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Exhibit 2.1
ASSET PURCHASE AGREEMENT
Between
XxxxxxxXxxx.xxx, Inc.,
Campus 24, Inc., and
XxxxxxxXxxxxxx.xxx, Inc., as Sellers
And
Student Advantage, Inc., as Buyer
Dated as of August 21, 2000
Execution Copy
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into as of August 21,
2000 by and among Student Advantage, Inc., a Delaware corporation or its
designee (the "Buyer"), and XxxxxxxXxxx.xxx, Inc. ("CollegeClub") and Campus 24,
Inc. ("Campus"), each of which is a Delaware corporation, and
XxxxxxxXxxxxxx.xxx, Inc., a Texas corporation ("CStudent")(CollegeClub, CStudent
and Campus each a "Seller," and collectively, "Sellers"), as Debtor(s) and
Debtor(s) In Possession. Campus and CStudent are each a wholly-owned subsidiary
of CollegeClub; and CStudent is the sole member of ESL. The Buyer and the
Sellers are referred to collectively herein as the "Parties."
W I T N E S S E T H:
WHEREAS, on July 28, 2000, eStudent Loan LLC, a Maryland limited liability
company ("ESL") sold substantially all of its assets ("the ESL Assets") to the
Buyer's wholly-owned subsidiary, ESL Acquisition ("ESL Acquisition") pursuant to
the Asset Purchase Agreement dated July 28, 2000 among the Buyer, ESL
Acquisition, CollegeClub, CStudent and ESL ("the ESL Agreement");
WHEREAS, it is agreed that on or about the date hereof (the "Filing Date"), each
of the Sellers will file a voluntary petition for relief under Chapter 11 of
Title 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the
United States Bankruptcy Court for the Southern District of California (the
"Bankruptcy Court") (the "Bankruptcy Case(s)" or "Chapter 11 Cases(s)", as
appropriate);
WHEREAS, subject to approval of the Bankruptcy Court, the Sellers desire to
sell, transfer and assign to the Buyer and the Buyer desires to purchase and
acquire from the Sellers substantially all of the Sellers' assets (other than
certain excluded assets) free and clear of all liens, claims, encumbrances,
liabilities and other obligations and interests, all as more specifically set
forth herein;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and undertakings herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows.
ARTICLE I
THE PURCHASE
1.1 PURCHASE AND SALE OF ASSETS AND ASSUMPTION AND ASSIGNMENT OF THE
ASSIGNED CONTRACTS.
(a) Upon and subject to the terms and conditions of this Agreement, the
Buyer shall purchase from the Sellers, and the Sellers shall sell, transfer,
convey, assign and deliver to the Buyer, at the Closing (as defined in Section
1.4(a)), for the aggregate consideration specified
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below in this Article I, all of the Sellers' right, title and interest in
and to all of the assets of the Sellers (other than the "Excluded Assets," as
defined below) existing as of the Closing regardless of whether such assets
existed prior to the commencement of Sellers' Chapter 11 Cases or arose
thereafter (collectively, the "Acquired Assets"), including, without limitation:
(i) all inventories, including, without limitation, all raw materials,
work in process, finished goods, supplies, packaging materials,
spare parts and similar items;
(ii) all personal property and interests therein, including, without
limitation, all machinery, equipment, tools and tooling (including
expendable tooling), furniture, fixtures, leasehold improvements
and motor vehicles, including, without limitation, such of the
foregoing set forth on the fixed asset property listing provided
by Sellers to the Buyer which is set forth as SCHEDULE 1.1(A)(II)
hereto;
(iii) all (A) patents, patent applications, patent disclosures and all
related continuation, continuation-in-part, divisional, reissue,
re-examination, utility model, certificate of invention and design
patents, patent applications, registrations and applications for
registrations, (B) trademarks, service marks, trade dress, logos,
tradenames and corporate names and registrations and applications
for registration thereof, (C) copyrights and registrations and
applications for registration thereof, (D) mask works and
registrations and applications for registration thereof, (E)
computer software, (including without limitation, source code,
object code, interpreted code, Java byte code, firmware,
middleware, programs, utilities, languages, subroutines or
routines), data, databases, compilations, documentation, data
processing systems, networks and network systems, website and
other Internet and webcentric systems and properties, domain
names, content contained on any Internet or intranet site, and
descriptions, flowcharts and other work product used to design,
plan, organize and develop any of the foregoing, (F) trade secrets
and confidential business information, whether patentable or
nonpatentable and whether or not reduced to practice, know-how,
manufacturing and product processes and techniques, research and
development information, copyrightable works, financial, marketing
and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information,
including, without limitation, all membership lists and databases
and related information and profiles (which include all website
and other content whether published by the members or otherwise),
and internet domain names (G) other proprietary rights relating to
any of the foregoing (including, without limitation, remedies
against infringements thereof and rights of protection of interest
therein under the laws of all jurisdictions), and (H) copies and
tangible embodiments thereof
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(collectively, "Intellectual Property"). Included within the
definition of "Intellectual Property" are the items set forth in
the listing on SCHEDULE 1.1(A)(III)(the "Intellectual Property
Listing") which the Sellers have provided to the Buyer which
listing is a true and complete list of each patent, copyright,
trademark, service xxxx, tradename or registration which has been
issued to the Sellers with respect to any of its Intellectual
Property, identifies each pending patent, copyright, trademark,
service xxxx or tradename application or application for
registration which the Sellers have made with respect to any of
its Intellectual Property, and identifies each license or other
agreement pursuant to which the Sellers have granted any rights to
or been granted any rights by any third party with respect to any
of its Intellectual Property;
(iv) the rights under all (A) contracts, (B) instruments, (C) licenses
and sublicenses of Intellectual Property or (D) leases of real or
personal property which are set forth on SCHEDULE 1.2(A) hereto
(collectively, the "Assigned Contracts and Leases");
(v) all of Sellers' rights, claims, causes of action against Buyer or
any Subsidiary thereof and any and all claims against any third
party relating to any Intellectual Property including, without
limitation, any such claims for past, present or future
infringement;
(vi) all permits, licenses, registrations, certificates, orders,
approvals, confidentiality agreements, nonsolicitation agreements,
franchises, variances and similar rights (collectively, "Permits")
issued by or obtained from any governmental, regulatory or
administrative authority or agency, court or arbitrational
tribunal (a "Governmental Entity") to the extent such Permits are
transferable;
(vii) except as excluded in Section 1.1(b)(ix) below, all books,
records, files, documents, correspondence, lists, engineering
drawings or specifications, product testing procedures and test
results, manufacturing and procedural manuals, advertising and
promotional materials, studies, reports and other printed or
written materials in whatever format relating to the items listed
in clauses (i) through (vi) above, including, without limitation,
any and all books, records or other documentation relating to any
and all undertakings, testing or compliance (or lack thereof) with
year 2000 issues or ISO certifications with respect to the
Acquired Assets or the Sellers' products and any and all original
(or if the original cannot be located, then a copy thereof) files,
applications, assignments and other documentation relating to the
prosecution and/or maintenance of any Intellectual Property,
provided that to the extent any of the foregoing are necessary for
the Buyer to get the benefit of any Acquired Asset or Assigned
Contracts and
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Leases, the Acquired Assets shall include any and all originals
and copies thereof;
(viii) all goodwill of the Sellers;
(ix) all billed but not earned trade and other accounts receivable,
notes receivable and any other unearned right to receive payment
from any other party, including, without limitation, those set
forth on SCHEDULE 1.1(A)(IX) (the "Unearned Receivables").
(b) Notwithstanding the provisions of Section 1.1(a), the Acquired Assets
shall not include the following assets (collectively, the "Excluded Assets"):
(i) the corporate charter, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating
to foreign qualifications, taxpayer and other identification
numbers, seals, minute books, stock transfer books and other
documents relating to the organization and existence of each
Seller;
(ii) any of the rights of each Seller under this Agreement or the
Ancillary Agreements (for purposes of this Agreement, "Ancillary
Agreements" shall mean the xxxx of sale and other instruments of
conveyance referred to in Section 1.4(b)(iv), and the instrument
of assumption and other instruments referred to in Section
1.4(b)(v));
(iii) any avoidance or other rights of each Seller's bankruptcy estate
under the Bankruptcy Code, (other than any such claims described
in Section 1.1(a)(v)), but excluding any rights in or to any of
the Acquired Assets or Assigned Contracts and Leases and any
rights necessary for the Buyer to avoid losing the benefit of any
Acquired Asset or Assigned Contracts and Leases;
(iv) (A) all cash, investments, deposits, bank accounts, and (B) all
trade and other accounts receivable, notes receivable and any
other right to receive payment from any other party to the extent
that it arises from the sale of goods or the provision of services
earned prior to the Closing, other than Unearned Receivables which
are included in the Acquired Assets;
(v) any and all capital stock owned by each Seller in any direct or
indirect Subsidiary thereof;
(vi) any and all claims against any third party (other than any such
claims described in Section 1.1(a)(v)), including any and all
refunds or rights to refunds from any federal, state or foreign
taxing authority, any VAT refunds;
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(vii) specific assets relating solely to the so-called "NACS" business
and the assets owned solely by Xxxxxxx.xxx, Inc. and Izio
Corporation;
(viii) any contracts, agreements, instruments, licenses, or leases which
are not Assigned Contracts and Leases;
(ix) all originals and copies of the items set forth in Section
1.1(a)(vii) above to the extent they relate solely to the Excluded
Assets or the Retained Liabilities or evidence any Accounts
Receivable, or, except in the case of Intellectual Property files,
are the subject of attorney-client privilege between the Sellers
and their attorneys (the Sellers specifically reserving and not
waiving any and all such attorney-client privileges);
(x) all leasehold security deposits and advances made to any third
party in connection with services to be performed by such third
party, including, without limitation, those set forth on SCHEDULE
1.1(B)(X); and
(xi) the other assets specifically set forth on SCHEDULE 1.1(B)(XI)
attached hereto.
1.2 ASSUMPTION OF LIABILITIES.
(a) Upon and subject to the terms and conditions of this Agreement, the
Buyer shall assume and become responsible for, from and after the Closing, all
obligations and nonperformance refunds of the Sellers as set forth on SCHEDULE
1.2(A) attached hereto that accrue and are required to be performed from and
after the Closing provided that as of the date such Assigned Contract or Lease
is assigned to the Buyer, the Sellers are not in default thereunder (other than
because of a provision of the type set forth in 11 U.S.C. ss. 365(e)) or any
such default has been cured by the Sellers (the "Assumed Liabilities").
