EXHIBIT 10.1
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ASSET PURCHASE AGREEMENT
BY AND AMONG
ALLOY, INC.,
CASS COMMUNICATIONS, INC.,
YOUTHSTREAM MEDIA NETWORKS, INC.,
AMERICAN PASSAGE MEDIA, INC.
AND
NETWORK EVENT THEATER, INC.
DATED AS OF AUGUST 5, 2002
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TABLE OF CONTENTS
PAGE
ARTICLE I PURCHASE AND SALE OF ASSETS; CLOSING...............................1
1.1 PURCHASE AND SALE OF ACQUIRED ASSETS..................................1
1.2 EXCLUDED ASSETS.......................................................4
1.3 ASSUMPTION OF LIABILITIES.............................................5
1.4 EXCLUDED LIABILITIES..................................................5
1.5 CONTINUING LIABILITIES................................................7
1.6 CLOSING...............................................................7
1.7 CONSENTS OF THIRD PARTIES.............................................7
1.8 CLOSING DELIVERIES....................................................9
1.9 FURTHER ASSURANCES....................................................9
ARTICLE II PURCHASE PRICE...................................................10
2.1 PURCHASE PRICE.......................................................10
2.2 WORKING CAPITAL ADJUSTMENT...........................................10
2.3 ACQUIRED ASSETS ADJUSTMENT...........................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................13
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND SELLER PARENT......13
3.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE BUYER PARENT.....27
ARTICLE IV ADDITIONAL AGREEMENTS............................................28
4.1 LITIGATION COOPERATION...............................................28
4.2 PUBLIC ANNOUNCEMENTS.................................................28
4.3 TRANSFER TAXES.......................................................28
4.4 EMPLOYMENT MATTERS...................................................29
4.5 TRANSITION...........................................................30
ARTICLE V INDEMNIFICATION...................................................31
5.5 CAP ON LIABILITY.....................................................33
ARTICLE VI MISCELLANEOUS....................................................34
6.1 EXPENSES.............................................................34
6.3 INTERPRETATION.......................................................34
6.4 NOTICES..............................................................34
6.5 COUNTERPARTS.........................................................35
6.6 GOVERNING LAW; VENUE.................................................35
6.7 BENEFITS OF AGREEMENT................................................36
6.8 PRONOUNS.............................................................36
6.9 AMENDMENT, MODIFICATION AND WAIVER...................................36
6.10 NO THIRD PARTY BENEFICIARIES........................................36
6.11 CONSENTS............................................................36
6.12 INTERPRETATION......................................................36
6.13 NO JOINT VENTURE....................................................36
6.14 SPECIFIC PERFORMANCE................................................36
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EXHIBITS
Exhibit A Xxxx of Sale, Assignment and Assumption Agreement
Exhibit B Trademark Assignment
Exhibit C Non-Competition and Confidentiality Agreement - Sellers, Seller
Parent and Buyer
Exhibit D License Agreement
Exhibit E Sellers' Legal Opinion
Exhibit F Buyer's Legal Opinion
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INDEX TO DEFINED TERMS
Acquired Assets............................................Section 1.1
Actions....................................................Section 3.1(m)
Adjustment Notice..........................................Section 2.2(c)
AdRax......................................................Preamble
Affiliate..................................................Section 1.1 (end)
Agreement..................................................Preamble
Assigned Contracts.........................................Section 1.1(a)
Assumed Liabilities........................................Section 1.3
Audited Working Capital....................................Section 2.2(c)
Xxxx of Sale, Assignment and Assumption Agreement..........Section 1.8(a)
Business...................................................Preamble
Business Day...............................................Section 1.6
Business Liability.........................................Section 3.1(e)(iii)
Buyer Legal Opinion........................................Section 1.8(f)
Buyer Parent...............................................Preamble
Buyer......................................................Preamble
Campus Voice Boards........................................Preamble
CERCLA.....................................................Section 3.1(q)(iv)
Closing Date...............................................Section 1.6
Closing....................................................Section 1.6
Code.......................................................Section 3.1(f)
Contract(s)................................................Section 3.1(k)
Copyrights.................................................Section 1.1(m)
Damages....................................................Section 1.1(m)
Disclosure Schedule........................................Section 3.1
Dispute Notice.............................................Section 2.2(c)
Employee Plans.............................................Section 3.1(s)(iii)
Employees..................................................Section 3.1(r)
Encumbrances...............................................Section 3.1(g)
Environmental Laws.........................................Section 3.1(q)(i)
ERISA Affiliate............................................Section 3.1(s)(iii)
ERISA......................................................Section 3.1(s)(iii)
Estimated Working Capital..................................Section 2.2(b)
Event Marketing............................................Preamble
Excluded Assets............................................Section 1.2
Excluded Liabilities.......................................Section 1.4
FICA.......................................................Section 4.4(c)
Final Working Capital......................................Section 2.2(c)
Fraud Claims...............................................Section 6.2(c)
FUTA.......................................................Section 5.5(d)
Governmental Authority ....................................Section 3.1(m)
GymBoards..................................................Preamble
Independent Auditor........................................Section 2.2(c)
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Independent Contractor.....................................Section 3.1(r)(ii)
Intellectual Property Licenses.............................Section 3.1(i)(i)
IP Assets..................................................Section 1.1(m)
Law(s).....................................................Section 3.1(b)(ii)
Liabilities................................................Section 3.1(d)
Licensed Software..........................................Section 3.1(j)
Losses.....................................................Section 5.2(d)
Material...................................................Section 3.1(k) (end)
Material Adverse Effect....................................Section 3.1(a)
Newspaper Placement........................................Preamble
Non Competition and Confidentiality Agreement..............Section 1.8(c)
Ordinary Course of Business................................Section 3.1(d)
Owned IP...................................................Section 3.1(i)
Person.....................................................Section 1.1 (end)
Postering..................................................Preamble
Purchase Price.............................................Section 2.1
Related Agreements.........................................Section 1.8
Revised Working Capital....................................Section 2.2(c)
Seller Affiliate...........................................Section 7.1(g)
Seller Financial Statement.................................Section 3.1(c)
Sellers' Legal Opinion.....................................Section 1.8(e)
Seller Parent..............................................Preamble
Sellers....................................................Preamble
Tax(es)....................................................Section 3.1(f)
Third Party Claim..........................................Section 5.3
Trademark Assignment.......................................Section 1.8(b)
Trademarks.................................................Section 3.1(i)(ii)
Transfer Documents.........................................Section 1.8(b)
Transfer Taxes.............................................Section 4.3
Transferred Employees......................................Section 4.4(a)
Working Capital............................................Section 2.2(a)
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of August 5,
2002, is made by and among Alloy, Inc., a Delaware corporation (the "BUYER
PARENT") and its indirect wholly owned subsidiary, Cass Communications, Inc.
(the "BUYER"), a Delaware corporation and a wholly owned subsidiary of Buyer
Parent, YouthStream Media Networks, Inc. (the "SELLER PARENT"), a Delaware
corporation, American Passage Media, Inc. and Network Event Theater, Inc. (the
"SELLERS"), each a Delaware corporation and a wholly owned subsidiary of Seller
Parent.
WHEREAS, the Sellers are engaged in the business of owning and operating
display media boards and providing related marketing and media network services
targeted at teenagers and young adults ages 12 to 24, including (i) owning and
operating wallboards (gym boards) in boys and girls high school and middle
school locker rooms ("GYMBOARDS"), (ii) owning and operating a college wallboard
network ("CAMPUS VOICE BOARDS"), (iii) owning and operating college newspaper
advertising stands ("ADRAX"), (iv) college and school campus postering
advertising services ("POSTERING"), (v) developing, soliciting and placing
advertising and promotional materials, as sales representative or otherwise, in
print and nonprint media ("NEWSPAPER PLACEMENT"), (vi) conducting event
marketing programs ("EVENT MARKETING PROGRAMS") and (vii) conducting film
screenings on college campuses (the "SCREENING BUSINESS") (collectively, the
"BUSINESS"); and
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Sellers wish to sell to the Buyer, and the Buyer wishes to purchase from the
Sellers, all of the assets and properties of the Business, all as identified or
described herein, and the Sellers wish to transfer to the Buyer, and the Buyer
has agreed to assume, certain of the Sellers' obligations and liabilities
associated with the Business, and in connection therewith the parties hereto
wish to make certain agreements related to such purchase, sale, assignment and
assumption.
NOW, THEREFORE, in consideration of the mutual benefits to be derived from
this Agreement and the representations, warranties, covenants, agreements,
conditions and promises contained herein and therein, the parties hereby agree
as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS; CLOSING
1.1 PURCHASE AND SALE OF ACQUIRED ASSETS. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, the Sellers shall (and
to the extent required Seller Parent shall, and shall cause any Affiliate (as
defined below) of Seller Parent (the Seller Parent and each such Affiliate, a
"SELLER AFFILIATE") to sell, transfer, assign and deliver to the Buyer, and
relinquish to the Buyer in perpetuity, free and clear of all Encumbrances (as
defined in Section 3.1(g)), all of Sellers' and the Seller Affiliates' right,
title and interest in and to all of the Acquired Assets. As used in this
Agreement, the term "ACQUIRED ASSETS" means the following assets, properties,
goodwill and rights of every kind and nature, real, personal and mixed, tangible
and intangible, of the Sellers and the Seller Affiliates, but excluding all
assets,
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properties, and rights of every kind and nature that constitute Excluded Assets
(as defined in Section 1.2):
(a) all right, title and interest of the Sellers or any Seller Affiliate
in, to and under all written and oral contracts, agreements, guaranties,
understandings, arrangements, deeds, mortgages, indentures, leases, licenses,
commitments, undertakings and other documents and instruments relating in any
manner to the Business or any part thereof, including, but not limited to, those
set forth in Section 1.1(a) of the Disclosure Schedule (the "ASSIGNED
CONTRACTS");
(b) all equipment, machinery, furniture, furnishings, vehicles, supplies,
tools, parts and other tangible personal property of the Sellers and each Seller
Affiliate listed in Section 1.1(b) of the Disclosure Schedule;
(c) all Gym Boards, consisting of customized messages boards and
information centers owned, leased, used, held for use or operated by the Sellers
and each Seller Affiliate and located in schools locker rooms nationwide,
consisting in the aggregate of at least 15,000 Gym Boards located in middle and
high school locker rooms, including, without limitation, the Gym Boards listed
in Section 1.1(c) of the Disclosure Schedule;
(d) all Campus Voice Boards, consisting of the entire college wallboard
network owned, leased, used, held for use or operated by the Sellers and each
Seller Affiliate, consisting in the aggregate of at least 4,000 wallboards
installed at university and college campuses, including, without limitation, the
Campus Voice Boards listed in Section 1.1(d) of the Disclosure Schedule;
(e) all AdRax, consisting of the entire network of college newspaper
advertising stands owned, leased, used, held for use or operated by the Sellers
and each Seller Affiliate, consisting in the aggregate of at least 2,000 campus
newspaper distribution racks at colleges and universities including, without
limitation, the racks listed in Section 1.1(e) of the Disclosure Schedule;
(f) [intentionally omitted];
(g) all assets used in the Newspaper Placement Business, and all right,
title and interest in such Newspaper Placement Business;
(h) all assets used in the Screening Business and all right, title and
interest in such Screening Business except for the satellite theater equipment
set forth in Section 1.2(g) of the Disclosure Schedule;
(i) all right, title and interest of the Sellers and each Seller Affiliate
with respect to personal property leasehold interests and rights thereunder
listed in Section 1.1(i) of the Disclosure Schedule;
(j) the accounts receivable of the Sellers and each Seller Affiliate listed
in Section 1.1(j) of the Disclosure Schedule;
(k) all prepaid items listed in Section 1.1(k) of the Disclosure Schedule;
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(l) all rights of the Sellers and each Seller Affiliate, under all federal,
state, local and foreign governmental licenses, consents, approvals,
authorizations, permits, orders, decrees and other compliance agreements
relating in any manner to, or used in connection with or necessary for the
conduct of the Business or any part thereof, including, without limitation,
those listed in Section 1.1(l) of the Disclosure Schedule;
(m) all Trademarks and copyrights (including any registrations,
applications and renewals for any of the foregoing (collectively, "COPYRIGHTS")
associated with any of the Acquired Assets or Assigned Contracts or used or held
for use primarily in connection with the operation of the Business, including
without limitation the Trademarks set forth in Section 1.1(m) of the Disclosure
Schedule, and all rights thereunder or in respect thereof, including, without
limitation, licenses and sublicenses granted to the Sellers and any Seller
Affiliate in respect thereto and rights thereunder, together with all claims
against third parties for (i) profits and (ii) all costs, losses, claims,
liabilities, fines, penalties, damages and expenses (including, without
limitation, interest which may be imposed in connection therewith), court costs
and reasonable fees and disbursements of counsel, consultants and expert
witnesses (collectively, "DAMAGES") incurred by reason of the past infringement,
alleged infringement, unauthorized use or disclosure or alleged unauthorized use
or disclosure of any Trademarks or any Copyrights together with the right to xxx
for and collect the same, or to xxx for injunctive relief, for the Buyer's own
use and benefit, and for the use and benefit of its successors, assigns or other
legal representatives ("IP ASSETS");
(n) originals of all books, records, manuals and other materials (in any
form or medium) relating in any manner to the Business or any of the Acquired
Assets, or used in connection with or necessary for the conduct of the Business
or any part thereof, including, without limitation, all advertising materials,
catalogues, price lists, correspondence, mailing lists, lists of customers,
distribution lists, photographs, production data, sales and promotional
materials and records, purchasing materials and records, personnel records,
research and development files, records, data, books, intellectual property
disclosures, media materials, accounting records, sales order files and
litigation files, and all rights in and to the information contained therein
(collectively, "BOOKS AND RECORDS"); except that Sellers and Seller Parent may
retain copies of Books and Records and the right to use such Books and Records
in connection with any litigation, arbitration, or other legal proceeding, for
tax and accounting purposes, and for any other reasonable business purpose not
precluded by the provisions of this Agreement or any Related Agreement;
(o) all claims, demands, causes of action, choses in action, rights of
recovery, rights of set off and rights of recoupment of the Sellers and each
Seller Affiliate which either (1) arise after the Closing and relate in any
manner to any of the other Acquired Assets or any of the Assumed Liabilities or
(2) arose prior to the Closing and relate exclusively to any of the other
Acquired Assets or any of the Assumed Liabilities;
(p) all guarantees, warranties, indemnities and similar rights in favor of
the Sellers or any Seller Affiliate which either (1) arise after the Closing and
relate in any manner to the Acquired Assets or the Assumed Liabilities or (2)
arose prior to the Closing and relate exclusively to the Acquired Assets or the
Acquired Liabilities;
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(q) all right, title and interest to, and in respect of the websites and
Internet domain names used or held for use primarily in connection with the
operation of the Business, including, without limitation, those listed in
Section 1.1(q) of the Disclosure Schedule;
(r) all of Seller Parent's right, title and interest in and to the name
"YouthStream" and Sellers' interest in and to the names "American Passage Media"
and "Network Event Theater," respectively (collectively, the "SELLER NAMES");
and
(s) all goodwill of the Sellers and each Seller Affiliate relating to the
Business or any part thereof, including, without limitation, the Seller Names.
