EXHIBIT 2.1
ASSET ACQUISITION AGREEMENT
PARTIES: MILLENNIUM MEDIA GROUP HOLDINGS, INC.,
a Delaware corporation
234 North Columbus Blvd.
Philadelphia, PA 19106
MICROLEAGUE MULTIMEDIA, INC.,
a Pennsylvania corporation
750 Dawson Drive
Newark, DE 19713
DATE: February 7, 1997
BACKGROUND: Millennium Media Group Holdings, Inc. ("Seller") is the secured
creditor of Rabbit Ears Productions, Inc., a Delaware corporation ("REP"),
pursuant to various loan and security agreements, namely, (1) the Project Loan
and Security Agreement, dated September 22, 1993, between BMG Music, a New York
general partnership, and REP, as amended; (2) the Project Loan Note, dated
September 22, 1993, executed by REP in favor of BMG, as amended; (3) the Option
Agreement, dated September 22, 1993, among REP, BMG and Mark Sottnick, as
amended; (4) the Distribution Agreement, dated September 22, 1993, between REP
and BMG, as amended; (5) the Mortgage of Copyrights, dated September 22, 1993,
executed by REP in favor of BMG; (6) the Conditional Assignment Agreement, dated
June 27, 1995, among BMG, REP and Mark Sottnick, as amended; (7) the Credit
Agreement, dated June 29, 1994, between REP and Chemical Bank, as amended; (8)
the Revolving Credit Promissory Note, dated June 29, 1994, executed by REP in
favor of Chemical Bank, as amended; (9) the Security Agreement, dated June 29,
1994 between REP and Chemical Bank, as amended; (10) the Copyright Security
Agreement, dated June 29, 1994 between REP and Chemical Bank, as amended; (11)
the Trademark Security Agreement, dated as of June 29, 1994, between REP and
Chemical Bank, as amended, (collectively, the "Security Documents").
Seller has a first lien priority perfected security interest in
all of the assets of REP under the Security Documents. REP has been and
continues to be in default under each of the Security Documents. Seller intends
to sell, by private sale, all of REP's assets pursuant to the Security Documents
and the Pennsylvania Uniform Commercial Code to Microleague Multimedia, Inc. or
an affiliated nominee of Microleague Multimedia, Inc. ("Buyer"). Seller's parent
corporation, Millennium Media Group, Inc. ("MMG") has agreed to guaranty the
obligations of Seller hereunder. The parties desire that the sale and purchase
of the assets of REP will be completed on the terms and conditions set forth in
this Agreement.
THEREFORE, INTENDING TO BE LEGALLY BOUND, in consideration of the
mutual agreements contained herein, and subject to the satisfaction of the terms
and conditions set forth herein, the parties hereby agree as follows:
1. DEFINED TERMS Certain defined terms used in this Agreement and not
specifically defined in context are defined in this Section 1, as follows:
1.1. "Accounts Receivable" means (a) any right to payment for goods
sold, leased or licensed or for services rendered, whether or not it has been
earned by performance, whether billed or unbilled, and whether or not it is
evidenced by any Contract, (b) any note receivable; or (c) any other receivable
or right to payment of any nature, except as specified on Schedule 1.1 hereof.
1.2. "Artist Services Agreement" (or plural "Artists' Services
Agreements") means any written or oral contract, agreement, instrument, order,
arrangement, commitment or understanding of any nature, entered into between REP
and any Person for such Person's provision of any services which contributed to
the production of the REP Titles for distribution or exhibition in any and all
media, including, but not limited to, narration, illustration, musical score
composition and performance or story adaptation.
1.3. "Artwork" means any artwork, art mechanical, film, color
separations, liner notes, negatives, photographs, storyboards and any other
graphic materials used in the production or in connection with the packaging,
promotion or advertising of the REP Titles or any other aspect of REP's
business.
1.4. "Asset" means, other than the accounts receivable specified on
Schedule 1.1 and Cash Assets, any real, personal, mixed, tangible or intangible
property of any nature, including, but not limited to prepayments, deposits,
escrows, Accounts Receivable, Tangible Property, Real Property, Software,
Insurance Policies, Contract Rights, Intangibles, Artwork, Masters, Literary
Property, Music Compositions, Production Properties, good will, and claims,
causes of action and other legal rights and remedies.
1.5. "Cash Asset" means any cash on hand, cash in bank, money market
or other accounts, and readily marketable securities held by REP in the ordinary
course of REP's business on the Closing Date.
1.6. "Common Stock" means common stock of Microleague Multimedia,
Inc., par value $.01 per share.
1.7. "Consent" means any consent, approval, order or authorization
of, or any declaration, filing or registration with, or any application or
report to, or any waiver by, or any other action (whether similar or dissimilar
to any of the foregoing) of, by or with, any Person (as defined in Section
1.25), which is necessary in order to take a specified action or actions in a
specified manner and/or to achieve a specified result.
1.8. "Contract" means any written or oral contract, agreement,
instrument, order, arrangement, commitment or understanding of any nature,
including, but not limited to, the Artists' Services Agreements, sales orders,
purchase orders, leases, subleases, data processing
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agreements, maintenance agreements, license agreements, sublicense agreements,
distribution agreements, loan agreements, promissory notes, security agreements,
pledge agreements, deeds, mortgages, guaranties, indemnities, warranties,
employment agreements, consulting agreements, sales representative agreements,
joint venture agreements, buy-sell agreements, options, warrants or any
contract, option or commitment relating to the development, production,
completion, delivery or exploitation of the REP Titles.
1.9. "Contract Right" means any right, power or remedy of any nature
under any Contract including, but not limited to, rights to receive property or
services or otherwise derive benefits from the payment, satisfaction or
performance of another party's Obligations, rights to demand that another party
accept property or services or take any other actions, rights to pursue or
exercise remedies or options, and all rights derived under the Artists' Services
Agreements.
1.10. "Employee Benefit Plan" means any employee benefit plan as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or any other plan, program, policy or arrangement for or
regarding bonuses, commissions, incentive compensation, severance, vacation,
deferred compensation, pensions, profit sharing, retirement, payroll savings,
stock options, stock purchases, stock awards, stock ownership, phantom stock,
stock appreciation rights, medical/dental expense payment or reimbursement,
disability income or protection, sick pay, group insurance, self insurance,
death benefits, employee welfare or fringe benefits of any nature; but not
including employment Contracts with individual employees.
1.11. "Encumbrance" means any lien, right of first refusal, security
interest, pledge, mortgage, easement, covenant, restriction, reservation,
conditional sale, prior assignment, or other encumbrance, claim, burden or
charge of any nature.
1.12. "GAAP" means generally accepted accounting principles under
United States accounting rules and regulations, consistently applied.
1.13. "Insurance Policy" means any public liability, product
liability, general liability, comprehensive, property damage, vehicle, life,
hospital, medical, dental, disability, worker's compensation, key man, fidelity
bond, theft, forgery, errors and omissions, directors' and officers' liability,
or other insurance policy of any nature.
1.14. "Intangible" means any name, corporate name, fictitious name,
trademark (whether registered or unregistered), trademark application, service
mark, service mark application, trade name, brand name, product name, slogan,
trade secret, know-how, patent, patent application, copyright (whether
registered or unregistered), copyright application, right to apply for copyright
registration, design, logo, formula, invention, product right or other
intangible asset of any nature existing in any jurisdiction, domestic or
foreign, whether in use, under development or design, or inactive.
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1.15. "Investment Intent Letter" means a letter executed by one or
more Investors, regarding certain securities law and other representations and
acknowledgments, in the form attached hereto as Schedule 1.15.
1.16. "Investors" means the Persons identified on Schedule 1.16
attached hereto.
1.17. "Judgment" means any order, writ, injunction, citation, award,
decree or other judgment of any nature of any foreign, federal, state or local
court, governmental body, administrative agency, regulatory authority or
arbitration tribunal.
1.18. "Law" means any provision of any foreign, federal, state or
local law, statute, ordinance, charter, constitution, treaty, rule or
regulation.
1.19. "Literary Property" means all rights of REP of every kind and
nature (including, without limitation, copyrights) in and to any literary,
musical, dramatic or other rights or material upon which any of the REP Titles
have been based, adapted or inspired, in whole or in part, or which have been
included in the REP Titles, including, without limitation, all scripts,
scenarios, screenplays, stories, treatments, outlines, books, titles, concepts,
manuscripts, rights of privacy or publicity, or other rights, properties or
material in whatever state of completion and all drafts, versions and variations
thereof.
1.20. "Market Value" means $7.46 per share.
1.21. "Masters" means the original material object in which sounds
(in any language with or without visual images), or visual images (with or
without sounds), related to the REP Titles, have been fixed by any method and
from which such sounds or images can be perceived, reproduced, or otherwise
communicated, either directly or with the aid of a machine, device or process,
including out takes, unused portions and similar material relating to the above.
1.22. "Music Compositions" means all rights of Seller or REP of
every kind and nature in and to any and all music and musical compositions
created for or used in connection with the REP Titles, including copyrights
therein and all rights to perform, copy, record, rerecord, produce, publish,
reproduce or synchronize any and all of such music and musical compositions as
well as all other rights to exploit such music including record, soundtrack
recording and music publishing rights.