(b) The Buyer shall not assume or otherwise become responsible for, and
the Sellers shall remain liable for, any and all liabilities or obligations
(whether known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, whether due or to become due, and whether claims with respect
thereto are asserted before or after the Closing) of the Sellers which are not
Assumed Liabilities (collectively, the "Retained Liabilities"). The Retained
Liabilities shall constitute claims and alleged claims in each Seller's
Bankruptcy Case; PROVIDED, HOWEVER, that nothing herein shall grant or create
any rights in favor of the holders of Retained Liabilities or create any
priority to right of payment. It is expressly understood and agreed that the
Parties intend that the Buyer shall not be considered to be a successor to the
Sellers by reason of any theory of law or equity and that the Buyer shall have
no liability except as expressly provided in this Agreement for any liability of
the Sellers. The Retained Liabilities shall include, without limitation, the
following (for purposes of the following clauses, the term "Seller" shall
include each Seller and each of its subsidiaries):
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(i) all liabilities of the Sellers for any federal, state, foreign,
local or other taxes;
(ii) all liabilities of the Sellers for costs and expenses incurred in
connection with this Agreement or the consummation of the
transactions contemplated by this Agreement;
(iii) all liabilities or obligations of the Sellers under this Agreement
or the Ancillary Agreements;
(iv) all liabilities and obligations of the Sellers under any
agreements, contracts, leases or licenses which are not Assumed
Liabilities;
(v) all liabilities and obligations of the Sellers relating to the
manufacture or sale or distribution of products or the provision
of services, including, without limitation, claims for
infringement, or customer support claims, or for repair,
replacement or return of products manufactured or sold or
distributed by the Sellers, including, without limitation, any
claims relating to or arising out of Year 2000 problems (but
excluding any of the foregoing liabilities or obligations arising
from the sale by Buyer after the Closing of Acquired Assets
consisting of products produced by the Sellers);
(vi) all liabilities and obligations of the Sellers arising out of
events, conduct or conditions existing or occurring prior to the
Closing that constitute a material violation of or non-compliance
with any law, rule or regulation, any judgment, decree or order of
any Governmental Entity, or any Permit;
(vii) all liabilities and obligations of the Sellers related directly or
indirectly to the environmental condition (and any adverse
consequences arising therefrom) of the facilities, equipment and
properties of the Sellers arising out of events, conduct or
conditions occurring prior to the Closing, regardless of whether
such condition constitutes a violation of, or non-compliance with
any applicable federal, state or local law, statute or regulation
relating to the environment or occupational health and safety
(collectively, "Environmental Laws");
(viii) except as specifically set forth in Section 1.3(d) and Section 1.7
hereof, all liabilities or obligations of the Sellers to pay any
compensation, bonus, incentive, accrued salary, accrued vacation,
sick pay or severance benefits or unemployment compensation or
employee welfare or pension benefits to any current or former
employee, agent, consultant, advisor or independent contractor of
any Sellers and all liabilities resulting from the termination of
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employment of employees of the Sellers that arose under any
federal, state, local or foreign law or under any employee benefit
plan established or maintained by the Sellers;
(ix) all liabilities of the Sellers for injury to or death of persons
or damage to or destruction of property arising out of events,
conduct or conditions occurring prior to the Closing;
(x) all liabilities of the Sellers for medical, dental and disability
(both long-term and short-term) benefits, whether insured or
self-insured, owed to employees or former employees of the Seller;
(xi) all liabilities or obligations of the Sellers and each ERISA
affiliate arising out of or with respect to any "multiemployer
plan" (as defined in Section 3(37) of ERISA) or other employee
benefit plan;
(xii) all liabilities of the Sellers arising out of any claim, suit,
action, arbitration, proceeding, investigation or other similar
matter which commenced or relates to the ownership of the Acquired
Assets on or prior to the Closing or the operation of the business
of the Sellers;
(xiii) all liabilities of the Sellers for any claims and administrative
or other expenses of whatever kind or nature, arising prior or
subsequent to the commencement of the Bankruptcy Case, whether or
not asserted; and
(xiv) all liabilities of the Sellers, or any of its officers, directors
or employees (in such capacities) to any person or entity as a
shareholder of the Sellers, including, without limitation, in
connection with any pending, threatened or future shareholder
lawsuit.
1.3 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price") to
be paid by the Buyer for the Acquired Assets shall be the sum of:
(a) $7,000,000 payable in cash at Closing from the Buyer by wire
transfer or other delivery of immediately available funds to Sellers (the "Cash
Purchase Price") LESS (i) a cash amount equal to the aggregate sum of all
deferred revenue obligations and obligations to refund advance payments made to
the Sellers which are required to be returned due to nonperformance under
Assigned Contracts and Leases, which deferred revenue obligations and
nonperformance refunds, net of any Unearned Receivables, are set forth on
SCHEDULE 1.3(A)(I) and relate to contracts or leases assigned to Buyer (the
"Deferred Revenue Adjustment"), (ii) an amount equal to the aggregate sum of the
value of any equipment or other property which is the subject of an Assigned
Contract or Lease (including, without limitation any debt or lease financing)
which cannot be located and provided to the Buyer at Closing that is in excess
of $50,000 (for purposes of this clause, the "value" of such property which
cannot be located shall
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equal the aggregate amounts of principal which are or may become due and
owing under the applicable Assigned Contract or Lease for such unlocated
equipment or property throughout the term of the such Assigned Contract or Lease
plus the amount of any cost or expense which is required to be paid or incurred
to purchase the unlocated equipment or property at the termination of the
applicable Assigned Contract or Lease; in the case of equipment or property
which is the subject of debt financing, the "value" shall be the aggregate
amount of such outstanding debt financing, together with all interest and other
charges due or payable thereunder as of the Closing, which is allocable to such
equipment or property on a pro rata basis as compared to all equipment and
property financed under such debt financing), and (iii) an amount equal to any
and all amounts of principal owing to and the amount of any cost or expense
which is required to be paid or incurred to purchase from, whether at Closing or
in the future, lessors under the leases described on Schedule 1.3(a)(iii)
hereto. The Buyer has agreed to provide DIP financing to the Sellers under a
Debtors in Possession Financing Agreement to be entered into upon approval by
the Bankruptcy Court (the "DIP Loan Agreement"); all Indebtedness (as defined in
the DIP Loan Agreement) incurred by the Sellers under the DIP Loan Agreement and
outstanding immediately prior to the Closing shall be a credit against the Cash
Purchase Price;
(b) $13,000,000 in the common stock of the Buyer; payable by delivery
of 1,516,667 shares of restricted common stock, $.01 par value per share, of the
Buyer (the "Shares");
(c) up to $5,000,000 in cash which is contingent upon and calculated
pursuant to the terms and provisions of the earnout set forth in Section 1.8 of
this Agreement;
(d) reimbursement to the Sellers of payments to be made to critical
employees accordance with an employee retention program set forth in Section 1.7
of this Agreement; and
(e) the assumption by the Buyer at Closing of the obligations of the
Sellers arising after the Closing Date under the Assigned Contracts and Leases
set forth in Section 1.2(a) hereof;
provided, however, that (x) if the amount calculated pursuant to subsection
(a)(ii) above (the "Calculated Amount") is less than or equal to $200,000, then
such amount will be deducted from the Purchase Price by reducing the number of
Shares to be delivered pursuant to subsection (b) above by an amount equal to
such amount divided by $8.571 per share (rounded up to the nearest whole share)
and (y) if Calculated Amount exceeds $200,000, then such amount will be deducted
from the Purchase Price by (1) first reducing the number of Shares to be
delivered pursuant to subsection (b) above by an amount equal to $200,000
divided by $8.571 per share (rounded up to the nearest whole share) and (2)
thereafter, by further reducing the amount of cash payable under subsection (a)
above by the amount which the Calculated Amount exceeds $200,000.
1.4 THE CLOSING.
(a) The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Xxxxxx Xxxx & Xxxxxxxx LLP in
Irvine, California or such other location as may be mutually agreed upon by the
Parties, commencing at 9:00 a.m. Pacific Time on the first business day
following the satisfaction or waiver of all conditions to the
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obligations of the Parties to consummate the transactions contemplated
hereby (the "Closing Date").
(b) At the Closing:
(i) the Sellers shall deliver to the Buyer the various
certificates, instruments and documents referred to in
Section 5.1;
(ii) the Buyer shall deliver to the Sellers the various
certificates, instruments and documents referred to in
Section 5.2;
(iii) the Buyer shall pay to Sellers the Cash Purchase Price
provided for in Section 1.3(a) less any and all principal,
interest, fees, charges and other amounts owed under or
with respect to the DIP Loan Agreement (defined herein), in
immediately available funds by wire transfer to an account
or accounts to be designated by Sellers and deliver to
Sellers the portion of the Purchase Price consisting of
Buyer's common stock;
(iv) the Sellers shall execute and deliver to the Buyer (A) a
xxxx of sale in the form attached hereto as EXHIBIT A, (B)
evidence that Sellers have changed their corporate names as
required by Section 6.2 and (C) such other instruments of
conveyance as the Buyer may reasonably request in order to
effect the sale, transfer, conveyance and assignment to the
Buyer of good title to the Acquired Assets;
(v) the Buyer shall execute and deliver to the Sellers an
instrument of assumption in the form attached hereto as
EXHIBIT B and such other instruments as the Sellers may
reasonably request in order to effect the assumption by the
Buyer of the Assumed Liabilities;
(vi) the Parties shall execute and deliver to each other the
Escrow Agreement in the form attached hereto as EXHIBIT D
(the "Escrow Agreement") and the Buyer shall deliver to the
escrow agent thereunder all Shares required to be deposited
into escrow pursuant to Section 8.5 of this Agreement;
(vii) Buyer shall reimburse Seller for employee plan payments if
due to the extent previously approved by the Buyer;
(viii) The Sellers shall deliver or cause to be delivered the
Approval Order (as defined in Section 4.3(a) in the form
attached hereto as EXHIBIT C, entered by the Bankruptcy
Court approving this Agreement and the consummation of the
transactions contemplated hereby;
(ix) the Sellers shall deliver a certificate, as of a date not
earlier than the eleventh day following the entry of the
Approval Order, of the
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Clerk of the Bankruptcy Court certifying as to the absence
of the filing of any appeal with respect to the Approval
Order or the Provision Order (as defined in Section
4.3(a)), or, if certificates to such effect are not
provided by such Clerk, then a certified copy of the court
docket for the Bankruptcy Case establishing the absence of
any such appeal as of the Closing Date;
(x) the Sellers shall deliver to the Buyer patent, trademark,
service xxxx and/or copyright assignments (which
assignments shall be prepared, at Buyer's expense, by Buyer
or its counsel with full cooperation of Sellers, and
Sellers shall request their intellectual property counsel
to also cooperate with the Buyer or its counsel, and such
counsel shall be instructed by Sellers to provide such
cooperation) duly executed by the Sellers, if applicable,
any party to which a security interest was granted or
assignment made with respect to the foregoing providing for
the assignment and transfer to the Buyer of all of such
entity's right, title and interest in and to all patents,
copyrights, trademarks, service marks, service names, trade
names or any applications therefor and any other
Intellectual Property);
(xi) the Sellers shall execute and deliver to the Buyer the
Lock-Up Agreement in the form attached hereto as EXHIBIT E
(the "Lock-Up Agreement");
(xii) the Sellers shall deliver to the Buyer, or otherwise put
the Buyer in control of, all of the Acquired Assets of a
tangible nature;
(xiii) the Sellers shall deliver to Buyer all copies of all items
described in Section 2.15; and
(xiv) the Buyer and the Sellers shall execute and deliver to each
other cross-receipts and such other instruments, documents
or agreements, in form and substance reasonable acceptable
to the Buyer and the Sellers, as may be necessary to effect
and evidence the transactions contemplated by this
Agreement.
1.5 ALLOCATION. The Buyer and the Sellers agree to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes) in accordance with
the allocation schedule attached hereto as SCHEDULE 1.5.