For purposes of this Agreement, "AFFILIATE" means, as to any Person, any Person,
directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with such Person, and "PERSON" means an
individual, corporation, partnership, limited liability company, joint venture,
trust or unincorporated organization or other legal entity.
1.2 EXCLUDED ASSETS. The following assets and property shall be retained by
the Sellers and Seller Affiliates, as the case may be, and shall not constitute
Acquired Assets, regardless of whether any of them relates in any manner to or
is used in the Business (collectively, the "EXCLUDED ASSETS"):
(a) all of the assets, properties, goodwill and rights of the Sellers or
any Seller Affiliate of every kind and nature, real, personal and mixed,
tangible and intangible, that are not owned, used or held for use by the
Sellers, the Seller Parent or any Seller Affiliate primarily in connection with
the operation of the Business;
(b) all insurance policies, contracts, coverages or bonds owned by the
Sellers or any Seller Affiliate, including, without limitation, entitlements to
the return of premiums on cancellation of policies, and all rights of the
Sellers or any Seller Affiliate of every nature and description under or arising
out of such insurance policies;
(c) all accounts receivable, notes receivable, credits, refunds, prepaid
expenses, deferred charges, advance payments, security deposits and prepaid
items, other than any of the foregoing (i) securing open customer orders which
are included in the Assigned Contracts or (ii) which are listed on Schedules
1.1(j) or 1.1(k);
(d) all cash, negotiable securities, certificates of deposit, commercial
paper, treasury bills and treasury notes and all other marketable securities,
bonds, bank accounts, lock boxes, letters of credit and other cash equivalents
held on the Closing Date;
(e) all real property owned by the Sellers or any Seller Affiliate and all
plants, buildings and improvements thereon and all right, title and interest of
the Sellers or any Seller Affiliate with respect to real property leasehold
interests and rights thereunder;
(f) all employment, consulting, independent contractor and similar
Contracts to which either of the Sellers or any Seller Affiliate is a party or
is bound, other than any Contracts or agreements with the Independent
Contractors set forth in Schedule 3(r)(ii) to the extent assignable and accepted
by the Buyer after the Closing Date;
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(g) those assets, if any, set forth in Section 1.2(g) of the Disclosure
Schedule;
(h) account books of original entry, general ledgers, tax returns and other
documents and records directly relating to Taxes;
(i) the corporate records consisting of director and stockholder minutes
and proceedings;
(j) all rights of the Sellers or the Seller Parent under this Agreement and
the agreements and instruments executed and delivered to the Sellers or the
Seller Parent by the Buyer or the Buyer Parent pursuant to this Agreement or any
Related Agreement;
(k) all rights of the Sellers or the Seller Parent to any Tax refunds or
claims for Tax refunds other than those relating to the Acquired Assets or the
Business as conducted after the Closing Date;
(l) all claims, demands, causes of action, choses in action, rights of
recovery, rights of set off and rights of recoupment of the Sellers and each
Seller Affiliate that relate exclusively to any of the other Excluded Assets or
any of the Excluded Liabilities; and
(m) all guarantees, warranties, indemnities and similar rights in favor of
the Sellers or any Seller Affiliate that relate exclusively to any of the other
Excluded Assets or any of the Excluded Liabilities.
1.3 ASSUMPTION OF LIABILITIES. At the Closing, pursuant to the Xxxx of
Sale, Assignment and Assumption Agreement referred to in Section 1.8(a), the
Buyer shall assume and shall agree to pay, perform and discharge the following
Liabilities (as defined in Section 3.1(d)) of the Sellers (collectively, the
"ASSUMED LIABILITIES"):
(a) Liabilities accruing after the Closing Date under the Assigned
Contracts, other than (i) Liabilities under any Assigned Contract required to be
disclosed in Section 3.1(k) of the Disclosure Schedule that is not disclosed
therein, or (ii) Liabilities under any Assigned Contract related to any material
misrepresentation made by the Sellers and the Seller Parent in Section 3.1(k)
relating to such Assigned Contract; and
(b) All current liabilities (as defined in Section 2.2) of the Sellers or
any Seller Affiliate to the extent taken into account in the determination of
"WORKING CAPITAL" under Section 2.2.
(c) The Buyer will not assume, discharge, undertake to perform or pay any
other Liabilities of the Sellers or any Seller Affiliate.
1.4 EXCLUDED LIABILITIES. Notwithstanding Section 1.3 or any other
provision hereof or any schedule or exhibit hereto and regardless of any
disclosure to the Buyer or the Buyer Parent, the Buyer shall have no liability
whatsoever for any Liabilities of either of the Sellers or any Seller Affiliate
which are not specifically assumed under Section 1.3, and, without limiting the
generality of the foregoing, the Buyer shall not assume, nor shall it be deemed
to have assumed, any of the following Liabilities (the "EXCLUDED LIABILITIES"):
(a) any Liabilities arising under or relating to any written or oral
contracts, agreements,
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guaranties, understandings, deeds, mortgages, indentures, leases, licenses,
commitments, undertakings or other documents or instruments to which either of
the Sellers or any Seller Affiliate is a party, other than liabilities arising
under the Assigned Contracts to the extent provided in Section 1.3(a);
(b) any Damages relating in any manner to or arising from any breach or
default by the Sellers or any Seller Affiliate of any Assigned Contract
occurring on or prior to the Closing Date regardless of whether the Sellers or
the Seller Parent discloses such breach or default pursuant to this Agreement;
(c) any Liabilities of either of the Sellers or any Seller Affiliate in
respect of any indebtedness for, or guarantees of, borrowed money;
(d) any Liabilities of either of the Sellers to any Seller Affiliate or
current or former stockholder of either of the Sellers or any Seller Affiliate,
including the Seller Parent;
(e) any Liabilities of either of the Sellers or any Seller Affiliate for or
in respect of Taxes (as defined in Section 3.1(f)) other than those assessed by
operation of Law against the Buyer arising out of or in connection with the
transactions contemplated hereby;
(f) any Liabilities of either of the Sellers or any Seller Affiliate
arising out of or relating, directly or indirectly, to any property of which
either of the Sellers or such Seller Affiliate has disposed or proposed to
dispose, including, without limitation, any and all Liabilities to any other
Person incurred in connection with any sale or proposed sale of (i) all or any
substantial part of the assets of either of the Sellers or any Seller Affiliate,
or any other business combination or proposed business combination, (ii) any
real property of either of the Sellers or any Seller Affiliate, (iii) any other
business or (iv) any securities of either of the Sellers, any Seller Affiliate
or any other Person;
(g) any Liabilities arising out of or relating, directly or indirectly, to
any Employee Plan (as defined in Section 3.1(s)) or the termination thereof;
(h) any Liabilities with respect to fees and expenses incurred by the
Sellers or any Seller Affiliate in connection with the sale or proposed sale or
other disposition or proposed disposition of all or part of the assets or
securities of either of the Sellers or any Seller Affiliate;
(i) any Liabilities of either of the Sellers or any Seller Affiliate to any
present or former employee or independent contractor of either of the Sellers or
any Seller Affiliate, including, without limitation, any and all Liabilities
arising under any federal, state, local or foreign laws, ordinances, regulations
or orders;
(j) any Liabilities of either of the Sellers or any Seller Affiliate
arising out of or related to any Actions (as defined in Section 3.1(m)) against
either Seller or any Seller Affiliate, including, without limitation, any
Actions pending or threatened against either of the Sellers as of the Closing
Date other than Liabilities arising out of any act of the Buyer, or the
operation of the Business by the Buyer or any Affiliate of the Buyer, after the
Closing;
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(k) any Liabilities of either of the Sellers or any Seller Affiliate for
damage or injury to Person or property including, without limitation, those
resulting from or arising out of environmental claims;
(l) any Liabilities of either of the Sellers or any Seller Affiliate
arising out of or resulting from non-compliance with any Law;
(m) any Liabilities of either of the Sellers or any Seller Affiliate
arising out of, relating to or resulting from any obligation to indemnify any
Person other than those arising after the Closing Date under any Assigned
Contract;
(n) any other Liabilities of either of the Sellers or any Seller Affiliate
relating to or arising out of the operation of the Business or the ownership of
the Acquired Assets prior to the Closing other than the Assumed Liabilities;
(o) any Liabilities attributable in any manner to any of the Excluded
Assets; and
(p) any Liabilities of either of the Sellers or any Seller Affiliate
arising under this Agreement or any of the Related Agreements (as defined in
Article IV).
1.5 CONTINUING LIABILITIES. To the extent that any Assumed Liability or any
Damages imposed on the Buyer by operation of law or otherwise in connection
with, or which otherwise arises out of or in relation to, the transactions
contemplated hereby (other than the Buyer's assumption of the Assumed
Liabilities pursuant to Section 1.3), results from or arises out of an event or
condition which is continuing or continuous in nature, the Buyer shall assume
and discharge only that portion of such Assumed Liability or Damage that results
from or arises out of that part of the event which occurs, or condition which
exists, after the Closing. The Sellers and the Seller Parent jointly and
severally agree to discharge all of such continuing or continuous Assumed
Liabilities or Damages, including, without limitation, those Assumed Liabilities
assumed by the Buyer pursuant to Section 1.3, if and to the extent they result
from a breach by either of the Sellers or the Seller Parent of any of their
respective representations, warranties or covenants hereunder.
1.6 CLOSING. The closing of the transactions contemplated by this Agreement
(the "CLOSING") will take place at 10:00 a.m. (New York time) on August 5, 2002
(the "CLOSING DATE"), unless another date is agreed to in writing by the
parties. The Closing shall take place at the offices of Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., 000 0xx Xxxxxx, Xxx Xxxx, Xxx Xxxx, unless
another time or place is agreed to in writing by the parties.
1.7 CONSENTS OF THIRD PARTIES.
(a) Notwithstanding anything in this Agreement or in any Related Agreement
to the contrary, neither this Agreement nor any such Related Agreement shall
constitute an agreement to assign or otherwise transfer any Assigned Contract or
any other Acquired Asset, or any rights thereunder, if an attempted assignment
or transfer thereof would, without the consent of a third party to such
assignment or transfer, constitute a breach thereof, would be ineffective or
would affect adversely the rights of the Buyer or the Sellers thereunder.
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(b) If any such consent has not been obtained as of the Closing Date, the
Sellers and the Seller Parent shall continue to use all commercially reasonable
efforts to obtain such consent after the Closing. In such circumstances, until
such consent has been obtained, the Buyer shall use all commercially reasonable
efforts to perform in the name of the Sellers all of the obligations of the
Sellers with respect to each Assigned Contract for which any such consent has
not been obtained; provided, however, that the Buyer shall not be required to
take any action in performing such obligations which, in the Buyer's reasonable
judgment, would subject the Buyer to any significant Liability or an
unreasonable risk of incurring any such Liability.
