Exhibit 99.1
PURCHASE AND SALE AGREEMENT
BETWEEN
STUDENT ADVANTAGE, INC.
and
NCSN, INC.
Dated as of November 18, 2003
TABLE OF CONTENTS
ARTICLE I ASSET PURCHASE.....................................................................1
1.1 Purchase and Sale of Assets; Assumption of Liabilities...........................1
1.2 Purchase Price...................................................................5
1.3 Allocation.......................................................................6
1.4 The Closing......................................................................7
1.5 Consents to Assignment...........................................................8
1.6 Further Assurances...............................................................9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER......................................9
2.1 Organization, Qualification and Corporate Power..................................9
2.2 Authority.......................................................................10
2.3 Noncontravention................................................................10
2.4 Financial Statements............................................................11
2.5 Absence of Certain Changes......................................................11
2.6 Undisclosed Liabilities.........................................................12
2.7 Tax Matters.....................................................................13
2.8 Title to Assets; Condition of Tangible Property.................................13
2.9 Real Property...................................................................13
2.10 Intellectual Property...........................................................14
2.11 Contracts.......................................................................16
2.12 Entire Business.................................................................17
2.13 Litigation......................................................................17
2.14 Employment Matters..............................................................17
2.15 Employee Benefits...............................................................18
2.16 Legal Compliance................................................................19
2.17 Permits.........................................................................19
2.18 Business Relationships with Affiliates..........................................19
2.19 Brokers' Fees...................................................................19
2.20 Insurance.......................................................................19
2.21 Top Producers and Suppliers; Accounts Receivable................................20
2.22 Solvency........................................................................20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER.....................................21
3.1 Organization....................................................................21
3.2 Authority.......................................................................21
3.3 Noncontravention................................................................21
3.4 Litigation......................................................................22
3.5 Financing.......................................................................22
3.6 Due Diligence by the Buyer......................................................22
ARTICLE IV PRE-CLOSING COVENANTS............................................................22
4.1 Closing Efforts.................................................................22
4.2 Operation of Business...........................................................23
4.3 Access..........................................................................24
4.4 Exclusivity.....................................................................25
4.5 Stockholders Meeting; Voting Agreement..........................................25
4.6 Disclosure Schedule; Additional Information.....................................26
4.7 Elimination of Intercompany Items...............................................27
4.8 Customer Contracts..............................................................27
ARTICLE V CONDITIONS PRECEDENT TO CLOSING...................................................27
5.1 Conditions to Obligations of the Buyer..........................................27
5.2 Conditions to Obligations of the Seller.........................................29
ARTICLE VI TERMINATION......................................................................30
6.1 Termination of Agreement........................................................30
6.2 Effect of Termination...........................................................31
ARTICLE VII EMPLOYEE MATTERS................................................................31
7.1 Offer of Employment; Continuation of Employment.................................31
7.2 Cessation of Business Benefit Plan Participation; 401(k) Plan Matters...........31
7.3 Employment Related Liabilities..................................................31
7.4 Employee Benefits; Severance Plans..............................................32
7.5 Welfare Plans...................................................................32
7.6 Accrued Vacation Time...........................................................32
7.7 U.S. WARN Act...................................................................33
7.8 U.S. COBRA......................................................................33
ARTICLE VIII OTHER POST-CLOSING COVENANTS...................................................33
8.1 Access to Information; Record Retention; Cooperation............................33
8.2 Collection of Accounts Receivable...............................................35
8.3 Payment of Assumed Liabilities and Excluded Liabilities.........................35
8.4 Transfer Taxes..................................................................35
8.5 Transition......................................................................35
8.6 Non-Competition.................................................................35
8.7 Third Party Consents............................................................36
8.8 Solomon Accounting System.......................................................36
ARTICLE IX INDEMNIFICATION; SURVIVAL........................................................37
9.1 Definitions.....................................................................37
9.2 Indemnification Generally.......................................................38
9.3 Assertion of Claims.............................................................39
9.4 Notice and Defense of Third Party Claims........................................39
9.5 Survival of Representations and Warranties......................................39
9.6 Characterization of Payments....................................................40
9.7 Indemnification Payments........................................................40
ARTICLE X MISCELLANEOUS.....................................................................40
10.1 Press Releases and Announcements................................................40
10.2 No Third Party Beneficiaries....................................................40
10.3 Action to be Taken by Affiliates................................................40
10.4 Entire Agreement................................................................40
10.5 Succession and Assignment.......................................................41
10.6 Notices.........................................................................41
10.7 Amendments and Waivers..........................................................42
10.8 Severability....................................................................42
10.9 Expenses........................................................................42
10.10 Specific Performance............................................................42
10.11 Governing Law...................................................................43
10.12 Bulk Transfer Laws..............................................................43
10.13 Construction....................................................................43
10.14 Waiver of Jury Trial............................................................43
10.15 Remedies Cumulative.............................................................43
10.16 Incorporation of Exhibits and Schedules.........................................43
10.17 Counterparts and Facsimile Signature............................................43
Exhibits:
Exhibit A Form of Note
Exhibit B Form of Warrant
Schedules:
Schedule 1.1(a)(ii) Acquired Assets
Schedule 1.1(a)(iv) Assigned Contracts
Schedule 1.1(a)(v) Intellectual Property
Schedule 1.1(b)(ii) Certain Excluded Assets
Schedule 1.3 Allocation of Purchase Price
Schedule 1.5(a) Required Consents
Schedule 1.5(b) Required Contracts
Schedule 4.2(d) Capital Expenditure Budget
Schedule 4.2(f) Permitted Employee and Compensation Charges
Schedule 7.1 Specified Business Employees
Schedule 10.1 Form of Public Announcement
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT, dated as of November 18, 2003, between
Student Advantage, Inc., a Delaware corporation (the "Seller"), and NCSN, Inc.,
a Delaware corporation (the "Buyer"). The Seller and the Buyer are referred to
together herein as the "Parties."
INTRODUCTION
1. The Seller is engaged, among other matters, in (a) providing a network
on the World Wide Web devoted to college sports known as the "Official College
Sports Network," providing online brand management, content delivery, consumer
marketing and business/commerce solutions to university athletic departments and
conferences, and (b) operating an on-line wire service known as "U-Wire" which
aggregates and syndicates to subscribers college newspaper-based content. All
such activities and all other business and activities conducted on or through
the and websites or any other websites
primarily utilized by the Seller in connection with such activities, hereinafter
referred to collectively as the "Business."
2. The Buyer desires to purchase from the Seller, and the Seller desires
to sell to the Buyer, the assets of the Seller relating exclusively or primarily
to the Business (other than assets excluded pursuant hereto), subject to the
assumption of related liabilities and upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Parties agree as
follows:
ARTICLE I
ASSET PURCHASE
1.1 Purchase and Sale of Assets; Assumption of Liabilities.
(a) On the basis of and contingent upon the representations,
warranties, covenants and agreements and subject to the satisfaction or waiver
of the conditions set forth in this Agreement, at the Closing (as defined in
Section 1.4(a)), the Seller shall sell, convey, assign, transfer and deliver to
the Buyer, and the Buyer shall purchase and acquire from the Seller, free and
clear of any and all Security Interests (as defined in Section 2.3), all of the
Seller's right, title and interest in and to the assets, properties and rights
of the Seller of every kind, nature, character and description, tangible and
intangible, real, personal or mixed, wherever located, existing as of the
Closing which are utilized exclusively or primarily by the Seller in the
Business (collectively, the "Acquired Assets"), including, without limitation,
the following assets in each case to the extent same are utilized exclusively or
primarily in the Business:
(i) all accounts receivable and other receivables, whether or
not billed;
(ii) all computers, equipment, furniture, furnishings,
fixtures, machinery, vehicles, tools and tooling and other tangible personal
property and all warranties and guarantees, if any, express or implied, existing
for the benefit of the Seller in connection therewith to the extent
transferable, including the items listed in Schedule 1.1(a)(ii) hereto;
(iii) the Leased Real Property (as defined in Section 2.9(b))
covered by the Leases (as defined in Section 2.9(b));
(iv) the rights under all contracts or agreements to which the
Seller is a party, including those listed in Schedule 1.1(a)(iv) hereto
(collectively, the "Assigned Contracts");
(v) all "Intellectual Property," which shall mean any or all
of the following and all rights in, arising out of, or associated therewith: (1)
all United States, international and foreign registered patents and applications
therefor, including such applications and registrations listed in Schedule
1.1(a)(v) hereto, and all underlying patent rights, reissues, divisions,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof; (2) all inventions (whether patentable or not), ideas, processes,
invention disclosures, improvements, trade secrets, proprietary information,
confidential business information, know-how, technology, improvements,
discoveries, technical data, customer or vendor lists, proprietary processes and
formulae, all source and object code, computer software and management
information systems, algorithms, architectures, structures, display screens,
layouts, development tools, including the user interface related to the
"gametracker" product, and all documentation and media constituting, describing
or relating to the above, including, without limitation, manuals, memoranda and
records; (3) all copyrights, copyrights registrations and applications therefor,
copyrightable material including derivative works, revisions, transformations
and adaptations, material that is subject to non-copyright disclosure
protections, and all other works of authorship and, and all other rights
corresponding thereto throughout the world; (4) all trade names, logos, trade
dress, common law trademarks and service marks, trademark and service xxxx
registrations and applications therefor, including such applications and
registrations listed in Schedule 1.1(a)(v) hereto, throughout the world; (5)
domain names, including and ; (6) web
sites and related content and sites, including sites with the web addresses
and ; (7) intellectual property rights
acquired by license or agreement; (8) damages or benefits derived from any
action arising out of or related to the foregoing, including laws controlling
computer and Internet rights; (9) all manuals, documentation and materials
relating to the above; and (10) any equivalent rights to any of the foregoing
anywhere in the world;
(vi) all licenses, permits or franchises issued by any
Governmental Entity (as defined below) relating to the development, use,
maintenance or occupation of the Seller Leased Facilities or the operations of
the Business (for purposes of this Agreement, "Governmental Entity" means any
court, arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency);
(vii) all goods and services and all other economic benefits
to be received subsequent to the Closing arising out of prepayments and payments
by the Seller prior to the Closing;
(viii) all prepaid deposits and other prepaid asset items;
(ix) all books (other than stock record books), records,
accounts, ledgers, files, documents, correspondence, studies, reports and other
printed or written materials, subject to any restrictions imposed by applicable
law on the transfer of employee files and other materials related to classified
programs;
(x) all telephone and facsimile numbers; and
(xi) all goodwill.
(b) Notwithstanding anything to the contrary in this Agreement, the
Acquired Assets shall not include any of the following (each, an "Excluded
Asset"):
(i) any cash and cash equivalents or similar investments, bank
accounts, commercial paper, certificates of deposit, Treasury bills and other
marketable securities;
(ii) any assets, properties or rights listed on, or arising
under any contracts or agreements listed on, Schedule 1.1(b)(ii) hereto;
(iii) any rights to insurance claims, related refunds and
proceeds arising from or related to the Excluded Assets and Excluded Liabilities
(as defined in Section 1.1(d));
(iv) any rights which accrue or will accrue to the benefit of
the Seller under this Agreement or the Ancillary Agreements (as defined in
Section 1.5(b));
(v) any rights relating to refunds or recoupment of Taxes (as
defined in Section 2.7) of the Seller, including rights under any legal or
administrative proceedings relating thereto, whether or not yet commenced;
(vi) any actions, claims, causes of action, rights of
recovery, choses in action and rights of setoff of any kind arising before, on
or after the Closing relating to the items set forth above in this Section
1.1(b) or to any Excluded Liabilities;
(vii) any books, records, accounts, ledgers, files, documents,
correspondence, studies, reports and other printed or written materials related
exclusively or primarily to any Excluded Assets or Excluded Liabilities; and
(viii) any of the Seller's corporate functions, facilities,
assets and properties that service the Seller's business activities as a whole
and are not primarily or exclusively related to the Business (such as, by way of
example, payroll systems, finance and accounting functions, shared business
services and the like).
(c) On the basis of the representations, warranties, covenants and
agreements and subject to the satisfaction or waiver of the conditions set forth
in this Agreement, at the Closing, the Buyer shall assume and agree to pay,
perform and discharge when due after the
Closing all of the following liabilities and obligations solely to the extent
related exclusively or primarily to the Business or the Acquired Assets
(collectively, the "Assumed Liabilities"):
(i) all liabilities (A) reflected on the face of the Interim
Balance Sheet (as defined in Section 2.4(a)) and (B) incurred after the Interim
Balance Sheet in the ordinary course of business consistent with past practice
(and which are similar in nature and amount to the liabilities which arose
during the comparable period of time in the immediately preceding fiscal period
(taking into account any corresponding increase in expenses that are
attributable to an increase in revenue)), except to the extent satisfied prior
to the Closing, in each of clauses (A) and (B) not including any liabilities or
obligations payable or otherwise owed to the Seller or any of its Affiliates
(collectively, "Intercompany Payables");
(ii) all liabilities and obligations of the Seller arising
after the Closing under the Assigned Contracts and the Leases included in the
Designated Contracts, except as provided in Section 1.5; provided, however that
the Buyer shall not assume, and does not hereby agree to pay, perform or
discharge, any liabilities or obligations relating in any manner to or arising
from any breach or default of the Seller of any Assigned Contract occurring on
or prior to the Closing Date (as defined in Section 1.4(a)) regardless of
whether the Seller discloses such breach or default pursuant to this Agreement;
(iii) all liabilities and obligations in respect of ownership
or operation of the Business or the Acquired Assets arising or incurred by the
Buyer from and after the Closing;
(iv) all liabilities and obligations arising out of the
ownership, leasing or operation of any Leased Facility or other real property
from and after the Closing;
(v) all liabilities and obligations in respect of employees or
employee benefits which are expressly assumed by the Buyer pursuant to Article
VII;
(vi) all liabilities and obligations for any Taxes relating to
the Business for periods beginning after the Closing Date (other than Taxes
imposed on the Seller's income); and
(vii) all liabilities and obligations arising out of or
relating to a Deferred Items (as defined in Section 1.5) under Section 1.5 to
the extent that the Buyer receives the benefits under such Deferred Item
pursuant to Section 1.5.