1.6 ESL ASSETS. The ESL Agreement, granted CollegeClub, a Seller herein, a
repurchase option for the capital stock of ESL Acquisition ("Repurchase Option")
for $1,250,000 plus the amount by which the Buyers operating expenses exceed
revenues received as of the closing of the Repurchase Option, which amounts
shall not exceed $100,000 (the "Repurchase Price"). In further consideration for
this Asset Sale, Buyer has consented to the exercise of the
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right to purchase the capital stock of ESL Acquisition held by the Buyer
to the bidder whose qualifying Alternative Proposal (as defined below) is
accepted by the court and closed in accordance with the terms of the bidding
procedures order whereby that successful bidder may purchase the capital stock
of ESL Acquisition at the Repurchase Price in accordance with the terms of the
ESL Agreement (including the September 26 expiration date) by giving notice of
its intent to exercise the repurchase right to the Buyer upon entry of the order
approving the ss. 363 sale and closing within ten (10) days. Otherwise the
repurchase right shall lapse in accordance with its terms and be no longer
exercisable. In consideration of the foregoing, CollegeClub hereby agrees that
it will not exercise its Repurchase Option if the Buyer is the successful bidder
for the Acquired Assets and in such case will have waived and released such
Repurchase Option as of the date hereof, provided that CollegeClub's right to
exercise the Repurchase option is otherwise unaffected. The Repurchase Option
shall terminate on the earlier of (i) September 26, 2000, and (ii) the Closing.
1.7 CRITICAL AND KEY EMPLOYEES. (a) Sellers may propose a retention
program (the "Plan") for the critical employees which are named on SCHEDULE 1.7
hereto (the "Critical Employees"). The Sellers have also provided the Buyer with
a list of each such Critical Employee's base salary. The Plan is subject to the
approval of the Buyer before filing it with the Court. Provided that Buyer is
the successful bidder for the Acquired Assets, Buyer will reimburse to Seller,
at or before the Closing, as Buyer's contribution to the Plan, for each Critical
Employee meeting the applicable criteria under the Plan (which shall include,
among other things, that such Critical Employee is still employed by the Sellers
at Closing), an amount under such Plan which is equal to the lesser of (i) 15%
of such Critical Employee's base salary listed on Schedule 1.7 and (ii)
$1,000,000 in the aggregate to all such Critical Employees.
(b) Buyer shall offer each of Xxxxx Xxxx, Xxxxx Xxxxxx, Xxxxx Xxx
Xxxxxxxxx, Xxxxxxx Xxxxxx and Xxxxxx Xxxx (the "Key Employees") an employment
contract which will contain terms including cash base salary, benefits, non
competition and non solicitation covenants and similar provisions which are
substantially similar to the greater of the Buyer's employment contracts with
similar employees and the terms of such Key Employee's current employment. The
Sellers shall use their commercially reasonable efforts to cause all of the Key
Employees to enter into employment agreements with the Buyer, subject to the
Buyer being the successful bidder.
1.8 EARN-OUT.
(a) If, and only if, the Buyer actually receives Media Revenues (as
defined below) of not less than $20,000,000 during the calendar year ending
December 31, 2001, then the Buyer shall make a payment to the Sellers, payable
by wire transfer or other transfer of immediately available funds, not later
than February 28, 2002, in an amount which shall equal $1,500,000, $4,500,000 or
$5,000,000, as determined in accordance with the following table:
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IF MEDIA REVENUES: TOTAL AMOUNT TO BE PAID
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Equal or exceed $20,000,000 $1,500,000
but are less than $22,500,000
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Equal or exceed $22,500,000 $4,500,000
but are less than $25,000,000
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Equal or exceed $25,000,000 $5,000,000
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(b) As used herein, "Media Revenues" shall mean net cash revenues
recognized (in accordance with generally accepted accounting principles, as
applied by the Buyer) by the Buyer from third parties (other than affiliates of
the Buyer which are owned 80% or more by the Buyer (the "Majority Affiliates"))
derived from advertisements, links, pointers, sponsorships, co-branding,
buttons, banners, navigation bars, and other placements and promotions or
similar services and rights executed on the xxx.xxxxxxxxxxx.xxx,
xxx.xxxxxxxxxxxxxx.xxx or xxxxxxxxxxxxxx.xxx websites. The parties agree that
the Buyer retains the ability to use excess inventory at the xxxxxxxxxxx.xxx,
xxxxxxxxxx.xxx and xxxxxxxxxxxxxx.xxx sites, in its sole discretion and at no
cost, for all purposes, including, without limitation, its ability to promote
the services and products of the Buyer, any of its Majority Affiliates, and any
partner of the Buyer related to such services and products, consistent with the
past practices of the Sellers.
(c) For purposes of determining whether any payment shall be made
pursuant to this Section 1.8 to the Sellers, the Buyer shall, on or before
February 17, 2002 provide the Sellers with a written calculation of what if any
amount would be payable by the Buyer to the Sellers under this Section 1.8. The
Sellers shall have a period of ten (10) days to review such calculation and
provide the Buyer with written notice of any objection thereto which objections
shall be in detail (an "Objection Notice"). In the event that the Buyer does not
receive any Objection Notice within such 10-day period that objects to the
calculation and amount to be paid by the Buyer, the Sellers shall be irrevocably
deemed to have accepted such calculations and determinations. In the event that
the Buyer receives an Objection Notice within such 10-day period, the Sellers
and the Buyer shall enter into good faith negotiations to resolve the
objection(s) from the Sellers. In the event that the Sellers and the Buyer
cannot reach agreement on the calculation of the amount, if any, to be paid
under this Section 1.8 within 90 days after the providing of an Objection
Notice, the Sellers and the Buyer shall negotiate in good faith the parameters
of a process by which such disagreement will be resolved. In any event, from and
after the delivery of an Objection Notice by the Sellers, the Buyer's obligation
to make any payment under this Section 1.8 shall be suspended until such time as
there has been a final determination pursuant to these procedures as to the
amount, if any, which must be paid by the Buyer to the Sellers under this
Section 1.8.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers, jointly and severally, represent and warrant to the Buyer, which
representations and warranties shall terminate as of the Closing, that the
statements contained in this Article II are true and correct, except as set
forth in the disclosure schedule attached hereto (the "Disclosure Schedule").
The Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article II, and the
disclosures in any paragraph of the Disclosure Schedule shall qualify only the
corresponding paragraph in this Article II unless and to the extent such
disclosure is readily apparent on its face.
2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Sellers are
corporations duly organized and validly existing under the laws of their
respective states of incorporation. The Sellers are in corporate and tax good
standing under the laws of their respective state of incorporation. The Sellers
are duly qualified to conduct their respective businesses and are in corporate
and tax good standing under the laws of each jurisdiction in which the nature of
their respective businesses or the ownership or leasing of their respective
properties require such qualification except for jurisdictions where the failure
to so qualify would not have a material adverse effect on the properties or
assets of the Sellers. The Sellers have all requisite corporate power and
authority to carry on the businesses in which they are engaged and to own and
use the properties owned and used by them.
2.2 AUTHORITY. Subject to the Approval Order (as defined in Section
4.3(a)), (a) the Sellers have all requisite corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements and to perform
their obligations hereunder and thereunder; (b) this Agreement has been duly and
validly executed and delivered by the Sellers and constitutes a valid and
binding obligation of the Sellers, enforceable against the Sellers in accordance
with its terms, except as such enforceability may be limited by principles of
public policy and subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of laws governing
specific performance, injunctive relief or other equitable remedies
(collectively, the "Enforceability Exceptions"); and (c) the Ancillary
Agreements, when delivered by the Sellers at Closing, will constitute valid and
binding obligations of the Sellers, enforceable against the Sellers in
accordance with there respective terms, except as such enforceability may be
limited by the Enforceability Exceptions.
2.3 NON-CONTRAVENTION. Upon entry of the Provision Order (as defined in
Section 4.3(a)), and the Approval Order (as defined in Section 4.3(a)), neither
the execution and delivery of this Agreement or the Ancillary Agreements by the
Sellers, nor the consummation by the Sellers of the transactions contemplated
hereby or thereby, will (a) conflict with or violate any provision of the
charter, By-laws or governing documents of Sellers, (b) require on the part of
Sellers or any corporation with respect to which a Seller, directly or
indirectly, has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors (a "Subsidiary"), any filing with, or any
permit, authorization, consent or approval of, any Governmental Entity or (c)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Sellers, or any of their properties or assets.
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2.4 FINANCIAL STATEMENTS; ABSENCE OF CERTAIN CHANGES.
(a) CollegeClub has provided the Buyer with copies of its
consolidated audited balance sheets and statements of income, changes in
stockholders' equity and cash flows for the year ended December 31, 1999 and the
audited consolidated balance sheets and statements of income for the fiscal year
ended December 31, 1999 and unaudited balance sheet and statements of income as
of and for the interim period ended June 30, 2000. Such financial statements
(collectively, the "Financial Statements") have been prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods covered thereby, fairly present, as of
the dates and for the periods indicated, the financial condition, the results of
operation and cash flows of the Sellers and are consistent with the books and
records of the Sellers.
(b) The Sellers do not have, to their knowledge, any liabilities
whether known or unknown, absolute or contingent, liquidated or unliquidated
or due or to become due, other than (i) the liabilities shown on the
June 30, 2000 balance sheet included in the Financial Statement (the "June
Balance Sheet"), and (ii) contractual liabilities disclosed in any contract set
forth in Section 1.2(a) of the Disclosure Schedule to the extent payment or
performance is not yet due.
(c) Since December 31, 1999, none of the Sellers has changed, or
agreed to change, in any material respect, its accounting methods, principles
or practices, except insofar as required by a generally applicable change
in generally accepted accounting principles.
2.5 OWNERSHIP AND CONDITION OF ASSETS. The Sellers have good title to all
of the Acquired Assets free and clear of all Security Interests, except as set
forth in Schedule 2.5. For purposes of this Agreement, "Security Interest" means
any mortgage, pledge, security interest, encumbrance, charge, or other lien
(whether arising by contract or by operation of law). Upon execution of the
Ancillary Agreements by the Sellers, the Buyer will become the true and lawful
owner of, and will receive good title to, the Acquired Assets, free and clear of
all Security Interests. The Acquired Assets constitute all of the assets and
properties of the Sellers necessary for the operation of their businesses.
2.6 INTELLECTUAL PROPERTY.
(a) Each of the Sellers owns or has the right to use all Intellectual
Property used in the businesses of the Sellers utilizing the Acquired Assets or
necessary for the operation of the Sites or which will be necessary for the
operation of the websites and functionalities which are currently in development
by the Sellers (collectively, the "Company Intellectual Property"). For purposes
of this Section, the terms "Sites" shall mean xxx.xxxxxxxxxxx.xxx,
xxx.xxxxxxxxxxxxxx.xxx and xxx.xxxxxxxxxxxxxx.xxx. Each item of Company
Intellectual Property will be owned or available for use by the Buyer on
identical terms and conditions immediately following the Closing. The Sellers
have taken all reasonable measures to protect the proprietary nature of their
Company Intellectual Property, and to maintain in confidence all trade secrets
and confidential information, that they own or use. The Sellers have not granted
to any third-party, and to the knowledge of the Sellers, no other person or
entity has, any rights to any of the Company Intellectual Property owned or used
by a Seller (except pursuant to agreements or licenses specified in the
Intellectual Property Listing), and to the knowledge of the
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Sellers, no other person or entity is infringing, violating or
misappropriating any of the Intellectual Property that a Seller owns or uses,
except as specified in Schedule 2.6(a). The Sellers have received from all
employees and contractors who may assert or have asserted any right in or claim
to any Intellectual Property as an inventor or otherwise an invention assignment
form, assigning such person's or entity's rights in the Intellectual Property to
the Sellers, as appropriate, which assignment forms have been filed with the
appropriate patent office.
