EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
on this 30th day of August, 2002, and effective as of 5:00 p.m. (E.S.T.) (or if
earlier the Effective Time (as defined in Section 3.1)) on August 30th, 2002, by
and among NATIONAL LAMPOON NETWORKS, INC., a Delaware corporation ("Purchaser"),
and BURLY BEAR NETWORK, INC., a Delaware corporation ("Seller") and joined in by
J2 COMMUNICATIONS, a California corporation ("Purchaser's Parent") and
CONSTELLATION VENTURE CAPITAL, L.P., a Delaware limited partnership, acting in
its capacity as agent (the "Agent") for the Lenders under the Credit Agreement
(in each case, as defined in Article 15).
RECITALS:
1. Seller has been engaged, in the business of producing and distributing
entertainment through a network of affiliated colleges and other
educational television stations (the "Business").
2. Seller is currently engaged in a wind down of its business and is
liquidating its assets and properties. Seller is in arrears in meeting the
claims of its creditors and may be in breach of its Credit Agreement with
its Lenders. Seller intends to enter into discussions and negotiations with
its creditors to effectuate an out of court work out. Seller intends to use
the proceeds to be derived from this transaction to satisfy to the extent
possible the claims of its creditors.
3. Seller desires to sell to Purchaser, and Purchaser desires to purchase from
Seller, certain remaining tangible and intangible assets owned by Seller
and formerly used in the operation of the Business.
4. Purchaser's Parent has organized Purchaser for the purpose of entering into
this Agreement and acquiring the assets and property hereunder.
5. Article 15 should be referred to for definitions which are applicable
throughout this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and conditions
contained in this Agreement, the parties hereto agree as follows:
ARTICLE 1. PURCHASE AND SALE OF ASSETS
Section 1.1. Assets to be Purchased and Sold. Subject to the terms and
conditions contained in this Agreement, at the Closing, Seller shall sell,
convey, assign and transfer to Purchaser, and Purchaser shall purchase from
Seller, the following assets, properties, privileges and rights used or held for
use in the conduct of, generated by, or constituting the Business (collectively,
the "Assets"):
(a) Seller's programming library, including, without limitation, the programs
and films listed on Schedule 1.1(a) (collectively and individually as to
each film or program, the "Library");
(b) Intellectual Property and Film Assets associated with the Library;
(c) rights under all Film Asset Acquisition Agreements, Film Asset Exploitation
Agreements and other agreements with respect to the development of the
Library;
(d) inventories of films, videos, DVDs and other similar products;
(e) rights under agreements between Seller and its affiliated television
stations and other similar affiliates, including, without limitation those
agreements listed on Schedule 1.1(e) ("Affiliate Agreements");
(f) subject to Section 1.5, rights under "Leased Carriage" agreements and
contracts (in addition to the Affiliate Agreements) for the distribution by
Seller of products or services of the Business, including without
limitation those identified on Schedule 1.1(f) (the "Leased Carriage
Agreements");
(g) the current names, addresses and contact names for all affiliates of the
Business, including, without limitation those listed in Schedule 1.1(g)
(the "Affiliate List");
(h) customer data bases and marketing plans of Seller;
(i) technical and production equipment, office furniture and other tangible
personal property, listed in Schedule 1.1(i) (the "Equipment");
(j) computer software used in connection with the Assets (the "Software");
(k) rights and privileges under leases of personal property used by Seller in
the Business identified in Schedule 1.1(k) (the "Personal Property
Leases");
(l) (i) trademarks and service marks, and any registrations, registration
certificates and applications for registration therefor, and the goodwill
associated therewith (the "Trademarks"), (ii) trade names, assumed and
fictitious names and registered user names, and registrations and any
applications for registration therefor, and the goodwill associated
therewith and related internet domain names (the "Trade Names"), and (iii)
copyrights and registrations and any applications for registration therefor
(the "Copyrights"), including, without limitation, those items identified
in Schedule 1.1(l));
(m) all books, records, files, manuals and other similar materials, including,
advertising materials, business and marketing plans and proposals,
production data, sales and promotional materials and records, purchasing
materials and records, files for past, existing and contemplated projects,
media materials, accounting records (copies), sales order files, customer
lists, advertiser lists, receipts and computer records relating to the
Assets (the "Business Records");
(n) rights under the contracts, agreements and instruments providing for
services to be rendered to Seller entered into in connection with the
Assets identified in Schedule 1.1(n) (the "Service Agreements"); and
(o) rights and choses in action relating to the Assets, including, without
limitation, all rights in, to and under express or implied warranties,
guaranties, indemnities, and representations relating to the Assets.
Section 1.2. Title to Assets at Closing. The Assets shall be sold, assigned
and transferred to Purchaser at the Closing, free and clear of any and all
security interests, mortgages, pledges, leases, liens, restrictions and
encumbrances of every kind and type whatsoever.
Section 1.3. Liabilities and Obligations to be Assumed. Subject to the
terms and conditions contained in this Agreement, at the Closing, Purchaser
shall assume, and agrees to timely pay, discharge and perform, all obligations
of Seller arising after the Closing Date under the Affiliate Agreements, the
Leased Carriage Agreements (but only to the extent assigned to Purchaser
pursuant to Sections 1.1(f) and 1.5), the Personal Property Leases and the
Service Agreements, which are listed on the Schedule 1.1(e), Schedule 1.1(g) and
Schedule 1.1(k) (the "Assumed Liabilities"); provided, however, that Purchaser
shall not assume or be responsible for any such obligations which arise from
breaches of such agreements or defaults thereunder by Seller, all of which
obligations shall constitute Excluded Liabilities (as defined in Section 1.4).
Section 1.4. Liabilities Not Assumed. It is expressly understood and agreed
that, except for those liabilities and obligations expressly assumed by
Purchaser pursuant to Section 1.3, Purchaser shall not assume and shall not be
liable for any liabilities, obligations, indebtedness, contracts or commitments
of Seller of any kind, character or description whatsoever, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, and whether due or to become due, including, without
limitation (which liabilities and obligations not expressly assumed by Purchaser
are referred to herein as "Excluded Liabilities"):
(a) any claim, regardless of when made or asserted, which arises out of or is
based upon any agreement made by Seller, or alleged to have been made by
Seller, or which is imposed or asserted to be imposed by operation of law,
in connection with any service performed or products sold or leased by or
on behalf of Seller prior to the Closing;
(b) any liability of Seller for Taxes, whether arising before or after the
Closing, including, without limitation, Taxes arising in connection with
the transactions contemplated by this Agreement and any subsequent
liquidation of Seller;
(c) any liability of Seller for the unpaid Taxes of any Person (other than
Seller) under IRC Reg.ss.1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise;
(d) any liability or obligation arising prior to or as a result of the Closing
to any employees, agents or independent contractors of Seller, whether or
not employed by Purchaser after the Closing, or under any benefit
arrangement; or
(e) any liability or obligation under or in connection with the assets excluded
from the Assets purchased by Purchaser hereunder.
(f) any liability or obligation of Seller under any oral Contract, whether or
not assigned to Purchaser hereunder, or under any Contract assigned to
Purchaser hereunder to the extent the liabilities or obligations arise
during, or relate to, a period prior to the Closing Date or relate to a
Contract not listed on the Schedules identified in Section 1.3;
(g) any liability or obligation which would not have existed had each of the
representations and warranties of Seller in this Agreement or the Other
Seller Agreements, been true;
(h) any obligation of Seller to pay Participations or Residuals to the extent
that such obligations become due, or arise out of or relate to proceeds
paid to or for the benefit of Seller prior to the Closing Date, and any
obligation of Seller to pay sales commissions in connection with any Film
Contract;
(i) any liability arising from the breach of any representation or warranty
made by Seller under any Contract to which it is a party;
(j) any liability or obligation of Seller with respect to unpaid laboratory
costs, tape duplication costs or unpaid advances, guaranties or deferments
in connection with any Film Contract;
(k) any liability or obligation of Seller with respect to unpaid
synchronization or music license fees or other material used in the Library
prior to the Closing Date;
(l) any liability or obligation of Seller with respect to unpaid production
costs;
(m) any liability or obligation of Seller which relate to any retirement,
pension, profit sharing or other compensation plan, including, without
limitation, any liability or obligation to any guild or collective
bargaining group;
(n) any liability or obligation of Seller relating to any severance,
"parachute" or other similar payment to any officer, director or employee
of Seller;
(o) any liability or obligation of Seller arising outside of the ordinary
course of the Business or otherwise arising by reason of any breach of
contract, tort or infringement of the rights of another;
(p) any liability or obligation of Seller in connection with its trade payables
and current liabilities existing as of the Closing Date;
(q) any liability or obligation of any Affiliate of Seller and any liability or
obligation owing to any Affiliate of Seller;
(r) any contingent liabilities, except to the extent explicitly assumed by
Purchaser under Section 1.3; and
(s) any liability or obligation of Seller or its Affiliates discharged by
operation of law.
To the extent of any inconsistencies between this Section 1.4 and Section 1.3
above, the provisions of Section 1.3 shall govern.
Section 1.5. Consents. Seller has advised Purchaser that some of the Leased
Carriage Agreements require the prior written consent of the other party thereto
to assign such agreements to Purchaser. To the extent a Leased Carriage
Agreement may not be assigned to Purchaser without the prior written consent of
the other party thereto, such Leased Carriage Agreement shall not be assigned to
Purchaser pursuant to Section 1.1(f) at the Closing. For a period of ninety (90)
days after the Closing, Seller covenants to assist Purchaser, as requested, in
obtaining any third party consents under any Leased Carriage Agreement not
assigned to Purchaser at the Closing pursuant to this Section 1.5 and, upon
obtaining such third party consents, Seller covenants to assign all of its
rights, title, interests and obligations under such Leased Carriage Agreement to
Purchaser.
ARTICLE 2. PURCHASE PRICE; ALLOCATION.
Section 2.1. Purchase Price. Subject to the terms and conditions contained
in this Agreement, Purchaser shall pay the following amount (the "Purchase
Price") to Seller as follows: (i) Two Hundred Thousand Dollars ($200,000) in
immediately available funds, (ii) the number of shares of common stock of
Purchaser's Parent with a value equal to Four Hundred Thousand Dollars
($400,000) with that value determined by the average closing price for the five
(5) trading days preceding the Closing on the Over the Counter Bulletin Board
(the "J2 Shares"), and (iii) one hundred and fifty (150) shares of common stock
of Purchaser, constituting fifteen percent (15%) of the outstanding shares (the
"NLN Shares" and together with the J2 Shares, collectively, the "Shares").