1.23. "Obligation" means any debt, liability or obligation of any
nature, whether secured, unsecured, recourse, nonrecourse, liquidated,
unliquidated, accrued, absolute, fixed, contingent, ascertained, unascertained,
known, unknown or otherwise.
1.24. "Permit" means any license, permit, approval, waiver, order,
authorization, right or privilege of any nature, granted, issued, approved or
allowed by any foreign, federal, state or local governmental body,
administrative agency or regulatory authority.
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1.25. "Person" means any individual, sole proprietorship, joint
venture, partnership, corporation, association, cooperative, trust, estate,
governmental body, administrative agency, regulatory authority or other entity
of any nature.
1.26. "Proceeding" means any demand, claim, suit, action,
litigation, investigation, arbitration, administrative hearing or other
proceeding of any nature.
1.27. "Production Properties" shall mean all physical properties of
every kind or nature of or relating to the development, production, completion,
delivery, exhibition, distribution or other exploitation of the REP Titles or
any part thereof, including, without limitation, the Artists' Services
Agreements, the Artwork, Masters, Literary Property, Music Compositions, radio
masters, camera masters, book plates, merchandising prototypes and drawings,
exposed film, developed film, positives, negatives, prints, answer prints,
special effects, preparing materials (including interpositives, negatives,
duplicate negatives, internegatives, color reversals, intermediates, lavenders,
fine grain master prints and matrices and all other forms of preprint elements
which may be necessary or useful to produce prints or other copies or additional
preparing elements, soundtracks, recordings, audio and video and all other
physical properties relating to the REP Titles in whatever state of completion,
and all duplicates, drafts, versions, variations and copies thereof.
1.28. "Real Property" means any real estate, land, building,
condominium, town house, structure or other real property of any nature, all
shares of stock or other ownership interests in cooperative or condominium
associations or other forms of ownership interest through which interests in
real estate may be held, and all appurtenant and ancillary rights thereto,
including, but not limited to, easements, covenants, water rights, sewer rights
and utility rights.
1.29. "REP Titles" means all stories which have been produced by REP
or are in any stage of pre-production whatsoever, for distribution in any and
all media, including but not limited to the titles identified on Schedule 1.29.
1.30. "SEC" means the U.S. Securities and Exchange Commission.
1.31. "Software" means any computer program, operating system,
applications system, firmware or software of any nature, whether operational,
under development or inactive, including all object code, source code, technical
manuals, user manuals and other documentation therefor, whether in machine
readable form, programming language or any other language or symbols, and
whether stored, encoded, recorded or written on disk, tape, film, memory device,
paper or other media of any nature, including without limitation, all rights in
and to the computer programs used as of the date hereof for calculating the
amount of royalties owed by REP pursuant to the Artists' Services Agreements.
1.32. "Tangible Property" means any furniture, fixtures, leasehold
improvements, vehicles, office equipment, computer equipment, other equipment,
machinery, awards, tools, forms, supplies, inventory or other tangible personal
property of any nature including, without limitation, the Production Properties.
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1.33. "Tax" means (a) any foreign, federal, state or local income,
earnings, profits, gross receipts, franchise, capital stock, net worth, sales,
use, occupancy, general property, real property, personal property, intangible
property, transfer, fuel, excise, payroll, withholding, unemployment
compensation, social security or other tax of any nature; (b) any foreign,
federal, state or local organization fee, qualification fee, annual report fee,
filing fee, occupation fee, assessment, sewer rent or other fee or charge of any
nature; or (c) any deficiency, interest or penalty imposed with respect to any
of the foregoing.
2. THE TRANSACTION
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2.1. Sale and Purchase of Specified Assets. On the Closing Date (as
defined in Section 10.1), subject to the terms and conditions of this Agreement,
the Seller shall sell, transfer, assign and convey to Buyer, and Buyer shall
purchase, all right, title and interest in and to all of the Specified Assets
(as defined in Section 2.1.1), and Seller shall assign to Buyer, and Buyer shall
assume, the Specified Liabilities (as defined in Section 2.1.2).
2.1.1 Assets. The "Specified Assets" means all Assets of REP and
all Assets related to the REP Titles (other than REP capital stock and the
Security Documents) held in the name of Seller or MMG wherever located and
whether or not reflected on Seller's, MMG's or REP's books and records
including, but not limited to, the following Assets:
(a) All of REP's current Assets (which does
not include the accounts receivable specified on Schedule 1.1 or Cash Assets)
arising in connection with or relating to REP's business including, but not
limited to, prepaid expenses, security deposits, rent escrows, and other
prepayments, deposits and escrows.
(b) All of REP's Tangible Property, Software
and Intangibles.
(c) All of REP's Contract Rights under the
Contracts specified in Schedule 2.1.1(c) attached hereto (the "Specified
Contracts").
(d) All rights under all Insurance Policies
owned, held or maintained by REP or any of its predecessors.
(e) All transferable rights under all Permits
granted or issued to REP or otherwise held by REP.
(f) All of REP's rights with respect to
telephone numbers, telephone directory listings and advertisements, post office
boxes and safe deposit boxes.
(g) All of REP's customer lists, prospect
lists, supplier lists, data bases, computer media, sales and marketing
materials, invoices, correspondence, files, books and records.
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(h) All rights to bring claims, causes of
action and other legal rights and remedies, whether or not known as of the
Closing Date, relating to REP's ownership of the Specified Assets.
(i) All of REP's goodwill and all of Seller's
and REP's rights to the name "Rabbit Ears Productions, Inc." and all variations
thereof.
2.1.2 Specified Liabilities. The "Specified Liabilities"
means the liabilities of REP under the Specified Contracts provided that (a) the
incurrence or existence of any such liability or Contract does not constitute or
consist of a breach or failure of, or a default under, any representation,
warranty, covenant or other provision of this Agreement; (b) such liabilities
arise for the first time after the Closing Date from acts or events occurring
after the Closing Date in the ordinary course of Buyer's performance of such
Specified Contracts in accordance with their respective terms, and (c) the
related Contract Rights have been assigned with all required Consents or the
Buyer is otherwise obtaining all benefits under such Specified Contract by
operation of Section 11.2 hereof. Notwithstanding the foregoing, the Specified
Liabilities of Seller shall not include the liabilities of the Seller or REP
under (1) this Agreement or any other Contracts entered into by the Seller with
the Buyer in connection with the transactions contemplated by this Agreement;
(2) any Contracts that constitute or evidence Employee Benefit Plans of REP; and
(3) any Contracts relating to the formation or acquisition of REP.
2.2. No Other Liabilities. Notwithstanding any other provisions of
this Agreement, Buyer shall not in any manner assume or be liable or responsible
for any Obligations of Seller or REP other than the Specified Liabilities, and
all Obligations of Seller and REP other than the Specified Liabilities shall
remain the sole responsibility of Seller or REP, as the case may be. Without
limiting the generality of the foregoing, Buyer shall not in any manner assume
or be liable or responsible for, any of the following Obligations of Seller or
REP:
2.2.1 Taxes. Any Obligation for any Tax, including but
not limited to, (a) any Tax payable by REP with respect to REP's business
operations; (b) any Tax payable with respect to the ownership, possession,
purchase, lease, sale, disposition or use of any of REP's Assets at any time,
including without limitation, the Specified Assets; and (c) any Tax resulting
from the sale of the Specified Assets to Buyer or otherwise resulting from the
transactions contemplated by this Agreement, or any subsequent dissolution of
REP, MMG or Seller.
2.2.2 Post-Closing. Any Obligation of Seller or REP that
is incurred or arises after the Closing Date, or that relates to any Proceeding
or other event that occurs or circumstances that exist after the Closing Date.
2.2.3 Transaction Related. Any Obligation that was or is
incurred in connection with the negotiation, execution or performance of this
Agreement and any other Contracts entered into between Buyer and Seller.
2.2.4 Defaults. Any Obligation, the incurrence or
existence of which constitutes or will constitute a breach or failure of, or a
default under, any representation, warranty, covenant or other provision of this
Agreement.
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2.2.5 Employees. Any Obligation to employees of REP,
including, but not limited to, Obligations under Employee Benefit Plans and/or
other retirement plans.
2.2.6 Infringement. Any Obligation related to REP's
infringement or alleged infringement of any Software or Intangible of any
Person.
2.2.7 Encumbrances. Any Encumbrance on or affecting REP's
Assets.
2.3. REP's Employees. Buyer, in its sole discretion, may offer to
employ employees of REP. Buyer does not assume any responsibility for, and
Seller and/or REP shall be fully responsible for the payment of, any severance
or other benefits related to or payable upon the termination of any of REP's
employees.