(b) To each Seller's knowledge, none of the activities or businesses
presently conducted, including without limitation, the Seller's operation of the
Sites, and none of the products presently sold by the Sellers infringes or
violates, or constitutes a misappropriation of, any Intellectual Property rights
of any other person or entity. Except as set forth in Schedule 2.6(b), Sellers
have not received any complaint, claim or notice alleging any infringement,
violation or misappropriation.
(c) The Sellers have made available to the Buyer true, correct and
complete copies of all the patents, copyrights, trademarks, service marks,
registrations, applications, licenses and agreements (as amended to date) listed
on the Intellectual Property Listing and all working files relating thereto and
all other written documentation evidencing ownership of, and any claims or
disputes relating to, each such item listed on the Intellectual Property
Listing. Except as set forth in Intellectual Property Listing, with respect to
each such item of Intellectual Property:
(i) the license, sublicense or other agreement (whether to or
from any Seller), covering such item is legal, valid,
binding, enforceable and in full force and effect;
(ii) such license, sublicense or other agreement will continue
to be legal, valid, binding, enforceable and in full force
and effect immediately following the Closing in accordance
with the terms thereof as in effect prior to the Closing;
and
(iii) to the knowledge of each of the Sellers the underlying
item of Intellectual Property is not subject to any
outstanding judgment, order, decree, stipulation or
injunction.
(d) Schedule 2.6(d) sets forth the Sellers' policy statements on
internet privacy. The Sellers are currently, and at all times since its
inception have been, operating their businesses in compliance with such
Internet privacy policy.
2.7 OMITTED.
2.8 CONTRACTS. The Sellers have delivered to the Buyer a true, correct and
complete copy of each Assigned Contract and Lease.
2.9 OMITTED.
2.10 LITIGATION. Except as disclosed in Schedule 2.10, there is no
litigation or investigation pending, or to Sellers' knowledge, threatened,
against the Sellers which litigation or
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investigation could reasonably be expected to have a material adverse effect on
the Buyer's use of the Acquired Assets.
2.11 OMITTED.
2.12 LEGAL COMPLIANCE. The Sellers are conducting and have conducted their
businesses in compliance with each law (including rules and regulations
thereunder) of any federal, state, local or foreign government, or any
Governmental Entity, which (a) affects or relates to this Agreement or the
transactions contemplated hereby or (b) is applicable to Sellers in accordance
with 28 U.S.C. ss. 959.
2.13 CUSTOMERS AND SUPPLIERS. Schedule 2.13 sets forth a complete, true and
correct listing of (a) each customer of the Sellers that accounted for more than
5% of the consolidated revenues of the Sellers during the last full fiscal year
and the amount of revenues accounted for by such customer during each such
period, and an electronic and printed copy of the Sellers' end-user customer
database, (b) each supplier that is the sole supplier of any product or
component or sole provider of any product related service to the Sellers and
identifies for each supplier or provider the product, component or service
provided thereby, the most recent and best prices quoted, and, if applicable,
the lead time for such product, component or service, and (c) each supplier that
holds any tooling for the Sellers or for the production of any of its products
and for each supplier identifies the tooling, its location, and the part and
product line the tooling supports.
2.14 SUBSIDIARIES. The Sellers hereby represent that, except for the
Sellers, none of the direct or indirect Subsidiaries of the Sellers owns (i) any
patents, copyrights, trademarks or other Intellectual Property or (ii) any other
property or assets of the type comprising Acquired Assets.
2.15 PRODUCTS. Sellers have provided the Buyer with lists by product name
of each product sold by the Sellers during calendar year 1999 and, to the extent
not otherwise included on such list, each product which is included within the
Acquired Assets, and, for each such product, identifies the most recent price
charged for such product and, if applicable, the range of prices charged for
such product during calendar year 1999.
2.16 EMPLOYEES. The Sellers have used their reasonable efforts to cause all
employees to enter into a confidentiality/assignment of inventions agreement
with the Sellers, a copy of which has previously been delivered to the Buyer. To
the knowledge of the Sellers, no key employee or group of employees has any
plans to terminate employment with the Sellers (other than for the purpose of
accepting employment with the Buyer following the Closing). The Sellers are not
a party to or bound by any collective bargaining agreement, nor has it
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes. The Sellers had no knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Sellers.
2.17 REAL PROPERTY. The Sellers do not own any real property.
2.18 INVESTMENT REPRESENTATION. With respect to the Shares:
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(a) Each of the Sellers is receiving the Shares for its own account
for investment only, and not with a view to, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the same, in violation of the Securities Act of 1933, as amended (the
"Securities Act").
(b) Each of the Sellers is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act.
(c) Each of the Sellers has had such opportunity as it has deemed
adequate to obtain from representatives of the Buyer such information as is
necessary to permit it to evaluate the merits and risks of its investment in the
Buyer.
(d) Each of the Sellers has sufficient experience in business,
financial and investment matters to be able to evaluate the risks involved in
the issuance of the Shares and to make an informed investment decision with
respect to such investment, and is financially able to bear the risks thereof.
(e) Each of the Sellers understand that (i) the Shares have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold,
transferred or otherwise disposed of unless they are subsequently registered
under the Securities Act or an exemption from registration is then available,
(iii) in any event, the exemption from registration under Rule 144 or otherwise
may not be available for at least one year and even then will not be available
unless a public market then exists for the common stock of the Buyer, adequate
information concerning the Buyer is then available to the public and other terms
and conditions of Rule 144 are complied with, and (iv) there is now no
registration statement on file with the Securities and Exchange Commission with
respect to any capital stock of the Buyer and the Buyer has no obligation or
current intention, except as provided in this Agreement, to register the Shares
under the Securities Act.
(f) A legend substantially in the following form will be placed on
the certificates of other documents representing the Shares:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the absence of an effective
registration statement under such Act or an opinion of counsel
satisfactory to the corporation to the effect that such registration
is not required."
2.19 DISCLOSURE. No representation or warranty by the Sellers contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered to or to be delivered
by or on behalf of the Sellers pursuant to this Agreement, and no other
statement made by the Sellers or any of their respective representatives in
connection with this Agreement, contains or will contain any untrue statement of
a material fact or omit or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading. The Sellers have either
disclosed or made available to the Buyer all
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material information relating to the business of the Sellers or the
transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to each Seller, which representations and
warranties shall terminate as of the Closing, that the statements contained in
this Article III are true and correct, except as set forth in the disclosure
schedule attached hereto (the "Buyer Disclosure Schedule") or as disclosed in
the Buyer's Reports (as defined below). The Buyer Disclosure Schedule shall be
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article III, and the disclosures in any paragraph of the Buyer
Disclosure Schedule shall qualify only the corresponding paragraph in this
Article III unless and to the extent such disclosure is readily apparent on its
face.
3.1 ORGANIZATION. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
The Buyer is duly qualified to conduct business and is in corporate and tax good
standing under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified or in good standing
would not have a material adverse effect on the properties or assets of the
Buyer. The Buyer has all requisite corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. The Buyer has furnished or made available to the Sellers complete
and accurate copies of its Certificate of Incorporation and By-laws.
3.2 AUTHORIZATION OF TRANSACTION. The Buyer has all requisite power
and authority to execute and deliver this Agreement and the Ancillary Agreements
and to perform its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Ancillary Agreements by the Buyer and the
performance of this Agreement and the consummation of the transactions
contemplated hereby and thereby by the Buyer have been duly and validly
authorized by all necessary corporate action on the part of the Buyer. This
Agreement has been duly and validly executed and delivered by the Buyer and
constitutes a valid and binding obligation of the Buyer, enforceable against it
in accordance with its terms, except as such enforceability may be limited by
the Enforceability Exceptions. The Ancillary Agreements, when delivered by the
Buyer at Closing, will constitute valid and binding obligations of the Buyer,
enforceable against the Buyer in accordance with their respective terms, except
as such enforceability may be limited by the Enforceability Exceptions.
3.3 NON-CONTRAVENTION. Except for the applicable requirements of the
Xxxx-Xxxxx-Xxxxxx Act, the Securities Act of 1933, as amended (the "Securities
Act"), and any applicable state securities laws, and the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), neither the execution and delivery of
this Agreement nor the Ancillary Agreements by the Buyer, nor the consummation
by the Buyer of the transactions contemplated hereby or thereby, will (a)
conflict or violate any provision of the charter or By-laws of the Buyer, (b)
require on the part of the Buyer any filing with, or permit, authorization,
consent or approval of, any Governmental Entity, (c) conflict with, result in
breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of, create in any party any
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right to accelerate, terminate, modify or cancel, or require any notice,
consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest or other arrangement to
which the Buyer is a party or by which it is bound or to which any of its assets
is subject and which is filed as an exhibit with any of the Buyer Reports or (d)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Buyer or any of its properties or assets.
3.4 CAPITALIZATION. The authorized capital stock of the Buyer consists
of (a) 150,000,000 shares of common stock, par value $.01 per share
(the "Buyer Common Stock"), of which 36,114,337 shares were issued and
outstanding of record as of July 31, 2000, and (b) 5,000,000 shares of preferred
stock, $.01 par value per share, of which no shares were issued or outstanding
of record as of July 31, 2000. All of the issued and outstanding shares of Buyer
Common Stock are duly authorized, validly issued, fully paid and nonassessable.
All of the Shares will be, when issued in accordance with this Agreement, duly
authorized, validly issued, fully paid and nonassessable.
3.5 REPORTS AND FINANCIAL STATEMENTS. The Buyer has previously
furnished or made available to the Sellers complete and accurate copies, as
amended or supplemented, of its (a) Annual Report on Form 10-K for the fiscal
year ended December 31, 1999, as filed with the Securities and Exchange
Commission (the "SEC"), and (b) all other reports filed by the Buyer under
Section 13 or subsections (a) or (c) of Section 14 of the Exchange Act with the
SEC since December 31, 1999 (such reports are collectively referred to herein as
the "Buyer Reports"). The Buyer Reports constitute all of the documents required
to be filed by the Buyer under Section 13 or subsections (a) or (c) of Section
14 of the Exchange Act with the SEC from December 31, 1999 through the date of
this Agreement. The Buyer Reports complied in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder when
filed. As of their respective dates, the Buyer Reports did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of the Buyer included in
the Buyer Reports (i) complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto when filed, (ii) were prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto, and in the case of
quarterly financial statements, as permitted by Form 10-Q under the Exchange
Act) and (iii) fairly present the consolidated financial condition, results of
operations and cash flows of the Buyer as of the respective dates thereof and
for the periods referred to therein.
