EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
By and Among
Launch Media, Inc.;
TD Merger Sub, Inc.;
Certain Principal Stockholders of Musicom, Inc.
and
Musicom, Inc.
Dated
January 14, 2000
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER..................................................................1
Section 1.1 General................................................................1
Section 1.2 The Merger.............................................................1
Section 1.3 Effective Time.........................................................1
Section 1.4 Articles of Incorporation..............................................2
Section 1.5 By-Laws................................................................2
Section 1.6 Directors and Officers.................................................2
ARTICLE I.A MERGER CONSIDERATION; CAPITAL STOCK; PURCHASE PRICE.........................2
Section 1.A.1 Payment of Merger Consideration........................................2
Section 1.A.2 Conversion of Company and Newco Stock..................................2
Section 1.A.3 Surrender of Certificates; Payment for Shares..........................3
Section 1.A.4 Transfers of Certificates..............................................3
Section 1.A.5 Escrow.................................................................3
Section 1.A.6 Transfer Restrictions..................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF BUYER AND NEWCO...........................3
Section 2.1 Organization...........................................................3
Section 2.2 Authorization..........................................................4
Section 2.3 Non-Contravention......................................................4
Section 2.4 Brokerage..............................................................4
Section 2.5 Buyer Common Stock.....................................................4
Section 2.6 Capital Structure......................................................4
Section 2.7 Securities filings.....................................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE
PRINCIPAL STOCKHOLDERS AND THE SELLER STOCKHOLDERS..........................5
Section 3.1 Organization...........................................................5
Section 3.2 Articles of Incorporation, Bylaws and Agreements.......................5
Section 3.3 Capital Structure......................................................5
Section 3.4 Due Authorization......................................................6
Section 3.5 Financial Statements and Absence of Changes of Profits and Loss........6
Section 3.6 Environmental Matters..................................................7
Section 3.7 Liabilities............................................................7
Section 3.8 Title to and Condition of Assets and Property..........................7
Section 3.9 Intellectual Property..................................................8
Section 3.10 Contracts..............................................................9
Section 3.11 Litigation and Compliance.............................................10
Section 3.12 Licenses and Permits..................................................10
Section 3.13 Insurance.............................................................11
Section 3.14 Employee Benefit Plans................................................11
Section 3.15 Taxes and Returns.....................................................11
Section 3.16 No Adverse Actions....................................................13
Section 3.17 Labor Matters.........................................................13
Section 3.18 Disclosure............................................................14
Section 3.19 Brokers...............................................................14
Section 3.20 Takeover Statutes.....................................................14
ARTICLE III.A REPRESENTATIONS AND WARRANTIES OF EACH SELLING
STOCKHOLDER................................................................14
Section 3.A.1 Ownership of Capital Stock............................................14
Section 3.A.2 Approval of the Merger................................................15
Section 3.A.3 Brokers...............................................................15
Section 3.A.4 Rights of First Refusal...............................................15
Section 3.A.5 Investment Representations............................................15
ARTICLE IV ADDITIONAL AGREEMENTS OF THE PARTIES.......................................15
Section 4.1 Further Assurances....................................................15
Section 4.2 Payment of Taxes......................................................16
Section 4.3 Employees.............................................................16
Section 4.4 Employment Agreements; Settlements....................................16
Section 4.5 SEC Filings...........................................................16
Section 4.6 Tax-Free Reorganization...............................................16
Section 4.7 Confidentiality.......................................................16
ARTICLE V THE CLOSING................................................................17
Section 5.1 Closing...............................................................17
Section 5.2 Deliveries by the Company and the Selling Stockholders................17
Section 5.3 Buyer's Deliveries....................................................18
ARTICLE VI INDEMNIFICATION............................................................18
Section 6.1 Survival..............................................................18
Section 6.2 Indemnification by the Selling Stockholders...........................19
Section 6.3 Indemnification by Buyer..............................................20
Section 6.4 Claims................................................................20
Section 6.5 Notice of Third Party Claims, Assumption of Defense...................21
Section 6.6 Settlement or Compromise..............................................21
Section 6.7 Failure of Indemnifying Person to Act.................................22
Section 6.8 Net Losses............................................................22
Section 6.9 Special Indemnification...............................................22
ARTICLE VII POWER OF ATTORNEY..........................................................23
Section 7.1 Appointment of Stockholders' Agent....................................23
Section 7.2 Irrevocable; Binding on Successors, Etc. .............................23
ARTICLE VIII MISCELLANEOUS..............................................................24
Section 8.1 Expenses..............................................................24
Section 8.2 Governing Law.........................................................24
Section 8.3 Dispute Resolution; Arbitration.......................................24
Section 8.4 Notices...............................................................25
Section 8.5 Assignment............................................................26
Section 8.6 Section Headings......................................................26
Section 8.7 Amendment.............................................................26
Section 8.8 Counterparts..........................................................27
Section 8.9 Entire Agreement......................................................27
Section 8.10 Binding Effect........................................................27
Section 8.11 Severability..........................................................27
Section 8.12 Third Parties.........................................................27
Section 8.13 Stock Legend..........................................................27
Section 8.14 Certain Definitions...................................................27
Section 8.15 Tax Records...........................................................28
EXHIBITS
Exhibit A - Form of Certificate of Merger
Exhibit B - Capitalization and Allocation of Purchase Price
Exhibit C - Form of Escrow Agreement
Exhibit D - Form of Offer Letter
Exhibit E - Form of Employment Agreement for Robert Schaefer
Exhibit F - Form of Employment Agreement for Alan Schaefer
SCHEDULES
Schedule 3.1 Foreign Qualification
Schedule 3.5 Material Adverse Changes
Schedule 3.7 Liabilities
Schedule 3.9 Intellectual Property
Schedule 3.10 Contracts
Schedule 3.11 Litigation
Schedule 3.12(a) Authorizations
Schedule 3.12(b) Consents
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Taxes
Schedule 3.16 Adverse Actions
Schedule 4.3 Employees
EXECUTION COPY
AGREEMENT
This Agreement and Plan of Merger (the "Agreement") is made as of
January 14, 2000 by and among LAUNCH Media, Inc., a Delaware corporation
("Buyer"), TD Merger Sub, Inc., a Georgia corporation and wholly owned
subsidiary of Buyer ("Newco"), Robert Schaefer and Alan Schaefer
(collectively, the "Principal Stockholders") and Musicom, Inc., a Georgia
corporation (the "Company").
RECITALS
WHEREAS, on the terms and subject to the conditions contained
herein, Buyer desires to acquire (i) all of the issued and outstanding
shares of common stock, par value $.001, of the Company (the "Common
Shares") and (ii) all of the issued and outstanding shares of Series A
Participating Preferred Stock, par value $.001, of the Company (the
"Preferred Shares") (the "Common Shares" and the "Preferred Shares" shall
be collectively referred to herein as the "Shares") through a merger of
Newco with and into the Company (the "Merger");
WHEREAS, each of the stockholders of the Company (the "Selling
Stockholders") and the Company desire to effect the Merger on the terms and
subject to the conditions contained herein; and
WHEREAS, the parties to this Agreement intend that this Agreement
be approved and adopted by all relevant parties as a plan of reorganization
within the provisions of Section 368(a)(1)(A) and 368(a)(2)(E) of the
Internal Revenue Code of 1986 as amended.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, agreements, representations and warranties herein contained, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 General. This Agreement, and the form of Certificate
of Merger attached hereto as Exhibit A (the "Certificate of Merger"),
provide for, upon the terms and conditions contained herein and therein,
the consummation of the Merger at the Effective Time (as defined in Section
1.3 below).
Section 1.2 The Merger. In accordance with the provisions of this
Agreement and the Georgia Business Corporation Code ("GBCC"), at the
Effective Time, Newco shall be merged with and into the Company, and the
Company shall be the surviving corporation (the "Surviving Corporation")
and shall continue its corporate existence under the laws of the State of
Georgia. The separate corporate existence of Newco shall terminate at the
Effective Time. The Merger shall have the effects specified in the GBCC.
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Section 1.3 Effective Time. Subject to the provisions of this
Agreement, the Merger shall be effected by the signing and filing of the
Certificate of Merger with the Secretary of State of the State of Georgia
in accordance with the GBCC, immediately after the Closing. The term
"Effective Time" means the date and time when the Merger becomes effective,
as set forth in the Certificate of Merger.
Section 1.4 Articles of Incorporation. The Articles of
Incorporation of Newco, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation,
until amended in accordance with the provisions thereof and the GBCC.
Section 1.5 By-Laws. The By-Laws of Newco, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation, until amended in accordance with the provisions of
the GBCC and the Articles of Incorporation of the Surviving Corporation.
Section 1.6 Directors and Officers. At the Effective Time, the
directors and officers of Newco immediately prior to the Effective Time
shall be the directors and officers of the Surviving Corporation, each to
hold office in accordance with the provisions of the Articles of
Incorporation and By-Laws of the Surviving Corporation.
ARTICLE I.A
MERGER CONSIDERATION; CAPITAL STOCK; PURCHASE PRICE
Section 1.A.1 Payment of Merger Consideration. At the Closing (as
hereinafter defined), Buyer shall: (i) pay to each Selling Stockholder the
amount in cash set forth opposite such Selling Stockholder's name on
Exhibit B under the column entitled "Amount of Cash to be Received at
Closing" (which amount shall include cash in lieu of fractional shares of
Buyer Common Stock (as hereinafter defined)) (the "Cash Payment"), (ii)
issue to each Selling Stockholder the number of shares of common stock of
Buyer, par value $.001 per share ("Buyer Common Stock"), set forth opposite
such Selling Stockholder's name on Exhibit B under the column entitled
"Number of Shares of Buyer Common Stock to be Received at Closing" (the
"Merger Shares") and (iii) deposit the aggregate number of shares of Buyer
Common Stock listed under the column on Exhibit B entitled "Number of
Shares of Buyer Common Stock to be held in Escrow" (the "Escrow Shares"
and, together with the Cash Payment and the Merger Shares, the "Merger
Consideration") in the Escrow (as hereinafter defined). At the Closing,
Buyer shall pay all cash amounts by means of wire transfer of immediately
available funds to a bank account or accounts designated by the Selling
Stockholders. The Selling Stockholders hereby acknowledge that the Buyer
Common Stock issued pursuant to this Agreement is not registered under the
Securities Act of 1933, as amended (the "Securities Act").