3. PURCHASE PRICE
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3.1. Purchase Price. The total purchase price for the Specified
Assets ("Purchase Price") shall consist of stock and options as follows:
(a) 268,097 shares of Common Stock ($2,000,000 divided by
the Market Value, rounded to the nearest whole share). Certificates representing
such shares of Common Stock shall be issued by Buyer on the Closing Date. As
directed by Seller in writing at by noon on the business day prior to the
Closing Date, Certificates representing 268,097 shares in the aggregate shall be
delivered to Seller in the name of Seller and any number of Investors for whom
Buyer has received an executed Investment Intent Letter. Seller acknowledges
that such Common Stock shall not be registered under Federal and state
securities laws and, except as specifically provided in this Agreement, Buyer
shall have no obligation to register shares under any such laws. Such shares of
Common Stock will constitute restricted securities subject to limitations on
transfer and, as such, will bear appropriate legends restricting their
disposition;
(b) A redeemable option, evidenced by a First Redeemable
Option Agreement in substantially the form set forth at Schedule 3.1(b) hereof,
granting Seller the right to acquire 125,000 shares of Common Stock (the "First
Option Shares") for an exercise price per share equal to the Market Value. Such
option shall expire at midnight on February 16, 1999 and shall be subject to
redemption by Buyer as provided in the First Redeemable Option Agreement. Except
as otherwise provided in the First Redeemable Option Agreement, shares of Common
Stock issued pursuant to the option will constitute restricted securities
subject to limitations on transfer and, as such, will bear appropriate legends
restricting their disposition; and
(c) A redeemable option, evidenced by a Second Redeemable
Option Agreement in the form set forth at Schedule 3.1(c) hereof, granting
Seller the right to acquire 125,000 shares of Common Stock (the "Second Option
Shares", and collectively with the First Option Shares, the "Option Shares") for
an exercise price per share equal to the Market Value multiplied by 1.20 (i.e.,
120% percent of the Market Value). Such option shall expire at midnight on
February 16, 2000 and shall be subject to redemption by Buyer as provided in the
Second
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Redeemable Option Agreement. Except as otherwise provided in the Second
Redeemable Option Agreement, Shares of Common Stock issued pursuant to the
option will constitute restricted securities subject to limitations on transfer
and, as such, will bear appropriate legends restricting their disposition.
3.2. Adjustments. The number of shares subject to, and exercise
price for, the options granted pursuant to this Section shall be subject to
proportional adjustment in the case of a reclassification, stock split or stock
dividend involving the Common Stock, or a reorganization, merger or
consolidation of Buyer, all as more specifically provided in the First
Redeemable Option Agreement and the Second Redeemable Option Agreement,
respectively.
3.3. Piggy-back Registration.
(a) If Buyer shall determine to register any of its
securities for its own account, or for that of shareholders, other than (x) a
registration relating solely to employee benefit plans, (y) a registration
relating solely to an SEC Rule 145 transaction or (z) a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Common Stock issued to Seller, the
Company will:
(i) promptly give notice thereof to the
record holders of Common Stock issued to Seller hereunder
(which notice, to the extent then known, shall include a
list of the jurisdictions in which Buyer intends to
attempt to qualify such securities under the applicable
blue sky or other state securities laws); and
(ii) include in such registration (and any
related qualification under blue sky laws), and in any
underwriting involved therein, such of the Common Stock
acquired hereunder and Option Shares (together, the
"Covered Stock"), as may be specified in a written
request or requests made by such holders within fifteen
(15) days after receipt of the written notice from Buyer
described in clause (i) above, except as set forth in
Section 3.3(b) below.
(b) If the registration of which Buyer gives notice is
for a registered public offering involving an underwriting, Buyer shall so
advise the record holders as a part of the written notice given pursuant to
Section 3.3(a). In such event, the right of such holders, to registration
pursuant to this Section shall be conditioned upon participation in such
underwriting and the inclusion of such holders' securities in the underwriting
to the extent provided herein. Such holders shall (together with Buyer) enter
into an underwriting agreement in customary form with the underwriter selected
for underwriting by Buyer. Notwithstanding any other provision of this Section,
if the underwriter determines that marketing factors require a limitation on the
number of shares to be underwritten, then underwriter may limit or eliminate the
number of securities to be included in the secondary portion of the registration
and underwriting. Any exclusion of Covered Stock shall be made pro rata among
the Investors seeking to include Covered Stock, in proportion to the number of
shares of Covered Stock sought to be included by such Investors; provided,
however, that the Company shall not exclude any shares of Covered
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Stock unless the Company has first excluded all outstanding securities, the
holders of which are not entitled to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Covered Stock; and provided, further, however, that, after giving effect to the
immediately preceding proviso, any exclusion of Covered Stock shall be made pro
rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights.
(c) All registration expenses incurred in connection with
any registration, qualification or compliance pursuant to this Section shall be
borne by Buyer except that (1) all underwriting discounts and selling
commissions shall be borne by the holders of the securities so registered pro
rata on the basis of the number of their shares so registered and (2) the
selling security holders shall be responsible for the fees and expenses of their
own attorneys, accountants and financial advisers.
(d) In connection with the registration of any Covered
Stock pursuant to this Section, Buyer shall:
(i) Prepare and file with the SEC a
registration statement (hereinafter, a "Registration Statement") on the
appropriate form under the Securities Act of 1933 (the "Securities Act"), which
form shall be available for the sale of such Covered Stock in accordance with
the intended method or methods of distribution thereof, and use its best efforts
to cause such Registration Statement to become effective (provided that before
filing any Registration Statement or prospectus or any amendments or supplements
thereto, the Buyer shall furnish, for review and comments, to the counsel
selected by the holders of a majority of the Covered Stock covered by such
Registration Statement, copies of all such documents proposed to be filed).
(ii) Notify each holder of Covered Stock of
the effectiveness of each Registration Statement filed hereunder and prepare and
file with the SEC such amendments, post-effective amendments and supplements to
such Registration Statement and the prospectus used in connection therewith as
may be necessary or appropriate to keep such Registration Statement effective
for the period referred to in Section 3.3(d)(xiii) hereof, cause such prospectus
as so supplemented to be filed as required under the Securities Act, and comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement or supplement to the prospectus;
(iii) Furnish to each selling security holder
a copy of each Registration Statement, amendment and supplement thereto and such
copies of each preliminary and final prospectus and such other documents as such
securityholder may reasonably request to facilitate the public offering of its
Covered Stock;
(iv) Use its best efforts to register or
qualify the Covered Stock covered by a Registration Statement under the
applicable securities or "blue sky" laws of such jurisdictions as any selling
securityholder may reasonably request and do any and all other acts
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and things which may be reasonably necessary or advisable to enable such selling
securityholder to consummate the disposition in such jurisdictions of the
Covered Stock owned by such selling securityholder; provided, however, that the
Buyer shall not be obligated to qualify to do business in any jurisdictions
where it is not then so qualified or to take any action which would subject it
to service of process in suits other than those arising out of the offer or sale
of the securities covered by the Registration Statement in any jurisdiction
where it is not then so subject;
(v) Furnish to each selling securityholder a
signed counterpart, addressed to the selling security holders, of an opinion of
counsel for the Buyer, dated the effective date of the Registration Statement
and "comfort" letters signed by the Buyer's independent public accountants who
have examined and reported on the Buyer's financial statements included in the
Registration Statement, to the extent permitted by the standards of the American
Institute of Certified Public Accountants, covering substantially the same
matters with respect to the Registration Statement (and the prospectus included
therein) and (in the case of the accountants' "comfort" letters) with respect to
events subsequent to the date of the financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' "comfort" letters
delivered to the underwriters in underwritten public offerings of securities,
but only to the extent that the Buyer is required to deliver or cause the
delivery of such opinion or "comfort" letters to the underwriters in an
underwritten public offering of securities;
(vi) Notify each selling securityholder of
such Covered Stock, at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, upon discovery that, or upon the
happening of any event as a result of which the prospectus included in such
registration statement as then in effect, contains an untrue statement of a
material fact or omits any fact necessary to make the statements therein not
misleading in the light of the circumstances under which they were made, and, at
the request of any such selling securityholder, the Buyer shall prepare a
supplement or amendment to such prospectus so that, thereafter delivered to the
purchasers of such Covered Stock, such prospectus shall not contain an untrue
statement of a material fact required to be stated therein or omit to state any
fact necessary to make the statements therein not misleading;
(vii) Cause all such Covered Stock to be
listed on the principal securities exchange or market on which similar
securities issued by the Buyer are then listed or traded;
(viii) Cooperate with the selling
securityholders of Covered Stock and the managing underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Covered Stock to be sold and not bearing any restrictive legends relating to
Covered Stock being registered; and enable such Covered Stock to be in such
denominations and registered in such names as the selling securityholders or the
managing underwriters, if any, may request at least ten (10) business days prior
to any sale of Covered Stock; and provide a transfer agent and registrar for all
such Covered Stock not later than the effective date of such registration
statement;
(ix) In the event of the issuance of any stop
order suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of
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any related prospectus or suspending the qualification of any Covered Stock
included in such registration statement for sale in any jurisdiction, the Buyer
shall use its best efforts promptly to obtain the withdrawal of such order.