(d) Except for the Assumed Liabilities, the Buyer shall not assume
or be liable for, and does not undertake to attempt to, assume or discharge, any
payment obligation, performance obligation, contingency or liability, whether
fixed, contingent, liquidated, unliquidated, matured, unmatured, asserted or
unasserted, of the Seller whether or not relating to the Business and operation
thereof on or prior to the Closing Date including, without limitation,
obligations of the Seller with respect to Taxes for periods ending prior to the
Closing Date, any Taxes imposed on the Seller's income and the conduct of the
Business prior to the Closing, liabilities and obligations in respect of
employees and employee benefits not expressly assumed by the Buyer pursuant to
Article VII, any Intercompany Payables, and any liabilities arising from or
relating to the failure of the Seller to maintain adequate licenses with respect
to third party
software and/or technology notwithstanding any disclosure with respect thereto
set forth in Section 2.10(b) of the Disclosure Schedule (as defined in Article
II) or elsewhere therein (collectively, the "Excluded Liabilities"), which
obligations and liabilities shall remain the sole responsibility of the Seller
and the Seller shall indemnify and hold harmless the Buyer therefor.
1.2 Purchase Price.
(a) In consideration for the sale and transfer of the Acquired
Assets, the Buyer shall at the Closing assume the Assumed Liabilities as
provided in Section 1.1(c) and shall pay to the Seller at Closing $7,100,000
(such amount, as the same may hereafter be adjusted, the "Purchase Price"), (i)
$2,850,000 of which shall be paid in cash in immediately available funds (such
amount, as the same may hereafter be adjusted, the "Cash Portion"), subject to
adjustment as set forth in Section 4.8 and in Schedule 1.5(a) hereto, and (ii)
the balance (the "Balance") of which shall be paid by delivery of a Note
Agreement substantially in the form attached hereto as Exhibit A (the "Note")
and a Common Stock Purchase Warrant substantially in the form attached hereto as
Exhibit B (the "Warrant"); provided, however, in the event that not less than
four Business Days (as defined in Section 1.4(a)) prior to the Closing Date the
Buyer delivers written notice to the Seller that upon delivery of the Note as of
the Closing Date the Buyer would be in default or breach of one or more
provisions thereof (which notice shall specify such provisions), at the option
of the Seller (exercisable by delivery to the Buyer of written notice thereof
not less than two Business Days prior to the Closing Date), at the Closing the
Seller shall either (y) accept payment of the Balance by delivery of the Note
and Warrant and deliver to the Buyer concurrently therewith a waiver (on behalf
of the Seller and its successors and assigns) of any and all such defaults and
breaches, any other defaults and breaches of which the Seller had knowledge and
any defaults or breaches under this Agreement with respect thereto (including,
without limitation, any breach by the Buyer of any of its representations or
warranties contained in this Agreement), and a release of any claims with
respect thereto or arising therefrom (the "Waiver and Release") or (z) in lieu
of delivery of the Note and the Warrant, accept payment of the Balance in cash
in immediately available funds of $4,250,000. In the event that the Seller fails
to deliver timely such written notice, the Seller shall have been deemed to have
elected to accept payment of the Balance pursuant to clause (z) above.
(b) The Purchase Price shall be adjusted at Closing as follows:
(i) if Estimated Working Capital (as hereinafter defined)
exceeds $50,000, the Cash Portion of the Purchase Price shall be increased by
such excess; or
(ii) if Estimated Working Capital is less than ($50,000) (that
is, negative $50,000), the Cash Portion of the Purchase Price shall be decreased
by such shortfall.
For purposes hereof, "Estimated Working Capital" shall mean an amount,
calculated by the Seller in good faith as at the Closing Date, equal to (A) the
sum of Specified Accounts Receivable (as hereinafter defined), inventory,
prepaid expenses and deposits (whether short or long-term), less (B) the sum of
accounts payable, deferred revenue, Pre-Closing Employee Liabilities (as defined
in Section 7.3) to the extent includable herein pursuant to Section 7.3, and
accrued expenses (not including Taxes or expenses with respect to the Assumed
Vacation Time (as defined in Section 7.6)). For purposes hereof, "Specified
Accounts Receivable" means (1)
the accounts receivable set forth on the statement of net assets of the Business
as of September 30, 2003 included in Section 2.4 of the Disclosure Schedule
(other than the accounts receivable identified as "Excluded Accounts Receivable"
in Schedule 1.1(b)(ii) hereto) and (2) any accounts receivable arising after
such date and before the Closing Date in the ordinary course of business
consistent with past practice.
(c) (i) Within 45 days after the Closing Date, the Seller shall
prepare a statement of net assets as of the Closing Date (the "Closing Date
Balance Sheet") from the books, records and accounts of the Seller based on the
closing statement of net assets used to calculate the Estimated Working Capital
at the Closing together with a statement (the "Working Capital Statement")
setting forth the Seller's calculation of actual working capital as of the
Closing Date ("Proposed Final Working Capital") determined on the same basis
used to determine Estimated Working Capital. If the Buyer does not agree with
the calculation of the Proposed Final Working Capital, the Buyer shall notify
the Seller in writing (such notice, the "Dispute Notice") of its objection
within 30 days (as defined in Section 1.4(a)) after its receipt of the Working
Capital Statement, which Dispute Notice shall set forth in reasonable detail the
basis for its objection. If the fails to deliver a Dispute Notice within such 30
day period, then the Proposed Working Capital shall become the final Working
Capital (the "Final Working Capital") for all purposes of this Agreement. If the
Buyer delivers a Dispute Notice within such 30 day period, each of the Buyer and
the Seller shall negotiate in good faith a resolution of the dispute set forth
in the Dispute Notice and if the parties are not able to reach agreement as to
an appropriate Final Working Capital within 10 Business Days of delivery of the
Dispute Notice, then the Buyer and the Seller shall, within 10 Business Days
thereof, mutually agree on and appoint an independent public accounting firm
(the "Independent Auditor") to review the Working Capital Statement and the
Dispute Notice (and all related information) and determine the Final Working
Capital. Each of the Buyer and the Seller shall provide the Independent Auditor
promptly upon request therefrom with such information and documentation as the
Independent Auditor may find necessary or appropriate to determine the Final
Working Capital. The Independent Auditor shall be requested to determine the
Final Working Capital within 90 days of the Closing Date, and such determination
shall be final and binding as to all parties hereto. The costs of the
Independent Auditor shall be borne by the party whose determination of working
capital as of the Closing Date was farthest from the Independent Auditor's
determination of the Final Working Capital, or equally by the Buyer and the
Seller if the determination by the Independent Auditor is equidistant from the
determinations of the parties.
(ii) Within five Business Days after the determination of the
Final Working Capital in accordance with clause (i) above, a payment, if any, to
adjust the Purchase Price shall be made by the Buyer or the Seller, as the case
may be, consistent with Section 1.2(b)(i), (ii) and (iii).
1.3 Allocation. The Purchase Price shall be allocated among the Acquired
Assets in accordance with Schedule 1.3 hereto. In the event that the Purchase
Price is adjusted as set forth Section 1.2, such allocation shall be
appropriately adjusted in proportion thereto. The Buyer and the Seller shall
each report in their respective federal, state and local income tax returns for
the taxable year that includes the Closing Date (as defined in Section 1.4) the
federal, state and local income and other Tax consequences of the transactions
contemplated by this Agreement in a manner consistent with such allocation,
including without limitation the
preparation and filing of Form 8594 under Section 1060 of the Internal Revenue
Code of 1986, as amended (the "Code"), or any successor form or successor
provision of any future Tax law, and neither the Buyer nor the Seller shall take
any position inconsistent with such allocation unless otherwise required by
applicable law.
1.4 The Closing.
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place (i) at the offices of Xxxx and Xxxx LLP in New
York, New York, on the fifth Business Day immediately following the date on
which all of the conditions set forth in Article V have been satisfied or waived
or (ii) such other time, date or place as the Buyer and the Seller may agree
(the "Closing Date"). For purposes of this Agreement, a "Business Day" shall be
any day other than (i) a Saturday or Sunday or (ii) a day on which banking
institutions located in New York, New York are permitted or required by law,
executive order or governmental decree to remain closed.
(b) At the Closing:
(i) the Seller shall deliver (or cause to be delivered) to the
Buyer the various certificates, instruments and documents required to be
delivered under Section 5.1;
(ii) the Buyer shall deliver (or cause to be delivered) to the
Seller the various certificates, instruments and documents required to be
delivered under Section 5.2;
(iii) the Seller shall execute and deliver a Xxxx of Sale in
form and substance reasonably satisfactory to the Buyer and the Seller;
(iv) the Seller shall execute and deliver a Trademark
Assignment in form and substance reasonably satisfactory to the Buyer and the
Seller;
(v) the Seller shall execute and deliver a Copyright
Assignment in form and substance reasonably satisfactory to the Buyer and the
Seller;
(vi) the Seller shall execute and deliver a Patent Assignment
in form and substance reasonably satisfactory to the Buyer and the Seller;
(vii) the Seller shall execute and deliver a Domain Name
Assignment and Transfer Agreement in form and substance reasonably satisfactory
to the Buyer and the Seller;
(viii) the Seller and the Buyer shall execute and deliver 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 valid
ownership of the Acquired Assets;
(ix) the Buyer shall execute and deliver to the Seller an
Assumption Agreement;
(x) the Buyer and the Seller shall execute and deliver such
other instruments as the Seller may reasonably request in order to effect the
assumption by the Buyer of the Assumed Liabilities;
(xi) the Seller shall, if applicable, deliver the Waiver and
Release;
(xii) the Seller shall execute and deliver to the Buyer a
certificate setting forth the Estimated Working Capital, including the basis
therefor and a certification that such Estimated Working Capital was prepared in
good faith by the Seller based on the books, records and accounts of the Seller
maintained in the ordinary course of business;
(xiii) the Seller shall transfer to the Buyer all the books,
records, files and other data (or copies thereof) within the possession or
control of the Seller relating to the Acquired Assets and reasonably necessary
for the continued operation of the Business by the Buyer;
(xiv) the Buyer shall (A) pay in cash by wire transfer of
immediately available funds to the Seller the Cash Portion, and (B) pay the
Balance in accordance with Section 1.2(a);
(xv) the Seller shall deliver to the Buyer, or otherwise put
the Buyer in possession and control of, all of the Acquired Assets of a tangible
nature owned by the Seller; and
(xvi) the Parties shall execute and deliver to each other a
cross-receipt evidencing the transactions referred to above.
The agreements and instruments referred to in clauses (iii) through (xii) above,
together with any other documents or instruments executed and delivered pursuant
hereto, are referred to herein as the "Ancillary Agreements."
1.5 Consents to Assignment. Anything in this Agreement to the contrary
notwithstanding but subject to the proviso below, this Agreement shall not
constitute an agreement to assign or transfer any contract, lease,
authorization, license or permit, or any claim, right or benefit arising
thereunder or resulting therefrom, if an attempted assignment or transfer
thereof, without the consent of a third party thereto or of the issuing
Governmental Entity, as the case may be, would constitute a breach thereof. If
such consent (a "Deferred Consent") is not obtained, or if an attempted
assignment or transfer thereof would be ineffective or would affect the rights
thereunder so that the Buyer would not receive all such rights, then, in each
such case, (a) the contract, lease, authorization, license or permit to which
such Deferred Consent relates (a "Deferred Item") shall be withheld from sale
pursuant to this Agreement without any reduction in the Purchase Price, (b) from
and after the Closing, the Seller and the Buyer will cooperate, in all
reasonable respects, to obtain such Deferred Consent as soon as practicable
after the Closing, provided that the Seller shall not be required to make any
material payments or agree to any material undertakings in connection therewith,
and (c) until such Deferred Consent is obtained, the Seller and the Buyer will
cooperate, in all reasonable respects, to provide to the Buyer the benefits
under the Deferred Item to which such Deferred Consent relates (with the Buyer
entitled to all the gains and responsible for all the losses, Taxes, liabilities
and/or obligations thereunder).
In particular, in the event that any such Deferred Consent is not obtained prior
to the Closing, then the Buyer and the Seller shall enter into such arrangements
(including subleasing or subcontracting if permitted) to provide to the Parties
to the extent reasonably practicable the economic and operational equivalent of
obtaining such Deferred Consent and assigning or transferring such contract,
lease, authorization, license or permit, including enforcement for the benefit
of the Buyer of all claims or rights arising thereunder, and the performance by
the Buyer of the obligations thereunder on a prompt and punctual basis.
Notwithstanding anything herein to the contrary, the assignment or transfer of
the leases and other contracts set forth on Schedule 1.5(a) and Schedule 1.5(b)
hereto, to the extent provided therein, shall be a condition to the Buyer's
obligation to consummate the Closing.
1.6 Further Assurances. At any time and from time to time after the
Closing Date, as and when requested by any Party hereto and at such Party's
expense, the other Party or Parties shall promptly execute and deliver, or cause
to be executed and delivered, all such documents, instruments and certificates
and shall take, or cause to be taken, all such further or other actions as are
necessary to evidence and effectuate the transactions contemplated by this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as follows, except as set
forth in the Disclosure Schedule provided by the Seller to the Buyer on the date
hereof (the "Disclosure Schedule"). The Disclosure Schedule shall be arranged in
sections and subsections corresponding to the numbered and lettered sections and
subsections contained in this Article II. The disclosures in any section or
subsection of the Disclosure Schedule shall qualify other sections and
subsections in this Article II to the extent it is reasonably clear from a
reading of the disclosure that such disclosure is applicable to such other
sections and subsections. The inclusion of any information in the Disclosure
Schedule (or any update thereto) shall not be deemed to be an admission or
acknowledgment, in and of itself, that such information is required by the terms
hereof to be disclosed, is material to the Business, has resulted in or would
result in a Business Material Adverse Effect (as defined in Section 2.1), or is
outside the ordinary course of business. For purposes of this Article II, the
phrase "to the knowledge of the Seller" shall mean and be limited to the
knowledge of the Seller's executive officers after due inquiry. To the extent
anything contained in the Disclosure Schedule conflicts with this paragraph,
this paragraph shall prevail.
2.1 Organization, Qualification and Corporate Power. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to conduct business under the
laws of each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification
necessary, except for any such failure to be qualified that would not reasonably
be expected to result in a Business Material Adverse Effect (as defined below).