Seller hereby assigns and transfers all of its rights and interests in such
Shares to Agent, as agent for the Lenders under that certain Credit Agreement.
Subject to the terms of Article 11 and the Escrow Agreement, the parties
acknowledge and agree that, upon issuance at the Closing, the Shares will be
deposited in escrow with the Escrow Agent, to be held and released to Purchaser
and/or the Lenders, as the case may be, in accordance with the terms and
conditions of the Escrow Agreement. The Shares will be deemed delivered to
Seller, and payment of that portion of the Purchase Price shall be deemed
satisfied, upon receipt of the Shares by the Escrow Agent.
Section 2.2. Deposit. Upon execution of this Agreement, Purchaser deposited
with Seller's counsel Fifty Thousand Dollars ($50,000) (the "Deposit") to be
held in escrow by Seller's counsel and applied against the Purchase Price (as
provided in Section 3.3), returned to Purchaser (as provided in Section 14.1) or
forfeited to Seller (as provided in Section 14.2), as the case may be. In the
event this Agreement is executed and closed on the same day, no Deposit will be
made with Seller's counsel.
Section 2.3. Allocation of Purchase Price. The Purchase Price and Assumed
Liabilities, as finally determined, shall be allocated among the Assets acquired
hereunder in accordance with Schedule 2.3 attached hereto. Seller and Purchaser
shall prepare and complete all of their respective income tax returns and
reports, including IRS Form 8594, on a basis consistent with such allocations
and shall not take a position before any taxing authority or in any judicial
proceeding that is in any way inconsistent with such allocations.
ARTICLE 3. CLOSING
Section 3.1. Date, Time and Place of Closing. The closing of the
transaction contemplated by this Agreement (the "Closing") shall take place on
Friday, August 30, 2002, by facsimile between the offices of Leagre Xxxxxxxx &
Xxxxxxx LLP, located at 000 X. Xxxxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxxx,
Xxxxxxx, and the offices of Xxxxx, Bonaquist & Fox LLP, 655 Third Avenue-21st
Floor, New York, New York or on such other date and at such other time and place
as Seller and Purchaser shall mutually agree upon. The date of the Closing is
referred to in this Agreement as the "Closing Date." The Closing shall be deemed
effective as of 5:00 p.m. (E.S.T) on the Closing Date or, if earlier, upon
delivery or waiver of each of the items set forth in Sections 3.2 and 3.3 (the
"Effective Time").
Section 3.2. Deliveries by Seller at Closing. At the Closing, Seller shall
deliver to Purchaser:
(a) All deeds, bills of sale, assignments, and other instruments of conveyance,
assignment and transfer, duly executed by Seller and dated as of the
Closing Date, necessary to transfer to Purchaser good and marketable title
to the Assets, including a duly executed assignment and assumption
agreement in substantially the same form as the Assignment and Assumption
Agreement attached hereto as Exhibit A;
(b) An executed copy of the Escrow Agreement;
(c) All consents, releases, opinions, agreements, instruments, certificates,
and other documents required by Article 8 to be delivered to Purchaser at
or before the Closing (if not already delivered to Purchaser prior to the
Closing);
(d) A letter executed by Seller and Broadway Video, in form and substance
satisfactory to Purchaser, which provides Purchaser with both access and
use of Seller's leased premises at 000 X. 00xx Xxxxxx (8th, 00xx & 00xx
Xxxxxx), Xxx Xxxx, Xxx Xxxx through September 30, 2002 (or such earlier
date as may be mutually satisfactory to Seller, Broadway Video and
Purchaser); and
(e) Full possession and enjoyment of all of the Assets.
Section 3.3. Deliveries by Purchaser at Closing. At the Closing, Purchaser shall
deliver or cause to be delivered:
(a) To Seller, immediately available funds in the amount of Two Hundred
Thousand Dollars ($200,000) less (i) the Deposit, if paid to Seller's
counsel as provided in Section 2.2, (ii) Seller's allocable share of the
Transfer Taxes as provided in Section 7.2 and (iii) Seller's allocable
share of the fee owed to the Escrow Agent under the Escrow Agreement;
(b) To Seller and the Escrow Agent, an executed copy of the Escrow Agreement.
(c) To Seller and the Escrow Agent, an irrevocable letter of instruction to
Purchaser's Parent's stock transfer agent authorizing it to issue a
certificate for the J2 Shares, in accordance with Seller's instructions, in
the name of Agent, as agent for the Lenders under that certain Credit
Agreement, and to deliver the J2 Shares to Escrow Agent;
(d) To the Escrow Agent, a certificate for NLN Shares issued, in accordance
with Seller's instructions, in the name of Agent, as agent for the Lenders
under that certain Credit Agreement; and
(e) To Seller, all consents, opinions, agreements, instruments, certificates,
and other documents required by Article 9 to be delivered to Seller at or
before the Closing (if not already delivered to Seller before the Closing).
In addition, Seller's counsel shall release the Deposit to Seller, if, in fact,
a Deposit was deposited with Seller's counsel pursuant to Section 2.2.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER REGARDING THE ASSETS
Seller represents and warrants to Purchaser as follows:
Section 4.1. Organization. Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to conduct its business (including
the Business) as now conducted by it and to own or use all assets and properties
presently owned or used by it. Seller is duly qualified to do business and is in
good standing as a foreign corporation in each state and other jurisdiction in
which the ownership or use of the Assets, or the nature of the activities
conducted by it in connection with the Business, requires such qualification
Section 4.2. Authority and Validity. Seller has all requisite corporate
power and authority to execute, deliver, and fully perform this Agreement and
all other agreements, instruments, certificates and other documents required to
be executed by or on behalf of Seller pursuant to this Agreement (the "Other
Seller Agreements"). The execution, delivery, and performance of this Agreement
and the Other Seller Agreements by Seller have been duly authorized by all
requisite corporate and shareholder action. This Agreement has been, and the
Other Seller Agreements will be, duly executed and delivered on behalf of Seller
by duly authorized officers of Seller, and this Agreement constitutes, and the
Other Seller Agreements (when executed and delivered) will constitute, the
legal, valid and binding obligations of Seller, enforceable against Seller in
accordance with their respective terms except as enforceability may be limited
by bankruptcy, insolvency, or similar law affecting the enforcement of
creditors' rights, generally, or by general principles of equity.
Section 4.3. Non-contravention. The execution, delivery and performance of
this Agreement and the Other Seller Agreements do not and will not, with or
without the giving of notice or the passage of time, or both: (i) violate the
Restated Certificate of Incorporation, as amended, or Bylaws of Seller; (ii)
violate any Law; or (iii) except as set forth in the Schedule 4.3, conflict
with, result in a breach of, constitute a default under, result in the
acceleration of any rights or obligations under, or create in any party the
right to accelerate, terminate, or modify the existing rights or obligations of
Seller under, any loan agreement, indenture, lease, license, or other agreement,
instrument, commitment or understanding, oral or written, to which Seller is a
party or by which it is bound, or to which any of its assets is subject.
Section 4.4. Consents. Except as set forth in the Schedule 4.4, no consent,
approval, license or authorization of, or filing, recording or registration
with, or exemption by, any Governmental Authority or any other Person is
required in connection with the execution, delivery or performance of this
Agreement or any of the Other Seller Agreements by Seller for the Sale and
transfer of any of the Assets, and all consents, approvals, licenses,
authorization of filings which are required will be obtained and/or made prior
to the Closing.
Section 4.5. Title to Assets. Seller has good and marketable title to the
Assets free and clear of any and all mortgages, security interests, pledges,
liens, charges, claims, leases, restrictions and other encumbrances and defects
of title of any nature whatsoever, except as specifically described in Schedule
4.5. Any such mortgages, security interests, liens and other encumbrances
described in the Schedule 4.5 will be paid and released at or before the
Closing. There are no existing agreements, options, commitments or rights with,
of or to any Person to acquire any of the Assets or any interest therein, except
for this Agreement and agreements for the sale of inventory entered into in the
ordinary course of business consistent with past practice.
Section 4.6. Condition of Tangible Assets. All tangible personal property
included in the Assets is being sold to Purchaser on an "As Is and Where Is"
basis. Seller makes no specific warranties or representations, but believes the
Assets are sufficient for the conduct of business as contemplated in the core
capabilities model. Purchaser has been given the opportunity to inspect all
Assets during the course of the due diligence period and has determined the
Assets to be acceptable in all respects.
Section 4.7. Intellectual Property.
(a) Seller owns, or possesses the royalty-free license or other right to use,
all Intellectual Property necessary to conduct the Business of Seller as
presently conducted by Seller.
(b) Except as set forth in Schedule 4.7(b), with respect to each item of
Intellectual Property owned by Seller: (i) Seller is the owner of all
right, title and interest in and to the item, free and clear of any
security interests, liens, encumbrances, or other restrictions; (ii) the
item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge; (iii) Seller has not received any notice of any kind
whatsoever which challenges the legality, validity, enforceability, use, or
ownership of the item; (iv) the item has not been misappropriated from any
Person; and (v) Seller has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other conflict
with respect to the item.
(c) With respect to each item of Intellectual Property owned by a third Person
and used by Seller pursuant to a license, sublicense, agreement, or other
permission: (i) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and
effect and will continue to be legal, valid, binding, enforceable, and in
full force and effect on substantially identical terms following the
consummation of the transactions contemplated herein; (ii) no party to the
license, sublicense, agreement, or permission is in breach or default, and
no event has occurred which, with notice or lapse of time, or both, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder; (iii) no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof; (iv) with
respect to each sublicense, the representations and warranties set forth in
clauses (i) through (iii) above are true and correct with respect to the
underlying license; (v) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree, ruling or
charge; (vi) Seller has not received any notice of any kind whatsoever
which challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and (vii) Seller has not granted
any sublicense or similar right with respect to the license, sublicense,
agreement, or permission.
(d) No third Person has interfered with, infringed upon, misappropriated, or
otherwise improperly used any item of Intellectual Property of Seller.
Seller has not taken, or omitted to take, any action which may have the
effect of waiving any of its rights to the Intellectual Property, the
waiver of which may make Purchaser unable to operate a material portion of
the Business of Seller as currently conducted by Seller or allow any other
Person to compete more effectively with Purchaser than it presently does
with Seller.