(x) Permit each selling securityholder or its
counsel or other representatives to inspect and copy such corporate documents
and records as may reasonably be requested by them to facilitate compliance with
Federal or state securities laws;
(xi) Furnish to each selling securityholder a
copy of all documents filed with and all correspondence from or to the SEC in
connection with any such offering of securities;
(xii) Use its best efforts to insure the
obtaining of all necessary approvals from the National Association of Securities
Dealers, Inc.;
(xiii) The Buyer will use its best efforts to
maintain the effectiveness for up to one year (or such shorter period of time as
the underwriters need to complete the distribution of the registered offering),
of any Registration Statement pursuant to which any of the Covered Stock are
being offered, and from time to time will amend or supplement such Registration
Statement and the prospectus contained therein to the extent necessary to comply
with the Securities Act and any applicable state securities statute or
regulation. The Buyer will also provide each security holder with as many copies
of the prospectus contained in any such Registration Statement as it may
reasonably request;
Whenever the security holders are registering Covered
Stock pursuant to any Registration Statement, each such security holder agrees
to timely provide to the Buyer, at its request, such information and materials
as it may reasonably request in order to effect the registration of such Covered
Stock.
(e) In the event that the Buyer registers any of the
Covered Stock under the Securities Act, the Buyer will indemnify and hold
harmless each selling security holder of the Covered Stock (including the
officers, directors, employees, agents, affiliates and partners of each such
security holder) so registered (including any broker or dealer through whom such
shares may be sold) and each Person (as defined in Section 2(2) of the
Securities Act), if any, who controls such security holders within the meaning
of Section 15 of the Securities Act from and against any and all losses, claims,
damages, expenses or liabilities, joint or several, to which they or any of them
become subject under the Securities Act, applicable state securities laws or
under any other statute or at common law or otherwise, as incurred, and, except
as hereinafter provided, will reimburse each such security holder, and each such
controlling Person, if any, for any legal or other expenses reasonably incurred
by them or any of them in connection with investigating or defending any actions
whether or not resulting in any liability, as incurred, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, in any preliminary or amended preliminary prospectus
or in the final prospectus (or the Registration Statement or prospectus as from
time to time amended or supplemented by the Buyer) or arise out of or are based
upon the omission or alleged omission to state therein a material fact
12
required to be stated therein or necessary in order to make the statements
therein not misleading, or any violation by the Buyer of any rule or regulation
promulgated under the Securities Act or any state securities laws applicable to
the Buyer and relating to action or inaction required of the Buyer in connection
with such registration, unless (i) such untrue statement or alleged untrue
statement or omission or alleged omission was made in such Registration
Statement, preliminary or amended preliminary prospectus or final prospectus in
reliance upon and in conformity with information furnished in writing to the
Buyer in connection therewith by any such a security holder, or any such
controlling Person, for use therein, or unless (ii) in the case of a sale
directly by such security holder (including a sale of such Covered Stock through
any underwriter retained by such security holder to engage in a distribution
solely on behalf of such security holder), such untrue statement or alleged
untrue statement or omission or alleged omission was contained in a preliminary
prospectus and corrected or updated in a final or amended prospectus copies of
which were delivered to such security holder or such underwriter on a timely
basis, if and as required by the Securities Act.
Promptly after receipt by any security holder or any controlling
Person of notice of the commencement of any action in respect of which indemnity
may be sought against the Buyer, such security holder or such controlling
Person, as the case may be, will notify the Buyer in writing of the commencement
thereof (provided, that failure to so notify the Buyer shall not relieve the
Buyer from any liability it may have hereunder) and, subject to the provisions
hereinafter stated, the Buyer shall be entitled to assume the defense of such
action (including the employment of counsel, who shall be counsel reasonably
satisfactory to such security holder or such controlling Person, as the case may
be), and the payment of expenses insofar as such action shall relate to any
alleged liability in respect of which indemnity may be sought against the Buyer.
Such security holder or any such controlling Person shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel subsequent to any
assumption of the defense by the Buyer shall not be at the expense of the Buyer
unless (a) the employment of such counsel has been specifically authorized in
writing by the Buyer or (b) the representation of both the Buyer and the
indemnified party(ies) by the same counsel would be inappropriate due to actual
or potential conflicts of interest between them. The Buyer shall not be liable
to indemnify any security holder or controlling Person for any settlement of any
such action effected without the Buyer's written consent (which shall not be
unreasonably withheld). The Buyer shall not, except with the approval of each
party being indemnified under this Section 3.3(e), consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to the parties being so
indemnified of a release from all liability in respect to such claim or
litigation.
In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which any security holder
exercising rights under this Agreement, or any controlling Person of any such
security holder, makes a claim for indemnification pursuant to this Section
3.3(e), but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 3.3(e) provides
for indemnification in such case, then the Buyer and such
13
security holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion as is appropriate to reflect the relative fault of the Buyer on
the one hand and of the security holder on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Buyer on the one hand and of the security holder on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Buyer
on the one hand or by the security holder on the other, and each party's
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided, however, that, in any such case,
no Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(f) In the event that the Buyer registers any of the
Covered Stock under the Securities Act, each security holder for which Covered
Stock was registered will indemnify and hold harmless the Buyer (including the
officers, directors, employees, agents, affiliates, and attorneys of the Buyer),
each underwriter of the Covered Stock so registered (including any broker or
dealer through whom such of the shares may be sold) and each Person, if any, who
controls the Buyer within the meaning of Section 15 of the Securities Act from
and against any and all losses, claims, damages, expenses or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, applicable state securities laws or under any other statute or at common
law or otherwise, and, except as hereinafter provided, will reimburse the Buyer
and each such other indemnified person for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any actions, whether or not resulting in any liability, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, in any preliminary or amended
preliminary prospectus or in the final prospectus (or in the Registration
Statement or prospectus as from time to time amended or supplemented) or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, but only insofar as any such statement or
omission was made in reliance upon and in conformity with information furnished
in writing to the Buyer in connection therewith by such security holder for use
therein.
Promptly after receipt of notice of the commencement of any action
in respect of which indemnity may be sought against such security holder, the
Buyer will notify such security holder in writing of the commencement thereof
(provided, that failure to so notify such security holder shall not relieve such
security holder from any liability it may have hereunder), and such security
holder shall, subject to the provisions hereinafter stated, be entitled to
assume the defense of such action (including the employment of counsel, who
shall be counsel reasonably satisfactory to the Buyer) and the payment of
expenses insofar as such action shall relate to the alleged liability in respect
of which indemnity may be sought against such security holder.
The Buyer and each such underwriter or controlling Person shall
have the right to employ separate counsel in any such action and to participate
in the defense thereof, but the fees
14
and expenses of such counsel subsequent to any assumption of the defense by such
security holder shall not be at the expense of the indemnifying holder, unless
(a) the employment of such counsel has been specifically authorized in writing
by the indemnifying holder or (b) the representation of both the Buyer and the
indemnified party(ies) by the same counsel would be inappropriate due to actual
or potential conflicts of interest between them. The security holder shall not
be liable to indemnify Buyer for any settlement of any such action effected
without the holder's written consent (which shall not be unreasonably withheld).
The holders shall not, except with the approval of Buyer, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
parties being so indemnified of a release from all liability in respect to such
claim or litigation.
In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which the Buyer exercising its
rights under this Agreement, makes a claim for indemnification pursuant to this
Section 3.3(f), but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding that this
Section 3.3(f) provides for indemnification, in such case, then the Buyer and
such security holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion as is appropriate to reflect the relative fault of the Buyer on
the one hand and of the security holder on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Buyer on the one hand and of the security holder on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Buyer
on the one hand or by the security holder on the other, and each party's
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided, however, that in any such case, no
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
3.4. Effect of Buyer's Indemnification. For the limited period set
forth in this Section, each share of Common Stock issued pursuant to Section
3.1(a) hereof, or issued upon the exercise of options delivered pursuant to
Section 3.1(b) or 3.1(c) hereof, shall be subject to forfeiture in satisfaction
of Seller's indemnification obligations under this Agreement. Specifically, if
Buyer establishes a claim for indemnity under Section 3.3 or 13 hereof, and
Seller does not satisfy such claim in cash within ten (10) days of Buyer's
demand therefor (made pursuant to Section 13.3.1 in the case of indemnification
under Section 13), then immediately upon written notice by Buyer to Seller
thereafter, Seller shall be deemed to have forfeited and relinquished to Buyer a
number of shares of Common Stock which, if such shares had been liquidated at
the closing sale price per share, as reported by the NASDAQ Smallcap Market (or
the principal market or exchange on which Common Stock is traded, if other than
the NASDAQ Smallcap Market), on the date of Buyer's written notice, would have
been sufficient to satisfy the amount owed pursuant to Section 13. If no sales
occurred on such date, reference shall be made to the last closing sale price
per share reported by the NASDAQ Smallcap Market (or the principal
15
market or exchange on which Common Stock is traded if other than the NASDAQ
Smallcap Market) immediately preceding such date.
The remedy provided in this Section: (a) shall automatically expire
if Buyer has not made any claim for indemnification under this Agreement within
180 days after the Closing Date, or (b) if Buyer has made a claim in good faith
for indemnification under this Agreement within 180 days after the Closing Date,
shall automatically expire as to any Common Stock or options not previously
forfeited, upon the payment in full of the last outstanding claim by Buyer for
indemnification under this Agreement or the last such outstanding claim is
disposed of adverse to the Buyer in a final Judgment.