(c) If any Assigned Contract or other Acquired Asset is not transferred to
the Buyer at the Closing pursuant to this Agreement, the Sellers and the Seller
Parent shall cooperate with the Buyer in any reasonable arrangement requested by
the Buyer and designed to provide for the Buyer all of the benefits of, and to
have the Buyer assume the burdens, liabilities, obligations and expenses
expressly assumed by the Buyer hereunder with respect to, such Assigned Contract
or other Acquired Asset, as applicable. At the Buyer's request, the Sellers and
the Seller Parent shall, at Buyer's expense, take all reasonable actions
requested by the Buyer to enforce for the benefit of the Buyer any and all
rights of the Sellers or any Seller Affiliate with respect to any such Assigned
Contract or other Acquired Asset that is not otherwise transferred pursuant to
the provisions of this Agreement. The Sellers hereby authorize the Buyer to
perform all of the Sellers' obligations after the Closing with respect to all
such Assigned Contracts and other Acquired Assets and hereby grant to the Buyer
a power of attorney to act in the name of the Sellers with respect thereto. Such
power of attorney shall be coupled with an interest and shall be irrevocable.
The Sellers and the Seller Parent agree to remit, or cause to be remitted,
promptly to the Buyer all collections or payments received by the Sellers or any
Seller Affiliate in respect of all such Assigned Contracts and other Acquired
Assets, and shall hold or cause to be held all such collections or payments in
trust for the benefit of, and promptly pay the same over to, the Buyer;
provided, however, that nothing herein shall create or provide any rights or
benefits in or to third parties.
(d) If, subsequent to the Closing, a claim brought within one year of
Closing by any party challenging any of the transactions contemplated hereby
results in any ruling or order which has the result of frustrating in a material
way the transfer of any of the Acquired Assets hereunder to the Buyer or the
Buyer's use thereof pursuant to the applicable transfer and licensing provisions
contained herein, the Sellers and the Seller Parent shall cooperate with the
Buyer in any reasonable arrangement requested by the Buyer and designed to give
the Buyer, as nearly as possible, the same economic benefits, and to have the
Buyer assume the same burdens, liabilities, obligations and expenses, as if such
transfer or license had been consummated in accordance with the provisions
hereof.
(e) Nothing in this Section 1.7 shall be deemed to modify in any respect
any of the Sellers or the Seller Parent's representations or warranties set
forth herein or the conditions to the Buyer's obligations contained in Article V
hereof, be deemed a waiver by the Buyer of its right to have received on or
before the Closing Date an effective assignment of all of the Acquired Assets or
be deemed to constitute an agreement to exclude from the Acquired Assets any
assets described under Section 1.1.
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1.8 CLOSING DELIVERIES. At the Closing, in addition to the agreements set
forth in Article IV, the parties shall execute and deliver the following
documents (the documents referred to in 1.8 (a) - (d) below collectively, the
"RELATED AGREEMENTS"):
(a) the Sellers, the Seller Parent and the Buyer shall execute and deliver
the xxxx of sale, assignment and assumption agreement in the form of EXHIBIT A
attached hereto (the "XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT")
pursuant to which the Sellers will transfer and assign to the Buyer certain of
the Acquired Assets and the Buyer will assume the Assumed Liabilities;
(b) each of the Sellers and the Seller Affiliates who are holders of any
Trademarks (as defined in Section 3.1(i)) included as part of the Acquired
Assets shall execute and deliver, and the Seller Parent shall use its best
efforts to cause any third party who is not a Seller Affiliate but who holds
title or rights to any Trademark included in the Acquired Assets to execute and
deliver to the Buyer) one or more trademark assignments in the form of EXHIBIT B
attached hereto (the "TRADEMARK ASSIGNMENT" and together with the XXXX OF SALE,
ASSIGNMENT AND ASSUMPTION AGREEMENT, the "TRANSFER DOCUMENTS");
(c) the Sellers, the Seller Parent and the Buyer shall execute and deliver
the non-competition and confidentiality agreement in the form of EXHIBIT C
attached hereto (the "NON-COMPETITION AND CONFIDENTIALITY AGREEMENT") pursuant
to which the Sellers and the Seller Parent will covenant not to engage in any
Competitive Business (as defined therein);
(d) the Seller Parent and the Buyer shall execute and deliver the license
agreement in substantially the form of Exhibit D attached hereto (the "License
Agreement") pursuant to which the Seller Parent shall be entitled to use the
name "YouthStream Media Networks, Inc.", for a period of time after the Closing;
(e) the Sellers and the Seller Parent shall cause their legal counsel to
deliver legal opinions in the forms attached as EXHIBIT E hereto (the "SELLERS'
LEGAL OPINION"); and
(f) the Buyer and the Buyer Parent shall cause their legal counsel to
deliver a legal opinion addressed to the Sellers and the Seller Parent in the
form attached as EXHIBIT F hereto (the "BUYER'S LEGAL OPINION").
1.9 FURTHER ASSURANCES. At any time and from time to time after the
Closing, at the request of the Buyer and without further consideration, the
Sellers and the Seller Parent shall execute and deliver, or cause to be executed
and delivered, such other instruments of sale, transfer, conveyance, assignment
and confirmation, and will take such further action, as may be reasonably
requested in order to more effectively transfer, convey and assign to the Buyer,
and to confirm the Buyer's title in and to, the Acquired Assets, and shall
execute, or cause to be executed, such other documents and take, or cause to be
taken, such further action as may be reasonably required or desirable to carry
out the provisions of this Agreement, each of the Related Agreements and the
transactions contemplated hereby and thereby. Without in any way limiting the
foregoing, the Sellers and the Seller Parent shall use commercially reasonable
efforts to terminate the UCC filings listed in Section 3.1(g) of the Disclosure
Schedule. The Buyer may, in its sole discretion, elect to treat or not to treat
as an Assigned Contract any Contract to which
9
the Sellers or any Seller Affiliate is a party, or by which any of them or their
properties are bound, which was required by the provisions of this Agreement to
be disclosed in, but is not listed in, Section 3.1(k) of the Disclosure
Schedule. Without limiting the generality of the foregoing, the Sellers and the
Seller Parent shall, from time to time, cooperate with, and, to the extent
reasonably practicable, take all action reasonably requested by the Buyer, to
effectively transition the Acquired Assets and the Business to the Buyer,
including without limitation using commercially reasonable efforts to maintain
the continuity of the Business as it is transferred to the Buyer.
ARTICLE II
PURCHASE PRICE
2.1 PURCHASE PRICE. The entire purchase price payable by the Buyer to the
Sellers for the Acquired Assets and the transactions contemplated by this
Agreement and the Related Agreements shall be Seven Million Dollars ($7,000,000)
(the "PURCHASE PRICE"). At the Closing, the Buyer shall deliver the Purchase
Price by wire transfer of immediately available funds on behalf of the Sellers
and Seller Parent, to the account specified in Section 2.1 of the Disclosure
Schedule.
2.2 WORKING CAPITAL ADJUSTMENT.
(a) For purposes hereof, the term "WORKING CAPITAL" means the excess of the
accounts receivable (less the allowance for bad debts) and prepaid expenses over
the accounts payable, accrued expenses and deferred revenues shown in Section
2.2 of the Disclosure Schedule (the "WORKING CAPITAL STATEMENT").
(b) The amount of $283,523 shown on the Working Capital Statement is
referred to as the "ESTIMATED WORKING CAPITAL." Within ten (10) Business Days of
the Closing Date, the Buyer shall pay to the Sellers the amount of $283,523 by
wire transfer of immediately available funds or bank check. As used herein,
"BUSINESS DAY" means any day on which the banks in New York are open for
business.
(c) As soon as reasonably practicable after the Closing, but in any event
within sixty (60) days of the Closing Date, the Buyer shall review the Working
Capital Statement to verify the accuracy of the determination of the Estimated
Working Capital as set forth therein. If the Buyer determines that the Working
Capital as of the Closing Date did not equal the Estimated Working Capital (the
Working Capital as so determined, the "REVISED WORKING CAPITAL"), the Buyer
shall deliver to the Sellers a notice (the "ADJUSTMENT NOTICE") setting forth
the Buyer's Revised Working Capital as determined by the Buyer and the
calculation thereof in reasonable detail. The Sellers shall have twenty (20)
Business Days from receipt of the Adjustment Notice to provide written notice
that they dispute the Adjustment Notice (a "DISPUTE NOTICE"), which Dispute
Notice shall provide a reasonably detailed description of such dispute and the
Sellers' calculation of the Working Capital as of the Closing Date. If the
Sellers do not timely deliver a Dispute Notice to the Buyer, or if the Sellers
notify the Buyer that they have no objection to the Dispute Notice, the Buyer's
determination of the Revised Working Capital shall be final and binding on all
parties and the Purchase Price shall be adjusted in accordance with the
provisions of Section 2.2(d). If the Sellers timely deliver a Dispute Notice to
the Buyer and the Buyer and
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the Sellers are unable to mutually agree on the Revised Working Capital within
ten (10) days following receipt by the Buyer of the Dispute Notice, the Buyer
and the Sellers shall mutually agree on an independent public accounting firm
(the "INDEPENDENT AUDITOR") to review the Working Capital Statement, the
Adjustment Notice and the Dispute Notice (and all related information). The
Independent Auditor shall determine the Working Capital as of the Closing Date
(the "AUDITED WORKING CAPITAL") which determination shall be final and binding
on all parties absent manifest error. The costs of the Independent Auditor shall
be borne by the party (either the Buyer or the Sellers) whose determination of
the Working Capital (as set forth in the Adjustment Notice, for the Buyer, or in
the Dispute Notice, for the Sellers) was farthest from the determination of the
Audited Working Capital, or equally by the Buyer and the Sellers if the
determination by the Independent Auditor is equidistant between the
determinations of the parties. For purposes hereof, "FINAL WORKING CAPITAL"
shall equal (i) the Estimated Working Capital, if the Buyer does not deliver an
Adjustment Notice in accordance with the provisions hereof, (ii) the Revised
Working Capital, if the Buyer delivers an Adjustment Notice in accordance with
the provisions hereof and the Sellers do not timely deliver a Dispute Notice,
(iii) the amount agreed upon by the Buyer and the Sellers if the Sellers timely
deliver a Dispute Notice and the Independent Auditor is not engaged, or (iv) the
Audited Working Capital, if the Buyer delivers an Adjustment Notice in
accordance with the provisions hereof and the Independent Auditor is engaged.
(d) Upon the determination of the Final Working Capital, the Purchase Price
shall be adjusted as follows:
(i) if the Final Working Capital equals or exceeds the Estimated
Working Capital, no adjustments to the Purchase Price pursuant to this
Section 2.2(b), or
(ii) if the Estimated Working Capital exceeds the Final Working
Capital by more than $25,000, the Sellers and the Seller Parent, jointly
and severally, agree to pay to Buyer the amount equal to the amount by
which the Estimated Working Capital exceeds the Final Working Capital.
(e) Any payment required pursuant to Section 2.2(d) shall be made within
ten (10) Business Days following the determination of the Final Working Capital.
2.3 ACQUIRED ASSETS ADJUSTMENT.
(a) At any time during the three month period following the Closing, the
Buyer may elect to commence an audit of the Gym Boards, Campus Voice Boards
and/or AdRax included as part of the Acquired Assets as set forth in 1.1(c),
1.1(d) and 1.1(e) of the Disclosure Schedule, respectively (each a "BOARD
NETWORK"). If the Buyer commences an audit, the Buyer will have three months
from the date of commencement of such audit in which to complete such audit.
(b) The Buyer shall notify the Seller Parent in writing at least two (2)
Business Days prior to auditing any particular school where a portion of the
Board Network is maintained of (i) the Board Network(s) to be audited; (ii the
anticipated dates, times and locations to be included in such audit; and (iii)
with reasonable specificity, the methodology for conducting such audit. Any
audit shall be conducted by the then-existing representatives servicing the Gym
Boards,
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Campus Voice Boards and/or AdRax, and may be subject to oversight and review by
a reputable independent third party auditor selected by the Buyer who is
experienced in conducting similar audits in the industry. The Buyer agrees that
any audit must include at least 10% of the applicable Board Network audited in
order for the Buyer to receive any adjustment for that Board Network.
(c) The Buyer, on the one hand, and the Seller and the Seller Parent
jointly on the other, shall each be responsible for half of the costs of any
audit conducted up to a maximum of $25,000 each. In addition, the Seller Parent
and the Sellers shall have the right, at their sole own expense, to send any of
their employees, representatives or agents to participate in the audit, and the
Buyer shall facilitate such participation in conducting the audit, including by
providing a schedule of dates and times when auditors will visit each school
being audited.
(d) The Buyer shall provide to the Seller Parent, the auditor's final
report, together with all supporting materials as reasonably requested by the
Sellers and the Seller Parent, promptly following the availability of the same,
and within ten (10) Business Days following completion of the audit, the Buyer,
the Seller Parent and the Sellers shall cooperate in good faith to resolve any
audit findings disputed by any party. If the Buyer and the Seller Parent are
unable to resolve any dispute within such ten (10) Business Day period, the
audit report as originally finalized by the auditor shall govern for purposes of
this Agreement.