Section 1.A.2 Conversion of Company and Newco Stock. At the
Effective Time:
(a) (i) Each Selling Stockholder's Preferred Shares shall
be converted into the right to receive cash as set forth on Exhibit B and
(ii) each Stockholder's Common Shares shall be converted into the right to
receive Buyer Common Stock as set forth on Exhibit B hereto and, subject to
delivery into escrow, interests in the Escrow Shares as set forth on
Exhibit B hereto.
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Each share of common stock, par value $.01 per share, of Newco
("Newco Stock"), issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into one share of common stock, par value
$.01 per share, of the Surviving Corporation and the Surviving Corporation
shall thereby become a wholly owned subsidiary of Buyer.
Section 1.A.3 Surrender of Certificates; Payment for Shares.
Subject to the terms and conditions of this Agreement, at the Closing,
Buyer shall deliver the Merger Consideration payable with respect to the
Shares, and the certificates representing such Shares shall forthwith be
surrendered to Buyer and be canceled. After the Effective Time and until so
surrendered and exchanged, each certificate representing Shares shall
represent solely the right to receive a ratable portion of the Merger
Consideration, without interest.
Section 1.A.4 Transfers of Certificates. After the Effective Time,
there shall be no transfers on the stock transfer books of the Company of
the Shares which were outstanding immediately prior to the Effective Time.
The Merger Consideration paid in respect of any Shares upon the surrender
of Shares in accordance with the terms hereof shall be deemed to have been
paid in full satisfaction of all rights pertaining to such Shares.
Section 1.A.5 Escrow. At the Closing, Buyer shall deliver to
Mayer, Brown & Platt (the "Escrow Agent") certificates representing the
Escrow Shares to be held in escrow (the "Escrow") pursuant to the terms of
an escrow agreement substantially in the form of Exhibit C attached hereto
(the "Escrow Agreement"). Pursuant to the terms of the Escrow Agreement,
(i) certain of the Escrow Shares shall be held in Escrow Fund I (as defined
in the Escrow Agreement) as collateral to indemnify Buyer for any and all
Non-Broker Losses (as hereinafter defined) pursuant to Section 6.2 and (ii)
certain of the Escrow Shares shall be held in Escrow Fund II (as defined in
the Escrow Agreement) as collateral to indemnify Buyer for any and all
Broker Losses (as hereinafter defined) pursuant to Section 6.9.
Section 1.A.6 Transfer Restrictions. Each Selling Stockholder
agrees that such Selling Stockholder will not transfer any shares of Buyer
Common Stock acquired pursuant to this Agreement for a period of one year
from the date of this Agreement (the "Restricted Period"). After the
Restricted Period, each Selling Stockholder agrees that such Selling
Stockholder will transfer shares of Buyer Common Stock obtained pursuant to
this Agreement only in accordance with applicable law. Notwithstanding
anything to the contrary contained in this Section 1.A.6, each Selling
Stockholder shall be permitted to immediately transfer any Buyer Common
Stock obtained in the Merger to another Selling Stockholder, a family
partnership, trust or similar entity for estate tax planning purposes so
long as such Selling Stockholder maintains sole control over the right to
vote any such shares of Buyer Common Stock so transferred.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BUYER AND NEWCO
Buyer, on behalf of itself and Newco, represents and warrants to
the Company and each Selling Stockholder as follows:
Section 2.1 Organization. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware. Newco is a corporation duly incorporated, validly
existing and in good standing under the laws of Georgia. Each of Buyer and
Newco is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its
properties or the conduct of its business requires such qualification,
except where the failure to be so qualified or in good standing is not
reasonably likely to have a Material Adverse Effect (as hereinafter
defined) on it.
Section 2.2 Authorization. The execution, delivery and performance
by Buyer and Newco of this Agreement and the Related Agreements (as
hereinafter defined) to which either of Buyer and Newco is a party have
been duly and validly authorized by the Boards of Directors of Buyer and
Newco, respectively, and this Agreement and the Related Agreements
constitutes the valid and binding agreement of Buyer and Newco, enforceable
in accordance with their terms, subject to (i) general principles of
equity, regardless of whether enforcement is sought in a proceeding in
equity or at law, and (ii) bankruptcy, reorganization, insolvency,
fraudulent conveyance, moratorium, receivership or other similar laws
relating to or affecting creditors' rights generally.
Section 2.3 Non-Contravention. Neither the execution nor delivery
of this Agreement or the Related Agreements, nor the consummation of the
transactions contemplated hereby or thereby, will result in the breach of
any term or provision of, or constitute a default under, the Certificate of
Incorporation or Bylaws of Buyer or Newco.
Section 2.4 Brokerage. No broker or finder has acted directly or
indirectly for Buyer in connection with this Agreement or the transactions
contemplated hereby, and no broker or finder is entitled to any brokerage
or finder's fee or other commission in respect thereof based in any way on
agreements, arrangements or understandings made by, or on behalf of Buyer.
Section 2.5 Buyer Common Stock. Buyer has taken all action
necessary to authorize and approve the issuance of the Buyer Common Stock
at the Closing. The Buyer Common Stock (including Escrow Shares) will, when
issued in accordance with this Agreement, be validly issued, fully paid and
nonassessable, and such issuance shall not violate applicable federal,
state or foreign securities laws. There are no statutory or contractual
shareholders' preemptive rights or rights of refusal with respect to the
issuance of the Buyer Common Stock (including Escrow Shares) upon execution
of this Agreement or consummation of the transactions contemplated hereby.
Section 2.6 Capital Structure. The authorized capital stock of
Buyer consists of 75,000,000 shares of common stock, $0.001 par value per
share, of which 12,849,676 are issued and outstanding as of December 31,
1999. All such outstanding securities have been duly and validly issued,
are fully paid and non-assessable, and have not been issued in violation of
the preemptive rights of any person or applicable federal, state or foreign
securities laws. No shares of any other class of capital stock of the Buyer
are outstanding.
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The authorized capital stock of Newco consists of 1,000 shares of
common stock, without par value, of which 100 are issued and outstanding as
of January 13, 2000. All such outstanding securities have been duly and
validly issued, are fully paid and non-assessable, and have not been issued
in violation of the preemptive rights of any person or applicable federal,
state or foreign securities laws. No shares of any other class of capital
stock of Newco are outstanding.
Section 2.7 Securities Filings. Each registration statement, proxy
statement, or report (collectively, the "SEC Filings") filed by Buyer with
the Securities and Exchange Commission (the "Commission") under the
Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act") did not, on the date of effectiveness in the case of each
registration statement, or on the later of the date of filing of each such
report or any subsequent amendment thereof in the case of each such report,
or on the date of mailing in the case of each such proxy or information
statement, contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. Buyer has filed all documents required to be filed by
it with the Commission pursuant to Section 13 and 14(a) of the Exchange
Act, and all such documents complied with all applicable requirements of
law. Since September 30, 1999, there have been no Material (as hereinafter
defined) adverse changes to the business, financial condition, results of
operations or prospects of Buyer taken as a whole or from that described in
the Buyer's SEC Filings. With a view to making available the benefits of
certain rules and regulations of the Commission that may at any time permit
the sale of the Merger Shares to the public without registration, the Buyer
agrees to use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, for at
least two years following the Closing Date;
(b) file with the Commission in a timely manner all reports and
other documents required of the Buyer under the Securities Act and Exchange
Act; and
(c) so long as any Selling Stockholder owns any Merger Shares,
Shares, to furnish to such Selling Stockholders forthwith upon request a
written statement by the Buyer as to its compliance with the reporting
requirements of Rule 144 under the Securities Act, a copy of the most
recent annual or quarterly report of the Buyer, and such other reports and
documents of the Buyer and other information in the possession of, or
reasonably obtained by, the Buyer as any Selling Stockholder may reasonably
request in availing itself of any rule or regulation of the Commission
allowing a Selling Stockholder to sell any Merger Shares without
registration.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDERS
The Principal Stockholders, jointly and severally, represent and
warrant to Buyer as follows:
Section 3.1 Organization. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Georgia, is duly qualified and in good standing as a foreign
corporation in the states set forth on Schedule 3.1 attached hereto with
full requisite corporate power and authority to own its properties and
assets and to carry on lawfully its business as currently conducted, and is
not required to be qualified to do business as a foreign corporation in any
other jurisdiction except where failure to be so qualified or in good
standing is not reasonably likely to have a Material Adverse Effect on the
Company.
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(b) Subsidiaries. The Company does not have any subsidiaries and
neither owns nor holds any securities of, or any interest in, any other
person or entity and is not a partner or member in or subject to any joint
venture, partnership, limited liability company or other arrangement or
contract that is or could be treated as a partnership for federal income
tax purposes.
Section 3.2 Articles of Incorporation, Bylaws and Agreements. A
true, complete and correct copy of the Amended and Restated Articles of
Incorporation and Bylaws of the Company together with all amendments
thereto have been delivered to Buyer. Except as set forth in that certain
Shareholders Agreement dated November 12, 1999 by and among the Company and
the Selling Stockholders (the "Shareholders Agreement"), there are no
agreements to which the Company is a party to imposing any restrictions
upon the transfer of or otherwise pertaining to the securities of the
Company (including but not limited to the Shares) or the ownership thereof.
Any and all such restrictions shall be duly complied with or effectively
waived as of the Closing.