(e) Seller has not interfered with, infringed upon, misappropriated, or
otherwise improperly used any Intellectual Property rights of any other
Person, and Seller has not received any notice of any kind whatsoever
alleging any such interference, infringement, misappropriation or improper
use.
Section 4.8. Computer Software. Seller has delivered to Purchaser complete
and correct copies of all user and technical documentation related to the
Software, as available.
Section 4.9. Tax Matters. All federal, state, local and foreign tax
returns, reports, statements and other similar filings required to be filed
through December 31, 2000 by Seller with respect to any Taxes (the "Tax
Returns") have been filed with the appropriate Governmental Authorities in all
jurisdictions in which such Tax Returns are required to be filed, and all such
Tax Returns properly reflect the liabilities of Seller for Taxes for the
periods, property or events covered thereby. All Taxes have been properly
accrued or paid. Seller has not received any notice of assessment or proposed
assessment in connection with any Tax Returns, and there are not any pending tax
examinations of or tax claims asserted against Seller or any of its assets or
properties. Except as set forth on Schedule 4.9, Seller has not extended, or
waived the application of, any statute of limitations of any jurisdiction
regarding the assessment or collection of any Taxes. There are no Tax liens
(other than any lien for current taxes not yet due and payable) on any of the
assets or properties of Seller. Seller has no knowledge of any basis for any
additional assessment of any Taxes. Seller has made all deposits required by law
to be made with respect to employees' withholding and other employment taxes.
Section 4.10. Contracts. Set forth on Schedule 4.10 is a complete and
correct listing and description of all of the following agreements, contracts
and commitments, whether written or oral: (i) by which any of the Assets are
bound, or (ii) to which Seller is a party or by which Seller is bound and which
relate directly or indirectly to the Assets (collectively, the "Contracts"):
(a) Notes, obligations, mortgages, security agreements and other agreements and
instruments;
(b) Employment, consulting, compensation and agency agreements (other than
employment arrangements terminable at will without liability on the part of
Seller or upon payment of no more than applicable statutory or regulatory
severance or termination benefits);
(c) Distributorship, or marketing agreements;
(d) Agreements, orders, or commitments for the purchase, acquisition or lease
of products, goods, services or equipment;
(e) Agreements, orders, or commitments for the sale of goods or the performance
of services;
(f) Licenses to or from others of Intellectual Property and Software;
(g) Brokerage or finder's agreements;
(h) Partnership, joint venture or other arrangements or agreements involving a
sharing of profits or expenses;
(i) Contracts or commitments to sell, lease, or dispose of any Asset, whether
or not in the ordinary course of business;
(j) Contracts or commitments with any shareholder, employee, director, officer,
or Affiliate of Seller; and
(k) All other agreements, contracts, commitments and understandings relating to
the Assets, including Film Contracts.
Section 4.11. Compliance with Laws; Authorizations. Seller has complied
with all, and is not in violation of any, Laws applicable to Seller, or the
Assets, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against Seller
alleging any failure to comply with such Laws. Seller owns or lawfully uses all
permits, licenses, franchises, and other authorizations and approvals from
Governmental Authorities and other Persons that are necessary in connection with
the Assets. All of such permits, licenses, franchises, authorizations and
approvals are in full force and effect, and there are no proceedings pending or
threatened, which may result in the revocation, cancellation, suspension, or any
adverse modification of any such permit, license, franchise, authorization or
approval.
Section 4.12. Litigation. Except as set forth on Schedule 4.7(b), there is
no litigation, arbitration, investigation or other proceeding pending against,
or otherwise affecting, or, to Seller's knowledge threatened against, the
Assets, nor is there any reasonably likely basis for any such litigation,
arbitration, investigation or proceeding. Any such litigation, arbitration,
investigation or other proceeding, if determined adversely to Seller, will not
have a material adverse effect on the Business or prevent the consummation of
any of the transactions contemplated by this Agreement. Seller is not subject
to, or in violation of, any judgment, order, writ, injunction, decree or award
of any court, arbitrator or other Governmental Authority that may have a
material adverse effect on the Business or prevent the consummation of any of
the transactions contemplated by this Agreement.
Section 4.13. Matters Regarding Library
(a) Schedule 1.1(a) sets forth, on a title-by-title basis, a true, correct and
complete list of the principal films and programs which constitute the
Library, specifying for each such film and program in the Library the
number and length of episodes produced, genre, and a short description of
the programming.
(b) The transfer of the Assets pursuant to this Agreement will vest in
Purchaser all rights of Seller for the distribution, exhibition and
exploitation of the Library.
(c) Except as set forth on Schedule 4.13(c), Seller has no liability or
obligation for any Residuals or Participations.
(d) Seller has not received any notice that any other party intends to cancel,
terminate, repudiate, rescind or exercise any offset with respect to any of
the Film Contracts.
(e) None of the licensors under any Film Asset Acquisition Agreement to which
Seller is a party has exercised any right to buy back any rights granted to
Seller in the Library nor have any such rights reverted to any licensor nor
has any such licensor purported to terminate or rescind any such rights.
(f) All advances, guarantees, Residuals, royalties and Participations payable
prior to the Closing Date by Seller under or in connection with the Library
have been fully paid, and all other obligations of Seller under or in
connection with the Library required to be performed prior to the Closing
Date (including, without limitation, delivery obligations to each
counter-party under a Film Asset Exploitation Agreement) have been fully
performed and there is no condition or event which upon notice or lapse of
time or both would constitute a breach of default by Seller relating to the
Library.
(g) At the Closing, Seller will transfer to Purchaser good title to all
Physical Properties owned by Seller.
(h) Each of the Assets in the Library is protected by copyright under the laws
of the United States. Seller has not received any notice from any third
parties notifying Seller that it has violated or infringed upon the
trademark, service xxxx, tradename, copyright, literary, dramatic, music,
artistic, personal, private, civil, contract or property right or rights of
privacy or any other right, whether tangible or intangible, of any Person.
(i) All of the artwork, packaging, publicity, promotional materials and
advertising prepared by Seller relating to the Library has been prepared in
accordance with and is in full compliance with all of the requirements of
the applicable Film Contracts and requirements of applicable Laws which are
customarily applicable to transactions of the type contemplated herein.
(j) The transfer of the Assets pursuant to this Agreement will vest in
Purchaser all rights with respect to musical compositions and sound
recordings licensed from third parties and contained in the Assets
necessary for the lawful distribution, exhibition and exploitation of the
Library without infringing or violating any laws or rights of third
parties; and the performance rights of all non-dramatic music contained in
the Library (whether in connection with musical compositions or sound
recordings) are: (i) controlled by a performing rights organization such as
the American Society for Composers Authors and Publishers (ASCAP),
Broadcast Music Inc. (BMI) SESAC, Inc., PRS, and/or SOCAN (ii) available
for license from the party(ies) controlling such rights, (iii) in the
public domain, or (iv) controlled by Seller directly or through license(s),
and if so, then such rights are granted herewith.
ARTICLE 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AND THE AGENT
REGARDING THE SHARES.
Section 5.1. Not Registered. Seller and Agent each acknowledges and
understands that the Shares have not been, and, except as provided in the
Registration Agreement, will not be, registered under the Securities Act of
1933, as amended, or any state securities laws, and are being sold to Seller
(and assigned pursuant to this Agreement to Agent) in reliance upon exemptions
from registration, based, in part, upon the representations of Seller and the
Agent made in this Agreement.
Section 5.2. Investment Intent. Except to the extent contemplated under
this Agreement and the Escrow Agreement, each of Seller and Agent represents and
warrants that it is receiving the Shares for investment purposes only and for
its own account as principal, and not with a view to, or for, resale or
distribution, except as permitted by applicable law.
Section 5.3. Risk. The Agent recognizes that each Lender must bear the
economic risk of the investment in the Shares for an indefinite period of time
and acknowledges that the Shares may not be sold, pledged, hypothecated,
encumbered or otherwise transferred or subjected to a security interest unless
such Shares are first registered under applicable federal and state securities
laws or unless an exemption from registration is available which is confirmed by
the issuer's legal counsel prior to transfer thereof.
Section 5.4. Information. Seller and Agent each represents and warrants
that it: (i) has received all documents and other information concerning
Purchaser and Purchaser's Parent that it has requested and as a result of its
study of the information and prior overall experience in financial matters, it
is properly able to evaluate the capital structure of Purchaser and Purchaser's
Parent, the business of Purchaser and Purchaser's Parent and the risks inherent
in an investment therein; (ii) understands that the Shares are not liquid and,
except for the shares of common stock of Purchaser's Parent, are not traded on
any public exchange or market; and (iii) has been given the full opportunity to
obtain any additional information or documents from, and to ask questions of,
Purchaser's and Purchaser's Parent's officers and directors to the extent
necessary to evaluate the merits and risks related to the investment in
Purchaser and Purchaser's Parent.
Section 5.5. Legend. The Agent acknowledges and agrees that the following
legend will be placed on each certificate representing the Shares and any other
documents evidencing ownership of the Shares:
"The transfer of the securities represented by this certificate has
not been registered under the Securities Act of 1933, as amended, or
applicable state securities laws. These securities have been acquired
for investment and not with a view to distribution or resale, except
as permitted by applicable law and in accordance with this legend.
These securities are subject to restrictions on transferability and
resale and may not be transferred or resold except as permitted under
the Securities Act of 1933, as amended, and applicable state
securities laws, pursuant to registration or exemption therefrom. The
holder of the securities represented by this certificate acknowledges
that it will be required to bear the financial risks of this
investment for an indefinite period of time.
By the acceptance hereof, the holder agrees that these securities may
not be made subject to a security interest, pledged, hypothecated or
otherwise transferred without an effective registration statement for
such shares under the Securities Act of 1933, as amended, and
applicable state securities laws or an opinion of counsel reasonably
satisfactory to the issuer that registration is not required under the
Securities Act of 1933, as amended, and applicable state securities
laws."
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
Section 6.1. Organization. Purchaser is a corporation duly organized and
validly existing under the laws of the State of Delaware and has all requisite
corporate power and authority to conduct its business as now conducted by it and
to own or use all assets and properties presently owned or used by it.