During the period in which the remedy under this Section is in
effect, each share of Common Stock subject to forfeiture pursuant to this
Section shall bear a legend indicating that such share is subject to forfeiture.
If Buyer is entitled to effect a forfeiture under this Section and all of the
shares of Common Stock pursuant to Section 3.1(a) hereof, plus those issued upon
the exercise of options delivered pursuant to Section 3.1(b) or 3.1(c) hereof,
have been or will have been forfeited, then Buyer may automatically cancel the
options issued pursuant to Section 3.1(b) and 3.1(c).
Upon any forfeiture pursuant to this Section, the Certificates
representing the forfeited shares shall be surrendered to Buyer, Buyer may
direct the transfer agent to transfer ownership of the forfeited shares to Buyer
on the corporate records, and all of Seller's rights and benefits as to such
shares shall cease.
4. REPRESENTATIONS OF SELLER
-------------------------
Seller represents and warrants to Buyer, both as of the date hereof
and as of the Closing Date, and covenants with the Buyer, with the intent that
Buyer shall rely on such representations, warranties and covenants, as follows:
4.1. Organization. Seller is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware. Seller
possesses the full corporate power and authority to sell the Assets, and enter
into and fully perform this Agreement. Seller is duly qualified to do business
in each jurisdiction in which it is required to be qualified. Millennium Media
Group, Inc., a Pennsylvania corporation ("MMG") owns all of the issued and
outstanding capital stock of Seller.
4.2. Effect of Agreement. The execution, delivery and performance of
this Agreement by Seller and the consummation by Seller of the transactions
contemplated hereby, (a) have been, or shall have been by the Closing Date, duly
authorized by all necessary corporate actions by its shareholders and boards of
directors; (b) do not constitute a violation of, a default under, or termination
of the articles or certificate of incorporation or other organizational
documents of Seller or; (c) do not constitute a default or breach of
(immediately after the giving of notice, passage of time or both), or
termination of any material Contract to which Seller is a party or by which
Seller is bound; (d) do not constitute a violation of any Law applicable to
Seller
16
or REP; and (e) comply or will comply in all respects with Law applicable to the
sale of the Specified Assets to Buyer, including, without limitation, all
requirements of the Uniform Commercial Code with respect to sale of a debtor's
assets by a creditor. There exists no rights of first refusal or other
preemptive rights with respect to REP's Assets. This Agreement constitutes the
valid and legally binding agreement of Seller, enforceable in accordance with
its terms.
4.3. No Proceedings. No Proceeding has been instituted or, to the
best of Seller's knowledge, threatened, no Judgment has been issued, and, to the
best of Seller's knowledge, no Law has been enacted, on or before the Closing
Date, that seeks to prohibit or restrain, or that seeks damages as a result of,
the consummation of the transactions contemplated by this Agreement.
4.4. Financial Records. All of the REP's financial statements
attached hereto at Schedule 4.4 were (a) prepared in accordance with GAAP; and
(b) all adjustments that are necessary for a fair presentation thereof
(consisting only of normal recurring adjustments) have been made.
4.5. Assets. Except for the Seller's security interests under the
Security Documents, REP has good and marketable title to all of its Assets.
Seller has the right to transfer and upon consummation of the transactions
contemplated hereby will transfer all right, title and interest in and to such
Assets to Buyer, free and clear of any Encumbrance. The Specified Assets include
all of the Assets of REP that are used in or for the operation of REP's business
or are necessary for the continued operation of REP's business consistent with
its past operation. Schedule 4.5 contains a non-exclusive list of Intangibles
related to REP Titles to which Seller will transfer all right, title and
interest, free and clear of any Encumbrance on the Closing Date.
4.6. Securities Representations. (a) Seller is acquiring the shares
of and options for Common Stock issued hereunder (the "Issued Securities")
solely for investment for its own account and not with a view to, or for resale
in connection with, the distribution or other disposition thereof, and there is
no current plan or intention by Seller to sell, exchange or otherwise dispose of
the Issued Securities, except that both Seller and MMG intend to dissolve and
liquidate after the Closing Date, and in connection therewith, the Issued
Securities may be distributed solely to those Investors who have executed and
delivered an Investment Intent Letter to the Buyer and Seller.
(b) Seller understands that the acquisition of the shares
of Issued Securities is a speculative investment which involves a high degree of
risk of loss of its investment therein, and that there are restrictions on the
transferability of the shares under the terms of the Federal Securities Act of
1933, as amended and applicable state securities laws.
(c) Seller's knowledge and experience in financial and
business matters are such that Seller is capable of evaluating the merits and
risks of acquisition of the Issued Securities.
(d) In making the decision to acquire Issued Securities,
Seller has relied upon independent investigations made by it.
17
(e) Seller has been given the opportunity to examine, to
ask questions of, and to receive answers from, Buyer and its representatives
concerning the terms and conditions of the acquisition of the Issued Securities
and to obtain information concerning Buyer and any additional information
necessary to verify the information provided. No representations or warranties
have been made to Seller concerning the Issued Securities, or Buyer's business
or prospects or other matters except as set forth in this Agreement.
4.7. REP Proceedings and Judgments. Except as described on Schedule
4.7, to the best of Seller's knowledge (a) no Proceeding involving or related to
REP's business or the Specified Assets is currently pending or threatened in
writing; and (b) no Judgment involving or related to REP's business or the
Specified Assets is currently outstanding.
5. REPRESENTATIONS OF BUYER
------------------------
Buyer represents and warrants to Seller, and covenants with Seller,
as follows:
5.1. Organization. Buyer is a corporation that is duly organized,
validly existing and in good standing under the Law of the Commonwealth of
Pennsylvania. Buyer has the full corporate power and authority to own its
assets, conduct its business as and where such business is presently conducted,
and enter into this Agreement.
5.2. Agreement. Buyer's execution, delivery and performance of this
Agreement, and its consummation of the transactions contemplated hereby, (a)
have been duly authorized by all necessary corporate actions by its board of
directors; (b) do not constitute a violation of or default under its charter or
bylaws; (c) do not constitute a default or breach (immediately or after the
giving of notice, passage of time or both) under any Contract to which it is a
party or by which it is bound; (d) do not constitute a violation of any Law or
Judgment that is applicable to Buyer or to the business or Assets of Buyer, or
to the transactions contemplated by this Agreement; and (e) do not require the
Consent of any Person. This Agreement constitutes the valid and legally binding
agreement of Buyer, enforceable against it in accordance with its terms.
5.3. Brokerage Fees. No Person acting on behalf of Buyer is entitled
to any brokerage, finder's or investment banking fee in connection with the
acquisition of the Specified Assets.
5.4. SEC Reports. Buyer has filed all forms, reports and documents
required to be filed with the SEC, and all required amendments and supplements
to all such reports and registration statements filed with the SEC
(collectively, the "SEC Reports"). The SEC Reports (i) were prepared in
accordance with the requirements of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
18
5.5. Financial Statements. To the extent required by the SEC, each
of the financial statements (including, in each case, any related notes thereto)
contained in the SEC Reports have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and each fairly presents the consolidated
financial position of Buyer and its subsidiaries at and as of the respective
dates thereof and the consolidated results of its operations and cash flows for
the period indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not
or will not be material in amount.
5.6. Absence of Certain Changes or Events. Except as set forth in
the SEC Reports, since September 30, 1996, there has not occurred any material
adverse change in the financial condition of the Buyer.
5.7. Full Disclosure. No statement contained herein or in any
certificate or schedule furnished or to be furnished by Buyer to Seller pursuant
to the provisions of this Agreement contains or will contain any untrue
statement of a material fact or omits or shall omit to state any material fact
necessary, in the light of the circumstances under which it was made, to make
the statements herein or therein not misleading.
5.8. Offering Exemption. The Buyer has complied and will comply with
the Securities Act and all applicable federal and state securities laws in
connection with the issuance and sale of the Common Stock, the options granted
hereunder and the Option Shares to the Seller.
5.9. No Proceedings. No Proceeding has been instituted or, to the
best of Buyer's knowledge, threatened, no Judgment has been issued, and, to the
best of Buyer's knowledge, no Law has been enacted, on or before the Closing
Date, that seeks to prohibit or restrain, or that seeks damages as a result of,
the consummation of the transactions contemplated by this Agreement.
6. CERTAIN OBLIGATIONS OF SELLER PENDING CLOSING
---------------------------------------------
6.1. Investigation. During the period, if any, from the date of this
Agreement to the Closing Date, (a) Seller shall permit Buyer and its authorized
representatives to have full access to REP's facilities during normal business
hours, to observe REP's operations, to meet with REP's officers and employees
and to audit, examine and copy all of REP's files, books and records, and (b)
Seller shall provide to Buyer and its authorized representatives all information
concerning REP and all information concerning the financial condition of Seller
and that is reasonably requested by Buyer.