(e) Upon completion of the audit, the results of the audit shall be
extrapolated across the entire Board Network to calculate the amount of Gym
Boards, Campus Voice Boards and/or AdRax missing or damaged across the entire
Board Network. If based on the results of any such audit and extrapolation,
there is evidence that, after deducting the aggregate number of deemed "missing"
or "damaged" (to the point they reasonably require replacement) Gym Boards,
Campus Voice Boards or AdRax, as the case may be, the number of Gym Boards does
not equal at least 13,500; the number of Campus Voice Boards does not equal at
least 3,600; or the number of AdRax does not equal at least 1,800, as the case
may be, the Buyer shall be entitled to an adjustment as follows:
(i) the Buyer shall first replace any missing or damaged Gym Boards,
Campus Voice Boards or AdRax from such of the inventory of 1672 uninstalled
Gym Boards, 942 uninstalled Campus Voice Boards or 942 uninstalled AdRax
transferred as part of the Acquired Assets that are not themselves damaged
so as to require replacement.
(ii) for any additional missing or damaged Gym Boards, Campus Voice
Boards or AdRax, the Seller Parent shall pay the Buyer the following agreed
upon replacement value amounts to the extent Buyer is entitled to payment
under paragraphs (a) through (f): (i) for each missing or damaged Gym Board
- $100 each; (ii) Campus Voice Boards - $125 each and (iii) AdRax - $175
each. The Seller Parent agrees to pay to Buyer any amounts due to the Buyer
as result of the adjustment mechanism set forth in this Section 2.3 which
are not in dispute and agrees to negotiate in good faith with the Buyer to
resolve any disputed amounts.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND SELLER PARENT. The
Sellers and the Seller Parent, jointly and severally, represent and warrant to
the Buyer and the Buyer Parent, that, except as disclosed in the disclosure
schedule dated the date hereof, and delivered to the Buyer (which disclosure
schedule shall contain specific references to the representations and warranties
to which the disclosures contained therein relate and an item on such disclosure
schedule shall be deemed to qualify only the particular subsection or
subsections specified for such item; provided, however, that for convenience
purposes, certain disclosures in one section or subsection of the disclosure
schedule may be specifically cross-referenced to another section or subsection
of the disclosure schedule and; provided, further, however, any item that is
disclosed in a particular section or subsection of the disclosure schedule shall
be deemed to be disclosed and incorporated into any other section or subsection
of the disclosure schedule where such disclosure would be otherwise appropriate
to the extent that it is reasonably apparent from the express language of such
disclosure that it applies to such other section or subsection) (the "DISCLOSURE
SCHEDULE"):
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Each of Sellers
and Seller Parent (i) is a corporation duly organized, validly existing and in
good standing under the law of the State of Delaware, (ii) has all requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted, to enter into this
Agreement and the Related Agreements to which it is a party, to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby and (iii) is duly qualified and in good standing
to do business as a foreign corporation in all jurisdictions where it is
required to be qualified except where the failure to be so qualified and in good
standing would have a Material Adverse Effect. For purposes of this Agreement,
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the Acquired
Assets, Assumed Liabilities or the Business taken as a whole. Each of the
Sellers and Seller Parent has delivered to the Buyer true and complete copies of
its Certificate of Incorporation and by-laws, in each case as amended or
restated to the date hereof.
(b) AUTHORITY; NO CONSENTS.
(i) The execution, delivery and performance by each of the Sellers and
the Seller Parent of this Agreement and the Related Agreements, and the
consummation of the transactions contemplated hereby and thereby, have been
duly and validly authorized by all necessary corporate action on the part
of each of the Sellers and the Seller Parent. This Agreement and the
Related Agreements have been duly and validly executed and delivered, and
are the valid and binding obligations of each of the Sellers or the Seller
Parent, respectively, enforceable against each of the Sellers and the
Seller Parent in accordance with their respective terms; except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
rights of creditors generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
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(ii) Neither the execution, delivery and performance of this Agreement
or the Related Agreements by each of the Sellers and the Seller Parent, nor
the consummation by each of the Sellers or the Seller Parent of the
transactions contemplated hereby or thereby, nor compliance by each of the
Sellers or the Seller Parent with any provision hereof or thereof will in
any material respect (A) conflict with, (B) result in any violation of, (C)
cause a default under (with or without due notice, lapse of time or both),
(D) give rise to any right of termination, amendment, cancellation or
acceleration of any obligation contained in or the loss of any material
benefit under or (E) result in the creation of any Encumbrance (as defined
in Section 3.1(g)) on or against any assets, rights or property of either
of the Sellers or the Seller Parent under any term, condition or provision
of (x) any instrument or agreement to which either of the Sellers or the
Seller Parent is a party, or by which either of the Sellers or the Seller
Parent or any of their respective properties, assets or rights may be
bound, (y) any law, statute, rule, regulation, order, writ, injunction,
decree, permit, concession, license or franchise of any Governmental
Authority (as defined in Section 3.1(m)) (each a "LAW", and collectively,
the "LAWS") applicable to either of the Sellers or the Seller Parent or any
of their respective properties, assets or rights or (z) the Certificate of
Incorporation or by-laws of either of the Sellers or the Seller Parent.
(iii) Except as set forth in Section 3.1(b) of the Disclosure
Schedule, no permit, authorization, consent or approval of or by, or any
notification of or filing with, any Governmental Authority or other Person
is required in connection with the execution, delivery and performance by
each of the Sellers or the Seller Parent of this Agreement or the Related
Agreements or the consummation by each of the Sellers or the Seller Parent
of the transactions contemplated hereby or thereby other than those
permits, authorizations, consents or approvals which may be required to be
obtained from Governmental Authorities in connection with the assignment of
any Contract with any state or government run school or university which
failure, either in the aggregate or individually, will not have Material
Adverse Effect.
(c) FINANCIAL INFORMATION. Section 3.1(c) of the Disclosure Schedule
consists of an unaudited statement of assets and liabilities related to the
Acquired Assets and the Acquired Liabilities, dated as of August 1, 2002 (the
"SELLER FINANCIAL STATEMENT"). The Seller Financial Statement (a) was prepared
in accordance with the books and records of the Sellers or the Seller Parent, as
the case may be, and (b) fairly presents the financial condition of the Acquired
Assets and the Acquired Liabilities as of August 1, 2002.
(d) ABSENCE OF UNDISCLOSED LIABILITIES. Neither of the Sellers nor the
Seller Parent nor any other Seller Affiliate has any liabilities or obligations
of any nature (whether known or unknown, fixed or contingent, secured or
unsecured, accrued, absolute or otherwise and whether due or to become due
(collectively, "LIABILITIES")), relating in any manner to, or arising from the
Business or the ownership, use or operation of any of the Acquired Assets except
(i) as set forth in Section 3.1(d) of the Disclosure Schedule, (ii) Liabilities
under leases, commitments and other agreements entered into in the ordinary
course of business (which, to the extent required by Section 3.1(k), are set
forth on Section 3.1(k) of the Disclosure Schedule), (iii) Liabilities disclosed
or reserved against in the Seller Financial Statement, (iv) Liabilities that
arose in the Ordinary Course of Business after the date of the Seller Financial
Statement that are not
14
individually or in the aggregate material to the Business and that have not had
or resulted in, and will not have or result in, a Material Adverse Effect, and
(v) other Liabilities which are being retained by the Sellers and the Seller
Parent as a part of the Excluded Liabilities and for which the Buyer will not
have any responsibility. As used in this Agreement, the term "ORDINARY COURSE OF
BUSINESS" means the operation of the Business in all material respects in a
manner consistent with usual and customary practices as they existed on May 1,
2002 without regard to the transactions contemplated by this Agreement or the
Related Agreements.
(e) ABSENCE OF CHANGES. Except as set forth in Section 3.1(e) of the
Disclosure Schedule, since May 1, 2002, the Sellers have operated the Business
in the Ordinary Course of Business, and there has not been with respect to the
Business or the Acquired Assets:
(i) any event that had a Material Adverse Effect other than losses, if
any, incurred in the Ordinary Course of Business;
(ii) any damage, destruction or loss to any of the Acquired Assets,
whether or not covered by insurance;
(iii) any Liability relating in any manner to, or arising from the
Business (a "BUSINESS LIABILITY") created, assumed, guaranteed or incurred,
or any material transaction or Contract relating in any manner to the
Business entered into, by either of the Sellers or any Seller Affiliate
other than in the Ordinary Course of Business and which individually or in
the aggregate are not material to the Business;
(iv) any payment, discharge or satisfaction of any material
Encumbrance on any of the Acquired Assets or any Business Liability or any
cancellation of any material debt or claim relating in any manner to, or
arising from the Business or any of the Acquired Assets, or any amendment,
termination or waiver of any right of either of the Sellers or any Seller
Affiliate relating in any manner to, or arising from the Business or any
part thereof or any of the Acquired Assets other than those undertaken in
the Ordinary Course of Business;
(v) any license, sale, transfer, pledge, mortgage or other disposition
of any material tangible or intangible asset (including any IP Assets)
relating in any manner to, or used or held for use in the Business or any
part thereof, other than in the Ordinary Course of Business;
(vi) any termination of, or written indication of an intention to
terminate or not renew, any material Contract to which either of the
Sellers or any Seller Affiliate is a party that relates in any manner to
the Business or any part thereof or any of the Acquired Assets;
(vii) any write-down or write-up of the value of any Acquired Asset,
or any write-off of any accounts receivable or notes receivable of either
of the Sellers or any Seller Affiliate or any portion thereof relating in
any manner to, or arising from the Business or any part thereof or any of
the Acquired Assets;
(viii) any increase in or modification of compensation payable or to
become
15
payable to any Transferred Employee, or the entering into of any
employment, consulting or similar Contract with any Transferred Employee;
(ix) any increase in or modification or acceleration of any benefits
payable or to become payable under any bonus, pension, severance, insurance
or other benefit plan, payment or arrangement (including, but not limited
to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any Transferred Employee;
(x) any change in the accounting methods or practices followed by the
Sellers or any Seller Affiliate or any change in depreciation or
amortization policies or rates theretofore adopted relating in any manner
to the Business or any part thereof or any of the Acquired Assets;
(xi) any change in the manner in which the Sellers or any Seller
Affiliate extends discounts or credit to customers or otherwise deals with
past or present customers of the Business;
(xii) any amendments or changes in the governing instruments of either
Seller, including, without limitation, the Certificate of Incorporation or
by-laws of each of the Sellers;
(xiii) any labor dispute or any union organizing campaign, which in
any way affects any Transferred Employee;
(xiv) the commencement of any litigation or other action by or against
either of the Sellers or any Seller Affiliate that arose out of or in
connection with the Business or any part thereof or relates to any of the
Acquired Assets; or
(xv) any agreement, understanding, authorization or proposal, whether
in writing or otherwise, for either of the Sellers or any Seller Affiliate
to take any of the actions specified in items (i) through (xiv) above.
(f) TAX MATTERS. Except as set forth in Section 3.1(f) of the Disclosure
Schedule, each of the Sellers and the Seller Parent and each other corporation
or entity (if any) included in any consolidated or combined tax return in which
either of the Sellers or the Seller Parent has been included have timely paid or
will timely pay all Taxes due on or before the Closing Date if the failure to
pay would result in any Encumbrance on any Acquired Assets or would otherwise
interfere with the operation of the Business or with the Buyer's use or
enjoyment of any of the Acquired Assets.
As used in this Agreement, "TAX" means any of the Taxes and "TAXES" means,
with respect to any entity, (A) all income taxes (including any tax on or based
upon net income, gross income, income as specially defined, earnings, profits or
selected items of income, earnings or profits) and all gross receipts, sales,
use, ad valorem, transfer, franchise, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property or windfall profits
taxes, alternative or add-on minimum taxes, customs duties and other taxes,
fees, assessments or charges of any kind whatsoever, together with all interest
and penalties, additions
16
to tax and other additional amounts imposed by any taxing authority (domestic or
foreign) on such entity and (B) any liability for the payment of any amount of
the type described in the immediately preceding clause (A) as a result of being
a "transferee" (within the meaning of Section 6901 of the Code or any other
applicable Law) of another entity or a member of an affiliated or combined
group.
(g) TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
(i) Except as set forth in Section 3.1(g) of the Disclosure Schedule, the
Sellers have good and valid title to all of the Acquired Assets free and clear
of all Encumbrances of any kind or nature. Except as set forth in Section 3.1(g)
of the Disclosure Schedule and except for the Excluded Assets, the Acquired
Assets constitute all assets used in the operation of the Business, and include
all material assets, properties and interests in properties (real, personal and
mixed, tangible and intangible) and all material rights, leases, licenses and
other Contracts necessary to enable the Buyer to carry on the Business in the
Ordinary Course of Business. Except as set forth in Section 3.1(g) of the
Disclosure Schedule, and except for the Excluded Assets, the Acquired Assets
constitute all of the material properties and assets used or held by the Sellers
or any Seller Affiliate for use in connection with operation of the Business in
the Ordinary Course of Business (except cash disposed of, accounts receivable
collected, prepaid expense realized, Contracts fully performed, and properties
or assets replaced by equivalent or superior properties or assets, in each case
in the Ordinary Course of Business). The Acquired Assets are in all material
respects adequate for the purposes for which they are currently used or held for
use and the Acquired Assets that constitute tangible assets are in good
operating condition and repair (ordinary wear and tear excepted). To the best of
the knowledge of the Sellers and the Seller Parent, there are no facts or
conditions affecting the Acquired Assets or the Business that could,
individually or in the aggregate, interfere in any material respect with the use
or ownership of the Acquired Assets or the operation of the Business in the
Ordinary Course of Business, except as a result of Buyer's failure to employ the
employees of either of the Sellers or reach arrangements with the independent
contractors servicing the Board Networks to enable them to carry on the Business
in the Ordinary Course of Business. Except as set forth in Section 3.1(g) of the
Disclosure Schedule, the Sellers and the Seller Parent have conducted the
Business only through the Sellers and not through any other division, subsidiary
or Affiliate of the Sellers or the Seller Parent, and no Person other than
Sellers or the Seller Affiliates own or control any of the Acquired Assets. As
used herein, the term "ENCUMBRANCES" shall mean and include security interests,
mortgages, liens, pledges, guarantees, charges, easements, reservations,
restrictions, clouds, equities, rights of way, options, rights of first refusal
and all other encumbrances, whether or not relating to the extension of credit
or the borrowing of money.