Section 6.2. Authority and Validity. Purchaser has all requisite corporate
power and authority to execute, deliver and fully perform this Agreement, and
all other agreements, instruments, certificates and documents required to be
executed by or on behalf of Purchaser pursuant to this Agreement (the "Other
Purchaser Agreements"). The execution, delivery, and performance of this
Agreement by Purchaser have been duly authorized by all requisite shareholder
and corporate action. This Agreement has been, and the Other Purchaser
Agreements will be, duly executed and delivered on behalf of Purchaser by duly
authorized officers of Purchaser, and this Agreement constitutes, and the Other
Purchaser Agreements (when executed and delivered) will constitute, the legal,
valid and binding obligations of Purchaser, enforceable against Purchaser in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, or similar law affecting the enforcement of
creditors' rights, generally, or by general principles of equity.
Section 6.3. Noncontravention. The execution, delivery and performance of
this Agreement and the Other Purchaser Agreements do not and will not, with or
without the giving of notice or the passage of time, or both: (i) violate the
Certificate of Incorporation or By-Laws of Purchaser; (ii) violate any Law; or
(iii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of any rights or obligations under, or create in any party
the right to accelerate, terminate, or modify the existing rights or obligations
of Purchaser under any loan agreement, indenture, lease, license, or other
agreement, instrument, commitment or understanding, oral or written, to which
Purchaser is a party or by which it is bound, or to which any of its assets is
subject.
Section 6.4. Consents. No consent, approval, license or authorization of,
or filing, recording or registration with, or exemption by, any Governmental
Authority or any other Person is required in connection with the execution,
delivery or performance of this Agreement or any of the Other Purchaser
Agreements by Purchaser, or, if required, will have been obtained prior to the
Closing.
Section 6.5. Status of Shares. When issued to Seller, the Shares will
constitute duly and validly issued common shares of Purchaser or Purchaser's
Parent, as the case may be, and will be fully paid and non-assessable.
Section 6.6. Litigation. There is no litigation, arbitration, investigation
or other proceeding pending against or, to the best knowledge of Purchaser,
threatened against or otherwise affecting, Purchaser which, if determined
adversely to Purchaser, would prohibit the consummation by Purchaser of the
transaction contemplated by this Agreement. Purchaser is not subject to, or in
violation of, any judgment, order, writ, injunction, decree or award of any
court, arbitrator or other Governmental Authority, which prohibits the
consummation by Purchaser of the transaction contemplated by this Agreement.
Section 6.7. Capitalization. Purchaser is authorized to issue One Thousand
(1,000) shares of common stock, with a $0.0001 par value per share. Immediately
following the Closing, Purchaser shall have One Thousand (1,000) shares of
common stock issued and outstanding.
ARTICLE 7. ADDITIONAL COVENANTS OF THE PARTIES
Section 7.1. Property Taxes. Seller shall be liable for all personal
property taxes and assessments attributable to the Assets (the "Property Taxes")
accruing prior to and on the Closing Date (regardless of when due and payable),
and Purchaser shall be liable for all such Property Taxes accruing after the
Closing Date.
Section 7.2. Transfer Taxes. All sales and use taxes, documentary taxes,
and other transfer taxes and fees arising out of the transfer of the Assets to
Purchaser (collectively, the "Transfer Taxes") shall be paid one-half by Seller
and one-half by Purchaser promptly upon the determination of the amount thereof.
In furtherance of the foregoing, Seller and Purchaser have agreed that Purchaser
shall hold back from the cash portion of the Purchase Price $6,517.50, which
amount represents Seller's estimated share of the Transfer Tax. In the event
Seller's share of the Transfer Tax is ultimately determined to be less than the
amount withheld by Purchaser pursuant to this Section 7.2, Purchaser shall
promptly remit such excess to Seller. Seller and Purchaser shall cooperate in
timely making all filings, returns, reports and forms as may be required to
comply with the provisions of such tax laws.
Section 7.3. Access to Premises and Information. From the date of this
Agreement until the Closing, Seller shall, upon reasonable notice and during
regular business hours, provide to Purchaser and its legal counsel, accountants,
and other representatives with full access to all premises, properties,
personnel, books, records (including Tax Returns and Tax records), contracts,
and documents related to the Business or the Assets, and Seller shall furnish
Purchaser with copies of all such documents and such other information relating
to the affairs of the Business as Purchaser may from time to time reasonably
request.
ARTICLE 8. CONDITIONS PRECEDENT TO PERFORMANCE BY PURCHASER
The obligations of Purchaser under this Agreement are subject to the
satisfaction, at or before the Closing, of each of the following conditions:
Section 8.1. Representations and Warranties True at Closing. All of the
representations and warranties of Seller and the Agent in this Agreement or in
any Other Seller Agreements or Other Agent Agreements, as applicable, shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing as if made at the time of the Closing, other than
representations and warranties that expressly refer to a specified time.
Section 8.2. Satisfaction of Covenants. Seller and the Agent shall have
performed and complied with all covenants and obligations required by this
Agreement, the Other Seller Agreements or the Other Agent Agreements to be
performed or complied with by them, as applicable, prior to the Closing. All
documents required to be delivered to Purchaser at or before the Closing
pursuant to this Agreement shall have been delivered to Purchaser, and the form
and content of all such documents shall be reasonably satisfactory to Purchaser
and its legal counsel.
Section 8.3. Consents. Seller shall have delivered to Purchaser all written
consents and approvals of third Persons and Governmental Authorities which are
required to consummate the transactions contemplated by this Agreement.
Section 8.4. No Adverse Proceedings. Except as set forth in Schedule
4.7(b), as of the Closing Date, no litigation, legal action, suit, arbitration,
investigation, claim, proceeding, injunction, order, decree, or judgment shall
be made, entered, pending, or threatened against Seller, which may (i) have a
material adverse effect on the Business, any Asset, or the continued operation
of the Business by Purchaser subsequent to the Closing, or (ii) enjoin or
prevent the consummation of the transaction contemplated by this Agreement.
Section 8.5. Certified Resolutions. Seller shall have delivered to
Purchaser copies of resolutions duly adopted by the Board of Directors and
shareholders of Seller, in such form as shall be reasonably satisfactory to
Purchaser, authorizing the execution, delivery and performance of this Agreement
and all Other Seller Agreements and all other corporate action necessary or
proper to consummate the transactions contemplated by this Agreement, which
copies of such resolutions shall be certified as true and correct by the
Secretary of Seller.
Section 8.6. Release of Liens. Seller shall have obtained releases of all
mortgages, security interests, restrictions, pledges, liens, encumbrances and
charges of any nature whatsoever in, on or against the Assets to the full
satisfaction of Purchaser.
ARTICLE 9. CONDITIONS PRECEDENT TO PERFORMANCE BY SELLER
The obligations of Seller under this Agreement are subject to the satisfaction,
at or before the Closing, of each of the following conditions:
Section 9.1. Representations and Warranties are True at Closing. All of the
representations and warranties of Purchaser and Purchaser's Parent contained in
this Agreement or in any Other Purchaser Agreements shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing as
if made at the time of the Closing, other than representations and warranties
that expressly refer to a specified time.
Section 9.2. Satisfaction of Covenants. Purchaser and Purchaser's Parent
shall have performed and complied with in all material respects all covenants
and obligations required by this Agreement or the Other Purchaser Agreements to
be performed or complied with by Purchaser and Purchaser's Parent, as
applicable, on or before the Closing.
Section 9.3. No Adverse Proceedings. As of the Closing Date, no litigation,
legal action, suit, arbitration, investigation, claim or proceeding, injunction,
order, decree, or judgment shall be made, entered, pending, or threatened
against Purchaser or Purchaser's Parent, which may enjoin or prevent the
consummation of the transaction contemplated by this Agreement.
Section 9.4. Registration Agreement. Purchaser's Parent shall have executed
the Registration Agreement.
ARTICLE 10. POST-CLOSING COVENANTS
Section 10.1. Preservation of Books and Records. For a period of six (6)
years after the Closing Date, Purchaser, and for a period of six (6) months
after the Closing Date, Seller shall each preserve all books and records
possessed or to be possessed by them relating to the assets, liabilities or
business of the Business. After the Closing Date, where there is a legitimate
purpose, upon prior reasonable written request specifying the need therefor and
during regular business hours, each party shall provide the other party with
access to such books and records in its possession relating to the assets,
liabilities or business of the Business and the other party shall have the right
to make copies of such books and records; provided, however, that such right of
access and to copy books and records shall be subject to a confidentiality
covenant at the request of the party providing the information. After the
aforesaid periods, all of such books and records may be destroyed, except those
books and records which either party specifically requests to be retained, in
which event the cost of storing and delivering such retained books and records
shall be borne by the party requesting them to be retained.
Section 10.2. Payments Received After Closing. After the Closing, Seller
and Purchaser shall promptly transfer and deliver to the other party, from time
to time as and when received by them, any and all cash, checks (with appropriate
endorsements, using their best efforts not to convert such checks into cash),
and other property that it may receive after the Closing which properly belong
to the other party and shall account to the other party for all such receipts.
After the Closing, Purchaser shall have the right and authority to endorse
without recourse the name of Seller on any check or any other evidences of
indebtedness received by Purchaser on account of the Business and the Assets
purchased by Purchaser hereunder.
Section 10.3. Rule 144. Purchaser's Parent shall make, and Purchaser shall
use its reasonable best efforts to cause Purchaser's Parent to make, publicly
available and available to the Agent and the Lenders, pursuant to Rule 144
promulgated under the Securities Act ("Rule 144"), such information as is
necessary to enable the Agent and Lenders to make sales of shares of common
stock of Purchaser's Parent received pursuant to Section 2.1 pursuant to Rule
144. Purchaser's Parent shall use its reasonable best efforts to file timely
with the SEC all documents and reports required of Purchaser's Parent under the
Exchange Act. Purchaser's Parent shall furnish to the Agent or any Lender upon
written request, a written statement executed on behalf of Purchaser's Parent as
to compliance with the current public information requirements of Rule 144.
ARTICLE 11. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
INDEMNIFICATION
Section 11.1. Survival of Representations, Warranties and Covenants.
(a) All representations and warranties of and by Seller, the Agent, Purchaser
and Purchaser's Parent, contained in this Agreement or in any Other Seller
Agreement, Other Agent Agreement or Other Purchaser Agreement shall survive
the Closing and shall continue in full force and effect until the first
anniversary of the Closing Date.