3.6 LITIGATION. Except as disclosed in the Buyer Reports, as of the
date of this Agreement, there is no litigation or investigation which is pending
or, to the Buyer's knowledge, threatened against the Buyer or any subsidiary of
the Buyer which challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement.
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3.7 BROKER'S FEES. The Buyer has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
ARTICLE IV
PRE-CLOSING COVENANTS
4.1 BEST EFFORTS. Each Party shall use commercially reasonable
efforts, to take all actions and to do all things necessary, proper or advisable
to consummate the transactions contemplated by this Agreement.
4.2 NOTICES AND CONSENTS. Each of the Parties shall use commercially
reasonable efforts to obtain all such waivers, permits, consents, approvals or
other authorizations from third parties and Governmental Entities, and to effect
all such registrations, filings and notices with or to third parties and
Governmental Entities, as may be necessary in order to permit the consummation
of the transactions contemplated by this Agreement, and permit the Buyer to hold
the Acquired Assets and to employ the Acquired Assets and the operations of
Buyer's business following the Closing (including, without limitation, those
listed in Article II hereof of the Disclosure Schedule).
4.3 BANKRUPTCY COVENANTS.
(a) Immediately subsequent to the execution of this Agreement, the
Sellers shall file (i) a motion, pursuant to 11 U.S.C. xx.xx. 105, 363, and 365
to approve the sale of the Acquired Assets to the Buyer pursuant to this
Agreement (the "Approval Motion"), (ii) a motion (the "Provision Motion") for
emergency determination of approval of the Exclusivity Provision (as defined in
Section 4.7 hereof), the Overbid Provisions (as defined in Section 4.8 hereof)
and the Breakup Fee (as defined in Section 4.9 hereof) provided for in this
Agreement, and (iii) a motion (the "DIP Motion") for an order approving and
authorizing the Sellers, as borrowers, to enter into a Debtors in Possession
Financing Agreement (the "DIP Loan Agreement") with the Buyer as lender, each of
such motions in form and substance reasonably acceptable to the Buyer. The
Sellers shall use their commercially reasonable efforts to obtain an order
approving the Provision Motion (the "Provision Order") within 10 days of the
date of this Agreement, and approval of the Approval Motion (the "Approval
Order") within 45 days of the date of this Agreement, which orders shall each be
in form and substance reasonably acceptable to the Buyer, provided that the
Approval Order shall be in a form substantially in conformity with the form of
order attached hereto as EXHIBIT C, with only such changes to such orders as
shall be agreed to by all of the Parties in writing.
(b) The Sellers shall promptly provide the Buyer with drafts of all
documents, motions, orders, filings or pleadings that the Sellers propose to
file with the Bankruptcy Court which relate to the consummation or approval of
this Agreement, the Ancillary Agreements, the DIP Motion, the Provision Motion
or any provision herein or therein, and will provide the Buyer with reasonable
opportunity to review and approve such filings as reasonably practical. The
Sellers shall also promptly (within 24 hours) provide the Buyer with facsimile
copies of all pleadings received by or served by or upon the Sellers in
connection with its Bankruptcy Case, which have not otherwise been served on the
Buyer.
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(c) The Sellers shall use their commercially reasonable efforts to
obtain, at their sole cost and expense, the entry of a final order authorizing
the Sellers to assume and assign the Assigned Contracts and Leases to the Buyer
(the "Assignment Order"). The Sellers shall be responsible for the payment, at
or prior to Closing of any amounts necessary to cure any defaults which exist on
the Closing Date under the Assigned Contracts and Leases, and the Buyer shall be
responsible for providing adequate assurance of its ability to perform the
obligations of the Sellers under the Assigned Contracts and Leases following the
Closing.
(d) Omitted.
(e) From and after the date hereof, the Sellers shall not, and shall
ensure that none of its direct or indirect Subsidiaries which are subject to the
control of the Sellers, take any action or fail to take any action, which action
or failure to act would reasonably be expected to (i) prevent or impede the
consummation of the transactions contemplated by this Agreement in accordance
with the terms of this Agreement, or (ii) result in (A) the reversal, avoidance,
revocation, vacating or modification (in any manner which would reasonably be
expected to materially and adversely affect the Buyer's rights hereunder) or (B)
the entry of a stay pending appeal, in the cases of each of sub-clauses (A) or
(B) of this Section, with respect to the Approval Order, the Assignment Order,
the Provision Order or any order approving the DIP Motion; PROVIDED, HOWEVER,
that nothing contained herein will in any way limit the Seller's ability to
provide notice of the Approval Motion and to comply with requests for
information from potential competing bidders for the Acquired Assets so long as
it is in compliance with the provisions of Section 4.7 hereof.
(f) From and after the commencement of the Chapter 11 Cases, each of
the Sellers shall continue to operate its business as a debtor in possession
pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
4.4 OPERATION OF BUSINESS. Except as contemplated by this Agreement
and to the extent not inconsistent with the Bankruptcy Code, the Bankruptcy
Rules, the operation and information requirements of the Office of United States
Trustee (the "OIRR"), any orders entered by the Bankruptcy Court in the Sellers'
Chapter 11 Cases, and subject to availability of financing pursuant for the DIP
Loan Agreement, during the period from the date of this Agreement to the
Closing, the Sellers shall conduct their respective operations in compliance
with all other applicable laws and regulations in all material respects, and to
the extent consistent therewith so as to preserve the current value and
integrity of the Acquired Assets, pay all post-petition taxes as they become due
and payable, maintain insurance on the Acquired Assets (in amounts and types
consistent with past practice), use its commercially reasonable efforts to
preserve its relationships with customers, suppliers and others having business
dealings with it. Notwithstanding the foregoing, the Sellers shall consult with
the Buyer prior to any transfer of any Acquired Assets from its locations as of
the date hereof, to determine a means of effectuating such transfer so as not to
affect the value of the Acquired Assets to the Buyer. Without limiting the
generality of the foregoing, prior to the Closing, the Sellers shall, but
subject to the requirements of the Bankruptcy Code, Bankruptcy Rules, the OIRR,
any orders entered by the Bankruptcy Court in the Sellers' Chapter 11 Cases and
subject to the availability of financing pursuant to the DIP Loan Agreement,
conduct their respective operations in the
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ordinary and usual course of business and shall not, without the prior written
consent of the Buyer:
(a) acquire, sell, lease, license, encumber or dispose of any
Acquired Assets;
(b) pay any prepetition liabilities other than such prepetition
liabilities as are approved for payment by the Court;
(c) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in any of the representations and warranties of the Sellers set forth in
this Agreement becoming untrue in any material respect;
(d) take any action to waive or compromise any material claims
(whether or not asserted in any pending litigation) which are included in the
Acquired Assets;
(e) agree in writing or otherwise to take any of the foregoing
actions;
(f) fail to maintain their businesses such that (i) active users,
page views, unique visitors and other significant traffic drop 15% below the
averages during May, June and July 2000 as historically measured; (ii)
CollegeClub site members decrease below 2,500,000; and (iii) Sellers' site
suffers an outage of more than 8 consecutive hours or six times for more than 2
hours, during any 30-day period, except as a result of any act of God or the
public enemy; changes in laws, regulations or orders; acts of declared or
undeclared war, including the use of any weapon of war; public disorder,
rebellion, epidemic, landslide, fire, storm, earthquake, flood, strike or
failure of utilities; and any other event caused by a natural disturbance;
(g) fail to use their commercially reasonable efforts to maintain
such security measures to ensure no unauthorized access to their properties or
systems occurs;
(h) fail to use their commercially reasonable efforts to maintain
adequate user data, site usage and activity data (posts to chats and threads),
and proprietary software backups such that the substantial functionalities of
the sites can be restored within 48 hours of a major loss of user data and/or
proprietary software;
(i) fail to use their commercially reasonable efforts to maintain
promotional placement and links to "xXxxxxxxXxxx.xxx Site" and
"xxxxxxxxxxxxxxxxxxxxxx.xxx Site" consistent with promotion of those sites
during May, June and July, 2000 on xxxxxxxxxxx.xxx;
(j) fail to notify the Buyer on a timely basis of any employee
terminations or harassment charges; or
(k) fail to continue to provide, consistent with past practices,
staff, funding, and active management of the transition to a new technical
architecture supported by Oracle.
4.5 FULL ACCESS AND CONFIDENTIALITY. The Sellers shall permit
representatives of the Buyer to have full access (at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Sellers) to all premises, properties, financial and accounting records,
contracts, other records and documents, and personnel, of or pertaining to the
Sellers.
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The Buyer shall, subject to any reasonable and appropriate inquiry
relating to this Agreement by any creditors' committee appointed in the Chapter
11 Cases, permit representatives of the Sellers to have reasonable access to
management of the Buyer at such reasonable times and intervals so as not to
interfere with the normal business operations of the Buyer. The Parties hereto
shall treat and hold as confidential any information obtained through the
diligence process or in connection with this Agreement. The Parties will not
disclose any confidential information received during the diligence process or
in connection herewith except to persons participating in this transaction, such
as attorneys and accountants, except that nothing herein shall prevent
disclosure or use of the information as may be required by a court or by
applicable law or that now is or hereafter becomes public other than by reason
of a breach of the obligations under this Section 4.5. The confidentiality
provisions of this Section 4.5 shall survive the termination of this Agreement
and shall remain binding regardless of whether or not the transactions
contemplated herein are consummated.
4.6 NOTICE OF BREACHES. Each Party hereto shall promptly deliver to
the other Parties written notice of any event or development that would (i)
render any statement, representation or warranty of such Party in this Agreement
(including exceptions set forth in the Disclosure Schedules) inaccurate or
incomplete in any material respect, or (ii) constitute or result in a material
breach by such Party of, or a failure by such Party to comply with, any
agreement or material covenant in this Agreement applicable to such Party. No
such disclosure shall be deemed to avoid or cure any such misrepresentation or
breach. In addition, the Sellers shall promptly provide the Buyer with any
notice of or advise the Buyer of any knowledge or communication regarding any
alleged or actual breaches by any of the Sellers of any material contract or
agreement of any of the Sellers. The Sellers shall provide the Buyer with
immediate written notice of any and all activities or occurrences under which
the pre-closing covenants in Sections 4.4(f) and 4.4(h) become untrue, incorrect
or misleading.
4.7 EXCLUSIVITY. Each Seller shall not, and shall use its commercially
reasonable efforts to cause its Subsidiaries and each of its directors,
officers, employees, representatives and agents not to, directly or indirectly,
encourage, solicit or initiate any proposal or offer from any person or entity
(other than the Buyer or an affiliate, associate, representative or agent of the
Buyer) concerning any merger, consolidation, sale of material assets, tender
offer, recapitalization, accumulation of shares of stock of any Seller, proxy
solicitation or other business combination involving Seller or any Subsidiary or
any division of any Seller or any Subsidiary or any of their respective
businesses relating to the Acquired Assets and the Assigned Contracts and Leases
(an "Alternative Proposal"), or (a) agree to, endorse or take any other action
to facilitate an Alternative Proposal unless such Alternative Proposal has been
approved by the Bankruptcy Court pursuant to the Section 363 sale process
contemplated by this Agreement or (b) provide any non-public information
concerning the business, properties or assets of any Seller to any person or
entity (other than the Buyer); PROVIDED, HOWEVER, that the Sellers shall not be
prohibited from giving notice or providing information, including non-public
information, to any persons who may seek to make a proposal as part of the
Section 363 sale process contemplated by this Agreement (the "Exclusivity
Provision"); PROVIDED, HOWEVER, that notwithstanding the foregoing, the Sellers
shall be entitled to give such notice of whatever buyer protections and/or
bidding procedures order as the Bankruptcy Court requires to respond to and
discuss any Alternative Proposal, to provide information, including due
diligence materials and negotiate and discuss any Alternative Proposal. The
Sellers shall immediately notify the Buyer
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of, and shall disclose to the Buyer a reasonably detailed description of
any inquiries received by any Seller or any of its agents or representatives
(including, without limitation, the date of such inquiry, the identity of the
inquirer and the status of such inquiry) with respect to the acquisition of any
of the Acquired Assets and the Sellers shall provide the Buyer with copies of
any written proposals and a description of any verbal proposals which are
received by Sellers or any of its agents or representatives. Nothing in this
Section 4.7 shall require the divulgence of the identity of any third party
making an Alternative Proposal in violation of any Confidential Agreement with
such third party.