6.2. Conduct of REP's Business. During the period, if any, from the
date of this Agreement to the Closing Date, except with the prior written
consent of Buyer:
6.2.1 Seller shall, (i) ensure that REP's business is
conducted in a diligent manner consistent with past practices, (ii) ensure that
REP does not make any change in such business practices, and (iii) use its best
efforts to preserve the business organization of REP intact, keeping available
the services of its current officers, employees, salesmen, agents and
19
representatives, and maintaining the good will of its customers, suppliers and
other Persons having business relations with REP; provided, however, that Seller
shall not be deemed to have breached this covenant solely as a result of failure
of REP to satisfy its current obligations as they become due if REP's funds are
insufficient to meet such obligations.
6.2.2 Except in the ordinary course of REP's business
consistent with its past practices, Seller shall not, and shall not permit REP
to (i) create or assume any Encumbrance upon any of the Specified Assets, (ii)
incur any Obligation on behalf of or relating to REP's business, (iii) make any
loan or advance to any Person, (iv) assume, guarantee or otherwise become liable
for any Obligation of any Person on behalf of or relating to REP's business, (v)
commit for any capital expenditure on behalf of or relating to the REP's
business, (vi) purchase, lease, sell, abandon or otherwise acquire or dispose of
any part of REP's business, (vii) waive any right or cancel any debt or claim on
behalf of or relating to REP's business, (viii) assume or enter into any
Contract on behalf of or relating to REP's business other than this Agreement
(and any other Contract contemplated herein), or (ix) do anything else outside
the ordinary course of its business.
6.2.3 Even in the ordinary course of REP's business
consistent with REP's past practices, Seller shall not for REP's account, and
shall not permit REP to, incur any Obligation, make any loan to any Person,
convert or dispose of any part of the Specified Assets or enter into any
Contract or other transaction, or do any of the other things described in
Section 6.2.2 involving an amount exceeding $25,000 in any single case, or
$100,000 in the aggregate.
6.2.4 Seller shall, or shall cause REP to (i) maintain all
Real Property and Tangible Property owned or used by REP in good condition and
repair, (ii) maintain REP's producer's liability insurance policy, other
Insurance Policies covering assets at REP's offices or at other locations, and
Permits in full force and effect, (iii) repair, restore or replace any of REP's
Assets that are damaged, destroyed, lost or stolen, (iv) comply with all
applicable Contracts, Permits and Laws until the Closing Date relating to or for
the benefit of the REP's business, (v) properly file all Tax returns, annual
reports and other returns and reports required to be filed by it with respect to
REP and (vi) fully pay when due all Taxes and fees payable by REP; provided,
however, that Seller shall not be deemed to have breached this covenant solely
as a result of failure of REP to satisfy its current obligations as they become
due if REP's funds are insufficient to meet such obligations.
6.2.5 Seller shall maintain its corporate existence and
good standing in the State of Delaware and MMG shall maintain its corporate
existence and good standing in the Commonwealth of Pennsylvania.
6.3. Consents. Between the date of this Agreement and the Closing
Date, Seller (as requested by Buyer in writing) and Buyer shall in good faith
use best efforts to obtain all Consents, and to give the notices and make the
filings required for Closing.
6.4. Acquisition Proposals. Between the date of this Agreement and
the Closing Date, neither Seller nor any of its respective officers, employees,
representatives or agents, or its respective affiliates, shall, directly or
indirectly, solicit, initiate, encourage or respond to any
20
inquiries or proposals from, or participate in any discussions or negotiations
with, or provide any non-public information to, any Person or group (other than
Buyer and its respective officers, employees, representatives and agents)
concerning any sale of any of the Specified Assets or REP's business. Seller
shall immediately advise Buyer of, and communicate to Buyer the terms of, any
such inquiry or proposal received by Seller.
6.5. Advice of Changes. Between the date of this Agreement and the
Closing Date, Seller shall promptly advise Buyer in writing of any fact arising,
if existing or known as of the date of this Agreement, would have been required
to be set forth or disclosed in or pursuant to this Agreement (it being
understood that such advice shall not be deemed limit or to modify the
representations, warranties and covenants of Seller contained in this
Agreement).
6.6. Best Efforts. Seller shall use its best efforts to consummate
the transactions contemplated by this Agreement as of the earliest practicable
date.
7. CERTAIN OBLIGATIONS OF BUYER PENDING CLOSING
--------------------------------------------
7.1. Corporate Status. Between the date of this Agreement and the
Closing Date Buyer shall maintain its corporate existence and good standing in
the Commonwealth of Pennsylvania.
7.2. Best Efforts. Buyer shall use its best efforts to consummate
the transactions contemplated by this Agreement as of the earliest practicable
date.
8. CONDITIONS PRECEDENT TO SELLER'S CLOSING OBLIGATIONS
----------------------------------------------------
Each obligation of Seller to be performed on the Closing Date shall
be subject to the satisfaction of each of the conditions stated in this Section,
except to the extent that such satisfaction is waived by Seller in writing.
8.1. Representations of Buyer. All representations, warranties and
certifications made by Buyer in this Agreement or pursuant hereto shall be true
in all material respects on and as of the Closing Date, with the same force and
effect as though made on and as of the Closing Date.
8.2. Performance by Buyer. All of the covenants, terms and
conditions of this Agreement to be satisfied or performed by Buyer on or before
the Closing Date shall have been substantially satisfied or performed.
8.3. Absence of Proceedings. No Proceeding shall have been
instituted or threatened (excluding any Proceeding instituted by or on behalf of
Seller), no Judgment shall have been issued, and no new Law shall have been
enacted, on or before the Closing Date, that seeks to or does prohibit or
restrain, or that seeks damages as a result of, the consummation of the
transactions contemplated by this Agreement.
21
9. CONDITIONS PRECEDENT TO BUYER'S CLOSING OBLIGATIONS
---------------------------------------------------
Each obligation of Buyer to be performed on the Closing Date shall
be subject to the satisfaction of each of the conditions stated in this Section,
except to the extent that such satisfaction is waived by Buyer in writing.
9.1. Representations of Seller. All representations, warranties and
certifications made by Seller in this Agreement or pursuant hereto shall be true
on and as of the Closing Date, with the same force and effect as though made on
and as of the Closing Date, and the Schedules to this Agreement shall be
complete, accurate and current on and as of the Closing Date.
9.2. Performance by Seller. All of the covenants, terms and
conditions of this Agreement to be satisfied or performed by Seller on or before
the Closing Date shall have been fully satisfied or performed.
9.3. Absence of Proceedings. No Proceeding shall have been
instituted or threatened, no Judgment shall have been issued, and no new Law
shall have been enacted, on or before the Closing Date, that seeks to or does
prohibit or restrain, or that seeks damages as a result of, the consummation of
the transactions contemplated by this Agreement.
9.4. Seller or REP's Adverse Changes. Between the earlier of the
date of the Agreement or the date of the last financial statements of REP
delivered to Buyer and the Closing Date, there shall not have been (a) any
material adverse change in, or material casualty loss affecting, REP or the
Specified Assets or the financial condition of REP or (b) any material adverse
change in the financial performance of REP.
9.5. Consents. All Consents necessary to convey all right, title and
interest in the Specified Assets to Buyer shall have been obtained.
10. CLOSING
10.1. Closing. Unless this Agreement is earlier terminated as
provided herein, the closing of the transactions contemplated by this Agreement
(the "Closing") shall be held at a mutually agreeable time on February 17, 1997
or such other date as is mutually agreeable (the "Closing Date"), at such
location as is agreed upon by Buyer and Seller.
10.2. Obligations of Seller at Closing. At the Closing, Seller shall
deliver to Buyer the following:
10.2.1 Specified Assets. Possession and control of the
Specified Assets other than as disclosed on Schedule 10.2.1.
10.2.2 Documents of Transfer. Such bills of sale,
assignments, deeds, endorsements, affidavits, Consents and other instruments and
documents of sale, transfer,
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assignment and conveyance as Buyer may reasonably require, in order to lawfully
and effectively sell, transfer, assign and convey to Buyer all right, title and
interest in and to all of the Specified Assets, in each case in form acceptable
to Buyer, dated as of the Closing Date, and duly executed and, if necessary,
acknowledged by Seller.
10.2.3 Closing Certificate. A certificate ("Seller's
Closing Certificate"), dated the Closing Date, in form and substance
satisfactory to Buyer, signed by the President of Seller, in which Seller
represents and warrants that:(a) all representations, warranties and
certifications made by Seller in this Agreement or pursuant hereto are true on
and as of the Closing Date, with the same force and effect as though made on and
as of the Closing Date; (b) the Schedules to this Agreement are complete and
accurate on and as of the Closing Date; (c) all of the covenants, terms and
conditions of this Agreement to be satisfied or performed on or before the
Closing Date have been satisfied or performed; (d) as of the Closing Date, no
Proceeding has been instituted or threatened, no Judgment has been issued, and
no new Law has been enacted that seeks to or does prohibit or restrain, or that
seeks damages as a result of, the consummation of the transactions contemplated
by this Agreement; and (e) since the date of this Agreement, there has not been
any material adverse change or material casualty loss affecting REP or the
Specified Assets, the financial condition of Seller or REP.