(b) The right of any party to indemnification, payment of damages, or other
remedy based upon such representations, warranties, covenants and
obligations shall not be impaired or otherwise affected by any
investigation conducted by such party prior to the Closing or by the fact
that such party knew or had reason to know prior to the Closing of the
inaccuracy of or non-compliance with any such representation, warranty,
covenant or obligation.
(c) For purposes of the indemnity provided in this Article 11, any Losses (as
defined in Section 11.2) hereunder shall include any amount (the
"Gross-up") necessary to hold the payee harmless on an after-tax basis from
all Taxes, if any, required to be paid as a result of receiving such
payment) including the payment of any Gross-up determined herein and after
taking into consideration any Tax benefits the payee actually derived from
the indemnified Loss) by such payee or by an consolidated group of which
such payee is or shall be a member. For purposes of calculating the amount
of any Taxes in the preceding sentence, it shall be assumed that such Taxes
are payable at the highest effective statutory federal and local state,
corporate income tax rates could apply to such payee or consolidated group,
as applicable for the relevant period.
Section 11.2. Indemnification by Seller. Seller agrees to indemnify and
hold harmless Purchaser and its officers, directors, employees, agents,
attorneys, advisors, representatives and Affiliates, and their respective heirs,
legal representatives, successors and assigns (collectively, the "Purchaser
Indemnitees"), from and against, and shall pay or reimburse Purchaser
Indemnitees for, any and all losses, liabilities, damages (including incidental
and consequential damages), diminution in value, obligations, claims,
proceedings, fines, deficiencies and expenses (including reasonable attorneys'
and accountants' fees and disbursements incurred in the investigation or defense
of any of the foregoing or in the enforcement or assertion of their indemnity
rights hereunder), whether or not involving a third party claim (collectively,
the "Losses"), arising out of, resulting from, or in connection with:
(a) Any inaccuracy of any representation or breach of any warranty made by
Seller in this Agreement or in any Other Seller Agreement (including any
allegations by any third Person that, if true, would mean that Seller has
breached any of its representations or warranties);
(b) Any failure by Seller to perform or comply with any covenant or obligation
contained in this Agreement or in any Other Seller Agreement (including any
allegations by any third Person that, if true, would mean that Seller has
failed to perform or comply with any of its or his covenants or
obligations);
(c) Any debt, liability or obligation of Seller not expressly assumed by
Purchaser pursuant to this Agreement or with respect to assets of Seller
not purchased by Purchaser pursuant to this Agreement (including, without
limitation, any such liability of Seller that becomes a liability of
Purchaser under any applicable bulk sales law, under any common law
doctrine of de facto merger or successor liability, or otherwise by
operation of law);
(d) Any act, omission, event, state of facts or other condition which occurred
or existed on or prior to the Closing Date, whether or not then known,
except to the extent expressly assumed by Purchaser pursuant to the terms
of this Agreement or any Other Purchaser Agreement;
(e) Any federal, state or local Taxes of any kind whatsoever, including
interest and penalties thereon, which may at any time be asserted or
assessed with respect to events occurring, or tax periods ending, on or
before the Closing Date (regardless of whether the possibility of the
assertion or assessment of any such tax liability shall have been disclosed
to Purchaser at or prior to the Closing);
(f) Any broker's or finder's fee or other commission resulting from any
services alleged to have been rendered to or at the request of Seller with
respect to this Agreement or any of the transactions contemplated by this
Agreement; and
(g) The assignment of the Shares to Agent.
Section 11.3. Indemnification by Agent. The Agent agrees to indemnify and
hold harmless the Purchaser Indemnitees from and against, and shall pay or
reimburse the Purchaser Indemnitees for, any and all Losses arising out of,
resulting from, or in connection with (a) any inaccuracy of any representation
or breach of any warranty made by the Agent in this Agreement or in any Other
Agent Agreement (including any allegations by any third Person that, if true,
would mean that the Agent has breached any of its representations or warranties)
and (b) the assignment of the Shares to Agent.
Section 11.4. Indemnification by Purchaser and Purchaser's Parent.
Purchaser and Purchaser's Parent shall indemnify and hold harmless Seller and
its officers, directors, employees, agents, attorneys, advisors, representatives
and Affiliates, and their respective heirs, legal representatives, successors
and assigns (collectively, the "Seller Indemnitees"), from and against, and
shall pay or reimburse Seller Indemnitees for, any and all Losses, arising out
of, resulting from, or in connection with:
(a) Any inaccuracy of any representation or breach of any warranty made by
Purchaser or Purchaser's Parent in this Agreement or in any Other Purchaser
Agreement (including any allegations by any third Person that, if true,
would mean that Purchaser or Purchaser's Parent, as applicable, has
breached any of its applicable representations or warranties);
(b) Any failure by Purchaser or Purchaser's Parent to perform or comply with
any covenant or obligation contained in this Agreement or in any Other
Purchaser Agreement (including any allegations by any third Person that, if
true, would mean that Purchaser or Purchaser's Parent, as applicable, has
failed to perform or comply with any of its covenants or obligations);
(c) Any Assumed Liability;
(d) Any product shipped or manufactured, or service performed, by or on behalf
of Purchaser subsequent to the Closing Date, and any act, omission, event,
state of facts or other condition which first occurred subsequent to the
Closing Date; and
(e) Any broker's or finder's fee or other commission resulting from any
services alleged to have been rendered to or at the request of Purchaser or
Purchaser's Parent, as applicable, with respect to this Agreement or any of
the transactions contemplated by this Agreement.
Section 11.5. Notice of Indemnification. Any party seeking indemnification
(the "Indemnified Party") from any other party (the "Indemnifying Party") with
respect to any matter pursuant to Section 11.2, Section 11.3 or Section 11.4
herein shall notify the Indemnifying Party of the existence of its claim for
indemnification (the "Claim"), setting forth in reasonable detail the facts and
circumstances pertaining thereto and the basis for the Indemnified Party's right
to indemnification ("Notice of Claim").
Section 11.6. Third Party Claims.
(a) If any third Person shall assert a claim against any party to this
Agreement with respect to any matter which may give rise to a Claim for
indemnification by an Indemnified Party against any Indemnifying Party
under this Article 11 ("Third Party Claim"), then the Indemnified Party
shall promptly notify the Indemnifying Party and, if Seller is the
Indemnifying Party, the Agent of such Third Party Claim in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless, and then solely to the extent that, the
Indemnifying Party is prejudiced thereby.
(b) The Indemnifying Party or, if Seller is the Indemnifying Party, the Agent
shall have the right, at its sole expense (subject to Section 9.19(e) of
the Credit Agreement), to assume the defense of such Third Party Claim
using counsel of its choice reasonably satisfactory to the Indemnified
Party if and so long as: (i) the Indemnifying Party or the Agent, if
applicable, notifies the Indemnified Party in writing, within fifteen (15)
days after the Indemnified Party has given notice of the Third Party Claim,
that the Indemnifying Party or the Agent, if applicable, will defend the
Third Party Claim and that the Indemnifying Party will indemnify the
Indemnified Party from and against all Losses incurred or suffered by the
Indemnified Party resulting from, arising out of, or relating to the Third
Party Claim; (ii) the Indemnifying Party or the Agent, if applicable,
provides the Indemnified Party with evidence reasonably satisfactory to the
Indemnified Party that the Indemnifying Party or Agent, if applicable, will
have the financial resources to defend against the Third Party Claim and
that the Indemnifying Party will have the financial resources to fulfill
its indemnification obligations hereunder; (iii) the Third Party Claim
involves money damages only and does not seek an injunction or other
equitable relief; (iv) any adverse judgment with respect to, or any
settlement of, the Third Party Claim is not, in the good faith judgment of
the Indemnified Party, likely to establish a precedential custom or
practice materially adverse to the continuing business interests of the
Indemnified Party; and (v) the Indemnifying Party or the Agent, if
applicable, conducts the defense of the Third Party Claim actively and
diligently.
(c) So long as the Indemnifying Party or the Agent is conducting the defense of
the Third Party Claim in accordance with the requirements of paragraph (b)
of this Section: (i) the Indemnified Party may retain separate counsel at
its sole expense and participate in the defense of a Third Party Claim;
(ii) the Indemnified Party shall not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim without
the prior written consent of the Indemnifying Party or the Agent, if
applicable, which consent shall not be unreasonably withheld; and (iii) the
Indemnifying Party or the Agent, if applicable, shall not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld.
(d) If the Indemnifying Party or the Agent, if applicable, fails to assume the
defense of such Third Party Claim for any reason, or if any of the
conditions specified in paragraph (b) of this Section is or becomes
unsatisfied: (i) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to, the
Third Party Claim in any manner it may deem appropriate, and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith; (ii) the Indemnifying Party
shall reimburse the Indemnified Party promptly for all costs of defending
against the Third Party Claim, including attorneys' fees and expenses; and
(iii) the Indemnifying Party shall remain liable for all Losses incurred or
suffered by the Indemnified Party resulting from, arising out of, or
relating to the Third Party Claim to the fullest extent provided in this
Article 11.
Section 11.7. Exclusive Remedy; No Other Indemnification Provisions. The
indemnification provisions contained in this Article 11 are the sole and
exclusive remedy which any party may have against any other party for Losses
arising out of, resulting from or in connection with any inaccuracy or breach of
any representation, warranty, or breach of any covenant made herein or in any
Other Agreement by any other party to this Agreement.
Section 11.8. Insurance Proceeds. The amounts for which the Indemnifying
Party shall be liable to the Indemnified Party under this Article 11 shall be
reduced by the amount of any insurance proceeds received by the Indemnified
Party in connection with any Claim.
Section 11.9. Indemnification Limitations.
(a) Purchaser agrees that its sole recourse against Seller or the Agent for any
Losses incurred or suffered by any Purchaser Indemnitee shall be satisfied
by the cancellation or reconveyance, as applicable, of such number of
Shares equal in value to the amount of the Losses in the manner provided
for in the Escrow Agreement. Except as provided by the next sentence, the
Shares shall contain a legend indicating that such Shares are subject to
cancellation or reconveyance, as applicable, pursuant to this Agreement to
the extent of the Purchaser Indemnitees' Losses. Following the termination
of the escrow and the release of any Shares (or replacement thereof) to
Agent, Purchaser shall remove and/or shall cause Purchaser's Parent to
remove, as applicable, any legend placed on the Shares (or replacements
thereof) pursuant to the preceding sentence upon delivery of such Shares to
Purchaser or Purchaser's Parent, as applicable.