The Seller has all requisite corporate power and authority to carry on the
business in which it is now engaged and to own, lease and use the properties now
owned, leased and used by it. For purposes of this Agreement, "Business Material
Adverse Effect" means any change, effect or circumstance that, individually or
in the aggregate, (i) is materially adverse to the business, financial or other
condition, results of operations or prospects of the Business as a whole (other
than changes,
effects or circumstances that are the result of economic factors affecting the
economy as a whole or that are the result of factors generally affecting the
industry in which the Business competes), or (ii) impairs or delays in any
material respect the ability of the Seller to consummate the transactions
contemplated by this Agreement or the Ancillary Agreements; provided, however,
that a "Business Material Adverse Effect" shall not include any adverse change,
effect or circumstance (a) arising out of or resulting primarily from actions
contemplated by the Parties in connection with this Agreement, or (b) that is
attributable to the announcement or performance of this Agreement or the
transactions contemplated by this Agreement.
2.2 Authority. The Seller has all requisite corporate power and authority
to execute and deliver this Agreement and the Ancillary Agreements to which it
will be a party and to perform its obligations hereunder and thereunder. The
execution and delivery by the Seller of this Agreement and such Ancillary
Agreements and, subject to the approval of the sale of the Acquired Assets by
the Seller to the Buyer as contemplated by this Agreement by a majority of the
votes represented by the outstanding shares of capital stock of the Seller
entitled to vote thereon (the "Requisite Seller Stockholder Approval"), the
consummation by the Seller of the transactions contemplated hereby and thereby
have been validly authorized by all necessary corporate action on the part of
the Seller. This Agreement has been, and such Ancillary Agreements will be,
validly executed and delivered by the Seller and, assuming this Agreement and
each such Ancillary Agreement constitute the valid and binding obligation of the
Buyer, constitutes or will constitute a valid and binding obligation of the
Seller, enforceable against the Seller in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally and by equitable principles, including those
limiting the availability of specific performance, injunctive relief and other
equitable remedies and those providing for equitable defenses.
2.3 Noncontravention..Neither the execution and delivery by the Seller of
this Agreement or the Ancillary Agreements to which the Seller will be a party,
nor the consummation by the Seller of the transactions contemplated hereby or
thereby, will:
(a) conflict with or violate any provision of the charter or bylaws
of the Seller;
(b) require on the part of the Seller any filing with, or any
permit, authorization, consent or approval of, any third party or Governmental
Entity, except for (i) the Requisite Seller Stockholder Approval and (ii) the
consents set forth in Sections 2.9(b) and 2.11(c) of the Disclosure Schedule;
(c) conflict with, result in a breach of, constitute (with or
without due notice or lapse of time or both) a default under, result in the
acceleration of obligations under, create in any party the right to terminate or
modify, or require any notice, consent or waiver under, any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage, instrument of indebtedness or Security Interest to which the Seller is
a party or by which the Seller is bound or to which its assets are subject,
except for (i) the consents required under the Designated Contracts set forth in
Section 2.11(c) of the Disclosure Schedule, (ii) any conflict, breach, default,
acceleration or right to terminate or modify in any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage, instrument of indebtedness or Security Interest (other than the
Designated Contracts) that would not reasonably be expected to result in a
Business Material Adverse Effect or (iii) any notice, consent or waiver (other
than the consents required under the Designated Contracts set forth in Section
2.11(c) of the Disclosure Schedule) the absence of which would not reasonably be
expected to result in a Business Material Adverse Effect; or
(d) violate any (i) judgment, order, writ, stipulation, injunction,
decree or (ii) statute, rule or regulation applicable to the Seller or any of
its properties or assets, except, in the case of clause (ii) above, for any
violation that would not reasonably be expected to result in a Business Material
Adverse Effect.
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), other than (i) liens arising solely by action
of the Buyer, and (ii) liens on tangible personal property which do not,
individually or in the aggregate, materially impair the use or value of the
Acquired Assets.
2.4 Financial Statements.
(a) Section 2.4 of the Disclosure Schedule includes copies of the
unaudited (a) statement of EBITDA (Earnings Before Interest, Taxes, Depreciation
and Amortization) of the Business for the 12-month period ended December 31,
2002, and for the six-month period ended June 30, 2003 and (b) statement of net
assets of the Business as of December 31, 2002, and as of June 30, 2003 (the
"Interim Balance Sheet"). The financial statements referred to in clauses (a)
and (b) above are herein referred to collectively as the "Financial Statements."
The Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied ("GAAP") and the
methodologies described in the footnotes thereto and fairly present, in all
material respects, the financial condition and combined results of operations of
the Business as of the respective dates thereof and for the periods referred to
therein in accordance with such methodologies; provided, however, that the
foregoing statements of net assets do not include footnotes required by GAAP,
and the interim statement of net assets is subject to year-end adjustments and
the Financial Statements do not include allocation of corporate expenses.
(b) Section 2.4 of the Disclosure Schedule includes copies of (i)
the unaudited statement of EBITDA (Earnings Before Interest, Taxes, Depreciation
and Amortization) of the Business for the three-month period ended September 30,
2003 and (ii) statement of net assets of the Business as of September 30, 2003.
Such financial statements are good faith estimates of the Seller, subject to the
Seller's ordinary period-end closing procedures; provided that nothing has come
to the attention of the Seller to indicate that any such estimates are
inaccurate as of the respective date thereof or for the period referred to
therein.
2.5 Absence of Certain Changes. Since June 30, 2003, there have not been
any changes in the financial condition, results of operations or prospects of
the Business, except for any changes that would not reasonably be expected to
result in a Business Material Adverse Effect. Except as set forth in Section 2.5
of the Disclosure Schedule, since June 30, 2003, the
Seller has not taken any of the following actions (or permitted any of the
following events to occur) with respect to the Business:
(a) sold, assigned or transferred (i) any portion of the Acquired
Assets consisting of tangible personal property in a single transaction or
series of related transactions in an amount in excess of $5,000 except in the
ordinary course of business or (ii) any other portion of the Acquired Assets;
(b) granted or amended any rights to severance benefits, "stay pay"
or termination pay to any director, officer or other employee of the Business or
increased benefits payable or potentially payable to any such director, officer
or other employee of the Business under any previously existing severance
benefits, "stay-pay" or termination pay arrangements, in each case (i) except as
required by law and (ii) except for obligations that will not constitute an
Assumed Liability;
(c) made any capital expenditures or commitments therefor in an
amount in excess of $5,000 other than in accordance with the Business' capital
budget included in Schedule 4.2(d) hereto;
(d) acquired any operating business, whether by merger, stock
purchase or asset purchase, except for any such business which did not become
part of the Business;
(e) incurred or guaranteed any indebtedness for borrowed money;
(f) entered into any employment, compensation or deferred
compensation agreement (or any amendment to any such existing agreement) with
any officer or other employee of the Business whose annual compensation exceeds
$50,000 or otherwise outside of the ordinary course of business or not
consistent with past practice;
(g) materially amended the terms of any existing Business Benefit
Plan (as defined in Section 2.15(a)), except as required by law;
(h) materially changed its accounting principles, methods or
practices, except in each case to conform to changes in GAAP;
(i) failed to pay or perform any liabilities or obligations which
would reasonably be expected to result in a Business Material Adverse Effect;
(j) engaged in any loans or borrowings or payments, dividends or
transfers of assets with any officers, directors, employees or other affiliates;
or
(k) entered into any agreement or commitment with respect to any of
the matters referred to in clauses (a) through (j) of this Section 2.5.
2.6 Undisclosed Liabilities. The Business does not have any liability of a
nature which is material to the Business, except for (i) liabilities shown on
the Interim Balance Sheet, (ii) liabilities which have arisen since June 30,
2003 in the ordinary course of business consistent with past practice (and which
are similar in nature and amount to the liabilities which arose
during the comparable period of time in the immediately preceding fiscal period
(taking into account any corresponding increase in expenses that are
attributable to an increase in revenue)), (iii) liabilities set forth in Section
2.6(a) of the Disclosure Schedule and (iv) the Excluded Liabilities.
2.7 Tax Matters. The Seller has filed or had filed on its behalf all Tax
Returns (as defined below) that it was required to file (separately or as part
of a consolidated, combined or unitary group) and all such Tax Returns were
correct and complete to the extent they relate to the Business, except for any
error or omission that would not reasonably be expected to result in a Business
Material Adverse Effect. The Seller has paid (or had paid on its behalf) all
Taxes that are shown to be due and payable on any such Tax Returns to the extent
they relate to the Business. All Taxes, to the extent they relate to the
Business, that the Seller is or was required by law to withhold or collect have
been duly withheld or collected and, to the extent required, have been paid to
the proper Governmental Entity, except for any such Taxes with respect to which
the failure to withhold, collect or pay would not reasonably be expected to
result in a Business Material Adverse Effect. The Seller is not a foreign person
within the meaning of Section 1445 of the Code. For purposes of this Agreement,
"Taxes" means (i) all taxes, including without limitation income, gross
receipts, ad valorem, value-added, excise, real property, personal property,
sales, use, transfer, withholding, employment, social security charges and
franchise taxes imposed by the United States of America or any state, local or
foreign government, or any agency thereof, or other political subdivision of the
United States or any such government, (ii) any interest, penalties, assessments
or additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof and (iii) any transferee
liability in respect of any items described in clauses (i) and/or (ii) above.
For purposes of this Agreement, "Tax Returns" means all reports, returns,
declarations, statements, forms or other information required to be supplied to
a governmental authority responsible for the imposition of Taxes in connection
with Taxes.
2.8 Title to Assets; Condition of Tangible Property. The Seller is the
sole owner of the Acquired Assets and has good title to, a valid leasehold
interest in or a valid license or right to use, all of the Acquired Assets, free
and clear of all Security Interests. The tangible Acquired Assets are in good
condition and repair, subject to normal wear and tear, and are suitable to
conduct the Business substantially in the same manner in which the Business has
been conducted prior to the date hereof. All of the tangible assets of the
Business are located in Carlsbad, California, Irvine, California or Atlanta,
Georgia.
2.9 Real Property.
(a) The Seller does not own any real property, and the Business has
never been located in or operated on any real property owned by the Seller or
any Affiliate of the Seller.
(b) Section 2.9(b) of the Disclosure Schedule lists all real
property included in the Acquired Assets (the "Leased Real Property") and each
lease and sublease in effect with respect thereto (each, a "Lease"). Section
2.9(b) of the Disclosure Schedule lists each Lease that cannot be assigned on
transferred by the Seller without the prior written consent of the other
party thereto. The Seller has made available to the Buyer true, complete and
accurate copies of each Lease. With respect to each such Lease:
(i) the Lease is a valid and binding obligation of the Seller
and, to the knowledge of the Seller, each other party to such Lease, enforceable
and in full force and effect;
(ii) except as set forth in Section 2.9(b)(ii) of the
Disclosure Schedule, neither the Seller nor, to the knowledge of the Seller, any
other party to the Lease is in breach or default and no event has occurred
which, with notice or lapse of time or both, would constitute a breach or
default or permit termination, modification or acceleration thereunder, and no
claim has been made by any other party to such Lease alleging that the Seller is
in breach of default therunder;
(iii) the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold of such Lease; and
(iv) the Seller has no knowledge of any Security Interest,
easement, covenant or other restriction applicable to the Leased Real Property
subject to such Lease, except for recorded easements, covenants and other
restrictions which do not materially impair the current uses or the occupancy of
the Seller of such Leased Real Property.
2.10 Intellectual Property.
(a) The Seller has disclosed accurately and completely to the Buyer
all Intellectual Property that is used exclusively or primarily in the Business
("Seller's IP"). The Seller is the sole and exclusive owner of all right, title
and interest in and to Seller's IP (with no breaks in the chain of title
thereof), except as set forth in Section 2.10(a) of the Disclosure Schedule,
free and clear of any security interest, lien, pledge, option, charge or
encumbrance of any kind whatsoever. The Seller's rights in Seller's IP are in
full force and effect. Seller's IP has not been used or enforced or failed to be
used or enforced in a manner that would result in the abandonment, cancellation
or unenforceability of any of the Seller's rights in and to Seller's IP. In the
event that the Seller is using any material Intellectual Property in the
Business under license (the "Licensed IP"), the Seller has disclosed such
license(s) to the Buyer, and the Seller is authorized to use the Licensed IP
under license and is in compliance with the terms of any such license
agreements(s).
(b) Except as set forth in Section 2.10(b) of the Disclosure
Schedule, the Seller has not transferred all or any portion of its ownership
interest in, or granted any exclusive license with respect to, any of Seller's
IP, to any third party.
(c) With respect to each item of Seller's IP, except as set forth in
Section 2.10(c) of the Disclosure Schedule, any necessary registration,
maintenance and renewal fees in connection therewith have been paid and any
necessary documents and certificates in connection therewith have been filed
with the relevant patent, trademark or copyright authorities or any other
appropriate registrar, including, without limitation, any domain name registrar,
in the United States or abroad for the purposes of securing or maintaining
rights in such Intellectual Property.
(d) Except as set forth in Section 2.10(d) of the Disclosure
Schedule, to the extent that any of Seller's IP has been developed or created by
a third party for the Seller, the Seller has a written agreement with such third
party with respect thereto and the Seller thereby has obtained ownership of, and
is the exclusive owner of, or has a valid license to use, all Intellectual
Property in such work, material or invention by operation of law or by valid
assignment or by agreement, as the case may be.
(e) Section 2.10(e) of the Disclosure Schedule lists all material
contracts, licenses, agreements and other instruments, to which the Seller is a
party or which otherwise govern the Seller's actions with respect to Seller's IP
(collectively, the "IP Documents"). The IP Documents are in full force and
effect. The consummation of the transactions contemplated by this Agreement will
not violate or result in the breach, modification, cancellation, termination, or
suspension of the IP Documents and will not cause the forfeiture or termination
or give rise to a right of forfeiture or termination of any rights of the Seller
to any of its Intellectual Property. The Seller is in material compliance with,
and has not materially breached any term of any IP Document and, to the best
knowledge of the Seller, all other parties to the IP Documents are in compliance
with, and have not breached any term of, such IP Documents.
(f) Except as set forth on Section 2.10(f) of the Disclosure
Schedule, the Seller is not under obligation to pay any royalty or other
compensation to any third party or to obtain any approval or consent for the use
of any Seller's IP used in or necessary for its business as it is currently
conducted or as currently contemplated to be conducted.
(g) Except as set forth in Section 2.10(g) of the Disclosure
Schedule, (i) the Seller has not received any written notice or claim
challenging the Seller's ownership or rights in Seller's IP or claiming that any
other person or entity has any legal or beneficial ownership or other rights
with respect thereto, and the Seller is not aware of any valid basis for such
claim; (ii) to the best knowledge of the Seller, no third party is infringing,
misappropriating or otherwise violating any material right of the Seller with
respect to Seller's IP; and (iii) no Seller's IP has been refused registration
or is the subject of any inter-parties proceedings.
