spouse of such natural person and any parent,
sibling, child, grandchild or grandparent (and any present or former spouse of
the foregoing) of such natural person or such natural person's present or former
spouse.
"Agent" shall have the meaning set forth in Paragraph 3.5.
"Agreement" shall have the meaning set forth in the Preamble.
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"Assets" shall have the meaning set forth in Paragraph 1.1.
"Assigned Contracts" shall have the meaning set forth in Paragraph
1.1(a).
"Assumed Liabilities" shall have the meaning set forth in Paragraph
1.6.
"Base Purchase Price" has the meaning set forth in Paragraph 1.3(a).
"Basket" has the meaning set forth in Paragraph 6.5.
"Business" shall have the meaning set forth in the Recitals.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which commercial banks in New York, New York are required or
authorized to be closed.
"Closing" shall have the meaning set forth in Paragraph 2.1.
"Closing Date" shall have the meaning set forth in Paragraph 2.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidential Data" shall have the meaning set forth in Paragraph
3.7(d).
"Contract" means any agreement, contract, commitment, instrument,
license, lease arrangement, consensual obligation, promise or undertaking,
whether written or oral and whether or not legally binding.
"Control" means a Person possesses, directly or indirectly, the power
to direct or cause the direction of the management and policies of another
Person, whether through the ownership of voting securities, by Contract or
otherwise.
"Effective Time" shall have the meaning set forth in Paragraph 2.1.
"Employee Benefit Plans" shall mean "employee benefit plan," as defined
in Section 3(3) of ERISA (including any "multiemployer plan" as defined in
Section 3(37) of ERISA) and each profit-sharing, bonus, stock option, stock
purchase, stock ownership, pension, retirement, severance, deferred
compensation, excess benefit, defined benefit, supplemental unemployment,
post-retirement medical or life insurance, welfare or incentive plan, or sick
leave, long-term disability, medical, hospitalization, life insurance, other
insurance plan, or other employee benefit plan, program or arrangement, whether
written or unwritten, qualified or non-qualified, funded or unfunded, maintained
or contributed to by Seller in which any employee of the Business participates.
"Enforceability Limitations" has the meaning set forth in Paragraph
4.2.
"Environmental Laws" means any law relating to the protection of soil,
surface water, groundwater, land, sediment, surface or subsurface strata or
ambient air.
"Excluded Assets" shall have the meaning set forth in Paragraph 1.2.
32
"Excluded Liabilities" shall have the meaning set forth in Paragraph
1.7.
"Final Adjusted Net Tangible Assets" has the meaning set forth in
Paragraph 1.4(b).
"Final Purchase Price" has the meaning set forth in Paragraph 1.4(c).
"Financial Statements" shall have the meaning set forth in Paragraph
4.4.
"Forum" shall mean any federal, national, state, local, municipal or
foreign court, governmental agency, administrative body or agency, tribunal,
private alternative dispute resolution system, or arbitration panel.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Government" shall mean any federal, national, state, provincial,
local, county, municipal, or foreign government or any department, commission,
board, bureau, agency, instrumentality, unit, or taxing authority thereof.
"hereof," "herein," "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and "Article," "Paragraph," "Exhibit,"
"Paragraph" and like references are to this Agreement and the exhibits and
Schedules to this Agreement unless otherwise specified; any reference to this
Agreement shall include the Exhibits and Schedules to this Agreement unless the
context clearly requires otherwise.
"Holdback Amount" has the meaning set forth in Paragraph 1.5.
"Holdback Period" has the meaning set forth in Paragraph 1.5.
"Holdback Promissory Note" has the meaning set forth in Paragraph 1.5.
"Indemnitee" shall have the meaning set forth in Paragraph 6.1.
"Indemnitors" shall have the meaning set forth in Paragraph 6.1.
"Independent Accountant" has the meaning set forth in Paragraph 1.4(b).
"Intellectual Property Rights" shall mean patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not
reduced to practice) and any reissues, continuations, continuations-in-part,
revisions, extensions or reexaminations thereof; trademarks, service marks,
trade dress, logos, trade names and corporate names, together with all
associated goodwill, all translations, adaptations, derivations and combinations
of any of the foregoing; copyrights and copyrightable works; mask works; and all
registrations, applications and renewals for any of the foregoing; trade secrets
and confidential information (including Confidential Data, ideas, formulae,
compositions, know-how, discoveries, inventions, computer programs, designs,
plans, proposals, technical data, financial, business and marketing plans, and
customer and supplier lists and related information).
"Known," "to the Knowledge of," "Aware" or words of similar import
employed in this Agreement with reference to any individual or entity shall be
conclusively presumed to mean that the individual or entity has made reasonable
efforts under the circumstances to become knowledgeable; in the case of MSGI and
Seller, "Knowledge" shall be deemed to be the individual and collective
Knowledge (as defined above) of any of MSGI's and Seller's directors, senior
officers and managers.
33
"Law" shall mean all federal, national, state, provincial, local,
county, municipal or foreign constitutions, statutes, rules, regulations, norms,
ordinances, acts, codes, legislation, treaties, conventions, common law
principles, judicial decisions, administrative or court orders, and similar laws
and legal requirements, whether of the United States of America or any other
jurisdiction or Government authority as in effect from time to time.
"Leased Real Property" has the meaning set forth in Paragraph 4.18.
"Liability" shall mean any liability or obligation, whether known or
unknown, asserted or unasserted, absolute, contingent or conditional, accrued or
unaccrued, matured or unmatured, liquidated or unliquidated and whether due or
to become due, and including liability resulting from contingencies.
"Licensed Software" has the meaning set forth in Paragraph 4.13.