(b) Seller and the Agent shall not be required to indemnify or hold Purchaser
Indemnitees from and against any Losses pursuant to Section 11.2 or Section
11.3 unless and until the amount of such Losses incurred by Purchaser
Indemnitees equal or exceed, in the aggregate $25,000 (the "De Minimis
Amount"). Once the Purchaser Indemnitees' Losses equal or exceed the De
Minimis Amount, Seller and Agent shall be liable for the full amount of all
Losses starting at the first dollar.
Section 11.10. Subordination of Rights. Agent recognizes that the rights of
the Lenders to the Shares being assigned pursuant to this Agreement and the
Other Agent Agreements are subject to and subordinate to the rights of the
Purchaser Indemnitees pursuant to Sections 11.2, 11.3 and 11.9 of this Agreement
and Sections 2(i) and 2(ii) of the Escrow Agreement. The Agent further
acknowledges that the Shares will provide collateral security for the
indemnification obligations of both the Agent and Seller under this Article 11,
notwithstanding the fact that the Shares have been issued in Agent's name, as
agent for the Lenders.
ARTICLE 12. REPRESENTATIONS AND WARRANTIES OF AGENT
The Agent represents and warrants to Purchaser and Purchaser's Parent as
follows:
Section 12.1. Organization. The Agent is a limited partnership duly
organized and validly existing under the laws of the State of Delaware.
Section 12.2. Authority and Validity. The Agent has all requisite power and
authority to execute, deliver and fully perform this Agreement, and all other
agreements, instruments, certificates and documents required to be executed by
or on behalf of the Agent pursuant to this Agreement (the "Other Agent
Agreements"). The execution, delivery, and performance of this Agreement by the
Agent have been duly authorized by all requisite action. This Agreement has
been, and the Other Agent Agreements will be, duly executed and delivered on
behalf of the Agent by duly authorized officers of the Agent, and this Agreement
constitutes, and the Other Agent Agreements (when executed and delivered) will
constitute, the legal, valid and binding obligations of the Agent, enforceable
against the Agent in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, or similar law
affecting the enforcement of creditors' rights, generally, or by general
principles of equity.
Section 12.3. Noncontravention. The execution, delivery and performance of
this Agreement and the Other Agent Agreements do not and will not, with or
without the giving of notice or the passage of time, or both: (i) violate the
Agreement of Limited Partnership of the Agent; (ii) violate any Law; or (iii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of any rights or obligations under, or create in any party the
right to accelerate, terminate, or modify the existing rights or obligations of
the Agent under any loan agreement, indenture, lease, license, or other
agreement, instrument, commitment or understanding, oral or written, to which
the Agent is a party or by which it is bound, or to which any of its assets is
subject.
Section 12.4. Consents. No consent, approval, license or authorization of,
or filing, recording or registration with, or exemption by, any Governmental
Authority or any other Person is required in connection with the execution,
delivery or performance of this Agreement or any of the Other Agent Agreements
by the Agent, or, if required, will have been obtained prior to the Closing.
Section 12.5. Agency. The Agent has provided Purchaser with a true and
complete copy of all documents relating to its agency relationship with Seller's
secured creditors, and such agency relationship remains in full force and
effect. Upon deposit of the Shares in escrow, Agent, on its own behalf and on
behalf of the other Lenders, hereby represents and warrants that as of the
Closing Date neither the Agent nor the Lenders shall have any claim or interest
on the Assets being acquired by Purchaser under this Agreement and that all
mortgages, security interests, pledges, liens, charges, claims, leases,
restrictions and other encumbrances of any nature with respect to the Assets in
favor of Agent, as a Lender and as agent for the Lenders, are released.
Section 12.6. Accredited Investor Status. Agent represents and warrants
that it and each Lender is an "accredited investor" as that term is defined in
Rule 501 under Regulation D promulgated by the Securities and Exchange
Commission."
ARTICLE 13. REPRESENTATIONS AND WARRANTIES OF PURCHASER'S PARENT
Purchaser's Parent represents and warrants to Seller as follows:
Section 13.1. Organization. Purchaser's Parent is a corporation duly
organized and validly existing under the laws of the State of California and has
all requisite corporate power and authority to conduct its business as now
conducted by it and to own or use all assets and properties presently owned or
used by it.
Section 13.2. Authority and Validity. Purchaser's Parent has all requisite
corporate power and authority to execute, deliver and fully perform its
obligations under this Agreement and the Registration Agreement. The execution,
delivery, and performance of this Agreement by Purchaser's Parent have been duly
authorized by all requisite corporate action. This Agreement has been, and the
Registration Agreement will be, duly executed and delivered on behalf of
Purchaser's Parent by duly authorized officers of Purchaser's Parent, and this
Agreement constitutes, and the Registration Agreement (when executed and
delivered) will constitute, the legal, valid and binding obligations of
Purchaser's Parent, enforceable against Purchaser's Parent in accordance with
their respective terms, except as enforceability may be limited by bankruptcy,
insolvency, or similar law affecting the enforcement of creditors' rights,
generally, or by general principals of equity.
Section 13.3. Noncontravention. The execution, delivery and performance of
this Agreement and the Registration Agreement do not and will not, with or
without the giving of notice or the passage of time, or both: (i) violate the
Articles of Incorporation or By-Laws of Purchaser's Parent; (ii) violate any
Law; or (iii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of any rights or obligations under, or create in any
party the right to accelerate, terminate, or modify the existing rights or
obligations of Purchaser's Parent under any loan agreement, indenture, lease,
license, or other agreement, instrument, commitment or understanding, oral or
written, to which Purchaser's Parent is a party or by which it is bound, or to
which any of its assets is subject.
Section 13.4. SEC Filings; Financial Statements. Purchaser's Parent has
filed all reports required to be filed by it with the Securities and Exchange
Commission (the "SEC") under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), from January 1, 2001 through the date of this Agreement
(such required reports, the "Parent SEC Reports"). The Parent SEC Reports (i)
were prepared in all material respects in accordance with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange
Act, as the case may be, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Parent SEC
Reports has been prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto
or in the Parent SEC Reports), and each fairly presents in all material respects
the consolidated financial position of Purchaser's Parent and its subsidiaries
as at the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount.
Except as listed in the Schedule 13.4, since the date of the financial
statements contained in the most recent Parent SEC Report there has been no
event or occurrence relating to Purchaser's Parent or any of its subsidiaries
which, in the reasonable judgment of Purchaser's Parent, will be required to be
disclosed in a Parent SEC Report on Form 8-K or which would have a material
adverse effect on Purchaser's Parent and which has not been disclosed to Seller
in a Schedule hereto or in a Parent SEC Report on Form 8-K.
ARTICLE 14. MISCELLANEOUS PROVISIONS
Section 14.1. Termination. Purchaser may terminate this Agreement by notice
to Seller in the event any of the conditions precedent to performance specified
in Article 8 have not been met. If Purchaser's termination is as a result of the
failure of Seller to meet the conditions precedent in any of Section 8.1 through
Section 8.6 of this Agreement, then the Deposit shall be returned to Purchaser.
Section 14.2. Failure to Close. If, notwithstanding the satisfaction of all
conditions precedent in this Agreement, Purchaser fails and refuses to close the
transaction contemplated by this Agreement then, in that event, and as Seller's
sole and exclusive remedy, this Agreement shall be deemed terminated and Seller
shall retain the Deposit.
Section 14.3. Expenses. Except as provided otherwise in this Agreement
whether or not the transactions contemplated by this Agreement are consummated,
each of the parties to this Agreement shall pay its own fees and expenses
incurred in connection with the negotiation, preparation and execution of this
Agreement and the related agreements and documents referred to herein, and the
consummation of all transactions contemplated by this Agreement, including,
without limitation, all attorneys', accountants', and financing fees.
Section 14.4. Further Assurances. Seller shall, whether before, at, or
after the Closing, execute, acknowledge, and deliver such deeds, assignments,
conveyances, instruments of transfer, documents, and other assurances, and shall
take such other actions consistent with the terms of this Agreement, as may be
reasonably requested by Purchaser as necessary or appropriate to transfer title,
possession, and enjoyment of the Assets to Purchaser. If requested by Purchaser,
Seller further agrees to prosecute or otherwise enforce in its own name for the
benefit of Purchaser any claims, rights, or benefits that are transferred to
Purchaser by this Agreement and that require the prosecution or enforcement in
Seller's name; provided, however, that any such prosecution or enforcement shall
be solely at Purchaser's expense, unless the prosecution or enforcement is made
necessary by a breach of this Agreement by Seller.
Section 14.5. No Third Party Beneficiaries. Except as provided in Article
11, this Agreement shall not confer any rights or remedies upon any Person other
than the parties hereto and their respective successors and permitted assigns.
Section 14.6. Notices. Except as expressly provided otherwise in this
Agreement, any notice, request, claim or other communication required to be
given pursuant to this Agreement shall be in writing and shall be either: (i)
delivered personally to the party to be notified, (ii) sent by registered or
certified United States Mail, first-class postage prepaid, return receipt
requested, to the party to be notified at such party's address specified below,
(iii) delivered by an overnight delivery courier service to the party to be
notified at such party's address specified below, or (iv) transmitted by
facsimile to the party to be notified at such party's facsimile number specified
below:
If to Seller, to: With a copy to :
Burly Bear Network, Inc. Xxxxxxx X. Xxx, Esq.
000 X. 00xx Xxxxxx, 00xx Xxxxx Xxxxx, Bonacquist & Xxx XXX
Xxx Xxxx, Xxx Xxxx 00000 000 Xxxxx Xxxxxx - 00xx Xxxxx
Phone: (000) 000-0000 Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000 Phone: (000) 000-0000
Fax: (000) 000-0000
If to Purchaser, to: With a copy to:
Xxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx
Chief Operating Officer Leagre Xxxxxxxx & Xxxxxxx LLP
J2 Communications 000 X. Xxxxxxxxxxxx Xxxxxx
00000 Xxxxxxxx Xxxxxxxxx #0000 Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 90024 Xxxxxxxxxxxx, Xxxxxxx 00000
Phone: (000) 000-0000 Phone: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
If to the Agent, to: With a copy to:
Constellation Venture Capital, L.P. Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxxxx Xxxxxx 000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx Attn: Xxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000 Phone: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
Any such notice shall be deemed to have been given as of the earlier of: (a) the
date of actual receipt of such notice, or (b) the third business day following
the date on which the mail containing such notice is posted if sent by certified
or registered United States Mail, or (c) the first business day after such
notice is delivered to an overnight delivery courier service for delivery to the
address specified above for the party to be notified, or (d) the date of the
confirmed transmission of any notice by facsimile. Any party to this Agreement
may designate a different address or facsimile number to which notices are to be
sent to such party by notifying all other parties to this Agreement as to such
different address or facsimile number in the manner set forth above in this
Section.