(h) The Seller has all right, title and interest in and to all of
its client information and related client or user data, and all proprietary
databases and data collections (collectively, "Proprietary Information"). Any
use or transfer of the Proprietary Information as contemplated under this
Agreement will not violate the rights of any third party or result in the breach
of any agreement to which the Seller is a party or which otherwise governs the
Seller's actions with respect thereto.
(i) The Seller has taken and will continue to take all reasonable
and practicable measures designed to protect its rights in its confidential
information and trade secrets or any confidential information or trade secrets
of third parties provided to the Seller. Neither the Seller nor any of its
employees or agents has permitted any such confidential information or trade
secrets to be used, divulged or appropriated for the benefit of persons to the
material detriment of the Seller of the Business.
2.11 Contracts.
(a) Section 2.11(a) of the Disclosure Schedule lists all of the
contracts or agreements, whether written or oral, to which the Seller is a party
or by which it is bound as of the date of this Agreement that relate exclusively
or primarily to the Business (excluding Leases, which are set forth in Section
2.9(b) of the Disclosure Schedule, and any contracts or agreements relating to
Excluded Assets), including, without limitation:
(i) any agreement (or group of related agreements with the
same party or affiliate thereof) for the lease of personal property from or to
third parties providing for lease payments the remaining unpaid balance of which
is in excess of $5,000;
(ii) any agreement (or group of related agreements with the
same party or affiliate thereof) for the purchase of products or services under
which the undelivered balance of such products and services is in excess of
$10,000;
(iii) any agreement (or group of related agreements with the
same party or affiliate thereof) which involves or could involve a payment to
the Seller in excess of $10,000, either pursuant to a contract with a customer
or client of the Business or pursuant to any other contract or agreement for the
sale of goods and services outside of the ordinary course of business;
(iv) any agreement for the acquisition by the Seller of any
operating business, whether by merger, stock purchase or asset purchase, except
for any such business which did not or will not become part of the Business;
(v) any agreement establishing a partnership or joint venture;
(vi) any agreement (or group of related agreements with the
same party or affiliate thereof) under which it has created, incurred, assumed
or guaranteed (or may create, incur, assume or guarantee) indebtedness the
outstanding balance of which is more than $5,000 or under which it has imposed a
Security Interest on any of the Acquired Assets;
(vii) any agreement that prohibits or restricts the Business
from freely engaging in business anywhere in the world;
(viii) any agreement, employment or otherwise, involving the
Seller's executive officers, directors or employees relating to the Business;
(ix) any agreement, including any termination agreement,
committing to pay severance, "stay pay" or other similar benefits to any officer
or other employee of the Business; and
(x) any agreement with any college, university, educational
institution or organization affiliated therewith , college conference or
coaches' association (each a "College Entity") or an advertiser not otherwise
disclosed in any of the foregoing.
(b) The Seller has made available to the Buyer a true, complete and
accurate copy of each contract and agreement listed in Section 2.11(a) of the
Disclosure Schedule (the "Designated Contracts"). Each Designated Contract is a
valid and binding obligation of the Seller and, to the knowledge of the Seller,
of each other party thereto, in full force and effect. Neither the Seller nor,
to the knowledge of the Seller, any other party to a Designated Contract is in
breach or default and no event has occurred which, with notice or lapse of time
or both, would constitute a breach or default or permit termination,
modification or acceleration thereunder. No written claim and, to the Seller's
knowledge, no oral claim has been made by any other party to a Designated
Contract alleging that the Seller is in breach or default thereunder. The Seller
has no knowledge that any other party intends to terminate or not renew any
Designated Contract.
(c) Section 2.11(c) of the Disclosure Schedule lists each Designated
Contract that cannot be assigned or transferred by the Seller without the prior
consent of the other party thereto.
2.12 Entire Business. Except for the Excluded Assets, the Acquired Assets
are, when utilized by a labor force substantially similar to that employed by
the Seller in connection with the Business, adequate to conduct the Business in
all material respects as currently conducted by the Seller. Section 2.12 of the
Disclosure Schedule lists any material assets or property (including
Intellectual Property) utilized in the operation of the Business and not
included in the Acquired Assets.
2.13 Litigation. Section 2.13 of the Disclosure Schedule lists each (a)
judgment, order, decree, stipulation or injunction of any Governmental Entity
with respect to this Agreement, the Business or any of the Seller's assets or
properties relating primarily thereto and (b) action, suit, claim, legal,
administrative, arbitratorial or other proceeding or investigation pending or,
the best knowledge of the Seller, threatened by or before any Governmental
Entity relating to (i) this Agreement or the consummation of the transactions
contemplated hereby, (ii) the Business or (iii) any of the Seller's assets or
properties relating to the Business.
2.14 Employment Matters.
(a) Section 2.14(a) of the Disclosure Schedule contains a list of
all employees of the Seller exclusively or primarily engaged in the Business
(the "Business Employees"), along with the position, hire date and the annual
rate of compensation of each such person. Each Business Employee listed in
Section 2.14(a) of the Disclosure Schedule has entered into a confidentiality
agreement and a non-competition agreement with the Seller, true, complete and
correct copies of which have previously been delivered to the Buyer. The
transaction contemplated by this Agreement will not trigger any restrictions
contained in any of the non-competition agreements.
(b) None of the Seller's employees, with respect to the Business, is
represented for purposes of collective bargaining by a labor organization. The
Seller is not a party to or bound by any collective bargaining agreement
relating to the Business, nor has the Seller executed any document or instrument
or taken any other action, whether enforceable or unenforceable, with respect
thereto. The Seller, with respect to the Business, has not
experienced, since January 1, 1999, any material strikes, grievances, claims of
unfair labor practices or other collective bargaining disputes.
2.15 Employee Benefits.
(a) Section 2.15 of the Disclosure Schedule contains a true,
complete and accurate list of all Employee Benefit Plans (as defined below)
maintained, or contributed to, with respect to the Business, by the Seller or
any ERISA Affiliate (as defined below) for the benefit of the Business Employees
(and their beneficiaries) that are material to the Business (the "Business
Benefit Plans"). For purposes of this Agreement, "Employee Benefit Plan" means
(i) any "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), other
than a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) (a
"Multiemployer Plan"), (ii) any "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA), and (iii) to the extent applicable to more than one
employee, any other written or oral plan, agreement or arrangement involving
compensation, including without limitation insurance coverage, severance
benefits, disability benefits, deferred compensation, bonuses, stock options,
stock purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation, or fringe benefits, but excluding
any Employee Benefit Plan required to be maintained or contributed to under
foreign law. For purposes of this Agreement, "ERISA Affiliate" means any entity
which is a member of (i) a controlled group of corporations (as defined in
Section 414(b) of the Code), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined under Section 414(m) of the Code or the regulations
under Section 414(o) of the Code), any of which includes the Seller. True,
complete and accurate copies of all Business Benefit Plans and all material
related trust agreements, insurance contracts and summary plan descriptions have
been made available to the Buyer.
(b) The Business Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Business Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income Taxes under Sections 401(a) and 501(a), respectively, of the Code or the
period for obtaining such letter has not yet expired.
(c) Neither the Seller nor any ERISA Affiliate, with respect to the
Business, has ever maintained or been required to contribute to any Employee
Benefit Plan subject to Title IV of ERISA or to any Multiemployer Plan.
(d) No act or omission has occurred and no condition exists with
respect to any Business Benefit Plan maintained by the Seller, any of its
Affiliates or any ERISA Affiliate that would subject the Seller or the Buyer to
any fine, penalty, Tax or liability of any kind imposed under ERISA or the Code
(other than liabilities for benefits accrued under Business Benefit Plans for
Business Employees and their beneficiaries).
(e) There are no unfunded obligations under any Business Benefit
Plan providing welfare benefits after termination of employment to any Business
Employee (or to any beneficiary of any such employee), excluding continuation of
health coverage required to be continued under Section 4980B of the Code or
other similar applicable laws.
2.16 Legal Compliance. Except as set forth in Section 2.16 of the
Disclosure Schedule, the Seller (with respect to the Business) is in compliance
in all material respects with all applicable laws (including rules and
regulations thereunder), including, without limitation, health, environmental
and safety, of any federal, state, local or foreign government, or any
Governmental Entity. The Seller has not received written notice of any pending
and, to the knowledge of the Seller, there is no threatened, action, suit,
proceeding, hearing, investigation, claim, demand or notice relating to the
Business alleging any failure to so comply.
2.17 Permits. Section 2.17 of the Disclosure Schedule lists all permits,
licenses, franchises or authorizations from any Governmental Authority relating
to the Business (collectively, the "Permits"). The Permits constitute all of the
permits, licenses, franchises or authorizations from any Governmental Authority
necessary to conduct the Business in all material respects as conducted by the
Seller. Each Permit listed in Section 2.17 of the Disclosure Schedule is in full
force and effect and the Seller is not in violation of or default under any
Permit and no suspension or cancellation of any such Permit has been threatened
in writing. Section 2.17 of the Disclosure Schedule lists each Permit that
cannot be assigned or transferred by the Seller without the prior consent of the
applicable Governmental Authority.
2.18 Business Relationships with Affiliates. Section 2.18 of the
Disclosure Schedule lists any agreements (written or oral) with respect to the
Business whereby any Affiliate (as hereinafter defined) of the Seller directly
or indirectly (a) owns any property or right, tangible or intangible, which is
used in the Business, (b) has any claim or cause of action with respect to the
Business, or (c) owes any money to, or is owed any money by, the Seller with
respect to or relating to the Business. For purposes of this Agreement,
"Affiliate" shall have the meaning assigned to it in Rule 12b-2 of the
Securities Exchange Act of 1934.
2.19 Brokers' Fees. The Seller does not have any liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement that would constitute an Assumed
Liability or for which the Buyer could become liable or obligated.
2.20 Insurance. Section 2.20 of the Disclosure Schedule lists each
material insurance policy (including fire, theft, casualty, comprehensive
general liability, workers compensation, business interruption, environmental,
product liability and automobile insurance policies and bond and surety
arrangements) relating to the Business or the Acquired Assets, all of which are
in full force and effect. There is no material claim pending under any such
policy as to which coverage has been questioned, denied or disputed by the
underwriter of such policy and the Seller is otherwise in compliance in all
material respects with the terms of such policies. All such insurance is in full
force and effect, and no notice of cancellation or termination, or reduction of
coverage or intention to cancel, terminate or reduce coverage, has been received
with respect to any policy for such insurance. The insurance coverage provided
by such policies of insurance will not terminate or lapse by reason of the
transactions contemplated by this Agreement and, following the consummation of
the transactions contemplated by this Agreement, the Seller will continue to be
covered under such policies for events occurring on or prior to the Closing
Date.
2.21 Top Producers and Suppliers; Accounts Receivable.
(a) Section 2.21(a) of the Disclosure Schedule lists (i) the Top
Producers (as hereinafter defined) for the period commencing January 1, 2003,
and the amount of revenues accounted for by each Top Producer during such period
and (ii) each supplier that is the sole supplier of any significant product or
service (not otherwise available from third parties on arms' length terms) to
the Business. For purposes hereof, "Top Producers" means those customers,
clients, licensees or others parties, including, without limitation, College
Entities, constituting the 20 highest producers of revenue (whether
merchandising, royalty or annual fees or other fees) reported or reportable by
the Seller in connection with the Business in accordance with GAAP.
(b) All accounts receivable included in the Acquired Assets are bona
fide receivables, represent sales actually made or services actually performed,
and are valid and legally enforceable obligations of the respective debtors,
subject to no counterclaims or setoffs.
2.22 Solvency.
(a) Assuming the Seller's current obligations to Reservoir Capital
Partners, L.P. are fully satisfied at or prior to the Closing, the Seller, in
its reasonable belief, (i) has sufficient capital to carry on its business, (ii)
is able to pay its debts as they mature and (iii) is solvent, and the value of
its property, at fair valuation, is greater than all of its debts. The Seller
has not (1) made a general assignment for the benefit of creditors, (2) filed,
or currently intends to file, any voluntary petition in bankruptcy or suffered
the filing of an involuntary petition by any of the Seller's creditors, (3)
suffered the appointment of a receiver to take possession of all, or any
substantial portion, of the Seller's assets, (4) suffered the attachment or
judicial seizure of all, or any substantial portion, of its assets, (5) admitted
in writing its inability to pay its debts as they come due or (6) made an offer
of settlement, extension or composition to its creditors generally.
(b) The Purchase Price and other terms and provisions of this
Agreement and the Ancillary Agreements were negotiated at arms' length and are
fair, reasonable and consistent with existing market conditions. Based on the
Seller's knowledge of market conditions and other appropriate and reasonable
considerations, the Seller believes that the terms provided for in this
Agreement and the Ancillary Agreements including the price terms, represent in
their totality the most favorable terms available to the Seller. Further, the
Board of Directors of the Seller has received the written opinion, dated October
12, 2003, of Luminary Capital, its financial advisor, to the effect that the
consideration to be received by the Seller in connection with the transactions
contemplated hereby is fair to the Seller from a financial point of view, a true
and correct copy of which has been delivered to the Buyer. The transactions
contemplated by this Agreement and the Ancillary Agreements are not being
entered into by the Seller with the intention of hindering, delaying or
defrauding any of the Seller's current or future creditors.
Exhibit 2.1
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
3.1 Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
3.2 Authority. The Buyer has all requisite corporate power and authority
to execute and deliver this Agreement, the Note, the Warrant and the Ancillary
Agreements to which it will be a party and to perform its obligations hereunder
and thereunder. The execution and delivery by the Buyer of this Agreement, the
Note, the Warrant and such Ancillary Agreements and the consummation by the
Buyer of the transactions contemplated hereby and thereby have been validly
authorized by all necessary corporate action on the part of the Buyer. This
Agreement has been, and the Note, the Warrant and such Ancillary Agreements will
be, validly executed and delivered by the Buyer and, assuming this Agreement,
the Note and each such Ancillary Agreement constitute the valid and binding
obligation of the Seller, constitutes or will constitute a valid and binding
obligation of the Buyer, enforceable against the Buyer in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other similar laws relating
to or affecting the rights of creditors generally and by equitable principles,
including those limiting the availability of specific performance, injunctive
relief and other equitable remedies and those providing for equitable defenses.