4.8 COMPETITIVE BID PROCEDURES. Subject to Bankruptcy Court approval, the
Sellers agree that in order for any Alternative Proposal to be approved by the
Bankruptcy Court, such proposal must (i) be upon and subject to substantially
the same or more favorable terms and conditions as are contained in this
Agreement, in all material respects (as reasonably determined by the Debtors),
except as to purchase price, and (ii) include (x) a purchase price having a
value at least $750,000 greater than the value of the Purchase Price provided in
this Agreement, (y) a cash component of the purchase price of at least
$7,750,000 and (z) any subsequent increase thereof shall have a cash component
of at least $200,000 in excess of the prior offer (in any event, the Buyer shall
have the right to match any competitive offers and any and all increases
thereof) (collectively, the "Overbid Provisions").
4.9 BREAKUP FEE PROVISIONS. In the event that the Sellers sell or
otherwise transfer all or any substantial portion of the Acquired Assets as part
of a sale approved pursuant to the Section 363 sale process contemplated by this
Agreement or otherwise to any party other than the Buyer, then the Sellers shall
pay to the Buyer, within two business days after the closing of such sale or
transfer, $600,000 (the "Breakup Fee"). The Breakup Fee provided for by this
Section 4.9 is intended to cover the expenses and opportunity costs incurred by
the Buyer in pursuing and negotiating this Agreement and the transactions
contemplated hereby, and is considered by the Parties to be reasonable for such
purposes. The claims of the Buyer to the Breakup Fee shall constitute an
administrative expense under 11 U.S.C. ss. 507(a)(1).
4.10 SOLICITATION OF EMPLOYEES. Any solicitation of employees by the Buyer
shall comply with the restrictions set forth in that certain Confidentiality and
Nonsolicitation Agreement, dated as of June 15, 2000, as amended on July 11,
2000, between CollegeClub and Student Advantage, Inc.; provided that such
agreement shall no longer apply to the solicitation of employees of the Sellers
in the event that the Approval Order is entered, or to the extent consented to
by any of the Sellers.
4.11 BRINGDOWN OF SCHEDULES. The Sellers shall, as of a date no more than
2 days prior to the Closing, provide the Buyer with any and all revisions,
modifications and updates to the schedules and exhibits hereto such that the
schedules and exhibits hereto shall be true and correct as of such date, and
shall include, without limitation, any and all executory contracts and leases
which the Sellers, or any of them, have entered into after the date hereof,
which revisions, modifications and updates are acceptable to the parties hereto.
To the extent that the Buyer determines that it does not desire to have either
or both of (x) that certain letter agreement between CollegeClub and Sony
Corporation of America dated September 28, 1999 and (y) that certain Strategic
Alliance and License Agreement between CollegeClub and Sony Pictures
Entertainment and Sony Corporation of America assumed and assigned to the Buyer,
the Buyer
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shall, no later than 19 days after the date hereof, provide CollegeClub
with written notice thereof, and such contract shall be deemed removed from
SCHEDULE 1.2(A).
ARTICLE V
CONDITIONS TO CLOSING
5.1 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to the satisfaction or waiver by the Buyer of the following
conditions:
(a) the sale of the Acquired Assets by the Sellers to the Buyer as
contemplated by this Agreement shall have been approved by the Bankruptcy Court
pursuant to the Approval Order, which shall have been entered not less than 10
days prior to the Closing Date and which, as of the Closing Date, shall be in
full force and effect, and not stayed, modified, vacated, amended or revoked;
(b) the assumption and assignment by the Sellers of the Assigned
Contracts and Leases to the Buyer shall have been authorized and approved by an
order of the Bankruptcy Court for which all applicable periods for appeal or
rehearing have expired and no notice of appeal or request for rehearing shall
have been entered and such order is in full force and effect without any
modification or amendment, as of the Closing Date;
(c) the Sellers shall have obtained all of the waivers, permits,
consents, approvals or other authorizations, and effected all of the
registrations, filings and notices, referred to in Section 4.2, except for those
the absence of which would not have any material adverse effect on the right of
the Buyer to own, operate or control the Acquired Assets following the Closing
or on the ability of the Parties to consummate the transactions contemplated by
this Agreement;
(d) all of the representations and warranties of the Sellers set forth
in Article II hereof as qualified by the Disclosure Schedule and any other
modification made pursuant to Section 4.11 hereof, shall be true and correct in
all material respects as of the date hereof and as of the Closing as if made as
of the Closing (other than those representations and warranties which are
qualified as to materiality, which shall be true and correct in accordance with
their terms) regardless of any examination or investigation made at any time by
or on behalf of the Buyer or the actual knowledge of any of the Buyer's
officers, directors, employees or agents at the time of the Buyer's execution of
this Agreement, except to the extent any of such representations and warranties
are made as of a specific date, in which case such representations and
warranties shall be true and correct in all material respects as of the
specified date;
(e) the Sellers shall have performed or complied in all material
respects with its agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Closing;
(f) except for the Bankruptcy Case, the Provision Motion, the DIP
Motion and the Approval Motion, (1) no action, suit or proceeding shall be
pending before any Governmental Entity, court or arbitrator wherein an
unfavorable judgment, order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be
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rescinded following consummation or (iii) affect adversely the right of the
Buyer to own, operate or control any of the Acquired Assets following the
Closing, and no such judgment, order, decree, stipulation or injunction shall be
in effect; and (2) there shall be no motions pending or expected to be filed to
convert or dismiss the Chapter 11 Cases or to appoint a trustee for any of the
Sellers.
(g) all applicable requirements under any applicable antitrust or trade
regulation of any country, territory or governing body shall have been
satisfied;
(h) the Sellers shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified in clauses (d) and (e) of this
Section 5.1 is satisfied in all respects;
(i) the Buyer shall have entered into an employment agreement on the
terms set forth in Section 1.7(b) with each of the Key Employees not later than
ten days prior to the Final Hearing, provided that in no event shall the non
competition provisions of such agreements cover less than a 12 month period
following termination of employment with the Buyer;
(j) the Sellers shall have provided the Buyer with a true and accurate
copy of all monthly reports provided to the office of the United States Trustee
with respect to Sellers in their Chapter 11 Cases and Sellers shall not be
delinquent in providing any such reports;
(k) the Sellers shall have provided the Buyer with a satisfactory
report covering all retention payments for which Sellers seek reimbursement
under the Plan;
(l) the actions to be taken by the Sellers in connection with the
consummation of the transactions contemplated hereby and the certificates,
instruments and other documents required to delivered to effect the transactions
contemplated hereby which are listed on SCHEDULE 5.1(L) hereto shall be
reasonably satisfactory in form and substance to the Buyer;
(m) the Sellers shall have been assigned or transferred, prior to the
Closing Date, all of the right, title, and interest in any and all assets (to
the extent such assets (i) would be Acquired Assets if owned by Sellers and are
reasonably necessary for the Buyer to realize the benefits of the transaction
contemplated hereby or (ii) would be Intellectual Property if owned by the
Sellers) from each of their Subsidiaries, which assets shall be included in the
Acquired Assets;
(n) the Sellers shall have entered into the Escrow Agreement;
(o) since the Filing Date, except for the commencement of the Chapter
11 Cases and the circumstances attendant thereto, there shall have been no
material adverse change in the Acquired Assets or a material increase in the
amount of the Assumed Liabilities, and no event or development has occurred
which could reasonably be foreseen to result in such a material adverse
reduction in the future;
(p) the Sellers shall have obtained an oral acknowledgement, which is
reasonably acceptable to Buyer, from such entities as the Buyer has notified the
Sellers on or before the date
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hereof that the Buyer will be a valid assignee of the Sellers' interest in
the contracts or agreements which such entities are party to with the Sellers;
(q) the Sellers shall have entered into and delivered to the Buyer, the
Lock-Up Agreement; and
(r) Each of the Sellers shall have executed and delivered to the Buyer
an Investment Representation Letter in the form reasonably satisfactory to the
Buyer and the Buyer shall have no reason to believe that the statements set
forth therein and in Section 2.18 hereof are not true and shall be reasonably
satisfied that the issuance and sale of the Shares is exempt from the
registration requirements of the Securities Act.
5.2 CONDITIONS TO OBLIGATIONS OF THE SELLERS. The obligation of the Sellers
to consummate the transactions to be performed in connection with the Closing is
subject to the satisfaction or waiver by the Sellers of the following
conditions:
(a) all of the representations and warranties of the Buyer set forth in
Article III hereof as qualified by the Buyer Disclosure Schedule and any other
modification made thereto, shall be true and correct in all material respects as
of the date hereof and as of the Closing as if made as of the Closing (other
than those representations and warranties which are qualified as to materiality,
which shall be true and correct in accordance with their terms) regardless of
any examination or investigation made at any time by or on behalf of the Sellers
or the actual knowledge of any of the Sellers' officers, directors, employees or
agents at the time of the Sellers' execution of this Agreement, except to the
extent any of such representations and warranties are made as of a specific
date, in which case such representations and warranties shall be true and
correct in all material respects as of the specified date;
(b) the Buyer shall have performed or complied with its agreements and
covenants required to be performed or complied with under this Agreement as of
or prior to the Closing;
(c) except for the Bankruptcy Case, the Provision Motion, the DIP
Motion and the Approval Motion, no action, suit or proceeding shall be pending
or threatened before any Governmental Entity (other than the Bankruptcy Case)
against the Buyer wherein an unfavorable judgment, order, decree, stipulation or
injunction would (i) prevent consummation of any of the transactions
contemplated by this Agreement, or (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation;
(d) the Buyer shall have delivered to the Sellers a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified in clauses (a) through (c) of this
Section 5.2 is satisfied in all respects;
(e) the sale of the Acquired Assets by the Sellers to the Buyer as
contemplated by this Agreement shall have been approved by the Bankruptcy Court
pursuant to the Approval Order, which, as of the Closing Date, shall be in full
force and effect and unstayed and unmodified;
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(f) except as may have become unnecessary due to order(s) of the
Bankruptcy Court or otherwise, all applicable approvals, consents and
requirements under any federal or state law or any requirements under any
applicable antitrust or trade regulation of any country, territory or governing
body shall have been satisfied;
(g) the Sellers and the Buyer shall have entered into the Registration
Rights Agreement; and
(h) all actions to be taken by the Buyer in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
the Seller.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 COLLECTION OF ACCOUNTS RECEIVABLE. Each party shall forward to the
other party hereto, within 15 days of receipt of, any monies, checks or
instruments received by such party after the Closing Date with respect to the
accounts receivable and any Unearned Accounts in accordance with the ownership
of such property in accordance with this Agreement.