Section 14.7. No Finders. Seller warrants to Purchaser, and Purchaser
warrants to Seller, that they have not incurred any obligation or liability,
contingent or otherwise, to pay any broker's or finder's fees, commissions, or
other similar fees by reason of any act done by them in connection with the
transactions contemplated by this Agreement, and each party agrees to indemnify
and hold harmless the other party against and in respect of any such obligation
or liability and costs and expenses, including reasonable attorneys' fees,
incurred in defending any such claim for such fees.
Section 14.8. Entire Agreement. This Agreement, together with the
Disclosure Schedule and any and all other Exhibits and Schedules attached
hereto, constitutes the entire agreement between the parties hereto with respect
to the subject matter hereof and supersedes all prior and contemporaneous
agreements, representations, and understandings of the parties, written or oral;
provided, however, that Section 5.4 shall be subject to a separate
confidentiality agreement.
Section 14.9. Amendments and Waivers. No supplement, modification, or
amendment of any provision of this Agreement shall be binding unless executed in
writing by Purchaser, Agent and Seller. No provision of this Agreement shall be
deemed to have been waived unless such waiver is executed in writing by the
party waiving such provision. No waiver of any provision of this Agreement shall
constitute a waiver of any other provision of this Agreement. No waiver of any
breach or violation of any provision of this Agreement shall constitute a waiver
of any subsequent breach of such provision.
Section 14.10. Severability. If any provision of this Agreement is held or
declared to be unenforceable, invalid or void, then such provision shall be
deemed to be severable from the remaining provisions of this Agreement, and such
declaration or holding shall in no way impair or affect the validity or
enforceability of the remaining provisions of this Agreement, which shall then
be construed as if such invalid or unenforceable provision were omitted.
Section 14.11. Controlling Law. This Agreement and the rights and
obligations of the parties hereto shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to any
choice or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
Section 14.12. Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
heirs, legal representatives, successors and assigns. No party may assign this
Agreement or its rights or obligations hereunder without the prior written
consent of all other parties hereto. Notwithstanding the foregoing, Purchaser
and Purchaser's Parent acknowledge and agree that Seller has collaterally
assigned its rights hereunder to the Lenders pursuant to the Credit Agreement.
Section 14.13. Accounting Terms. All accounting and financial terms used in
this Agreement shall have the meanings given to such terms in accordance with
generally accepted accounting principles, except as expressly provided otherwise
in this Agreement.
Section 14.14. Rules of Construction.
(a) The parties have participated jointly in the negotiation and drafting of
this Agreement. In the event that an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties, and no presumption or burden or proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
(b) An individual will be deemed to have "knowledge" or to be "aware" of a
particular fact or other matter if: (i) such individual is actually aware
of such fact or other matter; or (ii) a prudent individual could be
expected to discover or otherwise become aware of such fact or other matter
in the course of conducting a reasonably comprehensive investigation
concerning the existence of such fact or other matter. Seller or any other
Person that is not an individual will be deemed to have "knowledge" of a
particular fact or other matter if any individual who is serving, or who
has at any time served, as a director, officer, managing employee, partner,
executor, or trustee of such Person has, or at any time had, knowledge of
such fact or other matter.
Section 14.15. Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed an original, but all of such
counterparts together shall constitute but one and the same instrument.
ARTICLE 15. DEFINITIONS.
Certain capitalized terms used in this Agreement shall have the meanings
assigned to such terms by parenthetic reference throughout this Agreement. In
addition, except where the context of their use clearly requires a different
interpretation, the following terms used in this Agreement shall have the
following meanings:
"Affiliate" means, with respect to any Person: (i) any other Person
directly or indirectly controlling, controlled by, or under common control
with such Person, (ii) any other Person owning or controlling ten percent
(10%) or more of the outstanding voting interests of such Person, (iii) any
officer, director, or general partner of such Person, or (iv) any other
Person who is an officer, director, general partner, trustee, or holder of
ten percent (10%) or more of the voting interests of any Person described
in clauses (i) through (iii) of this sentence. For purposes of this
definition, the term "controls," "is controlled by," or "is under common
control with" shall mean the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of such a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Assets" has the meaning set forth in Section 1.1.
"Assumed Liabilities" has the meaning set forth in Section 1.2.
"Business" has the meaning set forth in Recital 1.
"Business Records" has the meaning set forth in Section 1.1(m).
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.1.
"Contracts" has the meaning set forth in Section 4.10.
"Copyrights" has the meaning set forth in Section 1.1(l).
"Credit Agreement" means that certain senior secured Credit Agreement dated
as of April 1, 2002, as amended from time to time.
"Disclosure Schedule" means the Schedules attached hereto, as amended from
time to time in accordance with this Agreement.
"Effective Time" has the meaning set forth in Section 3.1.
"Escrow Agent" means The National Bank of Indianapolis, a federally
chartered bank.
"Escrow Agreement" means the escrow agreement, in form and substance
satisfactory to the parties, by and among the Escrow Agent, the Agent and
Purchaser, pursuant to which the Shares are placed in escrow for a one year
period from the Closing Date.
"Excluded Liabilities" has the meaning set forth in Section 1.4.
"Film Asset Acquisition Agreement" shall mean, with respect to any Person,
a Contract pursuant to which that Person has acquired from another Person,
or must acquire from another Person, all or any of such other Person's
rights in the Library or any Film Asset.
"Film Asset Exploitation Agreement" shall mean, with respect to any Person,
a Contract pursuant to which that Person has granted to another Person, or
must grant to another Person, all or any of that Person's rights to exploit
the Library or any Film Asset.
"Film Assets" shall mean, with respect to the Library, all rights and
interests therein or pertaining thereto, including, all rights and
interests of every kind and nature of whatever description, present and
future, direct and indirect, whether now owned or hereafter acquired
(including, without limitation, any rights or interests that revert),
throughout the universe in perpetuity in all media, whether now or
hereafter created or devised, and by all means, whether now known or
hereafter created or devised, in and to the following:
(a) the underlying Literary Property;
(b) all worldwide copyrights, rights and interests in copyrights, renewals
and extensions of copyrights, domestic and foreign, obtained upon the
Library or the underlying Literary Property or any part thereof, the
right (but not the obligation) to make publication thereof for
copyright purposes and to register claims under copyright, the right
(but not the obligation) to renew and extend such copyright and the
right (but not the obligation) to xxx in the name of any Person for
past, present and future infringements of copyright and to receive all
damages, judgments, recoveries or proceeds therefrom;
(c) all music, musical compositions and master recordings created for,
used in or to be used in connection with the Library, including,
without limitation, all copyrights therein and all rights to perform,
copy, record, re-record, produce, publish, reproduce or synchronize
any or all of said music, musical compositions and master recordings
throughout the universe as well as all other rights to exploit such
music including recording, soundtrack recording and music publishing
rights;
(d) all collateral, allied, ancillary and subsidiary rights of every kind
and nature whatsoever derived from, appurtenant to or related to the
Library or the underlying Literary Property, including, without
limitation, all production, exploitation, reissue, remake, sequel,
prequel, serial or series production rights, by any means and in any
medium now known or hereafter devised, whether based upon, derived
from or inspired by the Library, the underlying Literary Property or
any part thereof; all rights to use, exploit and license others to use
or exploit any and all music, novelization, publishing, commercial
tie-ups and merchandising rights of every kind and nature whatsoever,
including, without limitation, those arising out of or connected with
or inspired by the Library or the underlying Literary Property, the
title or titles of the Library or the underlying Literary Property,
the characters appearing in the Library or the underlying Literary
Property and/or the names or characteristics of said characters, and
including further, without limitation, any and all commercial
exploitation in connection with or related to the Library, all
remakes, sequels, prequels or other adaptations and/or derivative
works thereof and/or said Literary Property (collectively the
"Ancillary Rights");
(e) all rights to develop, produce, acquire, reacquire, finance, release,
sell, distribute, subdistribute, lease, sublease, market, license,
sublicense, exhibit, broadcast, transmit, reproduce, publicize or
otherwise exploit the Library, the underlying Literary Property and
the Ancillary Rights in perpetuity, without limitation, in any manner
and in any media whatsoever throughout the universe, whether now known
or hereafter developed, including, without limitation, by projection,
radio, all forms of television (including, without limitation, free,
pay, toll, cable, sustaining subscription, sponsored and direct
satellite broadcast), in theatres, non-theatrically, all airline and
ship board exploitation, on cassettes, cartridges, DVD, other discs
and other similar and dissimilar video devices, all forms of computer
assisted or interactive media (including, without limitation, CD-ROM,
CD-I and similar disc systems), all so-called video-on-demand and/or
near video-on-demand systems however devised, interactive cable and by
any and all other means, methods, processes or devices now known or
hereafter conceived, devised or created;
(f) all underlying Literary Properties and all Ancillary Rights relating
to the Library, including, without limitation, (i) all rights to
receive proceeds of any insurance, indemnity, warranty or guaranty
with respect to the Library or any Film Asset relating thereto and all
applicable Film Contracts, and (ii) all claims for damages arising out
of or for breach of or default under all applicable Film Contracts or
otherwise, (iv) the right to terminate all applicable Film Contracts,
to perform thereunder and to compel performance and otherwise to
exercise all remedies thereunder;
(g) all agreements with respect to the Library or any Film Asset relating
thereto, including, without limitation, all Film Contracts relating to
the Library and all agreements for (i) acquisition of rights in the
Library or any Literary Property and all rights under distribution and
license agreements, (ii) personal and/or professional services,
including the services of writers, directors, performers, producers,
special effects personnel, production personnel, animators, cameramen
and other creative, artistic or technical staff and other persons
providing services with respect to the Library and (iii) the use of
studio space, equipment, facilities, locations, production services,
special effects services and laboratory services;
(h) all Physical Properties relating to the Library, including ownership
and all access rights and rights to use the same, all pledgeholder,
laboratory, access or film warehousing documents or agreements
relating to the Library or any Physical Properties thereof;
(i) all insurance of whatever description placed upon or relating to the
Library or the insurable properties thereof and/or any Person or
Persons engaged in the development, acquisition, production,
completion, delivery or exploitation of the Library, and all rights of
any kind or nature whatsoever in and to all completion guarantees and
all other agreements and documents relating to production, completion,
delivery and exploitation of the Library and the proceeds thereof;
(j) the title or titles of the Library including rights protected pursuant
to trademark, service xxxx, unfair competition and/or other laws,
rules or principles of law or equity and all inventions, processes,
formulae, licenses, copyrights, patents, patent rights, trademarks,
trademarks rights, service marks, service xxxx rights, trade names,
trade name rights, logos, indicia, corporate and company names,
business source or business identifiers and renewals and extensions
thereof, domestic and foreign, and the accompanying goodwill relating
to the Library, the right (but not the obligation) to register claims
under trademark, patent or copyright and to renew and extend such
trademarks, patents or copyrights and the right (but not the
obligation) to xxx in the name of any Person for past, present or
future infringement of trademark, copyright or patents; and
(k) all key art, transparencies, photographs, slides and promotional
materials of whatever nature.