Section 3.3 Capital Structure. The authorized capital stock of the
Company consists of 10,000,000 Common Shares, of which 648,018.14451 shares
are issued and outstanding and 5,000,000 shares of special stock, par value
$.001, of which 60,913.705584 shares designated as Preferred Shares are
issued and outstanding. All such outstanding securities have been duly and
validly issued, are fully paid and nonassessable and have not been issued
in violation of the preemptive rights of any person or applicable federal,
state or foreign securities laws. No shares of any other class of capital
stock of the Company are outstanding. There are no outstanding options,
warrants or other rights to acquire securities or other equity interests of
the Company nor are there securities outstanding which are convertible into
securities of the Company. Except pursuant to applicable corporate laws,
there are no restrictions, including but not limited to self-imposed
restrictions, on the retained earnings of the Company or on the ability of
the Company to declare and pay dividends.
Section 3.4 Due Authorization. The execution, delivery and
performance of this Agreement and the Related Agreements have been duly and
validly authorized, approved and adopted by the Board of Directors of the
Company and the Selling Stockholders in accordance with all applicable
provisions of the GBCC. This Agreement and the Related Agreements
constitute the valid and binding agreement of the Company, enforceable in
accordance with their terms, subject to (i) general principles of equity,
regardless of whether enforcement is sought in a proceeding in equity or at
law, and (ii) bankruptcy, reorganization, insolvency, fraudulent
conveyance, moratorium, receivership or other similar laws relating to or
affecting creditors' rights generally. Each of the Principal Stockholders
has full requisite power and authority to execute, deliver and perform his
obligations under this Agreement and the Related Agreements to which he is
a party. No other actions or proceedings on the part of the Principal
Stockholders are necessary to authorize the execution, delivery and
performance by the Principal Stockholders of this Agreement, or the
transactions contemplated hereby. No other actions or proceedings on the
part of the Principal Stockholders are necessary to authorize the
execution, delivery and performance by the Principal Stockholders of the
Related Agreements to which they are a party or the transactions
contemplated thereby. Each of the Principal Stockholders has duly and
validly executed and delivered this Agreement. Each of the Principal
Stockholders prior to or at the Closing will have duly and validly executed
and delivered the Related Agreements to which he is a party. This Agreement
constitutes legal, valid and binding obligations of the Principal
Stockholders, in each case, enforceable in accordance with their respective
terms, subject to (i) general principles of equity, regardless of whether
6
enforcement is sought in a proceeding in equity or at law, and (ii)
bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium,
receivership or other similar laws relating to or affecting creditors'
rights generally. The Related Agreements, upon execution and delivery by
Principal Stockholders of the Related Agreements to which they are a party,
will constitute legal, valid and binding obligations of the Principal
Stockholders, in each case enforceable in accordance with their respective
terms, subject to (i) general principles of equity, regardless of whether
enforcement is sought in a proceeding in equity or at law, and (ii)
bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium,
receivership or other similar laws relating to or affecting creditors'
rights generally.
Section 3.5 Financial Statements and Absence of Changes of Profits
and Loss. The statement of revenue and expenses - income tax basis, and
statement of assets, liabilities and deficits - income tax basis as of
September 30, 1999 of the Company compiled by Habif, Arogeti & Wynne, LLP
(the "Financial Statements") have been provided to Buyer. The Financial
Statements are true and Materially correct under the income tax method of
accounting and fairly present in all Material respects (including but not
limited to the inclusion of all adjustments with respect to interim periods
which are necessary to present fairly in all Material respects the
financial condition and assets and liabilities or the results of operations
of the Company under the income tax method of accounting) the financial
condition and assets and liabilities or the results of operations of the
Company as of the dates and for the periods indicated. Except as set forth
on Schedule 3.5, since September 30, 1999 there have been no Material
adverse changes to the business, financial condition, results of operations
or, to the knowledge of the Company, prospects of the Company that could
reasonably be expected, either alone or together with all other such
changes, to have a Material Adverse Effect on the Company.
Section 3.6 Environmental Matters. The Company has duly complied
with, and its business, operations, assets, equipment, leaseholds and other
facilities are in all Material respects in compliance with, the provisions
of all federal, state and local environmental, health and safety laws,
codes and ordinances and all rules and regulations promulgated thereunder,
governing (i) air emissions, (ii) discharges to surface water or ground
water, (iii) solid or liquid waste disposal, (iv) the use, storage,
generation, handling, transport, discharge, release, or disposal of toxic
or hazardous substances or wastes, or (v) other environmental, health or
safety matters, including without limitation, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, 42 U.S.C.
Sections 9601 at et seq., as amended, the Resource Conservation and Recovery
Act, 42 U.S.C. Sections 6901 et seq., as amended, the Federal Water Pollution
Control Act, 33 U.S.C. Sections 1251 et seq., as amended, and the Clean Air
Act, 42 U.S.C. Sections 7401 et seq., as amended. There are no
investigations, administrative proceedings, judicial actions, orders,
claims or notices which are pending, anticipated or, to the knowledge of
any Seller, threatened against the Company relating to the environment. The
Company has not received a notice of, and no Seller knows of nor suspects,
any facts which might constitute a violation of any federal, state or local
environmental, health or safety laws, codes or ordinances, and any rules or
regulations promulgated thereunder, which relate to the use, ownership or
occupancy of the property or the operation of the business of the Company.
7
Section 3.7 Liabilities. Except as and to the extent reflected or
reserved against in the Financial Statements, the Company has no
liabilities or obligations or indebtedness as of the dates thereof, secured
or unsecured (whether accrued, absolute, contingent or otherwise),
including, without limitation, tax liabilities due or to become due, and
the Company has not incurred, nor will it incur, any liabilities,
commitments or obligations since the date of the most recent of the
Financial Statements, except liabilities (i) described on Schedule 3.7
attached hereto, (ii) arising in the ordinary course of business not to
exceed $5,000, or (iii) expressly permitted by this Agreement. Except as
set forth on Schedule 3.7 attached hereto, the Company has no obligations
or liabilities, whether direct or indirect, joint or several, absolute or
contingent, matured or unmatured, secured or unsecured, which could be
affected by the execution and delivery of this Agreement or consummation of
the transactions contemplated by this Agreement or which could affect the
same.
Section 3.8 Title to and Condition of Assets and Property. The
Company has good and marketable title to, or a valid leasehold interest in,
any assets reflected in the Financial Statements or currently owned and/or
used in the operation of its business, and such assets are free and clear
of all liens, claims, charges, security interests, options, or other title
defects or encumbrances, except as set forth in the Financial Statements,
the Contracts (as hereinafter defined) or on Schedule 3.8 attached hereto.
Schedule 3.8 attached hereto sets forth a description of all real and
tangible personal property currently leased or otherwise occupied or used
but not owned by the Company, true, correct and complete copies of which
leases and other agreements have been delivered to Buyer. The Company does
not own any real property or any interest therein. All tangible personal
property not set forth on Schedule 3.8 attached hereto and reflected on the
Financial Statements or located on the premises of the Company and used in
the business of the Company is owned by the Company and all tangible
property owned or leased by the Company, set forth in Schedule 3.8 or
located on the premises of the Company and used in the business of the
Company is in good operating condition and repair (ordinary wear and tear
excepted), is suitable for the use to which the same is customarily put, is
free from defects (other than minor defects which do not interfere with the
use or operation thereof) and is of a quality presently usable in the
ordinary course of the operation of the business of the Company and
comprises in all material respects all of the tangible assets currently
used or needed in said business.
Section 3.9 Intellectual Property. Schedule 3.9 sets forth a true,
accurate and complete list of all United States and foreign patents issued
to the Company (including continuations, continuations-in-part, reissues
and re-examinations thereof), all patent applications filed by or on behalf
of the Company, and all trademark, trade name, service mark, service name
and copyright registrations in the name of the Company (or application for
the same). As used in this Agreement "Intellectual Property" means all
United States and foreign patents (including continuations,
continuations-in-part, reissues and re-examinations thereof) and patent
applications; registered and unregistered trade names, trademarks, service
names and service marks (and applications for registration of the same) and
all goodwill associated therewith; copyrights and copyright registrations
(and applications for the same); trade secrets, computer data (including
formulations and analyses), computer software (in source code and object
code form) and all related programming, user and systems documentation;
inventions, processes and designs (whether or not patentable or reduced to
practice); know-how and formulae; and all other intangible assets,
properties and rights owned or used by the Company. Except as set forth on
Schedule 3.9:
8
(a) all of the Intellectual Property designated on
Schedule 3.9 as "Owned Intellectual Property" is owned by the
Company free and clear of all liens, and is not subject to any
license, royalty or other agreement, and the Company has not
knowingly and intentionally granted any license, or knowingly and
intentionally agreed to pay or receive any royalty with respect to
any of the Owned Intellectual Property;
(b) none of the Owned Intellectual Property has been or
is the subject of any pending litigation, written claim that may
lead to litigation or claim of infringement and to the Company's
knowledge, none of the remaining Intellectual Property has been or
is the subject of such litigation or claim;
(c) no license or royalty agreement to which the Company
is party, is to the knowledge of the Company in breach or default
by any party thereto or the subject of any notice of termination
given or any written claim that could result in termination
overtly threatened in writing;
(d) the products and services produced and sold by the
Company, any process method, party, design, material or other
Intellectual Property that the Company employs, and the marketing
and use by the Company of any such product, service or
Intellectual Property, in each case, does not infringe any
intellectual property or confidential or proprietary rights of
another person or entity, and the Company has not received any
notice contesting their right to use any such Intellectual
Property; and
(e) the Company owns or possesses adequate rights in
perpetuity in and to all Intellectual Property necessary to
conduct its business as presently conducted, including, without
limitation, any URLs used or potentially used in the operation of
such business.