(ii) Section 3.1.(g)(ii) of the Disclosure Schedule sets forth a
description of Acquired Assets held in inventory, including numbers of units and
storage location. The inventory included in Acquired Assets includes 1672 Gym
Boards, 942 Campus Voice Boards and 942 AdRax.
(h) REAL PROPERTY. The Sellers do not own any real property.
17
(i) INTELLECTUAL PROPERTY.
(i) The Sellers or Seller Parent own or have valid license to use all
of the IP Assets. Except as set forth in Section 3.1(i)(i) of the
Disclosure Schedule, immediately after the Closing, the Buyer will have a
right or license to use all IP Assets and will own all IP Assets free of
all Encumbrances. Section 3.1(i)(i) of the Disclosure Schedule sets forth a
complete and correct list of all written or oral licenses and arrangements,
(i) pursuant to which the use by any Person of any IP Assets or any part
thereof is permitted by either of the Sellers or any Seller Affiliate and
(ii) pursuant to which the use by either of the Sellers or any Seller
Affiliate of any IP Assets or any part thereof is permitted by any Person
(collectively, the "INTELLECTUAL PROPERTY LICENSES") and except as set
forth in Section 3.1(i)(i) of the Disclosure Schedule, the Sellers are the
only licensors or licensees, as the case may be, under the Intellectual
Property Licenses. The Intellectual Property Licenses are in full force and
effect in accordance with their terms, and are free and clear of any
Encumbrances. To the best of the knowledge of the Sellers and the Seller
Parent, neither the Sellers nor the Seller Parent is in default under any
Intellectual Property License and no such default is currently threatened.
To the best of the knowledge of the Sellers and the Seller Parent, the
conduct of the Business as presently conducted does not infringe the rights
of any third party in respect of any IP Assets. Except as set forth in
Section 3.1(i)(i) of the Disclosure Schedule, none of the IP Assets used in
the Business or any part thereof is being furnished by any Seller Affiliate
or any other third party. There is no claim or demand of any Person
pertaining to, or any proceeding that is pending or to the best of the
knowledge of the Sellers and the Seller Parent, threatened that challenges
the rights of the Sellers or the Seller Parent in respect of the IP Assets
or Trademarks, or claims that any default exists under any Intellectual
Property License. None of the IP Assets or the Intellectual Property
Licenses is subject to any outstanding order, ruling, decree, judgment or
stipulation by or with any court, tribunal arbitrator, or other
governmental authority. As set forth in the "Registered Marks" section of
Section 1.1(m) of the Disclosure Schedule, the IP Assets have been duly
registered with, filed in or issued by, as the case may be, the United
States Patent and Trademark Office and the United States Copyright Office
or other filing offices, domestic or foreign, and such filings or
registrations remain in full force and effect.
(ii) Except as set forth in Section 3.1(i)(ii) of the Disclosure
Schedule, to the best of the knowledge of the Sellers and the Seller
Parent, all trademarks, service marks, trade names, service names, URLs and
Internet domain names and applications therefor (and all interest therein),
designs, slogans and general intangibles of like nature, together with all
goodwill related to the foregoing (including any registrations and
applications for any of the foregoing) (collectively, "TRADEMARKS") of the
Sellers that constitute IP Assets have been in continuous use by the
Sellers. To the best of the knowledge of the Sellers and the Seller Parent,
there has been no prior use of such Trademarks by any third party that
would confer upon said third party superior rights in such Trademarks.
(j) LICENSED SOFTWARE. Section 3.1(j) of the Disclosure Schedule sets forth
a true and complete list of all software programs and applications licensed by
the Sellers or any Seller Affiliate (the "LICENSED SOFTWARE") that constitutes
an Acquired Asset or that is used or held for use by the Sellers or any Seller
Affiliate in the Business or any part thereof, except for shrink-
18
wrap licenses for off the shelf software. The Licensed Software may be used by
the Sellers pursuant to the applicable license agreement with respect thereto.
To the knowledge of the Sellers and the Seller Parent, there exists no event or
condition that will result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default by the Sellers or any
Seller Affiliate or the licensor under any such license agreement.
(k) CONTRACTS. Section 3.1(k)(i) of the Disclosure Schedule sets forth a
true and complete list of all the following written or oral contracts,
agreements, arrangements, understandings, licenses, leases, commitments and
other instruments (and, with respect to any oral Contract, provides a
description of the terms of such Contract), and all material amendments,
modifications and supplements thereto (each a "CONTRACT" and, collectively,
"CONTRACTS"), to which either of the Sellers or any Seller Affiliate is a party
or by which their respective properties are bound and which directly relate to
the Business, the Acquired Assets or the Assumed Liabilities:
(i) all Contracts for the development, modification or enhancement of
computer software or multimedia products;
(ii) all distributorship, dealer, sales, advertising, agency,
manufacturer's representative, franchise or similar Contracts or
relationship and all other Contracts relating to the payment of a
commission or other fee calculated as, or by reference to, a percentage of
the profits or revenues;
(iii) all joint venture, partnership or other Contracts or arrangement
for the sharing of profits;
(iv) all collective bargaining Contracts or other Contracts with or
commitment to any labor union;
(v) all Contracts for the future purchase, sale or license of
products, material, supplies, equipment or services requiring payments in
an amount in excess of $25,000 per annum, which agreement, arrangement or
understanding is not terminable on 30 days' notice without cost or other
liability on or any time after the Closing Date, or pursuant to which
manufacturing rights are granted or received, or which contain most favored
nations pricing provisions or exclusive marketing or other exclusive or
perpetual rights relating to any product, group of products, services,
technology, assets or territory;
(vi) all licenses (whether as licensor or licensee), or sublicenses,
royalty, permits, franchise agreements or other Contracts, including,
without limitation, any Contracts pursuant to which any intellectual
property, including any Trademarks, is licensed to any third party (other
than ordinary course licenses to end-users and "shrink-wrap" licenses for
off-the-shelf software);
(vii) all Contracts relating to the content or delivery of computer
software or multimedia products and services (including the transmission or
other performance (electronically or otherwise));
(viii) all Contracts relating to the employment of any person as of
the Closing
19
Date who provides services in connection with the Business or any portion
thereof which (except as otherwise generally provided by applicable Law) is
not immediately terminable without cost or other liability at or at any
time after the Effective Time;
(ix) all profit-sharing, bonus, stock option, stock appreciation
right, pension, retirement, disability, stock purchase, hospitalization,
insurance or similar plans or agreements, formal or informal, providing
benefits to any person as of the Closing Date who is employed by the Seller
or any Seller Affiliate;
(x) any indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of money, for
a line of credit or for a leasing transaction of a type required to be
capitalized in accordance with Statement of Financial Accounting Standards
No. 13 of the Financial Accounting Standards Board;
(xi) all Contracts granting or permitting any Encumbrance on any of
the properties, assets or rights of the Sellers relating to the Acquired
Assets;
(xii) all leases for real property (whether as lessor or lessee) and
all other leases and agreements under which the Sellers are lessee of or
hold or operate any items of tangible personal property owned by any third
party;
(xiii) all Contracts or commitments for charitable contributions;
(xiv) all other Contracts or commitment not already listed for capital
expenditures individually or in the aggregate in excess of $25,000 or which
cannot be terminated by their terms on less than 60 (sixty) days notice
without liability;
(xv) all Contracts with a "disqualified individual" (as defined in
Section 280G(c) of the Code), which could result in an "excess parachute
payment" (as defined in Section 280G(b)(1) of the Code) being made under
Section 280G of the Code as a result of the transactions contemplated
hereby;
(xvi) all Contracts which restrict either of the Sellers from engaging
in any aspect of their business or competing in any line of business in any
geographic area; or
(xvii) all other Contracts or commitments not already listed that are
material to the conduct of the Business.
Solely for purposes of this Section 3.1(k) and 3.1(l) below, the term
"MATERIAL" shall mean and refer to those Contracts that involve payments or
expenditures by or to either of the Sellers, or otherwise have an aggregate
value, of at least $25,000. Except as disclosed in Section 3.1(k) of the
Disclosure Schedule, the Sellers or the Seller Parent have furnished to the
Buyer or the Buyer Parent true and complete copies of all such Contracts listed
in Section 3.1(k)(i) of Disclosure Schedule and (x) each such Contract (A) is
the legal, valid and binding obligation of either of the Sellers or the Seller
Parent, and, in each case enforceable in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the rights
of creditors generally and by general equitable principles (regardless of
whether such enforceability is
20
considered in a proceeding in equity or at law) and by an implied covenant of
good faith and fair dealing, (B) is in full force and effect and (y) neither of
the Sellers (or any Seller Affiliate, if applicable) nor to the best of the
knowledge of the Sellers, except as set forth in Section 3.1(k)(i) of Disclosure
Schedule, the other party or parties thereto is or are in material default
thereunder. Section 3.1(k)(ii) of the Disclosure Schedule sets forth information
regarding revenue recognized by the Sellers, xxxxxxxx made by the Sellers and
Collections received by the Sellers related to the Assigned Contracts as of
August 1, 2002 ("Historical Financial Information"). The Historical Information
is true, accurate and complete in all material respects as of the Closing Date.
(l) NO DEFAULTS. Except as set forth in Section 3.1(l) of the Disclosure
Schedule, neither of the Sellers nor the Seller Parent is in default or alleged
to be in default under (i) its Certificate of Incorporation or by laws or (ii)
any material agreement, lease, license, Contract, commitment, instrument or
obligation relating to the Business to which it is a party or by which any of
the Acquired Assets are or may be bound or affected, and to the best of the
knowledge of the Sellers and the Seller Parent, there exists no event, condition
or occurrence which, with or without due notice or lapse of time, or both, would
constitute such a default or alleged default by it of any of the foregoing.
(m) LITIGATION, ETC. Except as set forth in Section 3.1(m) of Disclosure
Schedule, there are no (i) actions, suits, claims, investigations or legal or
administrative or arbitration proceedings (collectively, "ACTIONS") pending, or
to the best of the knowledge of the Sellers and the Seller Parent, threatened
against either of the Sellers or any Seller Affiliate affecting or arising out
of the Business or use of the Acquired Assets, nor, to the best of the knowledge
of the Sellers and the Seller Parent, is there any basis therefor, whether at
law or in equity, or before or by any federal, state, municipal, foreign or
other governmental court, department, commission, board, bureau, agency or
instrumentality ("GOVERNMENTAL AUTHORITY"), (ii) judgments, decrees, injunctions
or orders of any Governmental Authority or arbitrator against the Sellers or any
Seller Affiliate affecting, relating in any manner to, or arising out of the
Business or use of the Acquired Assets, or (iii) disputes with customers or
vendors affecting, relating in any manner to, or arising out of the Business or
use of the Acquired Assets. There are no Actions pending or to the best of the
knowledge of the Sellers and the Seller Parent, any threatened Actions, nor is
there any basis therefor, with respect to (A) any of the Acquired Assets or
Assumed Liabilities, or (B) the employment by, or association with, the Sellers
or any Seller Affiliate, or future employment by, or association with, the Buyer
or any Affiliate of the Buyer, of any of the Transferred Employees. The Sellers
have delivered to the Buyer all material documents and correspondence relating
to such matters referred to in Section 3.1(m) of Disclosure Schedule (including,
in the case of clause (iii) of the first sentence of this Section 3.1(m), any
correspondence evidencing material customer dissatisfaction with either of the
Sellers or their respective products or services).
(n) ACCOUNTS RECEIVABLE. All of the accounts receivable being transferred
and assigned to the Buyer as part of the Acquired Assets, to the extent included
in current assets for the purpose of the Working Capital Adjustment under
Section 2.2, constitute valid and enforceable claims that arose from bona fide
transactions in the Ordinary Course of Business, and are not subject to any
claims, refusals to pay or rights of set-off that will reduce them below the
amount included in current assets, and there is no basis for any such claim,
refusal or right of set-off. Except as set forth in Section 3.1(n) of the
Disclosure Schedule, there is (i) no account
21
debtor that has refused (or, to the best of the knowledge of the Sellers and the
Seller Parent, threatened to refuse) to pay any obligation to either of the
Sellers arising from or relating to the Business, (ii) to the best of the
knowledge of the Sellers and the Seller Parent, no account debtor or note debtor
of the Business is insolvent or bankrupt, and (iii) no account receivable
intended to be transferred as part of the Acquired Assets and that is included
in current assets for the purpose of the Working Capital Adjustment under
Section 2.2 is pledged to any third party by either of the Sellers or any Seller
Affiliate.