3.3 Noncontravention. Neither the execution and delivery by the Buyer of
this Agreement, the Note, the Warrant or the Ancillary Agreements to which the
Buyer will be a party, nor the consummation by the Buyer of the transactions
contemplated hereby or thereby, will:
(a) conflict with or violate any provision of the charter or bylaws
of the Buyer;
(b) require on the part of the Buyer any filing with, or any permit,
authorization, consent or approval of, any third party or Governmental Entity,
except for any filing, permit, authorization, consent or approval which if not
obtained or made would not reasonably be expected to result, individually or in
the aggregate, in a material adverse effect on the ability of the Buyer to
consummate the transactions contemplated by this Agreement (a "Buyer Material
Adverse Effect");
(c) conflict with, result in a breach of, constitute (with or
without due notice or lapse of time or both) a default under, result in the
acceleration of obligations under, create in any party any right to terminate or
modify, or require any notice, consent or waiver under, any contract or
agreement to which the Buyer is a party or by which the Buyer is bound, except
for (i) any conflict, breach, default, acceleration or right to terminate or
modify that would not reasonably be expected to result in a Buyer Material
Adverse Effect or (ii) any notice, consent or waiver the absence of which would
not reasonably be expected to result in a Buyer Material Adverse Effect; or
(d) violate any (i) judgment, order, writ, stipulation, injunction,
decree or (ii) statute, rule or regulation applicable to the Buyer or any of its
properties or assets, except, in the case of clause (ii) above, for any
violation that would not reasonably be expected to result in a Buyer Material
Adverse Effect.
3.4 Litigation. There are no actions, suits, claims or legal,
administrative or arbitratorial proceedings or investigations pending against,
or, to the Buyer's knowledge, threatened against, the Buyer which would
adversely affect the Buyer's performance under this Agreement or the
consummation of the transactions contemplated by this Agreement.
3.5 Financing. The Buyer has, and at the Closing will have, sufficient
sources of financing in order to consummate the transactions contemplated by the
Agreement and to fulfill its obligations hereunder, including without limitation
payment to the Seller of the Purchase Price at the Closing.
3.6 Due Diligence by the Buyer. The Buyer acknowledges that it has
conducted to its satisfaction an independent investigation of the financial
condition, results of operations, assets, liabilities, properties and projected
operations of the Business and, in making its determination to proceed with the
transactions contemplated by this Agreement, the Buyer has relied solely on the
results of its own independent investigation and on the representations and
warranties of the Seller set forth in Article II and elsewhere in this
Agreement, including the Disclosure Schedule (and any updates thereto) and other
Schedules hereto, in the Ancillary Agreements to which the Seller is a party and
other documents delivered by or on behalf of the Seller in connection herewith
or therewith. Such representations and warranties by the Seller constitute the
sole and exclusive representations and warranties of the Sellers to the Buyer in
connection with the transactions contemplated hereby, and the Buyer acknowledges
and agrees that the Seller is not making any representation or warranty
whatsoever, express or implied, beyond those expressly given in this Agreement,
including the Disclosure Schedule (and any updates thereto) and other Schedules
hereto and in such Ancillary Agreements and other documents delivered by or on
behalf of the Seller in connection herewith or therewith, including any implied
warranty as to condition, merchantability, or suitability as to any of the
assets of the Business, and it is understood that the Buyer takes the Acquired
Assets and the Business as is and where is (subject to the benefit of such
representations and warranties). Notwithstanding anything in the foregoing to
the contrary, nothing herein shall be deemed to be a waiver by the Buyer of the
benefit of any and all of the representations and warranties made by the Seller
in this Agreement or in any Ancillary Agreement.
ARTICLE IV
PRE-CLOSING COVENANTS
4.1 Closing Efforts. Subject to the terms hereof, each of the Parties
shall take all actions and to do all things reasonably necessary or advisable to
consummate the transactions contemplated by this Agreement, including to: (i)
obtain all waivers, permits, consents, approvals or other authorizations from
Governmental Entities and other third parties including, without limitation, any
required consents of each party to an Assigned Contract (the "Third Party
Consents"); provided that the Seller hereby acknowledges and agrees that it has
the sole obligation to take all actions and do all things reasonably necessary
or advisable to obtain the
Third Party Consents to the assignment of the Assigned Contracts, provided
further that the failure to take all such actions with respect to any Assigned
Contract other than those set forth in Schedule 1.5(a) and Schedule 1.5(b) shall
not be deemed to give the Buyer a right to terminate pursuant to Section 6.1(b),
(ii) effect all registrations, filings and notices with or to Governmental
Entities (the "Governmental Filings") and (iii) otherwise comply in all material
respects with all applicable laws and regulations in connection with the
consummation of the transactions contemplated by this Agreement. Each Party
shall bear its own out-of-pocket costs associated with obtaining such Third
Party Consents. Each of the Parties shall promptly notify each of the other
Parties of any fact, condition or event known to it that would reasonably be
expected to prohibit, make unlawful or delay the consummation of the
transactions contemplated by this Agreement.
4.2 Operation of Business. Except as contemplated by this Agreement,
during the period from the date of this Agreement until the Closing Date, the
Seller shall (i) conduct the operations of the Business in the ordinary course
consistent with past practice, (ii) use commercially reasonable efforts to
preserve the Business intact, (iii) keep available the services of its employees
and preserve its relationships with its customers, suppliers and others with
whom it deals, (iv) maintain its books, accounts and records, (iv) have in
effect and maintain at all times its policies of insurance as set forth in
Section 2.20 of the Disclosure Schedule, and (v) give the Buyer written notice
not less than two Business Days prior to any capital expenditure or commitment
therefor in an amount in excess of $5,000 that does not extend beyond the
Closing Date, unless such capital expenditure or commitment therefor is provided
for in the capital expenditure budget included in Schedule 4.2(d) hereto.
Without limiting the generality of the foregoing, prior to the Closing, the
Seller, with respect to the Business, shall not, without the prior written
consent of the Buyer:
(a) sell, assign or transfer any portion of the Acquired Assets in a
single transaction or series of related transactions in an amount in excess of
$5,000, except for sales, assignments or transfers of obsolete assets not used
or useful in the Business;
(b) incur or guarantee any indebtedness for borrowed money, except
in the ordinary course;
(c) grant any rights to severance benefits, "stay pay" or
termination pay to any Business Employee or increase the compensation or other
benefits payable or potentially payable to any Business Employee under any
previously existing severance benefits, "stay-pay" or termination pay
arrangements, in each case, except for obligations that will not constitute an
Assumed Liability;
(d) make any commitments involving capital expenditures that extend
beyond the Closing Date in an amount in excess of $5,000 in the aggregate,
except in accordance with the Business' capital expenditure budget included in
Schedule 4.2(d) hereto;
(e) acquire any operating business, whether by merger, stock
purchase or asset purchase;
(f) enter into any employment, compensation or deferred compensation
agreement (or any amendment to any such existing agreement) with any Business
Employee unless in accordance with Schedule 4.2(f) hereto;
(g) materially change its accounting principles, methods or
practices insofar as they relate to the Business, except in each case to conform
to changes in GAAP;
(h) enter into any contract or agreement outside the ordinary course
of business consistent with past practice;
(i) without giving the Buyer prior written notice thereof at least
two Business Days prior thereto, enter into any license or other agreement, as
licensor, with any programming network devoted primarily or substantially to
sports programming;
(j) change or introduce any method of management or operations
except in the ordinary course of business consistent with past practice;
(k) adopt a shareholder rights plan or any similar plan or
instrument or take any other action which could have the effect of impairing or
delaying the consummation of the transactions contemplated hereby;
(l) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Seller (other than the transaction contemplated hereby);
(m) fail to take any steps to prevent the abandonment of any of
Seller's IP; or
(n) agree in writing or otherwise to take any of the foregoing
actions.
4.3 Access.
(a) The Seller shall permit representatives of the Buyer to have
access (at reasonable times, on reasonable prior written notice and in a manner
so as not to interfere with the normal business operations of the Business) to
the premises, properties, financial and accounting records, contracts, and other
records and documents, of or pertaining to the Business. Notwithstanding the
foregoing, the Seller shall not be obligated (i) to provide any information,
documents or access to any person unless the Buyer is responsible, pursuant to
the terms of the confidentiality letter agreement dated March 11, 2003 between
the Buyer and the Seller (the "Confidentiality Agreement"), for the use and
disclosure of any information obtained by such person from the Seller, or such
person enters into a confidentiality agreement with the Seller on terms that are
substantially the same as those set forth in the Confidentiality Agreement or
(ii) to provide any information, documents or access that would (A) violate the
provisions of any applicable laws or regulations (including without limitation
those relating to security clearance or export controls) or any confidentiality
agreement to which it is a party or (B) cause the loss of the attorney-client
privilege with respect thereto. Prior to the Closing, the Buyer and its
representatives shall not contact or communicate with the employees, customers
and suppliers of the Seller in connection with the transactions contemplated by
this Agreement, except with the prior written consent of the Seller.
(b) The Buyer and the Seller acknowledge and agree that the
Confidentiality Agreement remains in full force and effect and that information
provided by the Seller or any its Affiliates to the Buyer pursuant to this
Agreement prior to the Closing shall be treated in accordance with the
Confidentiality Agreement. If this Agreement is terminated prior to the Closing,
the Confidentiality Agreement shall remain in full force and effect in
accordance with its terms. If the Closing occurs, the Confidentiality Agreement,
insofar as it covers information relating exclusively or primarily to the
Business, shall terminate effective as of the Closing, but shall remain in
effect insofar as it covers other information disclosed thereunder.
(c) Notwithstanding any provision of this Agreement to the contrary,
the Buyer and its representatives shall not have any access at any time prior to
the Closing to any information regarding pending or proposed bids for new
contracts or subcontracts or any related information where the Buyer or an
Affiliate of the Buyer also has submitted or intends to submit a bid for such
contract or subcontract.
4.4 Exclusivity. The Seller shall not, and shall use its best efforts to
cause its Affiliates and each of their respective officers, directors,
employees, representatives and agents not to, (i) initiate, solicit or encourage
any proposal, offer or discussion with any party (other than the Buyer)
concerning any merger, business combination, sale of stock or sale of assets
(other than sales of assets in the ordinary course of business consistent with
past practice) involving the Business or (ii) except as may be required in the
exercise of its or his fiduciary duties, engage in discussions or negotiations
with any party (other than the Buyer) or its agent or representative concerning
any such transaction.
4.5 Stockholders Meeting; Voting Agreement.
(a) The Seller shall take all actions reasonably necessary in
accordance with applicable law, its certificate of incorporation and by-laws and
applicable stock market regulations to duly call as promptly as practicable
after the date hereof, give notice of, convene and hold a special meeting of its
stockholders for the purpose of considering and voting upon the sale of the
Acquired Assets contemplated by this Agreement (the "Special Meeting"). Without
limiting the generality of the foregoing, the Seller shall prepare and file with
the Securities and Exchange Commission (the "SEC") a proxy statement, together
with a form of proxy, with respect to the Special Meeting and will use its best
efforts to have the proxy statement, together with any amendments thereof or
supplements thereto (collectively, the "Proxy Statement"), cleared by the SEC as
soon as reasonably practicable, if such clearance is required, and cause copies
of such Proxy Statement and form of proxy to be mailed promptly to the
stockholders of the Seller in accordance with the provisions of applicable law.
Such Proxy Statement will comply as to form in all material respects with the
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC. The Proxy Statement will include the
recommendation of the Seller's Board of Directors that the stockholders approve
this Agreement and the transactions contemplated hereby, unless such Board of
Directors, in the exercise of its fiduciary duties, shall determine that such
recommendation should not be made. After the delivery to the stockholders of
copies of the Proxy Statement and form of proxy, the Seller will use its best
efforts to solicit proxies in connection with the Special Meeting in favor of
the approval of
this Agreement. The Seller will vote all shares of the Seller's capital stock
owned or controlled by it in favor of the approval of this Agreement. The Seller
will use its best efforts, after consultation with the Buyer, to respond
promptly to all comments and requests of the SEC with respect to the Proxy
Statement and to file all required supplements and amendments to the Proxy
Statement with the SEC and cause them to be mailed to the stockholders of the
Seller at the earliest practicable time. The Buyer agrees to cooperate with the
Seller in the preparation of the Proxy Statement.
(b) Concurrently with the execution and delivery of this Agreement,
Xxxxxxx X. Xxxxx, Xx. has entered into an agreement with the Buyer in which he
has agreed that at the Special Meeting, or at any other stockholders' meeting,
however called, and in any action by consent of the stockholders of the Seller,
he shall, and shall cause his affiliates that own any capital stock of the
Seller, to vote (i) in favor of the sale of the Acquired Assets to the Buyer as
contemplated by this Agreement and (ii) against any other sale or other business
combination between the Seller and any person or entity or any other action or
agreement that would result in the breach of any covenant, representation or
warranty or any other obligation or agreement of the Seller under this Agreement
or which would result in any of the conditions to the Seller's obligations under
this Agreement not being fulfilled.
(c) Notwithstanding any other provision of this Agreement (including
Sections 4.4, 4.5(a) and 4.5(b)), no shareholder, officer or director of the
Seller shall (i) be prevented from taking any action or (ii) be required to take
any action which would, in either case, be inconsistent with such shareholder's,
officer's or director's fiduciary obligations including, but not limited to, (x)
responding to any proposal or inquiry not obtained as a result of a breach of
Section 4.4 and (y) withholding, withdrawing or modifying any recommendation
with respect to the Agreement.
4.6 Disclosure Schedule; Additional Information.
(a) The Seller shall promptly submit to the Buyer, from time to time
(and in any event not less than once in each 30-day period commencing on the
date hereof) between the date hereof and the Closing Date, written updates to
the Disclosure Schedule disclosing any material events or developments that
occurred or any information learned between the date of this Agreement and the
Closing Date. The Seller's representations and warranties contained in this
Agreement shall be construed for all purposes of this Agreement (including,
without limitation, Section 5.1) in accordance with the Disclosure Schedule, as
so updated; provided that the Buyer shall have the right to terminate this
Agreement as a result of any such update to the Disclosure Schedule to the
extent provided in Section 6.1(c).