Section 3.10 Contracts. Except as set forth in Schedule 3.10
attached hereto, true, correct and complete copies of which referenced
items have been delivered to Buyer (any such contracts are referred to
collectively as the "Contracts" and individually as a "Contract"), the
Company is not a party to or bound by any of the following:
(a) any agreement or contract, whether written or oral,
or any other obligation of any kind to or from any person or entity
regarding, or in any way related to, any ownership interest in the
Company;
(b) contract for the purchase or sale of services,
equipment, inventory, materials, supplies, or any capital item or
items, (i) pursuant to which the aggregate financial obligation of
the Company may exceed $5,000 in the aggregate, or (ii) which is
not terminable by the Company without penalty upon no more than 30
days' notice;
9
(c) collective bargaining agreement or other agreement
with any labor union or labor organization or any employment,
consulting, severance, bonus, deferred compensation or similar
agreement;
(d) agreement, indenture or other instrument relating to
the borrowing of money or guaranty of any obligation for the
borrowing of money;
(e) tenancy, lease, license or similar agreement relating
to property;
(f) insurance policies naming the Company as an insured or
beneficiary or as a loss payee, or for which the Company has paid
all or part of the premium;
(g) any instrument or agreement relating to indebtedness
by way of lease-purchase arrangements, conditional sale, guarantee
or other undertakings on which others rely in extending credit,
any joint venture agreements or any chattel mortgages or other
security arrangements;
(h) any agreement or contract with, or any obligation to
or from, an Affiliate, or any Affiliate of any Seller. For
purposes of this Agreement, "Affiliate" shall mean: any person or
entity (i) that directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common
control with, the person or entity involved, including, without
limitation, officers and directors, (ii) that directly or
beneficially owns or holds 10% or more of any equity interest in
the person or entity involved, or (iii) 10% or more of whose
voting securities (or in the case of a person which is not a
corporation, 10% or more of any equity interest) is owned
indirectly or beneficially by the person or entity involved. As
used herein, the term "control" shall mean possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of a person or entity, whether through
ownership of securities, by contract or otherwise; or
(i) any other agreements, contracts, powers of attorney,
binding bids or proposals, whether written or oral (i) pursuant to
which the aggregate financial obligation of the Company may exceed
$5,000 in the aggregate or (ii) which are not terminable by the
Company without penalty upon no more than 30 days' notice.
None of the Company or, to the knowledge of the Company, any other
party to any Material Contract has breached any provisions of, or is in
violation or default under the terms of, or has caused or permitted to
exist any event that with or without due notice or lapse of time or both
would constitute a default or event of default under, any such Contract.
There are no facts or circumstances which could lead to the cancellation or
other early termination of one or more of the Contracts. All Contracts are
valid, binding and in full force and effect and will continue in full force
and effect to the benefit of the Company without change following the
consummation of the transactions contemplated by this Agreement without
obtaining the consent of any other party thereto, except as set forth in
Schedule 3.10 attached hereto. The consummation of the transactions
contemplated by this Agreement will not violate or cause a default under
any Material provision of, or result in the acceleration of any obligation
under, or the termination of, any Material Contract.
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Section 3.11 Litigation and Compliance. Except as set forth in
Schedule 3.11 attached hereto, there is no pending or, to the knowledge of
the Company, threatened claim, investigation, lawsuit or administrative
proceeding by or against the Company or the operation of its business or
involving the Shares. The Company and the operation of its business are in
compliance with all applicable federal, state, local and foreign laws
ordinances, rules and regulations except to the extent that any such
noncompliance does not have a Material Adverse Effect on the business of
the Company. There is no order, writ, injunction or decree relating to or
affecting the operations or the business of the Company or the transactions
contemplated by this Agreement.
Section 3.12 Licenses and Permits. The Company has all federal,
state, local and foreign franchises, tariffs, licenses, ordinances,
certifications, approvals, authorizations and permits (collectively, the
"Authorizations") necessary to the conduct of its business as currently
conducted, except where the failure to have such Authorization would not
reasonably be expected to have a Material Adverse Effect on the business of
the Company. A list of such Authorizations is set forth on Schedule 3.12(a)
attached hereto, true, correct and complete copies of which have been
delivered to Buyer. All Authorizations relating to the business of the
Company are in full force and effect, no violations have been made in
respect thereof, and no proceeding is pending or, to the knowledge of the
Company, threatened which could have the effect of revoking or limiting any
such Authorizations and the same will not cease to remain in full force and
effect by reason of the transactions contemplated by this Agreement.
Schedule 3.12(b) attached hereto sets forth all registrations,
filings, applications, notices, transfers, consents, approvals, orders,
qualifications, authorizations, certifications, waivers or other actions of
any kind required to be made, filed, given or obtained by or on behalf of
the Company or the Selling Stockholders with, to or from any governmental
authorities in connection with the consummation of the transactions
contemplated by this Agreement.
Section 3.13 Insurance. Schedule 3.13 attached hereto sets forth a
list of all policies of insurance which insure the properties, business or
liability (including, but not limited to, directors' and officers'
liability) of the Company, setting forth the types and amounts of coverage,
true, correct and complete copies of which have previously been delivered
to Buyer. Each of such policies is current and in full force and effect and
the Company has not received notice of default under, or intended
cancellation or nonrenewal of, any such policies. The Company will keep all
current insurance policies in effect through the Closing. The Company has
not been refused any insurance by an insurance carrier to which it has
applied for insurance.
Section 3.14 Employee Benefit Plans. Except as set forth on
Schedule 3.14 attached hereto, the Company is not a party to, participates
in or has any liability (contingent or otherwise) with respect to:
(a) any "employee welfare benefit plan" or "employee
pension benefit plan" (as those terms are respectively defined in
sections 3(1) and 3(2) of ERISA), other than a "multiemployer
plan" (as defined in section 3(37) of ERISA);
(b) any retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment compensation
plan, vacation pay, severance pay, bonus or benefit arrangement,
insurance or hospitalization program or any other fringe benefit
arrangements for any current or former employee, director,
consultant or agent, whether pursuant to contract, arrangement,
custom or informal understanding, which does not constitute an
employee benefit plan (as defined in section 3(3) of ERISA); or
(c) any employment agreement.
11
Section 3.15 Taxes and Returns. (a) All federal, state, country
and local, and all foreign and other, income, franchise, excise, tariff,
gross receipts, sales and use, Social Security, employees' withholding,
payroll, ad valorem, real and personal property and other taxes and
governmental charges, assessments and contributions for which the Company
is or may be liable, including but not limited to interest and penalties
("Taxes"), required to be paid, collected or withheld with respect to all
open years have been paid or collected or withheld and remitted to the
appropriate governmental agency, except for any Taxes which the Company is
contesting in good faith which have been noted in the Financial Statements,
and except for Taxes not yet payable which have been adequately provided
for in the Financial Statements. Except as set forth in Schedule 3.15,
true, complete and correct returns (including, without limitation,
information returns and other material information) have been timely filed
with the appropriate governmental agency with respect to all Taxes and the
copies thereof which have been provided to Buyer are true, accurate and
complete. To the knowledge of the Company, neither the Company nor any
group of which the Company is now or ever was a member has filed or entered
into any election, consent or extension agreement that extends any
applicable statute of limitations or the time within which a return must be
filed. Neither the Company nor any group of which the Company ever was a
member is a party to or is aware of any action or proceeding pending or
threatened by any governmental authority for assessment or collection of
Taxes, no unresolved claim for assessment or collection of Taxes has been
asserted, no audit or investigation by any governmental authority is
pending or threatened and no such matters are under discussion with any
governmental authority. Neither the Company nor any group of which the
Company ever was a member will have any liability for any Taxes arising
from an audit. No deficiencies for Taxes have been claimed, proposed or
assessed by any taxing or other governmental authority. The Company is not,
and never has been, an "S" corporation under the Internal Revenue Code of
1986, as amended (the "Code").
(b) All elections with respect to Taxes affecting the Company and
the subsidiaries are set forth in Schedule 3.15 attached hereto. The
Company: (i) has not consented at any time under Section 341(f)(1) of the
Code to have the provisions of Section 341(f)(2) of the Code apply to any
disposition of the Company's assets; (ii) has not agreed, nor is it
required, to make any adjustment under Section 481(a) of the Code by reason
of a change in accounting method or otherwise; (iii) has not made an
election, nor is it required, to treat any asset of the Company as owned by
another person for federal income tax purposes or as tax-exempt bond
financed property or tax-exempt use property within the meaning of Section
168 of the Code; or (iv) has made any of the foregoing elections or is
required to apply any of the foregoing rules under any comparable state or
local income tax provisions.
(c) Except as set forth in Schedule 3.15 attached hereto, the
Company is not and has never been an includable corporation in an
affiliated group of corporations, within the meaning of Section 1504 of the
Code.
(d) The Company has not made an election under Section 338 of the
Code nor has it taken any action that would result in any tax liability of
the Company as a result of a deemed election within the meaning of Section
338 of the Code.
12
(e) The Company has not made or become obligated to make, and will
not as a result of the transactions contemplated by this Agreement, make or
become obligated to make, any "excess parachute payment" as defined in
Section 280G of the Code (without regard to subsection (b)(4) thereof).
(f) The amount of tax credit of the Company subject to recapture
is set forth in Schedule 3.15 attached hereto. The aggregate amount of
ordinary losses on Section 1231(b) property that has been deducted by the
Company is set forth in Schedule 3.15 attached hereto.
(g) The Company is not nor has it been a United States real
property holding company (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(h) The Company is a United States person within the meaning
of the Code.
(i) None of the assets of the Company is property which the
Company is required to treat as being owned by any other person pursuant to
the so-called "safe harbor lease" provisions of former Section 168(f)(8) of
the Code.
(j) The transactions contemplated herein are not subject to the
tax withholding provisions of Code Section 3406, or of Subchapter A of
Chapter 3 of the Code or of any other provision of law.