(o) ACCOUNTS PAYABLE. Except as set forth in Section 3.1(o) of the
Disclosure Schedule, all accounts payable by either of the Sellers or any Seller
Affiliate that are to be assumed by the Buyer as part of the Assumed Liabilities
have arisen from bona fide transactions in the Ordinary Course of Business, and,
except as set forth in Section 3.1(o) of the Disclosure Schedule, there is no
such account payable delinquent in its payment, except those contested in good
faith and disclosed in Section 3.1(o) of Disclosure Schedule.
(p) COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS AND CONSENTS. Each of the
Sellers and the Seller Parent has complied and is in compliance with all Laws
applicable to the operation of the Business and the use of the Acquired Assets
except where the failure to comply would not have a Material Adverse Effect. To
the knowledge of Sellers and Seller Parent, Section 3.1(p) of the Disclosure
Schedule contains a true and complete list of all governmental licenses,
authorizations, consents, approvals or permits necessary for the conduct of the
Business or the use of the Acquired Assets. Neither of the Sellers is in default
or alleged to be in default under any thereof; and the Sellers have furnished to
the Buyer true and complete copies thereof. None of such licenses, consents,
approvals, authorizations or permits shall be terminated or revoked as a result
of the transactions contemplated hereby or by any of the Related Agreements.
(q) ENVIRONMENTAL MATTERS.
(i) To the best of the knowledge of the Sellers and the Seller Parent,
the Business has been operated in compliance with and is in compliance with
all foreign and domestic laws, governmental statutes (civil and criminal),
common laws, ordinances, codes, regulations, rules, notices, permits,
judgments, requirements, standards, guidelines, judicial and administrative
orders and decrees applicable to it and its properties, assets, operations
and businesses relating to pollution, worker and public health and safety,
and/or environmental protection (collectively "ENVIRONMENTAL LAWS");
(ii) to the best of the knowledge of the Sellers and the Seller
Parent, each of the Sellers and the Seller Affiliates, has obtained and
adhered to all necessary material permits and other approvals necessary to
treat, transport, store, dispose of and otherwise handle Wastes, Hazardous
Wastes and Hazardous Substances; except to the extent that a failure to do
so, either singly or in the aggregate, does not and would not have a
Material Adverse Effect;
(iii) to the best of the knowledge of the Sellers and the Seller
Parent, there have been no emissions, spills, discharges, releases or
threats of releases (as defined in Environmental Laws) at, from, in or on
any property owned, leased or operated by either
22
of the Sellers or any Seller Affiliates or except as permitted by
Environmental Laws or where such emissions, spills, discharges, and
releases do not and would not have a Material Adverse Effect;
(iv) none of the Sellers or Seller Parent knows of any on-site or
off-site location to which it or any Seller Affiliate has transported or
disposed of Wastes, Hazardous Wastes and/or Hazardous Substances or
arranged for the transportation or disposition of Hazardous Wastes and
Hazardous Substances, which site is the subject of any federal, state,
local or foreign enforcement action or any other investigation which could
lead to any claim against either of the Sellers, any Seller Affiliate or
the Buyer for any clean-up cost, remedial work, damage to natural resources
or personal injury, including without limitation any claim under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"); and
(v) to the knowledge of the Sellers and Seller Parent, none of the
Sellers or Seller Affiliates has, nor will it have, any liability in
connection with any release of any Hazardous Waste or Hazardous Substance
into the environment, except to the extent that such liability does not and
would not have a Material Adverse Effect.
For purposes hereof, the term Environmental Laws includes, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. ss. 9601 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. ss. 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. ss. 1251 et seq., the Clean Air Act, 42 U.S.C. ss.
1857 et seq., the Occupational Safety and Health Act of 1970, 29 U.S.C. ss.
651 et seq., and the Toxic Substances Control Act, 15 X.X.X.xx. 2601 et
seq.
(r) LABOR RELATIONS; EMPLOYEES.
(i) Section 3.1(r)(i) of the Disclosure Schedule identifies all
employees employed on the Closing Date by either of the Sellers or any
Seller Affiliate who perform or have performed services in connection with
the Business or any part thereof, excluding (x) any employees performing
legal, accounting or secretarial services; and (y) the Chairman, President,
Acting Chief Financial Officer and General Counsel of the Seller Parent
(the "EMPLOYEES"), and sets forth for each such individual: (i) rate of pay
or annual compensation (including actual or potential bonus payments or
commission arrangements), (ii) job title, (iii) state of employment, (iv)
date of hire, (v) annual vacation and sick time allowance and (vi) accrued
vacation and sick time as of August 1, 2002. Except for the Sellers'
severance pay policy that is generally applicable to all employees, there
are no employment, consulting, severance pay, continuation pay, termination
or indemnification Contracts (hereinafter "EMPLOYMENT CONTRACTS") between
either of the Sellers or any Seller Affiliate and any of the Employees that
is being transferred as part of the Acquired Assets. The Assigned Contracts
do not include any Employment Contracts. The Buyer will not as a direct or
indirect result of the transactions contemplated hereby, be required to pay
or accrue additional benefits, service or accelerated rights to payments
under any Employee Plan, including the right to receive any parachute
payment, as defined in Section 280G of the Code.
23
(ii) Schedule 3.1(r)(ii) contains a list of independent contractors
and project employees of the Sellers or any Seller Affiliate as of the
Closing who perform or have performed services in connection with the
Business or any part thereof ("INDEPENDENT CONTRACTORS"). Sellers and
Seller Parent believe that the Independent Contractors are, and could only
be reasonably considered to be, in fact "independent contractors" and not
"employees" or "common law employees" of the Sellers or any Seller
Affiliate for tax purposes.
(iii) None of the Sellers or Seller Parent is, or to the best of the
knowledge of the Sellers and the Seller Parent, are any of the Employees in
violation or default of any term of any employment, non-disclosure,
non-competition, inventions assignment or any other Contract to which such
Person is a party.
(iv) Except as set forth in Section 3.1(r)(iv) of the Disclosure
Schedule, (A) there are no delinquent payments owed for any wages,
salaries, commissions, bonuses or other direct compensation for any
services performed by any Employee to date, or amounts required to be
reimbursed to such employees, except that Employees may be owed
reimbursement for expenses incurred in the ordinary course of business
prior to Closing, which amounts the Sellers and the Seller Parent agree
they will pay to such employees in accordance with their standard policies
governing reimbursement of expenses, (B) upon termination of the employment
of any such Employees, the Buyer will not be liable to any of such
employees for so-called "severance pay" or any other payments that (x)
accrued on or prior to the Closing Date or as a result of the consummation
of the transactions contemplated hereby or (y) would otherwise accrue to
Sellers or Seller Parent by operation of Law, (C) there is no unfair labor
practice complaint against either of the Sellers or any Seller Affiliate
pending before the National Labor Relations Board or any other Governmental
Authority, and none of the employment policies or practices of either of
the Sellers is currently being audited or investigated by any Federal,
state or local Government Authority, in either case, relating in any manner
to, or arising from the Business or involving any Employee (D) there is no
labor strike, dispute, claim, charge, lawsuit, proceeding, labor slowdown
or stoppage pending, or to the best of the knowledge of the Sellers and the
Seller Parent, threatened against or involving either of the Sellers or any
Seller Affiliate which relates in any manner to the Business or the manner
in which it has been conducted or operated or involves any Employees, (E)
no labor union has taken any action with respect to organizing the
Employees, (F) neither of the Sellers nor the Seller Parent has any
knowledge that (x) any of the Employees intends to terminate his or her
employment or engagement with either of the Sellers or any Seller Affiliate
or, (y) if any of such Employees is offered and accepts employment with or
engagement by the Buyer, that such Employee(s) will or will not remain
employees of the Buyer for at least 180 days after the Closing.
(s) EMPLOYEE BENEFIT PLANS AND CONTRACTS.
(i) There are no Employee Plans of either of the Sellers or any Seller
Affiliate as to which the Buyer will become liable as a result of the
transactions contemplated by this Agreement or any of the Related
Agreements. None of the Acquired Assets is
24
subject to any Encumbrance in favor of the, or enforceable by, the Pension
Benefit Guaranty Corporation.
(ii) The consummation of the transactions contemplated by this
Agreement and the Related Agreements will not (A) cause any severance or
separation pay to become due to any Employee, or (B) accelerate the time of
payment or vesting, or increase the amount, of compensation due to any
Employee, in each case that the Buyer would be legally required to pay or
honor.
(iii) As used herein the term Employee Plan means "employee benefit
plans" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all bonus, phantom stock,
stock appreciation rights, incentive, deferred compensation, retirement or
supplemental retirement, severance, golden parachute, vacation, cafeteria,
dependent care, medical care, employee assistance program, education or
tuition assistance programs, insurance and other similar compensation,
fringe or employee benefit plans, programs or arrangements, and any current
or former employment or executive compensation or severance agreements,
written or otherwise, for the benefit of, or relating to, any present or
former Employee of either of the Sellers or any trade or business (whether
or not incorporated) which is a member of a controlled group or which is
under common control with either of the Sellers within the meaning of
Section 414 of the Code and the regulations promulgated thereunder (an
"ERISA AFFILIATE") and all other written or formal plans or agreements
involving direct or indirect compensation (including any employment
agreements entered into between either of the Sellers and any Employee, but
excluding workers' compensation, unemployment compensation, other
government-mandated programs and the salary and wage arrangements of the
Sellers) currently or previously maintained, contributed to or entered into
by either of the Sellers, or any ERISA Affiliate thereof for the benefit of
any Employee or former Employee under which either of the Sellers or any
ERISA Affiliate thereof has any present or future obligation or liability
(the "EMPLOYEE PLANS"), whether or not such plan or arrangement has been
terminated.
(iv) All pension plans, as that term is defined in Section 3(2) of
ERISA, ("PENSION PLANS") in which Employees participate that are intended
to be qualified under Section 401(a) of the Code and their related trusts
are qualified as to form and operation under Section 401(a) and Section
501(a) of the Code, respectively.
(t) INSURANCE. The Acquired Assets do not include any policies of
liability, theft, fidelity, fire, product liability, errors and omissions,
workmen's compensation, indemnification of directors and officers or other
similar forms of insurance held by the Sellers or the Seller Parent in
connection with, or that directly relate, to the Business or any part thereof,
the Acquired Assets or the Assumed Liabilities. To the knowledge of the Sellers
and the Seller Parent, neither of the Sellers nor the Seller Parent has, since
their inception, been denied or had revoked or rescinded any policy of insurance
in connection with their operation of the Business or the Acquired Assets.
(u) POWER OF ATTORNEY. Section 3.1(u) of the Disclosure Schedule sets forth
a true and complete list of the names of all Persons, firms, associations,
corporations or business
25
organizations holding general or special powers of attorney from the Sellers or
the Seller Parent relating in any manner to the Business, the Acquired Assets or
the Acquired Liabilities and a summary of the terms thereof.
(v) BROKERS. Neither of the Sellers or any Seller Affiliate has, nor have
any of their officers, directors, securityholders or employees, engaged any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated hereby except
Xxxxx & Company incorporated, the fees of which, if any, shall be paid by the
Sellers and the Seller Parent and with respect to which neither the Buyer nor
the Buyer Parent shall have any liability therefor.
(w) RELATED TRANSACTIONS. Except as set forth in Section 3.1(w) of the
Disclosure Schedule, no current or former director, officer or securityholder of
either of the Sellers or the Seller Parent that is an Affiliate of either of the
Sellers or the Seller Parent or any associate (as defined in the rules
promulgated under the Exchange Act) thereof, is now, or has been since January
1, 2001, a party to any Assigned Contract or Assumed Liability (including, but
not limited to, any contract, agreement or other arrangement providing for the
furnishing of services by, or rental of real or personal property from, or
borrowing money from, or otherwise requiring payments to, any such director,
officer or affiliated stockholder of the either of the Sellers or the Seller
Parent or associate thereof), or the direct or indirect owner of an interest in
any corporation, firm, association or business organization which is a present
or potential competitor, supplier or customer of either of the Sellers or the
Seller Parent (other than non-affiliated holdings in publicly-held companies).
(x) TERRITORIAL RESTRICTIONS. Except as set forth in Section 3.1(x) of the
Disclosure Schedule, neither of the Sellers nor any Seller Affiliate is
restricted by any Contract with any other Person from carrying on the Business
anywhere in the world. The Buyer, solely as a result of the consummation of the
transactions contemplated hereby, will not thereby become restricted in carrying
on any business anywhere in the world.
(y) CUSTOMERS. Section 3.1(y) of the Disclosure Schedule sets forth a true
and complete list of the twenty (20) largest revenue producing customers of the
Sellers relating to the Business during the period from July 1, 2001 to the date
hereof.
(z) BOOKS AND RECORDS. Except as set forth in Section 3.1(z) of the
Disclosure Schedule, the minute books of the Sellers provided to the Buyer for
review contain a complete summary of all meetings of and actions by their
directors and stockholders since July 1, 2001 to the date hereof and reflect all
actions referred to in such minutes accurately in all material respects.