"Lien" shall mean any mortgage, pledge, hypothecation, security
interest, encumbrance, claim, Tax, restriction on use, lien or charge of any
kind, or any rights of others, however evidenced or created (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the lien notice records or other
similar legislation of any jurisdiction).
"Losses" shall have the meaning set forth in Paragraph 6.1.
"Most Recent Balance Sheet Date" shall have the meaning set forth in
Paragraph 4.5.
"Most Recent Financial Statements" shall have the meaning set forth in
Paragraph 4.4.
"Orders" shall mean all applicable orders, writs, judgments,
injunctions, decrees, rulings, consent agreements, and awards of or by any Forum
or entered by consent of the party to be bound.
"Owned Software" has the meaning set forth in Paragraph 4.13.
"Permitted Liens" shall mean Liens imposed by operation of Law by a
Government authority for Taxes accrued in respect of current Tax periods that
are not yet due and payable and the additional Liens listed on Schedule 8
hereto.
"Permits" shall have the meaning set forth in Paragraph 1.1(j).
"Person" shall include any of an individual, a partnership, a limited
partnership, a joint venture, a corporation, a limited liability company, a
trust, an unincorporated organization or a Government.
34
"Preliminary Closing Date Balance Sheet" has the meaning set forth in
Paragraph 1.3(b).
"Reserve Amount" has the meaning set forth in Paragraph 6.5.
"Seller" shall have the meaning set forth in the Preamble.
"Sellers" shall mean Seller and MSGI.
"Sellers' Software" shall have the meaning set forth in Paragraph 4.13.
"Tangible Assets" means the total of the following items as derived
from the balance sheet of the Business (prepared as of the Most Recent Balance
Sheet Date, in the case of the Preliminary Closing Date Balance Sheet, and
prepared as of the Closing Date, in the case of the Adjustment Schedule), in
each case, per the books and records of the Sellers kept in accordance with
GAAP, consistent with past practice and consistent with the manner in which the
Most Recent Financial Statements were prepared: cash and cash equivalents;
accounts receivable, net of a reserve of Twenty-Five Thousand Dollars
($25,000.00) for doubtful accounts; prepaid expenses, excluding prepaid expenses
related to the Xxxxxxx line of credit; advances to employees; prepaid refundable
deposits; and the book value of fixed assets (net of accumulated depreciation).
"Taxes" shall mean any taxes, levies, imposts, duties, fees,
assessments, deductions, withholdings or other charges of whatever nature,
including income, gross receipts, excise, property, sales, use, customs, value
added, consumption, transfer, license, payroll, employee income, withholding,
social security, and franchise taxes, now or hereafter imposed or levied by the
United States of America or any Government or by any department, agency or other
political subdivision or taxing authority thereof or therein, all deposits
required in connection therewith, and all interests, penalties, additions to
tax, and other similar Liabilities with respect thereto.
"Teleservices" has the meaning set forth in the Preamble.
"Territory" shall have the meaning set forth in Paragraph 3.7(a).
"Transferred Employees" shall have the meaning set forth in Paragraph
3.6(a).
"Purchaser" shall have the meaning set forth in the Preamble.
35
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized agents as of the day and year first above
written.
PURCHASER:
SD&A TELESERVICES, INC.
By: /s/ Xxxxxx Xxx
-----------------------------
Name: Xxxxxx Xxx
Title:President
MSGI:
MEDIA SERVICES GROUP, INC.
By: /s/ Xxxxxx Xxxxxxx
---------------------------
Name:Xxxxxx Xxxxxxx
Title:Chairman, CEO
SELLER:
MKTG TELESERVICES, INC.
By: /s/ Xxxxxx Xxxxxxx
---------------------------
Name:Xxxxxx Xxxxxxx
Title:Chairman, CEO
36
SCHEDULES AND EXHIBITS
Schedule 1.1(a)___Assigned Contracts
Schedule 1.1(d)___Intellectual Property Rights
Schedule 1.1(l)___Accounts Receivable
Schedule 1.1(m)___Bank Accounts, deposits, etc.
Schedule 1.2______Excluded Assets
Schedule 1.3(b)___Preliminary Closing Date Balance Sheet
Schedule 1.4______Purchase Price Adjustment Schedule
Schedule 1.6______Assumed Liabilities
Schedule 1.8______Tax Allocation Schedule
Schedule 3.6(a)___Employees to be hired on Closing Date; Accrued Leave
Schedule 4.4______Financial Statements
Schedule 4.5______Other Liabilities
Schedule 4.7(a)___Fixed Assets
Schedule 4.7(c)___Leased Assets
Schedule 4.7(d)___Outbound Leases
Schedule 4.7(f)___Lease Defaults
Schedule 4.7(h)___Notices of Violations
Schedule 4.9______Required Consents and Filings
Schedule 4.10_____Changes since Financial Statement Date
Schedule 4.11_____Litigation
Schedule 4.12_____Permits
Schedule 4.13_____Computer Software
Schedule 4.15_____Other Contracts
Schedule 4.16_____Labor Matters
Schedule 4.17_____Employee Benefit Plans
Schedule 4.18_____Leased Real Property
Schedule 4.21_____Customers
Schedule 8________Permitted Liens
Exhibit A_________Form of Holdback Promissory Note
Exhibit B_________Form of Assignment and Xxxx of Sale
Exhibit C_________Form of Assumption Agreement
Exhibit D_________Form of Opinion of Xxxxxxxxx Traurig LLP
Exhibit E_________Form of Xxxxxx Xxxxxxx Non-Compete
Exhibit F_________Form of Landlord Estoppel Certificate
37