(k) The Company has not violated any of the COBRA continuation
coverage requirements set forth in Section 4980B of the Code.
The Company has disclosed on its federal income tax returns all
positions taken therein that could give rise to a substantial
understatement of federal income tax liability within the meaning of
Section 6662(d) of the Code.
(l) Except as set forth in Schedule 3.15 attached hereto: (i) none
of the assets of the Company have been financed with or directly or
indirectly secure any industrial development bond or debt the interest on
which is tax exempt under Section 103(a) of the Code; (ii) the Company is
not a borrower or guarantor of any outstanding industrial revenue bond; and
(iii) the Company is not a tenant, principal user or related person to any
principal user (within the meaning of Section 144(a) of the Code) of any
property which has been financed or improved with the proceeds of any
industrial revenue bond.
(m) The Company currently files Tax returns in the states,
political subdivisions thereof, and foreign countries set forth in Schedule
3.15 attached hereto.
(n) Except as set forth in Schedule 3.15 attached hereto, since
January 1, 1995, the Company has not acquired (i) any trade or business
(whether through a taxable or nontaxable asset or stock acquisition), or
(ii) any asset by way of merger or liquidation.
13
Section 3.16 No Adverse Actions. Except as set forth on Schedule
3.16 attached hereto, there is no existing, pending or, to the knowledge of
the Company, threatened termination, cancellation, limitation, modification
or change in the business relationship of the Company with any supplier,
customer or other person or entity that is expected to have a Material
Adverse Effect on the business of the Company.
Section 3.17 Labor Matters. The Company has no obligations,
contingent or otherwise, under any employment or consulting agreement
(except if and as set forth in Schedule 3.10 attached hereto), collective
bargaining agreement or other contract with a labor union or other labor or
employee group. There are no efforts presently being made or threatened by
or on behalf of any labor union with respect to employees of the Company.
The Company is in compliance with all federal, state or other applicable
laws, domestic or foreign, respecting employment and employment practices,
terms and conditions of employment and wages and hours, and has not and is
not engaged in any unfair labor practice; no unfair labor practice
complaint against the Company is pending or, to the knowledge of the
Company, threatened before the National Labor Relations Board; there is no
labor strike, dispute, slowdown or stoppage pending or, to the knowledge of
any Seller, threatened against or involving the Company; no representation
question exists respecting the employees of the Company; no grievance or
internal or informal complaint which might have an Material Adverse Effect
upon the Company or the conduct of their respective business exists, no
arbitration proceeding arising out of or under any collective bargaining
agreement is pending and no claim therefor has been asserted; no collective
bargaining agreement is currently being negotiated by the Company; and the
Company has not experienced any labor difficulty.
Section 3.18 Disclosure. No representation, warranty or statement
made by or on behalf of the Company or the Principal Stockholders in this
Agreement or the Schedules attached hereto or in the certificates or other
materials furnished to Buyer or its representatives in connection with this
Agreement and the transactions contemplated hereby or thereby, contains any
untrue statement of fact or omits to state a fact required to be stated
herein or therein or necessary to make the statements contained herein or
therein not misleading.
Full disclosure has been made to Buyer of all material facts with
respect to the Company, its business, assets, operations, condition and
prospects and the transactions contemplated by this Agreement which a
reasonable purchaser would deem relevant.
Section 3.19 Brokers. Except as previously disclosed to Buyer, the
Company has not engaged any investment banker, financial advisor or broker
of any kind with respect to the sale of the equity interests in the Company
and no fee or other compensation shall become payable to any investment
banker, financial advisor or broker of any kind upon the closing of the
transaction contemplated hereby.
Section 3.20 Takeover Statutes. No "fair price," moratorium,"
"control shares acquisition" or other similar anti-takeover statute or
regulation enacted under federal or state law is applicable to the
transactions contemplated by this Agreement.
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ARTICLE III.A
REPRESENTATIONS AND WARRANTIES OF EACH SELLING STOCKHOLDER
Each Selling Stockholder represents to Buyer and Newco that, as
applied solely to such Selling Stockholder, all of the representations and
warranties in this Article III.A are, as of the date of this Agreement,
true and correct and do not and will not contain or omit any disclosure
that has or will or could have a Material Adverse Effect on the Company or
Buyer.
Section 3.A.1 Ownership of Capital Stock. Each Selling Stockholder
is the record and beneficial owner of the number of Common Shares and
Preferred Shares set forth opposite such Selling Stockholder's name on
Exhibit B. Each of the Shares is owned by a Selling Stockholder free and
clear of any option, pledge, security interest, lien, charge, encumbrance,
claim, covenant, condition or restriction. Except as set forth in the
Shareholders Agreement, there are no agreements to which any Selling
Stockholder is a party, whether or not the Company is a party thereto,
imposing any restrictions upon the transfer of or otherwise pertaining to
the securities of the Company (including but not limited to the Shares) or
the ownership thereof. Any and all such restrictions shall be duly complied
with or effectively waived as of the Closing.
Section 3.A.2 Approval of the Merger. Each Selling Stockholder,
acting in each capacity in which he or it is entitled to vote to approve or
disapprove the consummation of the Merger, has voted all the Shares owned
by him or it in favor of the entering of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby.
Each Selling Stockholder was granted the right to dissent from the Merger
in accordance with Section 14-2-1302 et seq. of the GBCC, and each such
Selling Stockholder expressly waived such right to dissent.
Section 3.A.3 Brokers. No Selling Stockholder has engaged any
investment banker, financial advisor or broker of any kind with respect to
the sale of the equity interests in the Company and no fee or other
compensation shall become payable to any investment banker, financial
advisor or broker of any kind upon the closing of the transaction
contemplated hereby.
Section 3.A.4 Rights of First Refusal. Each Selling Stockholder
has waived any and all rights of first refusal such Selling Stockholder may
have with respect to the transfer of Shares upon the consummation of the
Merger including, without limitation, the right of first refusal contained
in the Shareholders Agreement.
Section 3.A.5 Investment Representations. Each Selling Stockholder
represents and warrants to Buyer that such Selling Stockholder is acquiring
the Buyer Common Stock for his own account and not with a view to dividing
the Buyer Common Stock with others or participating directly or indirectly
in any resale, distribution or underwriting thereof and will not transfer
or assign the Buyer Common Stock in violation of the Securities Act,
applicable state securities laws or this Agreement. Such Selling
Stockholder further represents and warrants that he is able to bear the
economic risk of the investment in the Buyer Common Stock and has such
knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of such investment. Such Selling
Stockholder shall provide such information and execute such documents as
Buyer may reasonably request in order to verify the foregoing. Such Selling
Stockholder acknowledges that he has had the opportunity to ask questions
and receive answers from Buyer concerning the terms and conditions of the
offering of the Buyer Common Stock and to obtain any additional information
which Buyer possesses or can acquire without unreasonable effort or expense
that is necessary to verify the accuracy of any information furnished in
connection with said offering.
15
ARTICLE IV
ADDITIONAL AGREEMENTS OF THE PARTIES
Section 4.1 Further Assurances. At any time and from time to time
at or after the Closing, the parties agree to cooperate with each other, to
execute and deliver such other documents, instruments of transfer or
assignment, files, books and records and do all such further acts and
things as may be reasonably required to carry out the transactions
contemplated hereby.
Section 4.2 Payment of Taxes. The Selling Stockholders agree to
pay all sales taxes, other property taxes, all documentary or other stamp
taxes and all similar taxes, including, but not limited to income taxes
imposed on such Selling Stockholders, if any, arising out of or related to
the transactions contemplated by this Agreement.
Section 4.3 Employees. The Principal Stockholders hereby
acknowledge that Buyer has no obligation to employ, or to continue the
employment of, any of the employees of the Company subsequent to the
Closing. None of the Principal Stockholders shall make any representations
to the contrary to any of such employees. Notwithstanding the foregoing,
Buyer shall, at the Closing, make an offer of employment pursuant to an
offer letter substantially in the form of Exhibit D attached hereto (the
"Offer Letter") to each of the employees of the Company set forth on
Schedule 4.3 attached hereto. The employment terms for each Offer Letter
shall be as set forth on Schedule 4.3. If and to the extent Buyer so
requests, the Principal Stockholders shall use their best efforts to cause
employees of the Company designated by Buyer to become employees or
consultants of Buyer, with it being understood and agreed that such
employment or engagement shall be with no contractual obligation on the
part of the Company or Buyer other than pursuant to the Employment
Agreements (as hereinafter defined), to continue any such employment or
engagement, which employment or engagement shall be upon terms and
conditions satisfactory to Buyer.
Section 4.4 Employment Agreements; Settlements.
(a) At the Closing, Buyer and (i) Robert Schaefer and (ii)
Alan Schaefer shall enter into employment agreements substantially in the
form attached hereto as Exhibits E and F, respectively (the "Employment
Agreements").
(b) Within sixty (60) days following the Closing, Buyer shall
pay the sums of deferred salary due to each of Alan Schaefer, Robert
Schaefer, and Teresa Burgera, in the amount for each such individual set
forth on Schedule 3.7.
Section 4.5 SEC Filings. Buyer shall continue to make all SEC
filings required by the Securities Act and Exchange Act on a timely basis
for at least two years following the Closing Date including, without
limitation, in order to make Rule 144 available for use by the Selling
Stockholders.
16
Section 4.6 Tax-Free Reorganization. Each of the Company, the
Principal Stockholders, Buyer and Newco shall use their best efforts to
cause the Merger to be treated as a reorganization within the meaning of
Section 368(a) of the Code.