The foregoing definition of "Film Assets" is not intended to imply that
Seller actually owns or has any interest in, or is representing herein that it
owns or has any interest in, each and every possible Film Asset with respect to
the Library. The Film Assets actually owned by Seller, or in which Seller
actually has any interest, with respect to the Library are subsumed within the
defined term "Library."
"Film Contracts" shall mean, with respect to any Person, all Contracts to
which that Person is a party relating to the Library or any Film Asset,
including, without limitation, all Film Asset Acquisition Agreements, Film
Asset Exploitation Agreements, sales agency agreements, financing
arrangements, copyright mortgages, collective bargaining agreements,
performance bonds, or other agreements of any nature whatsoever relating to
the acquisition, production, financing, distribution, exhibition, or
exploitation of the Library or Film Asset. The foregoing definition of
"Film Contracts" is not intended to imply that Seller owns or has any
interest in, or is representing herein that it owns or has any interest in,
each and every possible form of Film Contract for every film and program in
the Library.
"GAAP" means accounting principles generally accepted in the United States
of America.
"Governmental Authority" means any government or any nation, state,
province, commonwealth, territory, possession, county, parish, town,
township, village, municipality, or other political subdivision thereof, or
any governmental department, commission, board, bureau, agency, or other
Person or entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, government, including any
court or arbitration panel, whether now or hereafter constituted or
existing.
"Indemnified Party" has the meaning set forth in Section 11.5.
"Indemnifying Party" has the meaning set forth in Section 11.5.
"Intellectual Property" means and includes all Trademarks, Trade Names and
Copyrights associated with the Library and including those items listed on
Schedule 1.1(l).
"Inventories" has the meaning set forth in Section 1.1(d).
"IRC" means the Internal Revenue Code of 1986, as amended, or any successor
law.
"Laws" means all laws, statutes, judicial decisions, rules, regulations,
ordinances, codes, plans, injunctions, judgments, orders, decrees, rulings
and charges of federal, state, local, and foreign Governmental Authorities.
"Lenders" means collectively, creditors of Seller including Agent in its
capacity as a secured lender.
"Literary Property" shall mean all rights of every kind and nature
(including, without limitation, copyrights), throughout the universe, in
and to the literary and musical material upon which, in whole or in part,
any of the Library or Film Asset is or may be based, or which may be or has
been used or included in the Library or Film Asset, including, without
limitation, the screenplay and all other scripts, scenarios, bibles,
stories, treatments, novels, outlines, books, titles, concepts, manuscripts
or other properties or materials of any kind or nature, in whatever state
of completion and all drafts, versions and variations thereof.
"Losses" has the meaning set forth in Section 11.2.
"Equipment" has the meaning set forth in Section 1.1(i).
"Other Agent Agreements" has the meaning set forth in Section 12.2.
"Other Agreements" means any or all of the Other Agent Agreements, the
Other Purchaser Agreements or the Other Seller Agreements, as the context
may require.
"Other Purchaser Agreements" has the meaning set forth in Section 6.2.
"Other Seller Agreements" has the meaning set forth in Section 4.2.
"Participations" shall mean the amounts (other than Residuals) payable by
any Person pursuant to Contracts with any other Person or pursuant to
Contracts under which any Person assumed the obligations or is otherwise
obligated to pay such amounts, in connection with the acquisition,
production, financing, distribution, exhibition or exploitation of a Film
Asset, the payment of which is: (a) contingent upon and payable only to the
extent of the receipt by such Person of revenues from the exploitation of
such Film Asset; or (b) due based upon the passage of time or the
occurrence of an identified event; or (c) an advance or guarantee of
payments of the kind described in (a) or (b) above, and which are held by
(i) actors, writers, directors, producers, other film industry
professionals, or any of their respective loan out companies, (ii)
production companies or licensors or transferors of rights, or (iii) any of
their respective successors or assigns.
"Person" (whether or not capitalized) means and includes a natural person,
corporation, limited partnership, general partnership, limited liability
company, joint venture, association, company, trust, bank, trust company,
land trust, business trust or other organization, whether or not a legal
entity, and any government, agency, or political subdivision thereof.
"Personal Property Leases" has the meaning set forth in Section 1.1(k).
"Property Taxes" has the meaning set forth in Section 7.1.
"Physical Properties" shall mean all physical properties of every kind or
nature of or relating to any film or program in the Library and all
versions thereof and all teasers, trailers, music videos, featurettes,
television spots, "making of" films or programs, including, without
limitation, exposed film, developed film, positives, negatives, prints,
answer prints, special effects, preparing materials (including
interpositives, negatives, duplicate negatives, internegatives, color
reversals, intermediates, lavenders, fine grain master prints and matrices,
title overlays, textless backgrounds and all other forms of pre-print
elements which may be necessary or useful to produce prints or other copies
or additional pre-print elements, whether now known or hereafter devised),
soundtracks, recordings, audio and video tapes and discs of all types and
gauges, cutouts, trims and any and all other physical properties of every
kind and nature relating to the Library in whatever state of completion,
and all duplicates, drafts, versions and copies of each thereof. The
foregoing definition of "Physical Properties" is not intended to imply that
Seller actually owns or has any interest in or has access to, or is
representing herein that it actually owns or has any interest in or has
access to, or is transferring rights in or access to, each and every
possible form of Physical Properties for every film or program in the
Library.
"Registration Agreement" means that certain Piggyback Registration Rights
Agreement dated as of the Closing Date, by and among Purchaser's Parent,
Agent and the other shareholders who become parties thereto substantially
in the form attached hereto as Exhibit B.
"Residuals" shall mean all amounts (other than Participations) payable by
any Person pursuant to guild agreements or collective bargaining
agreements, or pursuant to contracts under which any such Person assumed
the obligations or is otherwise obligated to pay such amounts, in
connection with the development, acquisition, production, distribution or
exploitation of a Film Asset.
"Seller Indemnitees" has the meaning set forth in Section 11.3.
"Software" has the meaning set forth in Section 1.1(j).
"Tax Returns" has the meaning set forth in Section 4.9.
"Taxes" means any and all federal, state, local, and foreign income, gross
receipts, real property, personal property, sales, use, transfer, value
added, franchise, license, payroll, employment, excise, severance, stamp,
occupation, windfall profits, environmental, customs duties, withholding,
social security, unemployment, disability, alternative or add-on minimum,
and other taxes of any kind whatsoever, including any and all deficiencies,
assessments, charges, interest and penalties related thereto.
"Third Party Claims" has the meaning set forth in Section 11.6.
"Trademarks" has the meaning set forth in Section 1.1(l).
"Trade Names" has the meaning set forth in Section 1.1(l).
[Remainder of this Page Intentionally Blank]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
multiple counterparts thereof, each of which is deemed to be an original, on the
date first above written.
BURLY BEAR NETWORK, INC. NATIONAL LAMPOON NETWORKS, INC.
By: /s/ Xxxxx Xxxxxx By: /s/ Xxxxxx X. Xxxxxx
-------------------- ---------------------
Title: Chief Financial Officer Title: Chief Operating Officer
JOINDER
J2 Communications joins in this Agreement to evidence its agreement to
contribute to Purchaser the number of shares of its common stock sufficient to
the permit Purchaser to satisfy any obligations arising under this Agreement
pursuant to Section 2.1 to deliver shares of its common stock at the Closing and
to make the representations, warranties, covenants and indemnities applicable to
it contained in Section 10.3 and Articles 11 and 13.
J2 COMMUNICATIONS
By: /s/ Xxxxxx X. Xxxxxx
--------------------------
Title: Chief Operating Officer
JOINDER
Constellation Venture Capital, L.P., a Delaware limited partnership, joins
in this Agreement to evidence its agreement to receive the Shares (as assignee
and transferee of Seller) pursuant to Section 2.1 and to make the
representations, warranties, covenants and indemnities applicable to it
contained in Articles 5, 11 and 12.
CONSTELLATION VENTURE CAPITAL, L.P.
By: Constellation Ventures Management
LLO, its General Partner
By: /s/ Xxxxxx X. Xxxxxx
--------------------------
Title: Managing Director
Attachments:
Schedules
Schedule 1.1(a) Library
Schedule 1.1(e) Affiliate Agreements
Schedule 1.1(f) Leased CarriageAgreements
Schedule 1.1(g) Affiliate List
Schedule 1.1(i) Equipment
Schedule 1.1(k) Personal Property Leases
Schedule 1.1(l) Trademarks, Trade Names, Copyrights
Schedule 1.1(n) Service Agreements
Schedule 2.3 Allocation of Purchase Price
Schedule 4.3 Non-contravention
Schedule 4.4 Consents
Schedule 4.5 Title to Assets
Schedule 4.7(b) Impairment to Intellectual Property
Schedule 4.9 Tax Matters
Schedule 4.10 Contracts
Schedule 4.13(c) Liability for Residuals and Participations
Schedule 13.4 SEC Filings; Financial Statements
Exhibits
Exhibit A Assignment and Assumption Agreement
Exhibit B Piggyback Registration Rights Agreement