6.2 USE OF NAME. From and after the Closing, the Seller agrees not to
use or allow any Subsidiary to use the name "XxxxxxxXxxx.xxx", "Campus 24",
"XxxxxxxXxxxxxx.xxx", "XxxxXxxxxxXxxx.xxx", "Xxxxxxxxxxxxxxxxxxxxx.xxx",
"eStudent Loan," or any other trademarks or tradenames included within the
Acquired Assets or any names reasonably similar thereto after the Closing Date
in connection with any business related to, competitive with, or an outgrowth
of, the business conducted by the Sellers on the date of this Agreement. Sellers
shall amend their charters and other corporate records to comply with this
provision on or prior to the Closing.
6.3 BOOKS AND RECORDS. The books and records maintained by the Sellers,
other than those described in Subsection 1.1(b)(i) will, following the Closing,
be in the custody of the Buyer. However, the Buyer hereby agrees, for a period
of three (3) years from and after the Closing Date, to permit the Sellers to
have reasonable access to such books and records relating or pertaining to the
business and operations of the Sellers to the extent the Sellers have need
therefor in order to prepare and file tax returns and to complete the
administration of the Bankruptcy Case. The Buyer also hereby agrees, for a
period of three (3) years from and after the Closing Date, to permit the Sellers
to be able to discuss with any Key Employee or other former employee of the
Sellers employed by the Buyer to the extent the Sellers have need therefor in
order to complete the administration of the Bankruptcy Case; provided that (i)
the Sellers provide the Buyer with reasonable prior written notice thereof, (ii)
the amount of such time and effort requested of the employee and all such
employees shall be reasonable and shall not interfere with such employee's
duties and obligations to the Buyer, and (iii) the Sellers shall provide the
Buyer reasonable compensation for such employee's time and Sellers pay any and
all reasonable expenses incurred by the employee in providing such services. If
at any time the Buyer desires to dispose of or destroy any such records the
Buyer shall provide the Sellers with 30 days (the "Notice Period") prior written
notice thereof. If the Sellers desires to retain any such records or books, the
Sellers shall arrange to collect such books and records from the Buyer,
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at the Seller's expense. In the event that the Buyer does not receive any
notice of the Sellers' desire to retain any such books or records within
such Notice Period, the Buyer may then dispose of or destroy such records or
books without any further obligations.
6.4 COOPERATION. From and after the Closing, the Parties shall
cooperate with each other to give full effect to the terms and provisions of
this Agreement.
6.5 POST-CLOSING ASSUMPTION AND ASSIGNMENT. The Sellers shall use their
commercially reasonable efforts, at their sole cost and expense (including the
payment of any cure amounts), to obtain the entry of a final order authorizing
Sellers to assume and assign to the Buyer any and all additional executory
contracts of Sellers which are not the subject of the Assignment Order, to the
extent that such executory contracts have not been included in SCHEDULE 1.2(A)
and were discovered or disclosed by the Sellers or the Buyer after the date
hereof or were entered into by any of the Sellers after the date hereof. The
Sellers shall be responsible for payment, at or prior to the closing of any
amounts necessary to cure any defaults which exist under the Assigned Contracts
and Leases, to the extent that such amounts are not Assumed Liabilities.
ARTICLE VII
TERMINATION
7.1 TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
prior to the Closing (whether before or after Approval Order) with the prior
authorization of their respective Boards of Directors, as provided below:
(a) the Parties may terminate this Agreement by mutual written consent;
(b) the Buyer may terminate this Agreement by giving written notice to
the Sellers in the event any of the Sellers is in material breach, and the
Sellers may terminate this Agreement by giving written notice to the Buyer in
the event the Buyer is in material breach, of any representation, warranty, or
covenant contained in this Agreement; PROVIDED, HOWEVER, that in the case of any
breach by any Party, the Party in breach shall have five days after written
notice thereof in which to cure such breach;
(c) the Buyer may terminate this Agreement by giving written notice to
the Sellers if the Closing shall not have occurred on or before October 21, 2000
by reason of the failure of any condition precedent under Section 5.1 hereof
(unless the failure results primarily from a breach by the Buyer of any
representation, warranty or covenant contained in this Agreement);
(d) the Sellers may terminate this Agreement by giving written notice
to the Buyer if the Closing shall not have occurred on or before October 21,
2000 by reason of the failure of any condition precedent under Section 5.2
hereof (unless the failure results primarily from a breach by the Sellers of any
representation, warranty or covenant contained in this Agreement);
(e) the Buyer may terminate this Agreement, by giving written notice to
the Sellers, if the Bankruptcy Court has not entered the Provision Order prior
to September 8, 2000;
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(f) the Buyer may terminate this Agreement by giving written notice to
the Sellers if (i) the Bankruptcy Court has not entered either the Approval
Order or the Assignment Order prior to October 5, 2000, or (ii) if an Event of
Default (as defined in the DIP Loan Agreement) occurs and the Buyer has
commenced exercising any of its rights or remedies therein with respect to an
Event of Default (as defined therein);
(g) the Buyer may terminate this Agreement by giving written notice to
the Sellers if a motion to dismiss the Bankruptcy Case or a motion to convert
the Bankruptcy Case or appoint a trustee or examiner has been granted in the
Bankruptcy Case; and
(h) the Buyer may terminate this agreement by giving written notice to
the Sellers at least one (1) day prior to the Final Hearing that Buyer has been
unable to enter into employment agreements with each of the Key Employees on
satisfactory terms.
7.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 7.1, all obligations of the Parties hereunder shall terminate without
any liability on the part of the Buyer to the Sellers or the Sellers to the
Buyer, as the case may be, except for any liability of any Party for its
breaches of this Agreement and except for the Sellers' obligation to the Buyer
to pay the Breakup Fee pursuant to Section 4.9; PROVIDED, HOWEVER, that the
confidentiality provisions contained in Section 4.6 and all of Article VIII
shall survive any such termination. Except for a claim of Buyer for a Breakup
Fee, any claims arising out of or in connection with any Sellers' breach of any
agreement or material covenant in this Agreement shall be treated as follows:
(i) if the breach occurs prior to entry of the Approval Order or other order
entered by the Bankruptcy Court approving this Agreement (as it may be otherwise
amended or modified), then such claims shall be treated as unsecured claims in
each of the Bankruptcy Cases, or (ii) if the breach occurs at any time after
entry of the Approval Order or other order entered by the Bankruptcy Court
approving this Agreement (as it may otherwise be amended or modified), then such
claims shall be treated as expenses of administration under 11 U.S.C. ss.
503(b)(1) of each of the Sellers' bankruptcy estates.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION.
(a) The Sellers, jointly and severally, shall indemnify the Buyer in
respect of, and hold the Buyer harmless against, any and all debts, obligations
and other liabilities (whether absolute, accrued, contingent, fixed or
otherwise, or whether known or unknown, or due or to become due or otherwise),
monetary damages, fines, fees, penalties, interest obligations, deficiencies,
losses and expenses (including without limitation amounts paid in settlement,
interest, court costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation) ("Damages") incurred or suffered by the Buyer or any Affiliate
thereof resulting from, relating to or constituting:
(i) any misrepresentation, breach of warranty or failure to
perform any covenant or agreement of the Sellers in this
Agreement or in any Ancillary Agreement; or
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(ii) any Retained Liabilities;
(iii) any claim (including without limitation, warranty and
product liability claims), suit, action, arbitration,
proceeding, investigation or other similar matter which
relates to (A) services rendered or products leased,
licensed, sold or delivered by the Sellers prior to the
Closing or (B) the businesses of the Sellers prior to the
Closing; or
(iv) any claim, including without limitation claims of third
parties, employees or former employees of the Sellers, or
consultants or former consultants to the Sellers, relating
to the Sellers' Intellectual Property which are based on
events that occur prior to the Closing.
(b) The Buyer shall indemnify the Sellers in respect of, and hold the
Sellers harmless against, any and all Damages incurred or suffered by the
Sellers or any Affiliate thereof resulting from, relating to or constituting:
(i) any misrepresentation, breach of warranty or failure to
perform any covenant or agreement of the Buyer in this
Agreement or in any Ancillary Agreement; or
(ii) any Assumed Liabilities;
(iii) any claim (including without limitation, warranty and
product liability claims), suit, action, arbitration,
proceeding, investigation or other similar matter which
relates to (A) services rendered or products leased,
licensed, sold or delivered by the Sellers after the
Closing or (B) the businesses of the Buyer after the
Closing; or any claim, including without limitation claims
of third parties, employees or former employees of the
Buyer, or consultants or former consultants to the Buyer,
relating to the Intellectual Property which are based on
events that occur after the Closing.
8.2 METHOD OF ASSERTING CLAIMS.
(a) All claims for indemnification by any indemnified party pursuant
to this Article VIII shall be made in accordance with the provisions of this
Section 8.2.
(b) If a third party asserts that an indemnified party is liable to
such third party for a monetary or other obligation which may constitute or
result in Damages for which the indemnified party may be entitled to
indemnification pursuant to this Article VIII, and the indemnified party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) the indemnified party shall be entitled to satisfy such
obligation, without prior notice to or consent from the indemnifying party,
(ii) the indemnified party may make a claim for indemnification pursuant to
this Article V, and (iii) the indemnified party shall be reimbursed for any
such Damages for which it is entitled to indemnification pursuant to this
Article VIII.
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(c) The indemnified party shall give prompt written notification to
the indemnifying party of the commencement of any action, suit or proceeding
relating to a third party claim for which indemnification pursuant to this
Article VIII may be sought. Within 20 days after delivery of such notification,
the indemnifying party may, upon written notice thereof to the indemnified
party, assume control of the defense of such action, suit or proceeding with
counsel reasonably satisfactory to the indemnified party, provided each
indemnifying party acknowledges in writing to the indemnified party that any
damages, fines, costs or other liabilities that may be assessed against the
indemnified party in connection with such action, suit or proceeding constitute
Damages for which the indemnified party shall be entitled to indemnification
pursuant to this Article VIII. If no indemnifying party so assumes control of
such defense, the indemnified party shall control such defense. The party not
controlling such defense may participate therein at its own expense; provided
that if the indemnifying party assumes control of such defense and the
indemnified party reasonably concludes that the indemnifying party and the
indemnified party have conflicting interests or different defenses available
with respect to such action, suit or proceeding, the reasonable fees and
expenses of counsel to the indemnified party shall be considered "Damages" for
purposes of this Agreement. The party controlling such defense shall keep the
other party advised of the status of such action, suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
other party with respect thereto. The indemnified party shall not agree to any
settlement of such action, suit or proceeding without the prior written consent
of each indemnifying party, which shall not be unreasonably withheld. No
indemnifying party shall agree to any settlement of such action, suit or
proceeding without the prior written consent of each indemnified party, which
shall not be unreasonably withheld.