(b) The Seller shall deliver to the Buyer a bi-weekly update of
estimated e-commerce sales for the prior two weeks as well as a monthly update
of total estimated revenue for the Business within 15 days of the end of each
calendar month. All such updates shall be prepared from the books, records and
accounts of the Seller maintained in the ordinary course of business consistent
with past practice. Such estimates shall not in themselves constitute
representations or warranties under this Agreement but may be used by the Buyer
to establish whether covenants, representations or warranties under this
Agreement have been breached and whether Closing conditions have been satisfied.
(c) The Seller shall use its best efforts consistent with past
practice to have reduced to writing and executed all oral agreements listed in
Schedule 1.1(a)(iv) hereto.
4.7 Elimination of Intercompany Items. Effective as of the Closing, all
payables, receivables, liabilities and other obligations between the Business,
on the one hand, and the Seller and its Affiliates, on the other hand, shall be
eliminated except to the extent expressly provided for herein.
4.8 Customer Contracts. The Seller shall use its best efforts to obtain
the Third Party Consents to the assignment to the Buyer of the Assigned
Contracts specified in Schedule 1.5(b) (the "Required Contracts"), provided that
the Seller shall not be required to make any material payments or agree to any
material undertakings in connection therewith. In the event that the Seller
fails to obtain such Third Party Consents for at least four of the five Required
Contracts, the Purchase Price shall be reduced as set in Schedule 1.5(b). For
purposes of this Section 4.8 only, the term "Consent" shall mean (a) an executed
written consent to assignment from the contracting customer, (b) a contract
executed by the referenced customer that by its terms does not require consent
to assignment in connection with this transaction or (c) an oral confirmation
from such customer received on or prior to the Closing Date that such customer
intends to execute a written consent as set forth in clause (a) or (b) above. In
the event that any customer provides consent pursuant to clause (c) above and
such customer either fails to (i) provide such written consent on or before
August 1, 2004 or (ii) continue through December 31, 2004 or the expiration
pursuant to its terms of such customer's Required Contract, if earlier, the
relationship with the Buyer on substantially similar terms as set forth in the
applicable Required Contract, then the Purchase Price shall be reduced by an
amount as provided in Schedule 1.5(b) hereto and the Seller shall, within 30
days after the applicable date set forth in clause (i) or (ii) above, repay to
the Buyer an amount equal thereto.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions to Obligations of the Buyer. The obligation of the Buyer to
consummate the transactions to be consummated at 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 Seller to the Buyer as
contemplated by this Agreement shall have received the Requisite Seller
Stockholder Approval;
(b) the representations and warranties of the Seller set forth in
this Agreement shall be true and correct as of the Closing Date as if made as of
the Closing Date, except (i) for changes contemplated or permitted by this
Agreement, (ii) for those representations and warranties that address matters
only as of a particular date (which shall be true and correct as of such date,
subject to clause (iii) below), and (iii) where the failure of the
representations and warranties to be true and correct would not reasonably be
expected to result, individually or in the aggregate, in a Business Material
Adverse Effect (provided that any representation or warranty that is qualified
by a materiality or Business Material Adverse Effect qualification shall not be
further qualified hereby);
(c) the Seller shall have performed or complied with the agreements
and covenants required to be performed or complied with by it under this
Agreement as of or prior to the Closing, except where the failure to so perform
or comply would not reasonably be expected to result, individually or in the
aggregate, in a Business Material Adverse Effect;
(d) no action, suit or proceeding shall be pending by or before any
Governmental Entity seeking to prevent or challenge the consummation of the
transactions contemplated by this Agreement and no judgment, order, writ,
stipulation, injunction or decree enjoining or preventing the consummation of
the transactions contemplated by this Agreement shall be in effect;
(e) the Seller shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified in clauses (a) through (d)
(insofar as clause (d) relates to an action, suit or proceeding involving, or a
judgment, order, writ, stipulation, injunction or decree against, the Seller,
its assets or properties, or the Business) of this Section 5.1 is satisfied;
(f) the Seller shall have obtained all Third Party Consents and
effected all Governmental Filings to be obtained or effected by the Seller;
provided, that failure of the Seller to obtain consents to assignment of any
Assigned Contracts (other than the Assigned Contracts set forth on Schedule
1.5(a) and Schedule 1.5(b) hereto, to the extent provided therein) shall not be
considered a failure to meet this condition;
(g) the Buyer shall have received from Xxxx and Xxxx LLP, legal
counsel to the Seller, a written opinion with respect to good standing,
corporate power and authority, due authorization and no conflict with the
Seller's certificate of incorporation and by-laws, such opinion to be in form
and substance reasonably satisfactory to the Buyer and its counsel;
(h) Xxx X. Xxxxx, Xx. shall have executed and delivered a
non-competition agreement with the Seller, which agreement shall be in form and
substance satisfactory to the Buyer and assigned to the Buyer at Closing with
the written consent of Xx. Xxxxx;
(i) the Seller shall have provided access to the Buyer pursuant to
current passcodes (in read-only access that will enable the Buyer to download
reports) to all of the data with respect to the Business included in the
"Solomon" accounting system for the period commencing on April 1, 2002 through
the most recent available date prior to the Closing Date;
(j) the Buyer shall have received such other customary certificates
(such as certificates of good standing of the Seller in its jurisdictions of
incorporation and certificates as to the incumbency of officers and the adoption
of authorizing resolutions) as it shall reasonably request in connection with
the Closing;
(k) the Seller shall have paid to each Business Employee all
compensation and wages to which such Business Employee is entitled pursuant to
the policies of the Seller then in effect and applicable law, except with
respect to Assumed Vacation Time; and
(l) the Seller shall have cured or obtained a complete and permanent
waiver of any and all defaults under the Lease in respect of the Leased Real
Property located in Atlanta, Georgia.
5.2 Conditions to Obligations of the Seller. The obligation of the Seller
to consummate the transactions to be consummated at the Closing is subject to
the satisfaction (or waiver by the Seller) of the following conditions:
(a) the sale of the Acquired Assets by the Seller to the Buyer as
contemplated by this Agreement shall have received the Requisite Seller
Stockholder Approval;
(b) the representations and warranties of the Buyer set forth in
this Agreement shall be true and correct as of the Closing Date as if made as of
the Closing Date, except (i) for changes contemplated or permitted by this
Agreement, (ii) for those representations and warranties that address matters
only as of a particular date (which shall be true and correct as of such date,
subject to clause (iii) below), and (iii) where the failure of the
representations and warranties to be true and correct would not reasonably be
expected to result, individually or in the aggregate, in a Buyer Material
Adverse Effect (provided that any representation or warranty that is qualified
by a materiality or Buyer Material Adverse Effect qualification shall not be
further qualified hereby);
(c) the Buyer shall have performed or complied with its agreements
and covenants required to be performed or complied with by it under this
Agreement as of or prior to the Closing, except where the failure to so perform
or comply would not reasonably be expected to result in a Buyer Material Adverse
Effect;
(d) no action, suit or proceeding shall be pending by or before any
Governmental Entity seeking to prevent consummation of the transactions
contemplated by this Agreement and no judgment, order, writ, stipulation,
injunction or decree enjoining or preventing consummation of the transactions
contemplated by this Agreement shall be in effect;
(e) the Buyer shall have delivered to the Seller a certificate to
the effect that each of the conditions specified in clauses (b) through (d)
(insofar as clause (d) relates to an action, suit or proceeding involving, or a
judgment, order, writ, stipulation, injunction or decree against, the Buyer) of
this Section 5.2 is satisfied;
(f) the Buyer shall have obtained all Third Party Consents and
effected all Governmental Filings to be obtained or effected by the Buyer;
(g) the Seller shall have received such other customary certificates
(such as a certificate of good standing of the Buyer in its jurisdiction of
incorporation and certificates as to the incumbency of officers and the adoption
of authorizing resolutions) as it shall reasonably request in connection with
the Closing; and
(h) the closing pursuant to the Agreement and Plan of Merger, dated
as of the date hereof, among Athena Ventures Parent, Inc., Athena Ventures
Acquisition Sub, Inc. and the Seller, shall have been consummated pursuant to
the terms thereof; provided that in the event that such closing is not
consummated as a result of a breach by any of the parties thereto, the condition
set forth in this clause (h) shall be deemed waived by the Seller in all
respects, without any further action by the Seller.
ARTICLE VI
TERMINATION
6.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Closing 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 Seller in the event the Seller is in breach of any representation,
warranty, covenant or agreement contained in this Agreement, and such breach,
individually or in combination with any other such breach, (i) would cause the
conditions set forth in Section 5.1(b) or Section 5.1(c) not to be satisfied and
(ii) if curable, is not cured within 30 days following delivery by the Buyer to
the Seller of written notice of such breach;
(c) the Buyer may terminate this Agreement by giving written notice
to the Seller in the event the Seller provides an update to the Disclosure
Schedule pursuant to Section 4.7 which contains information that, absent such
disclosure and the provisions of Section 4.7 permitting the update of
representations and warranties, would have the effect of causing the condition
set forth in Section 5.1(b) not to be satisfied, and the Seller fails to cure
the event or condition causing the failure of such condition within 30 days
following delivery by the Buyer to the Seller of written notice under this
Section 6.1(c);
(d) the Seller may terminate this Agreement by giving written notice
to the Buyer in the event the Buyer is in breach of any representation,
warranty, covenant or agreement contained in this Agreement, and such breach,
individually or in combination with any other such breach, (i) would cause the
conditions set forth in Section 5.2(b) or Section 5.2(c) not to be satisfied and
(ii) if curable, is not cured within 30 days following delivery by the Seller to
the Buyer of written notice of such breach;
(e) either Party may terminate this Agreement by giving written
notice to the other Party at any time after the stockholders of the Seller have
voted on whether to approve the sale of the Acquired Assets contemplated by this
Agreement in the event such matter failed to receive the Requisite Seller
Stockholder Approval;
(f) the Buyer may terminate this Agreement by giving written notice
to the Seller if the Closing shall not have occurred on or before April 30,
2004; provided that the Buyer may not exercise its rights to terminate this
Agreement under this clause (f) if such failure results exclusively or primarily
from a breach by the Buyer of any representation, warranty, covenant or
agreement contained in this Agreement; and
(g) the Seller may terminate this Agreement by giving written notice
to the Buyer if the Closing shall not have occurred on or before April 30, 2004;
provided that the Seller may not exercise its rights to terminate this Agreement
under this clause (g) if such failure results exclusively or primarily from a
breach by the Seller of any representation, warranty, covenant or agreement
contained in this Agreement.
6.2 Effect of Termination. If any Party terminates this Agreement pursuant
to Section 6.1, all obligations of the Parties hereunder shall terminate without
any liability of any Party to the other Parties. Notwithstanding the foregoing,
termination of this Agreement shall not relieve any Party for any breach by such
Party, prior to the termination of this Agreement, of any covenant or agreement
(but not any representation or warranty) contained in this Agreement or impair
the right of any Party to obtain such remedies as may be available to it in law
or equity with respect to such a breach by any other Party.
ARTICLE VII
EMPLOYEE MATTERS
7.1 Offer of Employment; Continuation of Employment. The Buyer shall,
subject to satisfactory background checks on the same basis as applicable to the
Seller's employees, offer employment commencing on the Closing Date to all
Business Employees, including those on vacation, military leave, leave of
absence (whether paid or unpaid), disability or layoff with base salary that is
at least equal to the base salary each such Business Employee had earned
immediately prior to the Closing. Notwithstanding anything herein to the
contrary, and subject to the execution and delivery by each such Business
Employee of the Buyer's standard nonsolicitation and confidentiality agreement,
each Business Employee identified in Schedule 7.1 who accepts an offer of
employment with the Buyer and is terminated by the Buyer without Cause (as
defined below) within six months after the Closing Date shall continue to
receive the same compensation and benefits to which he or she would have
otherwise been entitled to receive from the Buyer under this Article VII until
the date that is six months after the Closing Date. For purposes hereof, "Cause"
shall mean (a) a significant breach of company policy, (b) insubordination, (c)
destruction or misappropriation of company funds, property or rights, or (d)
other act (including, without limitation, conviction of a felony) or omission
that negatively impacts the Buyer. Business Employees who voluntarily resign or
retire shall not be eligible to receive such compensation or benefits described
herein.
7.2 Cessation of Business Benefit Plan Participation; 401(k) Plan Matters.
Except as otherwise provided in this Article VII or as otherwise required by
applicable law, the Business Employees shall cease to participate in or accrue
further benefits under the Business Benefit Plans immediately prior to the
Closing. Effective as of the Closing, all Business Employees who participate in
the defined contribution plan qualified under Section 401 of the Code sponsored
by the Seller (the "Seller's 401(k) Plan") shall cease to participate in said
plan. The Buyer shall establish, if it does not already maintain, a defined
contribution plan qualified under Section 401 of the Code which shall accept
direct or indirect rollovers by New Buyer Employees (as defined in Section 7.3)
of their vested interest in the Seller's 401(k) Plan, unless the Buyer
determines in its sole discretion that accepting such rollovers may adversely
affect the tax qualified status of the Buyer's defined contribution plan or its
related trust.
7.3 Employment Related Liabilities. The Buyer shall assume liability for
any amounts to which any Business Employee becomes entitled as a result of, or
in connection with (i) the Buyer's failure to offer employment or to employ such
Business Employee in accordance with Section 7.1 or applicable local law and
(ii) the termination of employment of such Business Employee on or after the
Closing Date, except to the extent employment is not offered or is terminated on
the basis of an unsatisfactory background check as described in Section 7.1. The
Buyer shall have no liability with respect to any remuneration payable to any
Business Employee, including, without limitation, salary, commissions or
bonuses, for any period on or before the Closing Date (the "Pre-Closing Employee
Liabilities"), regardless of whether such Pre-Closing Employee Liabilities are
determinable or payable as of the Closing, and the Seller shall be liable for
any and all Pre-Closing Employee Liabilities. The Buyer and the Seller hereby
agree that to the extent any of the Pre-Closing Employee Liabilities are not
paid by the Seller on or before the Closing Date, such Pre-Closing Employee
Liabilities shall be included in the calculation of Estimated Working Capital
and, upon the determination of Final Working Capital pursuant to Section 1.2,
the Seller shall have no further liability therefor.