(aa) APPROVAL. The Boards of Directors of each of the Sellers and the
Seller Parent (i) have approved this Agreement and each of the Related
Agreements to which the Sellers or the Seller Parent is a party, as the case may
be, and the consummation of transactions contemplated hereby and thereby and
(ii) have determined that the consummation of transactions contemplated by this
Agreement and the Related Agreements are in the best interests of the Seller
Parent and the stockholders of the Seller Parent, as the case may be, and are on
terms that are fair to such stockholders. The approval of the sole stockholders
of the Sellers is the only approval of
26
stockholders of any class or series of capital stock or other securities of the
Sellers or the Seller Affiliates necessary to authorize the execution, delivery
and performance by the Sellers and the Seller Parent of this Agreement and each
of the Related Agreements and the consummation of transactions contemplated
hereby and thereby.
(bb) SOLE SHAREHOLDER. Seller Parent or a Seller Affiliate owns 100% of the
outstanding capital stock of each of the Sellers.
3.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE BUYER PARENT. The
Buyer and the Buyer Parent jointly and severally represent and warrant to the
Sellers and the Seller Parent as follows:
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. The Buyer (i) is
a corporation duly organized, validly existing and in good standing under the
law of the State of Delaware, and (ii) has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted, to enter into this Agreement and each of
the Related Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby.
(b) AUTHORITY. The execution, delivery and performance by the Buyer and the
Buyer Parent of this Agreement and each of the Related Agreements to which it is
party, and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of the
Buyer and the Buyer Parent. This Agreement and each of the Related Agreements to
which the Buyer or the Buyer Parent is a party are the valid and binding
obligations of the Buyer and the Buyer Parent, respectively, enforceable against
the Buyer and the Buyer Parent in accordance with their respective terms except
as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the rights
of creditors generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Neither the execution, delivery and performance by the Buyer or the Buyer Parent
of this Agreement and each of the Related Agreements to which the Buyer or the
Buyer Parent is a party, nor the consummation by the Buyer and the Buyer Parent
of the transactions contemplated hereby or thereby, will in any material respect
(A) conflict with, (B) result in any violation of, (C) cause a default under
(with or without due notice, lapse of time or both), (D) give rise to any right
of termination, amendment, cancellation or acceleration of any obligation
contained in or the loss of any benefit under, (E) result in the creation of any
Encumbrance on or against any assets, rights or property of the Buyer or the
Buyer Parent, under any term, condition or provision of (x) any Law applicable
to the Buyer or the Buyer Parent or any of its respective properties, assets or
rights or (y) the Buyer's or the Buyer Parent's Certificate of Incorporation or
by-laws, as amended through the date hereof, in each case, which conflict,
breach, default or violation or other event would prevent the consummation of
the transactions contemplated by this Agreement and each of the Related
Agreements or the performance in all material respects of the obligations of the
Buyer or the Buyer Parent. Except as contemplated by this Agreement, no permit,
authorization, consent or approval of or by, or any notification of or filing
with, any Governmental Authority or other Person is required in connection with
the execution, delivery and performance by the Buyer and the Buyer Parent of
this Agreement and each of the Related Agreements to which it is a party or the
consummation of the transactions contemplated hereby
27
or thereby, other than such other consents, waivers, authorizations, filings,
approvals and registrations which if not obtained or made would not impair in
any material respect the ability of the Buyer or the Buyer Parent to consummate
the transactions contemplated by this Agreement or to perform its respective
obligations under this Agreement.
(c) BROKERS. Neither the Buyer, the Buyer Parent nor any of their
Affiliates, is obligated, or will become obligated, to make any payment to any
broker, finder or other Person in respect to the transactions contemplated
hereby or by the Related Agreements.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 LITIGATION COOPERATION. If a party hereto shall become engaged or
participate in any investigation, claim, litigation, arbitration, mediation, or
other proceeding with any third party relating in any way to the Business, the
Acquired Assets or the Assumed Liabilities, the other parties shall cooperate in
all reasonable respects with such party in connection therewith, including,
without limitation, making available to such parties, without cost, all relevant
records and using its commercially reasonable efforts to make available to the
other the then employees of the parties or their Affiliates who may be helpful
with respect to such claim or litigation.
4.2 PUBLIC ANNOUNCEMENTS. The parties hereto agree that, to the maximum
extent feasible, but subject to the public disclosure and other legal
obligations of the Buyer, the Buyer Parent, the Sellers and the Seller Parent
and regulatory obligations to which each may be subject, they shall advise and
confer prior to the issuance (and provide copies to the other party prior to
issuance) of any public announcement or reports or statements with respect to
the transactions contemplated hereby.
4.3 TRANSFER TAXES. The Sellers and the Seller Parent, on the one hand and
the Buyer and the Buyer Parent, on the other hand, shall be jointly and
severally responsible for the timely payment of, and shall indemnify and hold
harmless the others against, all sales (including, without limitation, bulk
sales), use, value added, documentary, stamp, gross receipts, registration,
transfer, conveyance, excise, recording, license and other similar Taxes and
fees ("TRANSFER TAXES") to which the Sellers and the Seller Parent on the one
hand and the Buyer and the Buyer Parent on the other hand may be subject by
operation of Law, arising out of or in connection with or attributable to the
transactions effected pursuant to this Agreement and the Related Agreements. The
Sellers and the Seller Parent, on the one hand, and the Buyer and the Buyer
Parent, on the other hand, shall prepare and timely file all Tax Returns
required to be filed by it or them in respect of such Transfer Taxes (including,
without limitation, all notices required to be given with respect to bulk sales
taxes). As soon as practicable after the Closing Date, the Sellers and the
Seller Parent agree to obtain tax clearance certificates from the applicable
state tax authorities in each of the jurisdictions in which any of them
maintained an office within one (1) year of the Closing Date and upon receipt
thereof to provide copies of the same to the Buyer.
28
4.4 EMPLOYMENT MATTERS.
(a) The Sellers and the Seller Parent each will not interfere with the
Buyer's efforts to hire those employees, consultants, and officers of the
Sellers and the Seller Parent including without limitation Xxxxxx Xxxxx (the
"EMPLOYEES") the Buyer seeks to hire after the Closing Date. The Sellers and the
Seller Parent will not terminate any Employees unless and until Buyer has had an
opportunity to meet with and interview such Employees, provided that such
meeting occurs no later than midnight August 6, 2002. The Sellers and the Seller
Parent shall cooperate with Buyer to arrange such meetings. The Buyer may, but
is not required to, make offers of employment or consultancy to all or any of
such individuals. The terms and conditions (e.g., compensation matters,
full-time, part-time, temporary, permanent) of such offers shall be determined
by the Buyer in its sole discretion. Buyer agrees to notify Seller Parent of
those Employees to whom it makes offers of employment by August 7, 2002. Those
Employees who agree to accept a position with the Buyer or its Affiliates shall
be referred to herein as the "TRANSFERRED EMPLOYEES". Each of the Sellers and
the Seller Parent hereby consents to such hiring or engagement of the
Transferred Employees and effective as of the Closing waives in perpetuity, with
respect to the employment or engagement by the Buyer or any of its Affiliates of
the Transferred Employees, any claims or rights either of the Sellers or the
Seller Parent may have against the Buyer or any of its Affiliates or against any
such Transferred Employees under any non-competition, confidentiality,
employment, assignment of inventions or similar Contract.
(b) Neither the Buyer nor any of its Affiliates shall have any Liability
which arises from either of Sellers or Seller Parent's employment of any current
or former employee, officer, director or consultant of the Sellers or any Seller
Affiliate or Employee Plan or any claim thereof or related thereto. From and
after the Closing, the Sellers and the Seller Parent shall remain jointly and
severally responsible for any and all Liabilities in respect of the current and
former Employees, including the Transferred Employees and their beneficiaries
and dependents, relating to or arising in connection with or as a result of (i)
the employment or the actual or constructive termination of employment or
consultancy of any such employee or consultant by either of the Sellers or any
Seller Affiliate (including, without limitation, in connection with the
consummation of the transactions contemplated by this Agreement), (ii) the
participation in or accrual of benefits or compensation under, or the failure to
participate in or to accrue compensation or benefits under, or the operation and
administration of, any Employee Plan or other employee or retiree benefit or
compensation plan, program, practice, policy, agreement or arrangement of either
of the Sellers or any Seller Affiliate or (iii) accrued but unpaid salaries,
wages, bonuses, incentive compensation, vacation or sick pay or other
compensation or payroll items (including, without limitation, deferred
compensation). Each of the Sellers and the Seller Parent shall remain jointly
and severally responsible for the payment of any and all retention, change in
control, severance or other similar compensation or benefits which are or may
become payable to any of their Employees in connection with the consummation of
the transactions contemplated by this Agreement.
(c) At the request of the Buyer and to the extent commercially reasonable
and not requiring any costs or expenses to be paid by Sellers or Seller Parent,
the Sellers and the Seller Parent will cooperate with the Buyer to (i) treat the
Buyer as a "successor employer" and the Sellers or the Seller Parent as a
"predecessor," within the meaning of sections 3121(a)(1) and 3306(b)(1) of the
Code, with respect to Transferred Employees who are employed by the Buyer
29
for purposes of Taxes imposed under the United States Federal Unemployment Tax
Act ("FUTA") or the United States Federal Insurance Contributions Act ("FICA")
and (ii) avoid, to the extent possible, the filing of more than one IRS Form W-2
with respect to each such Transferred Employee for the calendar year within
which the Closing Date occurs, but the Buyer shall not be treated as a successor
employer for any other purpose. Further, at the request of the Buyer with
respect to any particular applicable tax Law relating to employment,
unemployment insurance, social security, disability, workers' compensation,
payroll, health care or other similar Tax other than Taxes imposed under FICA
and FUTA, the Sellers and the Seller Parent will (i) treat the Buyer as a
successor employer and the Sellers or Seller Parent as a predecessor employer,
within the meaning of the relevant provisions of such tax Law, with respect to
Transferred Employees who are employed by the Buyer and (ii) cooperate with the
Buyer to avoid, to the extent possible, the filing of more than one individual
information reporting form pursuant to each such tax Law with respect to each
such Transferred Employee for the calendar year within which the Closing Date
occurs.
(d) For a period of two (2) years from the Closing Date, each of the
Sellers and the Seller Parent, will not, and will not permit any of their
respective Affiliates to, solicit, offer to employ or retain the services of or
otherwise interfere with the relationship of the Buyer or any of its Affiliates
with any individual employed by the Buyer or its Affiliates.
4.5 TRANSITION.
(a) (i) The Sellers and the Seller Parent each agrees that it will not take
any action that is designed or intended to have the effect of discouraging any
customer, supplier, licensor, lessor or other business associate from
maintaining the same business relationships with respect to the Business or the
Acquired Assets after the Closing as it maintained with respect to the Business
or the Acquired Assets prior to the Closing. The Sellers and the Seller Parent
shall promptly refer all customer inquiries relating to the Business or the
Acquired Assets to the Buyer from and after the Closing.
(ii) For thirty days following Closing, the Sellers and the Seller Parent
shall cooperate with the Buyer as Buyer may reasonably request to effectuate the
delivery of the Acquired Assets (except those Acquired Assets set forth in
Schedules 1.1(c), 1.1(d) or 1.1(e)) to such location or locations as the Buyer
may request, at Buyer's sole cost and expense. The Buyer, at its election, may
notify the Seller Parent that the Buyer would like to assume some or all of the
Sellers' or the Seller Parent's existing storage or warehouse facilities and/or
arrangements housing any of the Acquired Assets ("FACILITIES"). In such event,
the Sellers or Seller Parent shall use commercially reasonable efforts to assist
the Buyer in assuming the leases or other contractual arrangements governing
such Facilities, but in no event shall Sellers or Seller Parent be required to
maintain any such Facilities for more than thirty days following Closing.
(iii) The Sellers and the Seller Parent shall use commercially reasonable
efforts to maintain the functionality of the phone systems, computer networks,
servers and systems hardware included in the Acquired Assets or housing any
Acquired Assets, including any data relating to the Business or included in the
Acquired Assets as of the Closing Date for a period of at least (30) thirty days
after the Closing Date. The Buyer shall use its commercially reasonable efforts
to transition such systems, networks, servers and other hardware and to migrate
such data
30
over to systems or locations controlled by the Buyer as promptly as practicable
after the Closing Date. If the location housing such server, system, data or
other hardware ceases to be leased or occupied by the Seller or any Seller
Affiliate, the Seller Parent shall notify the Buyer and the Buyer shall promptly
make arrangements to transfer such equipment to a location or provide a host for
any such servers, systems or data.
(iv) As soon as practicable following the Closing Date, but in any event
within (10) Business Days, the Sellers and the Seller Parent shall deliver to
the Buyer all software licenses and software source and object code and related
documentation to the Buyer.
(b) For a period of thirty (30) days following the Closing Date, the Buyer
and the Buyer Parent agree to permit Transferred Employees to devote an amount
of their working time that is reasonably acceptable to the Buyer and the Buyer
Parent (and which otherwise does not unreasonably interfere with the completion
by such individuals of his or her duties as assigned by the Buyer or the Buyer
Parent from time to time after Closing) to assist the Sellers and the Seller
Parent in winding up any of the affairs of Sellers that do not constitute
Acquired Assets or Assumed Liabilities.
(c) Promptly following the Closing Date, each of the Sellers shall change
its name to a name other than "American Passage Media" and "Network Event
Theater".