Section 4.7 Confidentiality. Except as contemplated by this
Agreement, as required by law or otherwise expressly consented to in
writing by Buyer, all information or documents furnished hereunder by any
party shall be kept strictly confidential by the party or parties to whom
furnished. Notwithstanding the foregoing, (a) Buyer may issue or make a
press release, announcement or other disclosure regarding this Agreement
and the transactions contemplated hereby which it determines necessary or
desirable under applicable law, and (b) Buyer may, at any time after the
date of this Agreement, file with the Commission a Report on Form 8-K
pursuant to the Exchange Act with respect to the transaction contemplated
by this Agreement, which Report may include, among other things, financial
statements and pro forma, financial information with respect to the
Company, and/or file with the Commission a registration statement under the
Securities Act which includes a prospectus containing any information
required to be included therein with respect to the transactions
contemplated by this Agreement, including but not limited to financial
statements and pro forma financial information with respect to the Company,
and thereafter distribute said prospectus in connection with the offer and
sale of securities of Buyer. The Principal Stockholders shall cooperate
with Buyer and provide such information and documents as may be required in
connection with any such filings.
ARTICLE V
THE CLOSING
Section 5.1 Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of Mayer, Brown & Platt, 190 S. LaSalle Street, Chicago, Illinois
60603, at 9:00 a.m. on January 14, 2000 (the "Closing Date"). The Closing,
and all transactions to occur at the Closing, shall be deemed to have taken
place at, and shall be effective as of, the close of business on the
Closing Date.
Section 5.2 Deliveries by the Company and the Principal
Stockholders. At the Closing, Buyer shall receive from the Company and the
Selling Stockholders the following deliveries:
(a) Certificates representing the Shares either duly
endorsed in blank or accompanied by duly executed stock powers
endorsed in blank;
(b) A true, correct and complete copy of the Articles of
Incorporation, as amended, of the Company, certified by the
Secretary of State of Georgia, and a true, correct and complete
copy of the Bylaws, as amended, of the Company, certified by the
corporate Secretary;
(c) Certificate of good standing in each of the states in
which the Company is incorporated or qualified stating that the
Company is a validly existing corporation in good standing;
17
(d) An opinion from counsel to the Company and the
Principal Stockholders, in form and substance reasonably satisfactory
to counsel for Buyer;
(e) Evidence that the Certificate of Merger have been
duly filed and the Merger has become effective in accordance with
the GBCC or the delivery of a duly executed Certificate of Merger
together with irrevocable instructions to cause the Certificate of
Merger to be filed;
(f) Copies of the resolutions of the Board of Directors
of the Company and the Selling Stockholders approving and adopting
this Agreement and the Merger, in each case certified by the
Secretary of the Company;
(g) The duly executed Escrow Agreement, Employment
Agreements and side agreement related to indemnification matters
(collectively, the "Related Agreements");
(h) Documentation, in form satisfactory to Buyer, evidencing
the transfer of the Tourdates.com URL and the Ticketboard.com URL
from Robert Schaefer to the Company (including, without limitation,
any agreements from Network Solutions, Inc. related thereto);
(i) An original or photostatic copy duly certified as
accurate and complete of all requisite governmental or regulatory
approvals of the transactions contemplated hereby;
(j) An affidavit of each Selling Stockholder stating, under
penalty of perjury, such Selling Stockholder's U.S. taxpayer
identification number and that such Selling Stockholder is not a
"foreign person" as defined in Section 1445 of the Code;
(k) The stock record book and corporate minute book of the
Company; and
(l) Such other documents and instruments as Buyer may
reasonably request.
Section 5.3 Buyer's Deliveries. At the Closing, the Selling
Stockholders shall receive from Buyer the following:
(a) Certificate of good standing from the Secretary of
State of Delaware stating that Buyer is a validly existing
corporation in good standing;
(b) Copy of duly adopted resolutions of Buyer's Board of
Directors approving the execution, delivery and performance of
this Agreement, certified by its Secretary or Assistant Secretary;
(c) Payment of the Merger Consideration pursuant to
Section 1.A.1;
(d) The duly executed Related Agreements;
18
(e) An opinion from counsel of Buyer in form and substance
reasonably satisfactory to counsel for the Company and the Principal
Stockholders; and
(f) Such other documents and instruments as the Principal
Stockholders may reasonably request.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Survival. The representations and warranties of the
parties contained in Articles II, III and III.A shall survive the Closing
for a period of twelve (12) months, except that representations and
warranties with respect to matters concerning Taxes (Section 3.15)
environmental matters (Section 3.6), capital structure matters (Sections
2.6, 3.3 and 3.A.1) and authorization (Sections 2.2, 3.2 and 3.A.2) shall
survive until ninety (90) days after the expiration of the applicable
statute of limitations. Notwithstanding the foregoing, nothing contained in
this Agreement shall limit any party's remedies in the event of fraud or
violation of the Securities Act or Section 10(b) or Rule 10b-5 of the
Exchange Act.
Section 6.2 Indemnification by the Selling Stockholders. The
Principal Stockholders jointly and severally agree to indemnify Buyer and
its Affiliates and respective officers, directors, employees, agents, and
representatives (the "Buyer Indemnified Parties") against, and agree to
hold the Buyer Indemnified Parties harmless from, any and all liabilities,
losses, costs, claims, damages, penalties, and expenses (including
reasonable attorney's fees actually incurred and expenses and costs of
investigation and litigation) (collectively "Losses") incurred or suffered
by any of them relating to, arising out of, or otherwise based upon any of
the following (Losses attributable to any of the following are referred to
herein as "Non-Broker Losses"):
(a) any breach of, or any inaccuracy in, any representation
or warranty made by the Principal Stockholders in this Agreement,
any Related Agreement or any other document delivered at the
Closing;
(b) any breach of, or failure by, the Principal Stockholders
to perform any covenant or obligation in this Agreement;
(c) any debt of the Company incurred prior to the Closing
and not expressly permitted by this Agreement; or
(d) any Taxes for which the Company is or may be liable
that have become due and payable during, or which have accrued
with respect to any of the Company's (i) taxable periods ending
prior to the Closing and (ii) any taxable periods which include
the Closing that have not been paid prior to the Closing or
reserved on the Financial Statements. Any Taxes attributable to
the operations of the Company payable as a result of an audit of
any Tax return shall be deemed to have accrued in the period to
which such Taxes are attributable.
19
The Principal Stockholders shall not be required to indemnify
Buyer for any Non-Broker Losses under this Section 6.2 until such time as
the amount of the Non-Broker Losses incurred by Buyer exceeds $50,000 (the
"Threshold Amount") in the aggregate. If and when the amount of the
Non-Broker Losses does exceed $50,000 in the aggregate, then the Principal
Stockholders shall be required to indemnify Buyer for the full amount of
such Losses up to $5,000,000 (it being understood that this $5,000,000
limitation shall not apply to (i) any and all Non-Broker Losses resulting
from a breach of Section 3.3 or 3.4 or (ii) the indemnification obligations
of the Principal Stockholders pursuant to Section 6.9). Except as set forth
in the preceding sentence, the liability of any Principal Stockholder is
limited to an amount equal to the product of (i) such Principal
Stockholder's percentage ownership of Common Shares, and (ii) Five Million
Dollars ($5,000,000).
In addition to the above-stated indemnification obligations of the
Principal Stockholders, each Selling Stockholder severally, and not
jointly, agrees to indemnify the Buyer Indemnified Parties for any Losses
relating to, arising out of or otherwise based upon (i) any breach of, or
any inaccuracy in, any representation or warranty made by such Selling
Stockholder in this Agreement or (ii) any breach of, or failure by, such
Selling Stockholder to perform any covenant or obligation of such Selling
Stockholder pursuant to this Agreement. The liability of any Selling
Stockholder (other than a Principal Stockholder whose limitations on
liability is set forth in the preceding paragraph) is limited to an amount
equal to the product of (i) such Selling Stockholder's percentage ownership
of Common Shares and (ii) $5,000,000 (it being understood that this
limitation shall not apply to (i) any and all Non-Broker Losses resulting
from a breach of Section 3.A.1 or 3.A.2 or (ii) the indemnification
obligations of the Selling Stockholders pursuant to Section 6.9.
Section 6.3 Indemnification by Buyer. Buyer agrees to indemnify
the Selling Stockholders and their Affiliates and their respective
officers, directors, employees, agents and representatives ("Seller
Indemnified Parties") against, and agrees to hold each of them harmless
from, any and all Losses incurred or suffered by them relating to, arising
out of, or in connection with, any of the following:
(a) any breach of or any inaccuracy in any representation
or warranty made by Buyer in this Agreement, or any Related
Agreement or any other document delivered at the Closing; or
(b) any breach of or failure by Buyer to perform any
covenant or obligation of Buyer set out or contemplated in this
Agreement, or any Related Agreement or any other document
delivered at the Closing.
Buyer shall not be required to indemnify the Selling Stockholders
for any Losses under this Section 6.3 until such time as the amount of the
Losses incurred by the Selling Stockholders exceed $50,000 in the
aggregate. If and when the amount of the Losses does exceed $50,000 in the
aggregate, then Buyer shall be required to indemnify the Selling
Stockholders for the full amount of such Losses up to $5,000,000 (it being
understood that this $5,000,000 limitation shall not apply to (i) any and
all Losses resulting from a breach of Section 2.5 or (ii) a failure of
Buyer to pay the Merger Consideration).