7.4 Employee Benefits; Severance Plans. Beginning on the Closing Date,
each Business Employee who accepts an offer of employment with the Buyer (each,
a "New Buyer Employee") shall be eligible to participate in the same benefit
plans, programs and arrangements in which the Buyer's similarly situated
employees participate. The Buyer will give credit for past service with the
Seller or its Affiliates under all the Buyer Plans including, without
limitation, severance pay plans, to all New Buyer Employees, to the same extent
such service was credited under similar plans of the Seller and its Affiliates
in which the New Buyer Employees participated prior to the Closing Date, except
that no past service credit shall be given to any New Buyer Employee for the
purpose of vacation benefit accrual with the Buyer.
7.5 Welfare Plans. With respect to any Buyer Plan that is an "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA) or any plan directly
or indirectly maintained or contributed to by the Buyer providing similar
benefits to an "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA), the Buyer shall (a) cause to be waived any pre-existing condition
limitations or actively-at-work requirements and (b) give effect, in determining
any deductible and maximum out-of-pocket limitations, to claims incurred and
amounts paid by, and amounts reimbursed to, such New Buyer Employees with
respect to similar plans maintained by the Seller or any of its Affiliates for
such New Buyer Employees immediately prior to the Closing Date. The Buyer shall
make appropriate arrangements to allow the use by New Buyer Employees of any
amounts available under any cafeteria plan or flexible spending account (as
defined in Section 125 of the Code) which was maintained by the Seller or any of
its Affiliates for such New Buyer Employees.
7.6 Accrued Vacation Time. The Buyer shall be liable for any accrued but
unused vacation time to which the Business Employees are entitled as of the
Closing Date pursuant to the vacation policies of the Seller then in effect and
applicable law, provided that the Buyer's obligations under this Section 7.6
shall only apply to such Business Employees who have been offered employment by
the Buyer and who have accepted such offer of employment before the Closing Date
(the "Assumed Vacation Time"). As a condition precedent to the Buyer's
obligations under this Section 7.6, the Seller shall use its best efforts to
obtain the written consent of each of its Business Employees for the Buyer to
assume such liability, and shall provide a copy of each such written consent to
the Buyer. The Buyer shall cooperate with the Seller in connection with
obtaining such written consents and the delivery of any requests therefor
concurrently with the Buyer's offers of employment pursuant to Section 7.1. The
Buyer hereby agrees that for the three-month period commencing on the Closing
Date, it shall not employ, or offer to employ, any Business Employee that (a)
did not accept the Buyer's offer of employment pursuant to Section 7.1 and (b)
was paid by the Seller for all accrued but unused vacation time to
which such Business Employee was entitled as of the Closing Date pursuant to the
vacation policies of the Seller then in effect and applicable law.
7.7 U.S. WARN Act. The Seller shall provide any required notice under the
Worker Adjustment and Retraining Notification Act ("WARN") and any other similar
applicable law and to otherwise comply with any such law with respect to any
"plant closing" or "mass layoff" (as defined in WARN) or similar event affecting
employees and occurring prior to the Closing Date or arising as a result of the
transactions contemplated hereby. The Buyer shall assume sole responsibility for
any liabilities or obligations arising under WARN or other applicable law
resulting from the actions (or inactions) of the Buyer or its Affiliates on or
after the Closing Date.
7.8 U.S. COBRA. The Seller agrees to provide any required notice under the
Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA") and any other
similar applicable law arising from any qualifying event, as defined in COBRA,
that occurs on or prior to the Closing Date. The Buyer shall assume sole
responsibility for any liabilities or obligations arising under COBRA or other
similar applicable law resulting from the actions (or inactions) of the Buyer or
its Affiliates on or after the Closing Date.
ARTICLE VIII
OTHER POST-CLOSING COVENANTS
8.1 Access to Information; Record Retention; Cooperation.
(a) Subject to compliance with contractual obligations and
applicable laws and regulations, following the Closing, each Party shall afford
to each other Party and to such Party's authorized accountants, counsel and
other designated representatives during normal business hours in a manner so as
to not unreasonably interfere with the conduct of business (i) reasonable access
and duplicating rights to all non-privileged records, books, contracts,
instruments, documents, correspondence, computer data and other data and
information solely relating to the Business prior to the Closing (collectively,
"Information") and within the possession or control of such Party and (ii)
reasonable access to the personnel of such Party. Requests may be made under
this Section 8.1(a) for the Information for use in connection with financial
reporting and accounting matters, preparing financial statements, preparing and
filing of any Tax Returns, prosecuting any claims for refund, defending any Tax
claims or assessment, preparing securities law or securities exchange filings,
prosecuting, defending or settling any litigation or insurance claim, performing
obligations under this Agreement and the Ancillary Agreements and any other
proper business purposes. The Seller acknowledges and agrees that
notwithstanding anything in the foregoing to the contrary, from and after the
Closing, the Buyer will be entitled to sole possession to all Acquired Assets
including, without limitation, any documents, books, records (including tax
records), agreements and financial data of any sort relating exclusively or
primarily to the Business, other than the Excluded Assets.
(b) A Party making Information or personnel available to another
Party under this Section 8.1 shall be entitled to receive from such other Party,
upon the presentation of invoices therefor, payments for such amounts relating
to supplies, disbursements and other out-of-pocket expenses, as may reasonably
be incurred in making such Information or personnel
available; provided, however, that no such reimbursements shall be required for
the salary or cost of fringe benefits or similar expenses pertaining to
employees of the providing Party.
(c) Except as may otherwise be required by law or agreed to in
writing by the Parties, each Party shall use reasonable commercial efforts to
preserve, until six years after the Closing Date, all Information in its
possession or control pertaining to the Business prior to the Closing.
Notwithstanding the foregoing, in lieu of retaining any specific Information,
any Party may offer in writing to the other Party or Parties to deliver such
Information to the other Party or Parties, and if such offer is not accepted
within 90 days, the offered Information may be disposed of at any time.
(d) Each Party shall hold, and shall use commercially reasonable
efforts to cause their respective Affiliates, consultants and advisors to hold,
in strict confidence all Information concerning the other furnished to it by the
other Party or Parties or their representatives pursuant to this Section 8.1
(except to the extent that such Information (i) is or becomes generally
available to the public other than as a result of any action or inaction by the
receiving Party, (ii) was within the possession of the receiving Party prior to
it being furnished to the receiving Party by or on behalf of the disclosing
Party pursuant hereto, provided that the source of such information was not
bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to any person or entity with respect to
such information, or (iii) is or becomes available on a non-confidential basis
to the receiving Party from a source other than the disclosing Party, provided
that the source of such information was not bound by a confidentiality agreement
with or other contractual, legal or fiduciary obligation of confidentiality to
any person or entity with respect to such information), and each Party shall not
release or disclose such Information to any other person, except its auditors,
attorneys, financial advisors, bankers and other consultants and advisors,
unless compelled to disclose such Information by judicial or administrative
process or by other requirements of law or so as not to violate the rules of any
stock exchange; provided, however, that in the case of disclosure compelled by
judicial or administrative process, the receiving Party shall (to the extent
permitted by applicable law) notify the disclosing Party promptly of the request
and the documents requested thereby so that the disclosing Party may seek an
appropriate protective order or other appropriate remedy. If, in the absence of
a protective order or other remedy or the receipt of a waiver hereunder, a Party
is, in the written opinion of its counsel, compelled to disclose any Information
to any tribunal or other entity or else stand liable for contempt or suffer
other censure or penalty, such Party may so disclose the Information without
liability hereunder; provided, however, that, such Party gives written notice to
the other Party or Parties of the information to be disclosed (including copies
of the relevant portions of the relevant documents) as far in advance of its
disclosure as is practicable, uses all reasonable efforts to limit any such
disclosure to the precise terms of such requirement and cooperates with the
disclosing Party to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded to such information by
the tribunal or other entity.
(e) Notwithstanding anything herein to the contrary, the Buyer
acknowledges and agrees that any Information (privileged or otherwise) included
in the Acquired Assets belongs solely to the Buyer and may be disclosed or used
by the Buyer in its sole discretion without the consent of the Seller in any
instance. In furtherance of the foregoing, (i) the disclosure or use by the
Buyer of any such Information (privileged or otherwise) shall not be
deemed a breach by the Buyer of any provision of this Agreement or any other
agreement between the Seller and the Buyer and (ii) the disclosure or use by any
New Buyer Employee of any such Information (privileged or otherwise) in
furtherance of his or her employment by the Buyer shall not be deemed a breach
by such New Buyer Employee of any confidentiality or other agreement in effect
between such New Buyer Employee and the Seller or any Affiliate thereof, and
each Party hereby agrees that each New Buyer Employee is an intended beneficiary
of this clause (ii). The Seller hereby covenants and agrees that upon the
request of the Buyer or any New Buyer Employee, the Seller shall provide written
confirmation to such New Buyer Employee that he or she is not and will not be in
breach of such confidentiality or other agreement so in effect upon such
disclosure or use of Information (privileged or otherwise) in furtherance of his
or her employment by the Buyer.
8.2 Collection of Accounts Receivable. The Seller agrees that it shall
forward promptly to the Buyer any monies, checks or instruments received by the
Seller after the Closing with respect to the accounts receivable purchased by
the Buyer from the Seller pursuant to this Agreement. The Seller hereby
authorizes the Buyer to endorse and cash any checks or instruments payable or
endorsed to the Seller or its order which are received by the Buyer and which
relate to accounts receivable purchased by the Buyer from the Seller.
8.3 Payment of Assumed Liabilities and Excluded Liabilities. In the event
that the Seller (or its Affiliate) inadvertently pays or discharges, after the
Closing, any Assumed Liabilities, the Buyer shall reimburse the Seller or its
Affiliate for the amount so paid or discharged within 30 days of being presented
with written evidence of such payment or discharge. In the event that the Buyer
inadvertently pays or discharges, after the Closing, any Excluded Liability, the
Seller shall reimburse the Buyer for the amount so paid or discharged within 30
days of being presented with written evidence of such payment or discharge.
8.4 Transfer Taxes. Any sales, stock transfer taxes, real estate transfer
taxes, personal property transfer taxes or other similar taxes payable in
connection with the sale of the Acquired Assets shall be paid by the Buyer. If
any Tax Returns or other documents are required to be filed in a jurisdiction
with respect to any of the foregoing, then the Buyer shall prepare and file such
Tax Returns or other documents and shall provide copies of such Tax Returns or
other documents to the Seller.
8.5 Transition. The Seller shall not discourage or take any action that is
intended to have the effect of discouraging any lessee, lessor, licensee,
licensor, customer, supplier or other business associate from maintaining the
same business relationship with the Buyer and the Business after the Closing as
the Seller maintained prior to the Closing, or otherwise interfere or take any
such action that is intended to have the effect of interfering with any such
relationship with the Buyer or the Business.
8.6 Non-Competition.
(a) For a period of two years from the Closing Date (the
"Non-Compete Period"), the Seller shall not, and it will cause its Affiliates
not to, directly or indirectly, in the United States (i) engage in a Competitive
Business (as hereinafter defined), (ii) render any services or act as an agent
or consultant in connection with the operation of a Competitive
Business, or (iii) become associated with or have any interest in, as a
shareholder, member, partner, joint venturer or otherwise, any person, entity or
business organization that engages in a Competitive Business; provided that the
Seller shall not be deemed to have violated this provision solely by reason of
an acquisition of a controlling interest in the Seller by an entity incidentally
but not primarily engaged in a Competitive Business and, after or in connection
with such acquisition, the Seller does not contribute in any manner to such
Competitive Business activities. For purposes hereof, "Competitive Business"
shall mean the business of providing (A) a network devoted to college sports
that provides brand management, content delivery, consumer marketing and/or
business/commerce solutions to university athletic departments and conferences
through the internet or through broadband or VOD distribution, or (B) an on-line
wire service that provides to subscribers aggregation and syndication of college
newspaper based content, or (C) any other business and activities conducted as
of the Closing Date on or through the (xxx.xxxx.xxx) and (xxx.xxxxxxxxxxxxx.xxx)
websites or any other websites primarily utilized by the Seller in connection
with (A) through (C).
(b) The Seller agrees that the Non-Compete Period is reasonable and
necessary in light of the transactions entered into pursuant to this Agreement,
that breach by the Seller of this covenant would likely cause irreparable injury
to the Buyer in conducting the Business which would be difficult to compute, and
that in such event the Buyer shall be entitled, without limiting other remedies
available to it, to temporary and permanent injunctive relief against the Seller
in any court of competent jurisdiction without the posting of a bond. If the
final judgment of a court of competent jurisdiction declares that any term or
provision of this Section 8.8 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 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.
(c) The Seller hereby agrees that the covenants made by it herein
are intended to benefit any successor of the Buyer or purchaser or other
assignee of all or substantially all of the assets of the Business and that each
such successor, purchaser or assign shall be a third party beneficiary of such
covenants with full right, power and authority to enforce such covenants at law
or in equity with the same right, power and authority as the Buyer, including,
without limitation, seeking injunctive relief without the necessity of posting a
bond.
8.7 Third Party Consents(a) . The Seller shall be obligated after the
Closing to continue to use its best efforts to obtain the Third Party Consents
to the assignment to the Buyer of the Assigned Contracts, provided that the
Seller shall not be required to make any material payments or agree to any
material undertakings in connection therewith.
8.8 Solomon Accounting System. As soon as practicable after the Closing
(and in any event within 60 days after the Closing Date), the Seller shall
provide access to the Buyer pursuant to current passcodes (in read-only access
that will enable the Buyer to download reports) to all of the data with respect
to the Business included in the "Solomon" accounting system for the period
commencing on April 1, 2002 through and including the Closing Date, and
the Buyer shall cooperate with the Seller to take such action as may reasonably
be necessary to enable the Seller to so provide access to such data.
ARTICLE IX
INDEMNIFICATION; SURVIVAL
9.1 Definitions. As used in this Agreement, the following terms shall have
the following meanings:
(a) "Event of Indemnification" shall mean and include:
(i) with respect to the Buyer, (A) the breach by the Seller of
any of its representations or warranties contained in this Agreement including,
without limitation, Article II hereof, (B) the breach by the Seller of any of
its representations or warranties contained in any Ancillary Agreement, (C) the
failure of the Seller to pay, perform and discharge any Excluded Liability or
any obligation or liability of the Business relating to the Excluded Assets, (D)
the non-fulfillment or breach by the Seller of any of its covenants and
agreements contained in this Agreement or in any Ancillary Agreement, (E) the
failure of the Seller to comply with any bulk sales or bulk transfer laws or (F)
the failure of the Seller to pay any sales, use or similar Taxes with respect to
the Business attributable to transactions occurring on or prior to the Closing
Date (each, a "Buyer Event of Indemnification"); and
(ii) with respect to the Seller, (A) the breach by the Buyer
of any of its representations or warranties contained in this Agreement
including, without limitation, Article III hereof, (B) the breach by the Buyer
of any of its representations or warranties contained in any Ancillary
Agreement, (C) the failure of the Buyer to pay, perform and discharge any
Assumed Liability or (D) the non-fulfillment or breach by the Buyer of any of
its covenants and agreements contained in this Agreement or in any Ancillary
Agreement (each, a "Seller Event of Indemnification").