4.6 VALUE OF ACQUIRED ASSETS. The parties acknowledge and agree that the
transactions contemplated hereby are the result of arm's length negotiations and
that the fair market value of the Acquired Assets as of the Closing is equal to
the Purchase Price.
ARTICLE V
INDEMNIFICATION
5.1 SURVIVAL.
(a) All representations and warranties of the parties contained in this
Agreement shall survive the Closing Date, but no party shall be liable to the
other for misrepresentation or breach of warranty except to the extent that
notice of a claim is asserted in writing and delivered to it prior to 5:00 New
York City time on August 6, 2003; provided, however, that the representations
and warranties contained in the first sentence of Section 3.1(g) and in Section
3.1(v) shall survive for the full period of the applicable statute of
limitations related to such representations and warranties. Any notice of a
claim for misrepresentation or breach of warranty shall state in reasonable
detail the representation or warranty with respect to which the claim is made,
the alleged basis for the claim, and the amount of liability asserted against
the other party by reason of the claim to the extent known.
(b) The Buyer shall be deemed to have waived any claim for
misrepresentation or breach of warranty under Section 3.1 if, prior to the
Closing, it had actual knowledge of that misrepresentation or breach of
warranty; provided, however, that the Buyer shall only be deemed to have actual
knowledge of those misrepresentations and breaches of warranty if, prior to the
Closing, the relevant facts are known to Xxxx Xxxxx, Xxxx XxXxxxx or Xxx Xxxxxxx
as of the Closing.
31
(c) The Sellers and the Seller Parent shall be deemed to have waived any
claim for misrepresentation or breach of warranty under Section 3.2 if, prior to
the Closing, it had actual knowledge of that misrepresentation or breach of
warranty.
5.2 INDEMNIFICATION.
(a) Subject to the provisions of Sections 5.3, 5.4, 5.5 and 5.6, the
Sellers and the Seller Parent shall jointly and severally indemnify and hold
harmless the Buyer, the Buyer Parent and their respective Affiliates, successors
and assigns, and the respective officers, directors, employees and agents of
each of the foregoing, from and against all Losses (as defined below) that any
of them may suffer, sustain or become subject to, arising from or as a result of
(i) any misrepresentation by the Sellers or the Seller Parent in this Agreement
or any breach by the either of the Sellers or the Seller Parent of any warranty,
covenant or other agreement contained in this Agreement (unless waived by
Buyer); (ii) the failure of either of the Sellers or the Seller Parent to pay,
perform and discharge when due any Liabilities of the Sellers or the Seller
Parent other than the Assumed Liabilities and (iii) the failure of the Sellers
to terminate the UCC filings listed in Section 3.1(g) of the Disclosure Schedule
regardless of whether or not Sellers and Seller Parent have exerted commercially
reasonable efforts to obtain such terminations.
(b) Subject to the provisions of Sections 5.3, 5.4, 5.5 and 5.6, the Buyer
and the Buyer Parent shall jointly and severally indemnify and hold harmless the
Sellers, the Seller Parent and their respective Affiliates, successors and
assigns, and the respective officers, directors, employees and agents of each of
the foregoing, from and against all Losses (as defined below) that any of them
may suffer, sustain or become subject to, arising from or as a result of (i) any
misrepresentation by the Buyer or the Buyer Parent in this Agreement or any
breach by the Buyer or the Buyer Parent of any warranty, covenant or other
agreement contained in this Agreement (unless waived by the Sellers or the
Seller Parent) and (ii) the failure of either the Buyer or the Buyer Parent to
pay, perform and discharge when due any Assumed Liabilities.
(c) For purposes hereof, "Losses" means any and all losses, demands,
actions or causes of action, suits, proceedings, investigations, arbitrations,
claims, damages, liabilities (contingent or otherwise), payments, obligations,
expenses (including reasonable attorneys' and accountants' fees), assessments or
Taxes (including interest or penalties thereon) sustained, suffered or incurred
by any party arising from or in connection with any such matter that is the
subject of indemnification under this Article.
5.3 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 parties shall promptly give written notice to the
indemnifying parties of any Third Party Claim that might give rise to any Loss
by the indemnified parties, 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
32
indemnifying parties from any liability which they may have to the indemnified
parties 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 parties and they were not otherwise aware of such
action or claim).
(b) The indemnifying parties shall defend any Third Party Claims with
counsel of their own choosing, and shall act reasonably and in accordance with
their good faith business judgment in handling such Third Party Claims. The
indemnifying parties, on the one hand, and the indemnified parties, 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.
5.4 LIMITATIONS ON LIABILITY. Notwithstanding anything to the contrary in
this Agreement, (a) neither the Sellers nor Seller Parent, on the one hand, nor
the Buyer or Buyer Parent, on the other hand, shall be liable to the other for
misrepresentation or breach of warranty except to the extent that the aggregate
Losses incurred by the other as a result of all such misrepresentations and
breaches of warranty exceeds the sum of $100,000 and (b) in calculating the
amount of the Losses to the Buyer and Buyer Parent for misrepresentation or
breach of warranty by the Sellers or the Seller Parent (i) the Sellers and the
Seller Parent shall receive credit for any reduction in the indemnified party's
tax liability and any recovery by an indemnifying party from any third party
(including insurance proceeds) as a result of the facts or circumstance giving
rise to the Losses; provided, however, that no indemnified party shall be
obligated to seek any payment pursuant to the terms of any insurance policy in
respect of any Loss and (ii) no amount shall be included except for the
indemnified party's actual out-of-pocket costs and expenses.
5.5 CAP ON LIABILITY. The aggregate liability of the Sellers to the Buyer
for misrepresentation or breach of warranty under this Agreement shall be
$700,000, and the Buyer shall have no other recourse against the Sellers or the
Seller Parent or any of their respective Affiliates. Notwithstanding any
provision of this Agreement to the contrary, nothing contained in this Agreement
shall in any way limit, impair, modify or otherwise affect the rights of any
party to bring any claim, demand, suit or cause of action otherwise available to
such party based upon (i) an allegation or allegations that the other party had
an intent to defraud or made a willful, intentional or reckless
misrepresentation or willful omission of a material fact in connection with this
Agreement or any Related Agreement and the transactions contemplated hereby or
thereby, (ii) any breach or alleged breach of any of the representations or
warranties set forth in Section 3.1(g), or 3.1(v) or (iii) the provisions for
adjustment to the Purchase Price pursuant to Section 2.2. Payments made or owed
under Section 2.3 shall not be counted towards the cap specified in this Section
5.5. In the event the Sellers and the Seller Parent are unable to terminate the
UCC filings listed in Section 3.1(g) of the Disclosure Schedule, then any Losses
incurred by Buyer as a result of such failure shall not be subject to the cap
specified in this Section 5.5.
5.6 EXCLUSIVE REMEDY. The indemnification provisions of this Section 6
shall be the exclusive remedy for any misrepresentation or breach of warranty
under this Agreement, and no
33
party shall pursue any other remedy in respect of any such misrepresentation or
breach. In addition, with respect to any misrepresentation or breach of the
warranty set forth in Section 3.1(g)(ii) or otherwise relating to the number,
condition or location of any Gym Boards, Campus Voice Boards or AdRax, the
Buyer's exclusive remedy shall be to seek payment under the provisions of
Section 2.3.
ARTICLE VI
MISCELLANEOUS
6.1 EXPENSES. Each party hereto shall bear its own fees and expenses in
connection with the transactions contemplated hereby.
6.2 ENTIRE AGREEMENT. This Agreement (including the Disclosure Schedule and
the Exhibits attached hereto), the Related Agreements and the other writings
referred to herein and contemplated hereby contain the entire agreement among
the parties hereto with respect to the transactions contemplated hereby and
supersede all prior agreements or understandings, written or oral, among the
parties with respect thereto. Except as specifically set forth in this Agreement
or the Related Agreements, there are no representations or warranties by any
party in connection with the transactions contemplated by this Agreement.
6.3 INTERPRETATION. Descriptive headings are for convenience only and shall
not control or affect the meaning or construction of any provision of this
Agreement. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The word "herein" and similar references mean, except where a specific Section
or Article reference is expressly indicated, the entire Agreement rather than
any specific Section or Article. The table of contents and the headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
6.4 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and shall be sufficient if delivered
personally or sent by nationally-recognized overnight courier or by registered
or certified mail, postage prepaid, return receipt requested, or by electronic
mail with a copy thereof to be delivered by mail (as aforesaid) within 24 hours
of such electronic mail, or by facsimile, with confirmation as provided above
addressed as follows:
(i) if to the Buyer, to:
Cass Communications, Inc.
c/o Alloy, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
34
c/o Alloy, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
and
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
(ii) if to the Sellers or the Seller Parent, to:
YouthStream Media Networks, Inc.
00 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
with copies to (which shall not constitute notice):
YouthStream Media Networks, Inc.
00 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such notices
or communications shall be deemed to be received (a) in the case of personal
delivery, on the date of such delivery, (b) in the case of nationally-recognized
overnight courier, on the next business day after the date when sent, (c) in the
case of facsimile transmission or electronic mail, upon confirmed receipt, and
(d) in the case of mailing, on the third business day following the date on
which the piece of mail containing such communication was posted.
6.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts by original or facsimile signature, each such counterpart shall be
an original instrument, and all such counterparts together shall constitute one
and the same agreement.
6.6 GOVERNING LAW; VENUE. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without reference to its
conflicts of laws
35
provisions. The parties irrevocably and unconditionally submit to the exclusive
jurisdiction of the Federal courts sitting in New York City over any suit,
action or proceeding arising out of or relating to this Agreement or any Related
Agreement. The parties irrevocably and unconditionally waive any objection to
the laying of venue of any such suit, action or proceeding brought in such court
and any claim that any such suit, action or proceeding brought in such court has
been brought in an inconvenient forum. The parties agree that a final judgment
in any such suit, action or proceeding brought in such court shall be conclusive
and binding upon the parties and may be enforced in any other courts to whose
jurisdiction other parties are or may be subject, by suit upon such judgment.
6.7 BENEFITS OF AGREEMENT. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement shall not be
assignable by the Sellers or the Seller Parent without the prior written consent
of the Buyer.
6.8 PRONOUNS. As used herein, all pronouns shall include the masculine,
feminine, neuter, singular and plural thereof whenever the context and facts
require such construction.
6.9 AMENDMENT, MODIFICATION AND WAIVER. This Agreement shall not be altered
or otherwise amended except pursuant to an instrument in writing signed by the
Buyer, the Sellers and the Seller Parent; provided, however, that any party to
this Agreement may waive in writing any obligation owed to it by any other party
under this Agreement. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
6.10 NO THIRD PARTY BENEFICIARIES. Nothing express or implied in this
Agreement is intended to confer, nor shall anything herein confer, upon any
Person other than the parties and the respective successors or assigns of the
parties, any rights, remedies, obligations or liabilities whatsoever, except to
the extent that such third Person is an Indemnified Person or Indemnifying
Person in respect of the indemnification provided in accordance with Article VII
of this Agreement.
6.11 CONSENTS. Except as otherwise expressly provided in this Agreement,
any consent or approval of the Buyer requested or permitted hereunder may be
given or withheld in the Buyer's sole discretion.
6.12 INTERPRETATION. This Agreement has been negotiated between the parties
and will not be deemed to be drafted by, or the product of, any party. As such,
this Agreement will not be interpreted in favor of, or against, any party.
6.13 NO JOINT VENTURE. No party hereto shall make any warranties or
representations, or assume or create any obligations, on the other party's
behalf except as may be expressly permitted hereunder or in writing by such
other party. Each party hereto shall be solely responsible for the actions of
all its respective employees, agents and representatives.
6.14 SPECIFIC PERFORMANCE. Certain of the covenants contemplated by this
Agreement are unique and any failure on the part of either of the Sellers or
Seller Parent to perform such covenants will not be fully compensable in damages
and the breach or threatened breach of such
36
provisions of this Agreement would cause the Buyer irreparable harm.
Accordingly, in addition to and not in limitation of any other remedies
available to the Buyer for a breach or threatened breach of such covenants, the
Buyer will be entitled to specific performance of Sections 1.7, 1.9, 4.3, 4.4
and 4.5 of this Agreement upon any breach or threatened breach by either of the
Sellers or the Seller Parent, and to an injunction restraining any such party
from such breach or threatened breach.
37
IN WITNESS WHEREOF, each of the parties hereto has caused this Asset
Purchase Agreement to be executed on its or his behalf as of the day and year
first above written.
ALLOY, INC.
By: /s/ XXXX XXXXXXX
------------------------------
Xxxx XxXxxxx
Vice President and General Counsel
CASS COMMUNICATIONS, INC.
By: /s/ XXXX XXXXXXX
------------------------------
Xxxx XxXxxxx
Assistant Secretary
AMERICAN PASSAGE MEDIA, INC.
By: /s/ XXXXXX XXXXX
------------------------------
Xxxxxx Xxxxx
President
NETWORK EVENT THEATER, INC.
By: /s/ XXXXXX XXXXX
------------------------------
Xxxxxx Xxxxx
President
YOUTHSTREAM MEDIA NETWORKS, INC.
By: /s/ XXXXXX XXXXX
------------------------------
Xxxxxx Xxxxx
President
38