10.2.4 Resolutions. Copies of the resolutions duly
adopted by the board of directors and, if applicable, shareholders or partners
of Seller and MMG, respectively, authorizing Seller to enter into and perform
this Agreement and MMG to guaranty Seller's performance hereunder, certified by
proper officers as in full force and effect on and as of the Closing Date.
10.2.5 Good Standing. Good standing certificates for
Seller and MMG from their respective jurisdiction of incorporation, dated no
earlier than 20 days before the Closing Date.
10.2.6 Opinion of Counsel. An opinion of counsel to
Seller and MMG addressed to Buyer and dated the Closing Date, in form acceptable
to Buyer.
10.2.7 Consents. The original signed copies of all
Consents described in Section 9.5 hereof and an executed Investment Intent
Letter for each Investor in whose name a Common Stock certificate has been
requested by Seller to be issued pursuant to Section 3.1 hereof.
10.2.8 Debt Payoff. Proper documentary evidence of the
removal of all Encumbrances upon any of the Specified Assets; together with all
further documents reasonably requested by Buyer to remove all such Encumbrances
on the Specified Assets, including, but not limited to, UCC-3 (or other)
termination forms duly executed by the secured parties and mortgage satisfaction
and release forms duly executed by the mortgagees, and UCC-3 (or other)
termination forms duly executed by former secured parties for which UCC-1 (or
other) financing statements remain of record, in each case in form acceptable
for immediate filing with the appropriate state or local governmental office.
23
10.2.9 Guaranty. A guaranty by MMG of Seller's
obligations hereunder in the form of Schedule 10.2.10 attached hereto.
10.2.10 Other Documents. All other agreements,
certificates, instruments and documents reasonably requested by Buyer in order
to fully consummate the transactions contemplated by this Agreement and carry
out the purposes and intent of this Agreement.
10.3. Obligations of Buyer at Closing. At the Closing,
Buyer shall deliver to Seller the following:
10.3.1 Stock Certificates and Option Agreements. A First
Redeemable Option Agreement, in the form set forth in Schedule 3.1(b), a Second
Redeemable Option Agreement, in the form set forth on Schedule 3.1(c), in each
case executed by an authorized officer of Buyer, and one or more certificates
representing the Common Stock required to be delivered on the Closing Date
pursuant to Section 3.1 hereof;
10.3.2 Closing Certificate. A certificate ("Buyer's
Closing Certificate"), dated the Closing Date, in form and substance
satisfactory to Seller, signed by an officer, President and Chief Financial
Officer of Buyer, in which Buyer, represents and warrants to the Seller that:
(a) all representations, warranties and certifications made by Buyer in this
Agreement or pursuant hereto are true on and as of the Closing Date, with the
same force and effect as though made on and as of the Closing Date; (b) all of
the covenants, terms and conditions of this Agreement to be satisfied or
performed by Buyer on or before the Closing Date have been satisfied or
performed; and (c) as of the Closing Date, no Proceeding has been instituted or
threatened against Buyer, no Judgment has been issued against Buyer, and no new
Law has been enacted that seeks to or does prohibit or restrain, or that seeks
damages as a result of, the consummation of the transactions contemplated by
this Agreement; and
10.3.3 Incumbency Certificate. A certificate of the
corporate Secretary (or Assistant Corporate Secretary) of Buyer as to the
incumbency and signatures of the officers of Buyer executing this Agreement and
the related certificates; and
10.3.4 Resale Certificates. Certificates of exemption for
Pennsylvania sales tax from Buyer and any affiliated nominee substituted for
Buyer at Closing on forms acceptable to the Pennsylvania Department of Revenue.
11. CERTAIN POST-CLOSING OBLIGATIONS
--------------------------------
11.1. Transition and Cooperation. From and after the Closing Date,
(a) Seller shall, and shall cause REP to, fully cooperate to transfer to the
Buyer the control and enjoyment of the Specified Assets; (b) Seller shall not
take any action, directly or indirectly, alone or together with others, which
obstructs or impairs the smooth assumption by Buyer of the Specified Assets; and
(c) Seller shall, and shall cause REP to, promptly deliver to Buyer all
correspondence, papers, documents and other items and materials received by it
or REP or found to be in the possession of Seller or REP which pertain to the
Specified Assets.
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11.2. Contract Matters. After the Closing, each Contract as to which
(a) the Contract Rights of Seller are included in the Specified Assets, and (b)
Consent to the assignment thereof from Seller to Buyer is required but was not
obtained on or before the Closing Date (each a "Transferred Contract"), to the
extent such Consent was waived as a closing condition by Buyer, shall be handled
in accordance with the following provisions:
11.2.1 Consent. Seller, as and if requested by Buyer in writing,
shall cooperate with Buyer to obtain the Consent; however, Buyer shall be
primarily responsible for preparing any documents and making any arrangements to
obtain the Consent, and Seller's responsibility shall generally be limited to
execution of documents prepared by Buyer and confirmation of the arrangements
made by Buyer. If and when Consent to assignment of such Transferred Contract is
obtained, such Transferred Contract shall no longer be subject to the provisions
of this Section.
11.2.2 Subcontracting. Seller shall make available, or cause REP to
make available, to Buyer all Contract Rights and other benefits of such
Transferred Contract, on a subcontract or sublease basis or in some other
appropriate manner to the fullest extent possible, and Buyer shall be considered
an independent subcontractor or sublessee of Seller, or an agent of Seller, with
respect to all matters concerning such Transferred Contract. Without limiting
the foregoing, Buyer shall be considered Seller's agent for purposes of (a)
collecting all amounts that may be due from the other party or parties to such
Transferred Contract; and (b) negotiating or otherwise handling all disputes and
issues that may arise in connection with such Transferred Contract. Without
Buyer's prior written consent, Seller shall not agree to any amendment,
modification, extension, renewal, termination or other change in the terms of
such Transferred Contract, nor shall Seller exercise any Contract Right under
such Transferred Contract.
11.2.3 Buyer's Instructions. At Buyer's direction, Seller shall (a)
notify the other party or parties to such Transferred Contract that Buyer is
Seller's subcontractor, sublessee or agent with respect thereto and that all
further payments, notices and other communications with respect thereto shall be
directed to Buyer; (b) agree to such amendments, modifications, extensions,
renewals, terminations or other changes in the terms of such Transferred
Contract as Buyer determines, in its sole discretion, are advisable; and (c)
exercise any Contract Right under such Transferred Contract at such time and in
such manner as Buyer determines, in its sole discretion, to be advisable.
11.2.4 Collateral Assignment. Effective as of the Closing Date,
Seller hereby collaterally assigns to Buyer (except and only to the extent that
such collateral assignment is expressly prohibited by the terms of such
Transferred Contract), and grants to Buyer a security interest in, all of
Seller's and/or REP's contract rights under such Transferred Contract and all
cash and non-cash proceeds thereof, as security for the prompt and timely
satisfaction and performance of Seller's obligations under this Section. Buyer
shall have, and Seller shall deliver to Buyer at the Closing, possession of the
original executed copy of such Transferred Contract. Effective as of the Closing
Date, Seller hereby appoints Buyer as Seller's attorney to take such actions, in
Seller's name and on its behalf, as such attorney determines, in its sole
discretion, to be necessary or advisable to protect, perfect and continue
perfected the security interest granted
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hereunder, including, but not limited to, the execution and filing of such
financing statements and other instruments and documents as such attorney
determines, in its sole discretion, to be necessary or advisable for such
purposes.
11.3. Further Assurances. At any time and from time to time after
the Closing Date, at Buyer's request and expense, and without further
consideration, Seller shall promptly execute and deliver all such further
agreements, certificates, instruments and documents, and perform such further
actions, as Buyer may reasonably request in order to fully consummate the
transactions contemplated hereby and carry out the purposes and intent of this
Agreement. If Seller thereafter elects to dissolve, liquidate, or go out of
existence, Seller shall first irrevocably appoint Buyer as its attorney in fact
to execute all documents and act in any manner on behalf of Seller as required
to vest in Buyer title to all Specified Assets, including any Transferred
Contracts.
11.4. Board of Directors. Buyer shall use its best efforts to cause
Wayne Weisman or one other person who is designated in writing by Seller and
acceptable to the existing Board of Directors of Buyer, to be elected or
appointed to the Board of Directors of Buyer. Such person shall serve until his
or her successor is duly elected and qualified or as otherwise provided in
Buyer's Articles of Incorporation or Amended and Restated Bylaws.
11.5. Name Change. Within thirty days after the Closing Date, Seller
shall cause REP to be dissolved as a corporation or shall cause its name to be
changed to a name which is dissimilar to Rabbit Ears Productions, Inc., which is
not any variation of such name, and which does not otherwise infringe on any
Intangible being assigned to Buyer hereunder. Seller will file or cause to be
filed appropriate certificates or amendments with the Department of State of the
State of Delaware to effect the foregoing, and at Buyer's request shall provide
Buyer with any consents or similar documents that may be required from Seller to
enable Buyer to conduct business under and otherwise obtain the full benefit and
use of the foregoing name and all variations thereof.