20
Section 6.4 Claims. The provisions of this section shall be
subject to Section 6.5. As soon as is reasonably practicable after becoming
aware of a claim for indemnification under Section 6.2 or 6.3 (an
"Indemnification Claim"), the party claiming indemnification from the other
party (the "Indemnified Person") shall promptly give notice to the party
from whom indemnification is requested (the "Indemnifying Person") of such
Indemnification Claim and the amount the Indemnified Person will be
entitled to receive hereunder from the Indemnifying Person (a "Claim
Notice"); provided that the failure of the Indemnified Person to give
notice shall not relieve the Indemnifying Person of its obligations under
this Article VI, except to the extent (if any) that the Indemnifying Person
shall have been actually and materially prejudiced thereby. Within thirty
(30) calendar days of receiving the Claim Notice, the Indemnifying Person
shall either (i) remit to the Indemnified Party an amount in cash
sufficient to fully satisfy the Indemnification Claim, (ii) execute and
deliver a certificate to be countersigned by the Indemnified Person
instructing the Escrow Agent to disburse promptly Escrow Shares from Escrow
Fund I in the amount of the Indemnification Claim (it being understood that
this clause (ii) is only applicable if Buyer is the Indemnified Party) or
(iii) notify the Indemnified Party of an intention to dispute the
Indemnification Claim and the basis for such dispute. If the Indemnifying
Person agrees that it has an indemnification obligation, but objects on the
basis that it is obligated to pay only a lesser amount, the Indemnified
Person shall nevertheless be entitled to recover promptly from the
Indemnifying Person (or, if a Buyer Indemnified Party is the Indemnified
Person and Escrow Fund I continues to be held by the Escrow Agent, from the
Escrow Agent) the lesser amount, without prejudice to the Indemnified
Person's claim for the difference (which claim the Indemnifying Person will
not be responsible to pay until there is a final adjudication with respect
to the disputed amounts).
Section 6.5 Notice of Third Party Claims, Assumption of Defense.
The Indemnified Person shall give notice as promptly as is reasonably
practicable to the Indemnifying Person of the assertion of any claim, or
the commencement of any suit, action or proceeding, by any person not a
party hereto in respect of which indemnity may be sought under this
Agreement; provided that the failure of the Indemnified Person to give
notice shall not relieve the Indemnifying Person of its obligations under
this Article VI, except to the extent (if any) that the Indemnifying Person
shall have been actually and materially prejudiced thereby. The
Indemnifying Person may, at its own expense: (a) participate in the defense
of any claim, suit, action or proceeding; and (b) upon notice to the
Indemnified Person and the Indemnifying Person's delivering to the
Indemnified Person a written agreement that the Indemnified Person is
entitled to indemnification pursuant to Section 6.2 or 6.3 for all Losses
arising out of such claim, suit, action or proceeding and that the
Indemnifying Person shall be liable for the entire amount of any Loss, at
any time during the course of any such claim, suit, action or proceeding,
assume the defense thereof; provided that: (i) the Indemnifying Person's
counsel is reasonably satisfactory to the Indemnified Person; and (ii) the
Indemnifying Person shall thereafter consult with the Indemnified Person
upon the Indemnified Person's reasonable request for such consultation from
time to time with respect to such claim, suit, action or proceeding. If the
Indemnifying Person assumes such defense, the Indemnified Person shall have
the right (but not the obligation) to participate in the defense thereof
and to employ counsel, at its own expense, separate from the counsel
employed by the Indemnifying Person. If, however, the Indemnified Person
reasonably determines in its good faith judgment that representation by the
Indemnifying Person's counsel of both the Indemnifying Person and the
Indemnified Person would present such counsel with a conflict of interest
(after providing the Indemnifying Party prior written notice thereof and an
opportunity to demonstrate otherwise), then such Indemnified Person may
thereafter employ separate counsel to represent or defend it in any such
claim, action, suit or proceeding, and the Indemnifying Person shall pay
the reasonable fees and disbursements of such separate counsel. Whether or
not the Indemnifying Person chooses to defend or prosecute any such claim,
suit, action or proceeding, all of the parties hereto shall cooperate in
the defense or prosecution thereof.
21
Section 6.6 Settlement or Compromise. Any settlement or compromise
made or caused to be made by the Indemnified Person or the Indemnifying
Person, as the case may be, of any such claim, suit, action or proceeding
of the kind referred to in Section 6.5 shall also be binding upon the
Indemnifying Person or the Indemnified Person, as the case may be, in the
manner as if a final judgment or decree had been entered by a court of
competent jurisdiction in the amount of such settlement or compromise;
provided that no obligation, restriction or Loss shall be imposed on the
Indemnified Person as a result of such settlement without its prior written
consent. The Indemnified Person shall give the Indemnifying Person at least
thirty (30) days' notice of any proposed settlement or compromise of any
claim, suit, action or proceeding it is defending, during which time the
Indemnifying Person may reject such proposed settlement or compromise;
provided that from and after such rejection, the Indemnifying Person shall
be obligated to assume the defense of and full and complete liability and
responsibility for such claim, suit, action or proceeding and any and all
Losses in connection therewith in excess of the amount of unindemnifiable
Losses which the Indemnified Person would have been obligated to pay under
the proposed settlement or compromise.
Section 6.7 Failure of Indemnifying Person to Act. In the event
that the Indemnifying Person does not elect to assume the defense of any
claim, suit, action or proceeding, then any failure of the Indemnified
Person to defend or to participate in the defense of any such claim, suit,
action or proceeding or to cause the same to be done, shall not relieve the
Indemnifying Person of its obligations hereunder.
Section 6.8 Net Losses. Any indemnification pursuant to this
Article VI shall be net of: (i) any actual federal or state income Tax
benefit, specifically arising from the facts and circumstances giving rise
to the Loss, realizable by the Indemnified Person (or any of its
Affiliates) by a reduction in Taxes payable, or by the receipt of a refund
of Taxes, by the Indemnified Person (or such Affiliate) so that the
Indemnified Person, on an after-tax basis, shall be placed in the same
position as though the facts and circumstances giving rise to the Loss had
never occurred or existed; and (ii) any net insurance proceeds received by
the Indemnified Person (or its Affiliates) with respect to the Loss. The
Indemnified Person shall treat the Loss in a good faith manner that causes
any federal or state income Tax benefit to apply in the earliest year
reasonably permissible.
Section 6.9 Special Indemnification. (a) The Selling Stockholders
jointly and severally agree to indemnify Buyer for any and all Losses
incurred by Buyer resulting from any oral or written claim or demand by any
broker, investment bank, agent or similar individual or entity
(collectively "Brokers") that such Broker is entitled to cash or equity
compensation from the Company or Buyer as a result of a past relationship
with the Company (a "Broker Claim"). The definition of "Broker Claim" shall
include, without limitation, claims by Brokers that such Broker has a right
to equity in the Company, either as compensation for past services rendered
or otherwise. In the event Buyer receives notice of a Broker Claim, Buyer
shall provide the Principal Stockholders with written notice of such Broker
Claim within 24 hours of receipt thereof (a "Broker Claim Notice"). Upon
receipt of a Broker Claim Notice, the Principal Stockholders shall be
solely responsible for the payment of any Losses, including legal fees and
other expenses, incurred by Buyer, the Principal Stockholders or the
22
Company in responding to and defending against such Broker Claim ("Broker
Losses"). In the event (i) a Broker Loss is paid by Buyer, subject to the
right of the Selling Stockholders to receive the Broker Claim Notice, and
to dispute, settle, or otherwise dispose of such claims or (ii) a court or
arbitrator enters a final and binding judgment against Buyer relating to a
Broker Loss, Buyer shall provide written notice of such payment or judgment
to the Principal Stockholders ("Broker Loss Notice") and the Selling
Stockholders shall, within three business days of receipt of the Broker
Loss Notice, remit the full amount of the Broker Loss to Buyer. If the
Selling Stockholders do not remit the full amount of the Broker Loss to
Buyer within three business days of receipt of the Broker Loss Notice, then
Buyer shall send instructions to the Escrow Agent with respect to the
withdrawal of Escrow Shares from Escrow Fund II as provided for in the
Escrow Agreement.
(b) Notwithstanding the indemnification provisions set forth in
Section 6.9(a), in the event of a Broker Claim, Buyer and the Selling
Stockholders, shall in good faith cooperate with each other in defending
such Broker Claim. Such cooperation shall include, without limitation, (i)
making available all information (by way of producing written documents, in
person meetings, or otherwise) that would be necessary or desirable in
defending the Broker Claim and (ii) retaining legal counsel to assist in
the defense of such Broker Claim if it is determined that legal counsel is
necessary (it being understood that both Buyer and the Principal
Stockholders shall each have the right to approve any such legal counsel
prior to such counsel's retention). Buyer and the Principal Stockholders
shall jointly approve any settlement that may be reached with respect to a
Broker Claim.
ARTICLE VII
POWER OF ATTORNEY
Section 7.1 Appointment of Stockholders' Agent. The Selling
Stockholders, and each of them, hereby irrevocably constitute and appoint
Robert Schaefer with an address at 644 Antone Street, Suite 3, Atlanta, GA
30318 (the "Stockholders' Agent") as their agent and attorney-in-fact to
modify, amend, or otherwise change this Agreement, or any of its terms or
provisions (including modifications, amendments, or changes subsequent to
Closing), to take all actions and to execute all documents necessary or
desirable to consummate the transactions contemplated by this Agreement, to
tender their Shares pursuant to this Agreement and to accept the Merger
Consideration in connection therewith and to take all actions, to execute
all documents that may be necessary or desirable in connection therewith
(including, without limitation, delivery of the certificates for their
Shares and execution of such powers of attorney or other instruments as may
be necessary to comply with this Agreement), to give and receive consents
and all notices hereunder, to negotiate and settle claims for
indemnification under Article VI hereof, and to perform any other act
arising under or pertaining to this Agreement and the transactions
contemplated hereby. The Selling Stockholders, and each of them, agree that
service of process upon the Stockholders' Agent in any action or proceeding
arising under or pertaining to this Merger Agreement shall be deemed to be
valid service of process upon the Selling Stockholders, and any claim by
Buyer or Newco against the Selling Stockholders, or any of them, in respect
to this Agreement may be asserted against, and settled with, said
Stockholders' Agent. The Stockholders' Agent shall be deemed to have
accepted the appointment herein upon his execution of this Agreement.