(b) "Indemnified Persons shall mean and include:
(i) with respect to a Buyer Event of Indemnification, the
Buyer and its Affiliates, successors and assigns, and the respective officers
and directors of each of the foregoing; or
(ii) with respect to a Seller Event of Indemnification, the
Seller and its Affiliates, successors and assigns, and the respective officers
and directors of each of the foregoing.
(c) Indemnifying Persons shall mean and include:
(i) with respect to a Buyer Event of Indemnification, the
Seller and each of its successors and assigns (the "Seller Indemnifying
Parties"); or
(ii) with respect to a Seller Event of Indemnification, the
Buyer and each of its successors and assigns (the "Buyer Indemnifying Parties").
(d) "Losses" shall mean any and all losses, demands, actions or
causes of action, suits, proceedings, investigations, arbitrations, claims,
assessments, shortages, damages, liabilities (contingent or otherwise),
payments, obligations, expenses (including reasonable attorneys' and
accountants' fees), assessments sustained, suffered or incurred by any
Indemnified Person arising from or in connection with any such matter that is
the subject of indemnification under Section 9.2 hereof.
9.2 Indemnification Generally.
(a) The Indemnifying Persons shall indemnify and hold harmless the
Indemnified Persons from and against any and all Losses with respect to, arising
out of or in connection with any Event of Indemnification; provided that, the
maximum aggregate liability hereunder of the Seller Indemnifying Parties, on the
one hand, and of the Buyer Indemnifying Parties, on the other hand, shall be an
amount equal to $1,500,000 (the "Indemnification Cap"); provided, however, that
the maximum aggregate liability with respect to any Losses to the extent with
respect to, arising out of or in connection with (i) a breach of the
representations and warranties contained in the first sentence of Section 2.8
("Section 2.8 Breaches"); (ii) a breach of the representations and warranties
set forth in Section 2.7, 2.14, 2.15 or 2.16, (iii) non-fulfillment or breach of
the covenants or agreements set forth in Article VII, and (iv) any liabilities
of a Party for Taxes (clauses (ii), (iii) and (iv) collectively, the "Carve-Out
Events"), shall be an amount equal to the Purchase Price. Notwithstanding
anything herein to the contrary, any claims for Losses to the extent with
respect to, arising out of or in connection with fraud or Section 2.23 may be
asserted without regard to the Indemnification Cap or any other maximum
liability and the applicable Indemnifying Party shall be liable for any and all
such Losses.
(b) (i) No indemnification shall be payable to an Indemnified Person
until the aggregate amount of Losses incurred by all Indemnified Persons related
to such Indemnified Person as a result of all Events of Indemnification exceeds
$150,000 (the "Deductible Amount"), whereupon such Indemnified Persons shall be
entitled to receive the amount of all Losses in excess of the Deductible Amount;
provided, however, that (A) the Deductible Amount shall not be applicable with
respect to, and the Indemnified Persons shall be entitled to payment of any and
all Losses incurred by any Indemnified Persons, with respect to any breach of
the representations and warranties set forth in the first sentence of Section
2.10(a) or in respect of any liabilities and obligations of the Seller arising
prior to the Closing Date to the extent continuing after the Closing Date
("Carry-Over Liabilities") (provided that no indemnification shall be paid to
any Indemnified Person with respect to any Carry-Over Liabilities until the
Carry-Over Liabilities total $50,000, provided further that after such threshold
is reached any and all such Losses shall be fully indemnified from the first
dollar) and any Carve-Out Events, and (B) the Deductible Amount shall equal
$10,000 with respect to Section 2.8 Breaches. In addition, no Indemnified Person
shall have any right to indemnification to the extent that any Loss has been
reimbursed by insurance proceeds (in excess of the amount paid or payable in
insurance premiums), tax benefits actually realized, or any other actual
recovery, whether directly from the Seller or otherwise.
(i) No indemnification shall be payable in respect of any
Event of Indemnification (A) where such Indemnified Person entered into a
settlement of a Third Party Claim (as defined below) without the prior written
consent of the applicable Indemnifying Party,
which consent shall not be unreasonably withheld or delayed, or (B) pursuant to
Section 9.1(a)(i)(A) and (B) with respect to matters disclosed by the Seller to
the Buyer in writing prior to the Closing.
9.3 Assertion of Claims. No claim shall be brought under Section 9.2
hereof unless the Indemnified Persons, or any of them, at any time prior to the
applicable Survival Date (as defined in Section 9.5), give the appropriate
Indemnifying Persons (a) written notice of the existence of any such claim,
specifying the nature and basis of such claim and the amount thereof, to the
extent known or (b) written notice pursuant to Section 9.4 of any Third Party
Claim, the existence of which might give rise to such a claim but the failure so
to provide such notice will not relieve the Indemnifying Persons from any
liability which they may have to the Indemnified Persons under this Agreement or
otherwise (unless and only to the extent that such failure results in the loss
or compromise of any rights or defenses of the Indemnifying Persons and they
were not otherwise aware of such action or claim). Upon the giving of such
written notice as aforesaid, the Indemnified Persons, or any of them, shall have
the right to commence legal proceedings prior or subsequent to the Survival Date
for the enforcement of their rights under Section 9.2 hereof.
9.4 Notice and Defense of Third Party Claims. Losses resulting from the
assertion of liability by third parties (each, a "Third Party Claim") shall be
subject to the following terms and conditions:
(a) The Indemnified Persons shall promptly give written notice to
the Indemnifying Persons of any Third Party Claim that might give rise to any
Loss by the Indemnified Persons, stating the nature and basis of such Third
Party Claim, and the amount thereof to the extent known. Such notice shall be
accompanied by copies of all relevant documentation with respect to such Third
Party Claim, including, without limitation, any summons, complaint or other
pleading that may have been served, any written demand or any other document or
instrument. Notwithstanding the foregoing, the failure to provide notice as
aforesaid will not relieve the Indemnifying Persons from any liability which
they may have to the Indemnified Persons under this Agreement or otherwise
(unless and only to the extent that such failure directly results in the loss or
compromise of any rights or defenses of the Indemnifying Person and they were
not otherwise aware of such action or claim).
(b) The Indemnified Persons shall defend any Third Party Claims with
counsel of their own choosing, at the sole cost and expense of the Indemnifying
Parties, and shall act reasonably and in accordance with their good faith
business judgment in handling such Third Party Claims. The Indemnifying Persons,
on the one hand, and the Indemnified Persons, on the other hand, shall make
available to each other and their counsel and accountants all books and records
and information relating to any Third Party Claims, keep each other fully
apprised as to the details and progress of all proceedings relating thereto and
render to each other such assistance as may be reasonably required to ensure the
proper and adequate defense of any and all Third Party Claims.
9.5 Survival of Representations and Warranties. Subject to the further
provisions of this Section 9.5, the representations and warranties of the Buyer
contained in this Agreement and any Ancillary Agreements and the representations
and warranties of by the Seller in this
Agreement and any Ancillary Agreements shall survive the Closing for a period of
one year after the Closing Date; provided that (a) the representations and
warranties contained in Section 2.7, 2.15 and 2.16 shall survive for the
applicable statute of limitations and (b) the representation and warranty
contained in the first sentence of Section 2.8 and in Section 2.19 shall survive
without limitation. Notwithstanding the preceding sentence, any representation
or warranty in respect of which indemnity may be sought under Section 9.2 shall
survive the time at which it would otherwise terminate pursuant to the preceding
sentence, if notice of the inaccuracy or breach thereof giving rise to such
right to indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time. For convenience of reference, the
date upon which any representation and warranty contained herein shall terminate
is referred to herein as the "Survival Date."
9.6 Characterization of Payments. Any payments made pursuant to this
Article IX and Section 1.2(c)(ii) shall be treated for all Tax purposes as
adjustments to the Purchase Price and no party or any of its Affiliates shall
take any position on a Tax Return or in any proceeding with any taxing authority
contrary to such treatment, unless otherwise required by law.
9.7 Indemnification Payments. Without limiting any other rights it may
have at law or in equity, the Buyer shall not be entitled to offset or deduct
from any monies owed under the Note an amount equal to the indemnification
obligations hereunder of the Buyer Indemnifying Parties.
ARTICLE X
MISCELLANEOUS
10.1 Press Releases and Announcements. No Party shall issue (and each
Party shall cause its Affiliates not to issue) any other press release or public
disclosure relating to the subject matter of this Agreement without the prior
written approval of the other Party or Parties; provided, however, that any
Party may make any public disclosure it believes in good faith is required by
law, regulation or stock exchange rule (in which case the disclosing Party shall
advise the other Party or Parties and the other Party or Parties shall, if
practicable, have the right to review such press release or announcement prior
to its publication). Notwithstanding the foregoing, the public announcement of
this transaction shall be substantially in the form set forth on Schedule 10.1
hereto.
10.2 No Third Party Beneficiaries. Except as specifically set forth in
Section 8.1(e), this Agreement is not intended for the benefit of any creditor
or any third party and shall not confer any rights or remedies upon any person
other than the Parties and their respective successors and permitted assigns
and, to the extent specified herein, their respective Affiliates.
10.3 Action to be Taken by Affiliates. The Parties shall cause their
respective Affiliates to comply with all of the obligations specified in this
Agreement to be performed by such Affiliates.
10.4 Entire Agreement..This Agreement (including the documents referred to
herein) and the Confidentiality Agreement constitute the entire agreement
between the Buyer, on
the one hand, and the Seller, on the other hand. This Agreement supersedes any
prior agreements or understandings among the Buyer, on the one hand, and the
Seller, on the other hand, and any representations or statements made by or on
behalf of any Party or any of its respective Affiliates to the other Party,
whether written or oral, with respect to the subject matter hereof, other than
the Confidentiality Agreement. The Confidentiality Agreement, insofar as it
covers information relating exclusively or primarily to the Business, shall
terminate effective as of the Closing, but shall remain in effect insofar as it
covers other information disclosed thereunder.
10.5 Succession and Assignment. No Party may assign either this Agreement
or any of its rights, interests, or obligations hereunder without the prior
written approval of the Seller (in the case of an assignment by the Buyer) or
the Buyer (in the case of an assignment by the Seller). Notwithstanding the
foregoing, this Agreement, and all rights, interests and obligations hereunder,
may be assigned, without such consent, (a) to any entity that acquires all or
substantially all of a Party's business or assets and (b) by the Buyer to any
direct or indirect wholly owned subsidiary; provided that no assignment of this
Agreement or any of the rights, interests or obligations hereunder shall relieve
any Party of its obligations under this Agreement. This Agreement shall be
binding upon and inure to the benefit of the Parties and their respective
successors and permitted assigns.
10.6 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing and delivered by hand or sent by a
nationally recognized overnight courier service or certified mail, return
receipt requested, in each case postage or delivery fee prepaid. Any notice,
request, demand, claim or other communication hereunder shall be deemed duly
delivered upon receipt thereof, in each case to the intended recipient as set
forth below:
(a) If to the Buyer: With a copy to:
NCSN, Inc. Xxxxx Xxxx LLP
Chelsea Piers, Xxxx 00 0000 Xxxxxx of the Americas
Xxx Xxxx, XX 00000 Xxx Xxxx, XX 00000
Telecopy: 000-000-0000 Telecopy: 000-000-0000
Attention: President Attention: Xxxxx X. Xxxxx, Esq.
NCSN, Inc.
Chelsea Piers, Xxxx 00
Xxx Xxxx, XX 00000
Telecopy: 000-000-0000
Attention: General Counsel
(b) If to the Seller: With a copy to:
Student Advantage, Inc. Xxxx and Xxxx LLP
000 Xxxxxx Xxxxxx 00 Xxxxx Xxxxxx
Xxxxxx, XX 00000 Xxxxxx, XX 00000
Telecopy: 000-000-0000 Telecopy: 617-526-5000
Attention: President Attention: Xxxx X. Xxxxxx, Esq.
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including 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 party for whom it is
intended. Any Party may change the address to which notices, requests, demands,
claims and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
10.7 Amendments and Waivers. The Parties may mutually amend or waive any
provision of this Agreement at any time. No amendment or waiver 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.
10.8 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 body 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 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.
10.9 Expenses. Except as otherwise specifically provided to the contrary
in this Agreement, each of the Parties shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
10.10 Specific Performance. Each Party acknowledges and agrees that the
other Party or 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
Party or Parties may 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 any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter.
10.11 Governing Law. This Agreement and any disputes hereunder shall be
governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts without giving effect to any choice or conflict of
law provision or rule (whether of the Commonwealth of Massachusetts or any other
jurisdiction) that would cause the application of laws of any jurisdiction other
than those of the Commonwealth of Massachusetts. This Agreement shall have the
effect of an instrument under seal.
10.12 Bulk Transfer Laws. The Buyer acknowledges that the Seller will not
comply with the provisions of the bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement.
10.13 Construction.
(a) The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against any Party.
(b) 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.
(c) 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.
(d) Any reference herein to an Article, section or clause shall be
deemed to refer to an Article, section or clause of this Agreement, unless the
context clearly indicates otherwise.
(e) All references to "$", "Dollars" or "US$" refer to currency of
the United States of America.
10.14 Waiver of Jury Trial. To the extent permitted by applicable law,
each Party hereby irrevocably waives all rights to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement or the transactions contemplated
hereby or the actions of any Party in the negotiation, administration,
performance and enforcement of this Agreement.
10.15 Remedies Cumulative. The remedies provided in this Agreement shall
be cumulative and shall not preclude the assertion by any Party of any other
rights or the seeking of any other remedies against the other Party hereto.
10.16 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
10.17 Counterparts and Facsimile Signature. 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. This Agreement may be executed by
facsimile signature.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
STUDENT ADVANTAGE, INC.
By: /s/ Xxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Financial Officer and Treasurer
NCSN, INC.
By: /s/ Xxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer and President
[Signature page to Purchase and Sale Agreement]