8.3 TREATMENT OF INDEMNITY PAYMENTS. Any payment made to the Buyer pursuant
to this Article shall be treated as a reduction in the Purchase Price.
8.4 SURVIVAL. The representations, warranties, covenants and agreements of
the Sellers set forth in this Agreement shall survive the Closing and the
consummation of the transactions contemplated hereby and continue until the
earlier of (i) twelve (12) months from the Closing hereunder or (ii) such time
as the Sellers shall have distributed or transferred substantially all of the
Shares received from the Buyer ("Indemnification Termination Date"). The
representations, warranties, covenants and agreements of the Buyer set forth in
this Agreement shall survive the Closing and the consummation of the
transactions contemplated hereby and continue until the earlier of (i) twelve
(12) months from the Closing hereunder or (ii) the Indemnification Termination
Date.
8.5 ESCROW. As security for Sellers' indemnification of Buyer, Sellers
shall escrow 233,345 shares (the "Escrow Shares") of common stock of the Buyer,
with United States Trust Company, as escrow agent, or such other escrow agent as
may be mutually agreed upon between the Parties, who will keep the escrowed
funds in an escrow account subject to Buyer rights of indemnification pursuant
to the terms of the Escrow Agreement. Among other things, the Escrow Agreement
shall provide that any distribution of the shares to the Buyer to satisfy any
indemnification obligation shall be made by releasing to the Buyer the number of
shares held under the Escrow Agreement which when multiplied by a share price of
$8.571 per share (regardless of the actual market valuation at that time),
equals or exceeds the amount of the indemnification obligation. If no claim is
pending or been asserted on the Indemnity
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Termination Date, the escrow shall be turned over to the Sellers in
accordance with the terms of the Escrow Agreement.
8.6 LIMITATION OF LIABILITY. Notwithstanding anything in this Agreement to
the contrary, the Buyer will not be entitled to any indemnification pursuant to
Section 8.1(a) unless and until the Damages relating to the indemnification
claims exceed $50,000 in the aggregate, in which case the Buyer will be entitled
only to those in excess of $50,000. Notwithstanding anything in this Agreement
to the contrary, the Sellers will not be entitled to any indemnification
pursuant to Section 8.1(b) unless and until the Damages relating to the
indemnification claims exceed $50,000 in the aggregate, in which case the
Sellers will be entitled only to those in excess of $50,000. In no event shall
the indemnification obligations of the Sellers or the Buyer under this Article
VIII exceed the Purchase Price.
8.7 EFFECT OF INSURANCE PROCEEDS. The liability of the Sellers with respect
to any indemnification claim will be reduced by any insurance proceeds actually
realized by the Buyer as a result of Damages upon which such indemnification
claim is based. The liability of the Buyer with respect to any indemnification
claim will be reduced by any insurance proceeds actually realized by the
Sellers, or any of them, as a result of Damages upon which such indemnification
claim is based.
ARTICLE IX
REGISTRATION OF SHARES
9.1 REGISTRATION OF SHARES. The Buyer shall file with the United States
Securities and Exchange Commission (the "SEC"), within the later of (a) 75 days
following the Closing and (b) 10 days following the date Sellers' disclosure
statement is approved by the Bankruptcy Court, a registration statement on Form
S-3 covering the resale by the Sellers to the creditors or stockholders of the
Sellers of the Shares issued to the Sellers at the Closing (the "Stockholder
Registration Statement"). The Buyer shall use its commercially reasonable
efforts to cause the Stockholder Registration Statement to be declared effective
by the SEC within the later of (i) 150 days following the Closing and (ii)10
days after the date the Sellers' plan of reorganization is confirmed by the
Bankruptcy Court in accordance with Section 1129 of the Bankruptcy Code. The
Buyer shall cause the Stockholder Registration Statement to remain effective
until the date one year after the Closing Date or such earlier time as all of
the Shares covered by the Stockholder Registration Statement have been sold
pursuant thereto.
9.2 LIMITATIONS ON REGISTRATION RIGHTS.
(a) The Buyer may, by written notice to the Sellers, (i) delay the
filing or effectiveness of the Stockholder Registration Statement or (ii)
suspend the Stockholder Registration Statement after effectiveness and require
that the Sellers immediately cease sales of shares pursuant to the Stockholder
Registration Statement, in the event that (A) the Buyer determines that
information required to be included in the financial statements comprising a
portion of the Stockholder Registration Statement is not yet available, (B) the
Buyer files a registration statement (other than a registration statement on
Form S-8 or its successor form) with the SEC for a public offering of its
securities or (C) the Buyer is engaged in any activity or transaction or
preparations or negotiations for any activity or transaction that the Buyer
desires to
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keep confidential for business reasons, if the Buyer determines that the
public disclosure requirements imposed on the Buyer under the Securities Act in
connection with the Stockholder Registration Statement would require disclosure
of such activity, transaction, preparations or negotiations.
(b) If the Buyer delays or suspends the Stockholder Registration
Statement or requires the Sellers to cease sales of shares pursuant to
paragraph (a) above, the Buyer shall, as promptly as practicable following the
termination of the circumstance which entitled the Buyer to do so but in no
event more than 20 days thereafter, take such actions as may be necessary to
file or reinstate the effectiveness of the Stockholder Registration Statement
and/or give written notice to the Sellers authorizing them to resume sales
pursuant to the Stockholder Registration Statement. If as a result thereof the
prospectus included in the Stockholder Registration Statement has been amended
to comply with the requirements of the Securities Act, the Buyer shall enclose
such revised prospectus with the notice to the Sellers given pursuant to this
paragraph (b), and the Sellers shall make no offers or sales of shares pursuant
to the Stockholder Registration Statement other than by means of such revised
prospectus.
9.3 REGISTRATION PROCEDURES.
(a) In connection with the filing by the Buyer of the Stockholder
Registration Statement, the Buyer shall furnish to the Sellers a copy of the
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act.
(b) The Buyer shall use its commercially reasonable efforts to
register or qualify the Shares covered by the Stockholder Registration
Statement under the securities laws of each state of the United States;
PROVIDED, HOWEVER, that the Buyer shall not be required in connection with this
paragraph (b) to qualify as a foreign corporation or execute a general consent
to service of process in any jurisdiction.
(c) If the Buyer has delivered preliminary or final prospectuses to
the Sellers and after having done so the prospectus is amended or supplemented
to comply with the requirements of the Securities Act, the Buyer shall
promptly notify the Sellers and, if requested by the Buyer, the Sellers shall
immediately cease making offers or sales of Shares under the Stockholder
Registration Statement and return all prospectuses to the Buyer. The Buyer shall
promptly provide the Sellers with revised or supplemented prospectuses and,
following receipt of the revised or supplemented prospectuses, the Sellers shall
be free to resume making offers and sales under the Stockholder Registration
Statement.
(d) The Sellers shall reimburse the Buyer, not later than ten days
after notice from the Buyer, for all expenses, up to $25,000, incurred by
the Buyer in complying with its obligations under this Article IX, including all
registration and filing fees, exchange listing fees, fees and expenses of
counsel for the Buyer, and fees and expenses of accountants for the Buyer.
9.4 REQUIREMENTS OF COMPANY STOCKHOLDERS. The Buyer shall not be required
to include any Shares in the Stockholder Registration Statement unless:
(a) The Sellers furnish to the Buyer in writing such information
regarding the Sellers and the proposed sale of Shares by the Sellers as the
Buyer may reasonably request in
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36
writing in connection with the Stockholder Registration Statement or as
shall be required in connection therewith by the SEC or any state securities law
authorities; and
(b) The Sellers report to the Buyer sales made pursuant to the
Stockholder Registration Statement.
9.5 INDEMNIFICATION.
(a) The Sellers agree to indemnify the Buyer and each of its
directors and officers against, and hold the Buyer and each of its
directors and officers harmless from, any losses, claims, damages, expenses or
liabilities (including reasonable attorneys fees) to which the Buyer or its
directors and officers may become subject by reason of any statement or omission
in the Stockholder Registration Statement made in reliance upon, or in
conformity with, information furnished by or on behalf of the Sellers.
(b) The Buyer agrees to indemnify and hold harmless the Sellers
against any losses, claims, damages, expenses or liabilities to which the
Sellers may become subject by reason of any untrue statement of a material fact
contained in the Stockholder Registration Statement or any omission to state
therein a fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages, expenses
or liabilities arise out of or are based upon information furnished to the Buyer
by or on behalf of the Sellers for use in the Stockholder Registration
Statement. The Buyer shall have the right to assume the defense and settlement
of any claim or suit for which the Buyer may be responsible for indemnification
under this Section 9.5(b).
9.6 ASSIGNMENT OF RIGHTS. The Sellers may not assign any of its rights
under this Article IX.
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ARTICLE X
MISCELLANEOUS
10.1 PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement without
the prior approval of the other Parties; PROVIDED, HOWEVER, that any Party may
make any public disclosure it is advised by legal counsel is required by law or
regulation (in which case the disclosing Party shall advise the other Parties
and provide it with a copy of the proposed disclosure prior to making the
disclosure).
10.2 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
10.3 ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
10.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties; provided that the Buyer may assign all or any portion of
its rights, interests and/or obligations hereunder to one or more Subsidiaries
of the Buyer, provided that the Buyer remains primarily liable therefor.
10.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.6 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
IF TO THE SELLERS: XxxxxxxXxxx.xxx, Inc., et al
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxx Xxxx
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COPY TO: Xxxxxx Xxxx & Xxxxxxxx LLP
0 Xxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxx, Esq.
IF TO THE BUYER: Student Advantage, Inc.
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: General Counsel
COPY TO: Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Either Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
10.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Delaware.
10.9 AMENDMENTS AND WAIVERS. The Parties may mutually amend any provision
of this Agreement at any time prior to the Closing; PROVIDED, HOWEVER, that any
amendment effected subsequent to the Approval Order shall be subject to the
restrictions contained in the Approval Order. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
all of the Parties. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
10.10 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision
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39
that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
10.11 EXPENSES. Each Party shall bear its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
10.12 SPECIFIC PERFORMANCE. Each Party acknowledges and agrees that the
other Parties would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each Party agrees that the other Parties
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in the United States
Bankruptcy Court for the Southern District of California, in addition to any
other remedy to which it may be entitled, at law or in equity.
10.13 SURVIVAL OF REPRESENTATIONS. None of the representations and
warranties made by the Parties herein or the documents or certificates
contemplated hereby, nor the covenants set forth in Article IV hereof, shall
survive the Indemnification Termination Date.
10.14 CONSTRUCTION. The language used in this Agreement shall be deemed to
be the language chosen by the Parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against any Party. Any reference
to any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Accounting terms not otherwise defined herein shall have the
meanings assigned to the by generally accepted accounting principles
consistently applied in the United States of America as promulgated by the
Financial Accounting Standards Board.
10.15 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
[Signature pages follow]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
XXXXXXXXXXX.XXX, INC.
By: /s/ Xxxx Xxxxxxx
--------------------------------
Title: President
CAMPUS 24, INC.
By: /s/ Xxxx Xxxxxxx
--------------------------------
Title: President
XXXXXXXXXXXXXX.XXX, INC.
By: /s/ Xxxx Xxxxxx
--------------------------------
Title: President
STUDENT ADVANTAGE, INC.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
--------------------------------
Title: President
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