23
Section 7.2 Irrevocable; Binding on Successors, Etc. It is
expressly understood and agreed that the power of attorney and agency
created by this Article VII is coupled with an interest of the respective
parties hereto and shall be binding and enforceable on and against the
respective heirs, personal representatives, successors and assigns of the
Selling Stockholders, and each of them, and the same shall not be revoked
or terminated by the death, disability, bankruptcy, or incompetency of the
Selling Stockholders, or any of them, but shall continue to be binding and
enforceable by the Stockholders' Agent, Buyer, and Newco, and their
respective successors and on and against the heirs, personal
representatives, and successors and assigns of the Stockholders in the
manner provided herein.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Expenses. Subject to the following sentence and as
otherwise provided herein, each party hereto shall bear its own expenses
with respect to the transactions contemplated hereby. At the Closing, Buyer
will pay the legal and accounting expenses incurred by the Company and the
Principal Stockholders in connection with this Agreement and the Related
Agreements; provided, however, that the legal and accounting expenses to be
paid by Buyer pursuant to this sentence shall not exceed $75,000 in the
aggregate.
Section 8.2 Governing Law. This Agreement shall be deemed to be
made in, and in all respects shall be interpreted, construed and governed
by and in accordance with the internal laws of, the State of California.
Section 8.3 Dispute Resolution; Arbitration.
(a) Dispute Resolution. In the event any dispute arises in
connection with the negotiation, execution, interpretation, performance or
non-performance of this Agreement, the parties agree to use all
commercially reasonable efforts to settle such dispute by consulting and
negotiating with each other, in good faith and understanding of their
mutual interests, to reach a just and equitable solution satisfactory to
both parties. If the matter is not resolved within 30 days, then the
disputes or differences shall be finally settled by arbitration in
accordance with the provisions of this Section 8.3.
(b) Arbitration. If the parties are unable to resolve their
dispute or differences in accordance with the provisions of paragraph (a),
the dispute or differences shall be finally settled by arbitration in
accordance with this Section 8.3 and the Rules of the American Arbitration
Association (the "AAA Rules"). In the event of any conflict between this
Section 8.3 and the AAA Rules, this Section 8.3 shall control. Prior to any
such arbitration, the parties agree to use all reasonable good faith
efforts to reach satisfactory resolution among themselves.
(c) Arbitration Panel. A panel of three arbitrators shall be
formed in the following manner (the "Arbitration Panel"). Each of the
Sellers' Representative and Buyer shall appoint one arbitrator, and those
two arbitrators shall choose the third arbitrator. If the Arbitration Panel
is not formed within 60 days after the expiration of the deadline for
referral to arbitration set forth in paragraph (a), either party may
request the American Arbitration Association to select the Arbitration
Panel. All of the arbitrators shall be unaffiliated in any manner with any
of the parties or their counsel.
24
(d) Procedures. The arbitrators shall allow such discovery as the
arbitrators determine to be appropriate under the circumstances and shall
resolve the dispute as expeditiously as practicable, and if reasonably
practicable, within 120 days after the selection of the arbitrator(s). The
arbitrators shall hold a conference with the parties as soon as
practicable, to define and narrow the issues and claims to be arbitrated,
to define and limit discovery, and to identify the form of evidence to be
presented. Any arbitration pursuant hereto shall be conducted by the
arbitrators under the guidance of the AAA Rules. The arbitrators shall
conduct the arbitration procedure in accordance with the AAA Rules. The
arbitrators shall conduct such evidentiary or other hearings as they deem
necessary or appropriate and thereafter shall make their determination as
soon as practicable. A full and complete record and transcript of the
arbitration procedure shall be maintained and the judgment of the
arbitrators shall be accompanied by detailed written findings of fact and
the conclusions reached by the arbitrators (which findings and conclusions
the arbitrators shall be required to make), as well as the arbitrators'
reasons for reaching such conclusions. The arbitrators shall give the
parties written notice of the decision, with the reasons therefor set out,
and shall have 30 days thereafter to reconsider and modify such decision if
any party so requests within 10 days after the decision. Thereafter, the
decision of the arbitrators shall be final, binding and nonappealable with
respect to all persons, including persons who have failed or refused to
participate in the arbitration process, and shall be reviewable only to the
extent provided by the AAA Rules.
(e) Specifics of Arbitration. The arbitration shall take place in
New York, New York. The arbitrators shall have authority to award relief
under legal or equitable principles, and to allocate responsibility for the
costs of the arbitration and to award recovery of attorneys fees and
expenses in such manner as is determined to be appropriate by the
arbitrators. The arbitration award shall be final, binding on the parties,
and shall deal with the question of costs of arbitration and all matters
related thereto. Judgement upon the award rendered may be entered into any
court having jurisdiction, or application may be made to such court for a
judicial recognition of the award or any order of enforcement thereof, as
the case may be. The arbitration shall be governed by the choice of laws
set forth in Section 8.2.
(f) Confidentiality. All proceedings under this Section 8.3, and
all evidence given or discovered pursuant hereto, shall be maintained in
confidence by all parties except (i) to the extent necessary to comply with
law or with the valid order of an administrative agency or a court of
competent jurisdiction; or (ii) in order to enforce its rights under this
Agreement.
(g) Continued Performance. The fact that the dispute resolution
procedures specified in this Section 8.3 shall have been or may be invoked
shall not excuse any party from performing its obligations under this
Agreement, and during the pendency of any such procedure all parties shall
continue to perform their respective obligations in good faith, subject to
any rights to terminate this Agreement that may be available to any party.
Section 8.4 Notices. Any notices or other communications required
under this Agreement shall be in writing, shall be deemed to have been
given when delivered in person, by telex or telecopier, when delivered to a
recognized next business day courier, or, if mailed, when deposited in the
United States first class mail, registered or certified, return receipt
requested, with proper postage prepaid, addressed as follows or to such
other address as notice shall have been given pursuant hereto:
25
If to the Company or the Principal Stockholders:
Robert Schaefer
Alan Schaefer
c/o Musicom, Inc.
644 Antone Street, Suite 3
Atlanta, GA 30318
Telecopy: (404) 355-9066
With a copy to:
Kilpatrick Stockton LLP
Attn: Terry Aronoff
1100 Peachtree Street
Atlanta, GA 30309
Telecopy: (404) 815-6555
If to Buyer:
LAUNCH Media, Inc.
Attn: Senior Vice President, Business and Legal Affairs
2700 Pennsylvania Avenue
Santa Monica, CA 90404
Telecopy: (310) 526-4400
With a copy to:
Mayer, Brown & Platt
Attn: Seth J. Weinberger
190 South LaSalle Street
Chicago, Illinois 60603
Telecopy: (312) 701-7711
Section 8.5 Assignment. This Agreement may not be assigned, by
operation of law or otherwise, except that Buyer may assign its rights
under this Agreement in whole or in part to a subsidiary or other Affiliate
of Buyer (including but not limited to any subsidiary or Affiliate of Buyer
formed or acquired following the date hereof); provided, however, that any
such assignment by Buyer shall not discharge Buyer from any of its
obligations under this Agreement.
Section 8.6 Section Headings. The section headings contained in
this Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
26
Section 8.7 Amendment. This Agreement may be amended, modified or
supplemented but only in writing signed by Buyer and the Stockholders' Agent.
Section 8.8 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
Section 8.9 Entire Agreement. This Agreement constitutes the
entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof.
Section 8.10 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.
Section 8.11 Severability. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
Section 8.12 Third Parties. Nothing contained in this Agreement or
in any instrument or document executed by any party in connection with the
transactions contemplated hereby shall create any rights in, or be deemed
to have been executed for the benefit of, any person or entity that is not
a party hereto or a successor or permitted assign of such a party.
Section 8.13 Stock Legend. Each of the certificates of Buyer
Common Stock issued to the Selling Stockholders pursuant to the
transactions hereunder, shall bear the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, WITH RESPECT THERETO OR IN
ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
Section 8.14 Certain Definitions. For purposes of this Agreement:
(a) "knowledge of the Company" means the knowledge of
Robert Schaefer or Alan Schaefer, and it is assumed that such
persons made reasonable and diligent efforts under the
circumstances to become knowledgable of the relevant state of facts
and circumstances.
(b) "Material" means, as applied to any entity, material
to the business, operations, property or assets, liabilities,
financial condition, results of operations or prospects of that
entity and its subsidiaries, taken as a whole.
(c) "Material Adverse Effect" means, with respect to the
consequences of any fact or circumstance (including the occurrence
or non-occurrence of any event) to any entity, that such fact or
circumstance has caused, is causing or will cause, directly or
indirectly, or consequentially, singularly or in the aggregate
with other facts and circumstances, any Losses in excess of the
Threshold Amount.
27
Section 8.15 Tax Records. At the Closing, the Company shall
provide Buyer with copies of such records as Buyer may require for the
preparation of any Tax returns or other similar reports or forms required
to be filed by Buyer and such records as Buyer may require for the defense
of any audit, examination, administrative appeal or litigation of any such
Tax return or other similar report or form. After the Closing, (i) the
Principal Stockholders and Buyer shall mutually cooperate in resolving any
audit or litigation pertaining to any Taxes by, including without
limitation, providing the assistance of any knowledgeable employees and
shareholders and by supplying any necessary records and (ii) Buyer shall
provide each Selling Stockholder with copies of such records as such
Selling Stockholder may reasonably require for the preparation of any Tax
returns.
28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
PRINCIPAL STOCKHOLDERS LAUNCH MEDIA, INC.
/s/ Robert Schaefer By: /s/ Robert D. Roback
- -------------------------- -----------------------------
ROBERT SCHAEFER Name: Robert D. Roback
Its: President
/s/ Alan Schaefer
- --------------------------
ALAN SCHAEFER
MUSICOM, INC. TD MERGER SUB, INC.
By: /s/ Robert Schaefer By: /s/ Matthew Lehman
----------------------- -----------------------------
Name: Robert Schaefer Name: Matthew Lehman
Its: President Its: President
29