12. SELLER RESTRICTIVE COVENANTS
----------------------------
12.1. Basis for Covenants. The covenants of Sections 12.2 (the
"Covenants") are a material part of this Agreement and are an integral part of
the obligations of Seller hereunder; the Covenants are supported by good and
adequate consideration; and the Covenants are reasonable and necessary to
protect the legitimate business interests of Buyer.
12.2. Nondisclosure Covenants. At all times after the date of this
Agreement, for an indefinite period of time, except with Buyer's prior written
consent, Seller shall not directly or indirectly, in any capacity, communicate,
publish or otherwise disclose to any Person, or use for the benefit of any
Person, any confidential or proprietary property, knowledge or information of
the Buyer or concerning any of its business, software, assets or financial
condition, no matter when or how such knowledge or information was obtained,
including without limitation (a) any information concerning the Specified
Assets, or the conduct and details of REP's business; (b) the identity of
customers and prospects, their specific requirements, and the names, addresses
and telephone numbers of individual contacts at customers and prospects; (c)
prices, renewal dates and
26
other detailed terms of customer and supplier Contracts and proposals; (d)
pricing policies, marketing and sales strategies, methods of delivering
services, and product development projects and strategies; (e) source code,
object code, user manuals, technical manuals and other documentation for
Software products; (f) artwork, images, musical compositions, screen designs,
report designs and other designs, concepts and visual or audio expressions for
Software products; (g) employment and payroll records; (h) forecasts, budgets
and other nonpublic financial information; and (i) expansion plans, management
policies, methods of operation, and other business strategies and policies.
12.3. Enforcement of Covenants. Seller expressly acknowledges that
it would be extremely difficult to measure the damages that might result from
any breach of the Covenants, and that any breach of the Covenants will result in
irreparable injury to the Buyer for which money damages could not adequately
compensate. If a breach of the Covenants occurs, then Buyer shall be entitled,
in addition to all other rights and remedies that it may have at law or in
equity, to have an injunction issued by any competent court enjoining and
restraining the Seller and all other Persons involved therein from continuing
such breach. The existence of any claim or cause of action that Seller or any
such other Person may have against Buyer shall not constitute a defense or bar
to the enforcement of any of the Covenants. If Buyer must resort to litigation
to enforce any of the Covenants that has a fixed term, then such term shall be
extended for a period of time equal to the period during which a breach of such
Covenant was occurring, beginning on the date of a final court order (without
further right of appeal) holding that such a breach occurred or, if later, the
last day of the original fixed term of such Covenant.
12.4. Scope of Covenants. If any Covenant, or any part thereof, or
the application thereof, is construed to be invalid, illegal or unenforceable,
then the other Covenants, or the other portions of such Covenant, or the
application thereof, shall not be affected thereby and shall be enforceable
without regard thereto. If any of the Covenants is determined to be
unenforceable because of its scope, duration, geographical area or other factor,
then the court making such determination shall have the power to reduce or limit
such scope, duration, area or other factor, and such Covenant shall then be
enforceable in its reduced or limited form.
13. INDEMNIFICATION
---------------
13.1. Seller's Indemnification. From and after the Closing Date and
until the later of (1) six months from the Closing Date or (2) the date Seller
is dissolved pursuant to Delaware law, Seller shall indemnify and hold harmless
Buyer, its affiliates, assigns, and their respective directors, officers,
employees, agents and representatives, from and against any and all actions,
suits, claims, demands, debts, liabilities, obligations, losses, damages, costs
and expenses (collectively, "Claims"), including without limitation reasonable
attorney's fees and court costs, arising out of or caused by, directly or
indirectly, any of all of the following:
13.1.1 Misrepresentation. Any misrepresentation, breach
or failure of any warranty or representation made by Seller in or pursuant to
this Agreement; provided, however, that Seller shall not be liable under this
Section for losses suffered by Buyer due to the ineffectiveness of conveyance
documents prepared by Buyer (although Seller shall remain
27
obligated to execute corrected, effective conveyance documents in accordance
with this Agreement if it is determined that any such conveyance documents are
ineffective).
13.1.2 Nonperformance. Any failure or refusal by Seller
to satisfy or perform any covenant, term or condition of this Agreement required
to be satisfied or performed by it.
13.1.3 Non-Assumed Obligations. Any Obligation of Seller
other than those expressly included in the Specified Liabilities including, but
not limited to, (a) any of the types of Obligations specifically excluded from
the Specified Liabilities under Section 2.2; (b) any such Obligation that may be
imposed upon the Buyer as a result of the failure by Seller or REP to comply
with any bulk sales, bulk transfer, fraudulent conveyance or similar Law of any
jurisdiction that may be applicable to some or all of the transactions
contemplated by this Agreement; and (c) any such Obligation that may be imposed
upon Buyer as a result of any Law under which Buyer or its affiliates may have
successor liability for any Tax or other Obligations of Seller or REP.
13.1.4 Unasserted Claims. Any action, suit or claim
arising out of, caused by or based upon any act or omission of Seller or REP or
their respective shareholders, partners, directors, executives, officers,
employees, agents or representatives at any time before the Closing, except
actions, suits or claims which are disclosed in the Schedules to this Agreement.
13.1.5 Proceedings by Employees. Any Proceeding against
Buyer by or on behalf of any employee of REP who is not hired by Buyer.
13.1.6 Investor Claims. Any Claims by or for
shareholders, noteholders, or other investors in REP, MMG or Seller, including,
without limitation, Investors, asserting any interest in the Assets to be
acquired hereunder (other than interests as shareholders of Buyer), or seeking
to obstruct or rescind this Agreement or the sale contemplated hereby; or
otherwise relating to the transactions contemplated by this Agreement other than
claims arising from a breach of this Agreement by the Buyer.
13.2. Buyer's Indemnification. From and after the Closing Date,
Buyer shall indemnify and hold harmless Seller, its affiliates, assigns, and
their respective directors, officers, employees, agents and representatives (and
any of the Investors who legally become record holders of Common Stock issued to
Seller after delivering a true, executed Investment Intent Letter to Buyer),
from and against any and all actions, suits, claims, demands, debts,
liabilities, obligations, losses, damages, costs and expenses, including without
limitation reasonable attorney's fees and court costs, arising out of or caused
by, directly or indirectly, any of all of the following:
13.2.1 Misrepresentation. Any misrepresentation, breach
or failure of any warranty or representation made by Buyer pursuant to Section 5
of this Agreement.
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13.2.2 Nonperformance. Any failure or refusal by Buyer to
satisfy or perform any covenant, term or condition of this Agreement required to
be satisfied or performed by Buyer.
13.2.3 Assumed Obligations. The Specified Liabilities.
13.2.4 Unasserted Claims. Any action, suit or claim
arising out of, caused by or based upon any act or omission of Buyer its
shareholders, directors, executives, officers, employees, agents or
representatives at any time after the Closing.
13.3. Indemnification Procedures. With respect to each event,
occurrence or matter ("Indemnification Matter") as to which any Person (the
"Indemnitee") is entitled to indemnification from Seller or Buyer, as the case
may be (the "Indemnitor") under this Section:
13.3.1 Notice. Within ten (10) days after the Indemnitee
receives written documents underlying the Indemnification Matter or, if the
Indemnification Matter does not involve a third-party action, suit, claim or
demand, promptly after the Indemnitee first has actual knowledge of the
Indemnification Matter, the Indemnitee shall give notice to the Indemnitor of
the nature of the Indemnification Matter and the amount demanded or claimed in
connection therewith ("Indemnification Notice"), together with copies of any
such written documents.
13.3.2 Defense. If a third-party action, suit, claim or
demand is involved, then, upon receipt of the Indemnification Notice, the
Indemnitor shall, at its expense and through counsel of its choice, promptly
assume and have sole control over the litigation, defense or settlement (the
"Defense") of the Indemnification Matter, except that (a) the Indemnitee may, at
its option and expense and through counsel of its choice, participate in the
Defense; (b) if the Indemnitee reasonably believes that the handling of the
Defense by the Indemnitor may have a material adverse effect on the Indemnitee,
its business or financial condition, or its relationship with any customer,
prospect, supplier, employee, salesman, consultant, agent or representative,
then the Indemnitee may, at its option and expense and through counsel of its
choice, assume control of the Defense, provided that the Indemnitor shall be
entitled to participate in the Defense at its expense and through counsel of its
choice; (c) the Indemnitor shall not consent to any Judg ment, or agree to any
settlement, without the Indemnitee's prior written consent; and (d) if the
Indemnitor does not promptly assume control over the Defense or, after doing so,
does not continue to prosecute the Defense in good faith, the Indemnitee may, at
its option and through counsel of its choice, but at the Indemnitor's expense,
assume control over the Defense. In any event, the Indemnitor and the Indemnitee
shall fully cooperate with each other in connection with the Defense, including
without limitation by furnishing all available documentary or other evidence as
is reasonably requested by the other.
13.3.3 Payments. All amounts owed by the Indemnitor to
the Indemnitee (if any) shall be paid, in the case of third-party actions,
suits, claims or demands, in full within fifteen (15) business days after a
final Judgment (without further right of appeal) determining the amount owed is
rendered, or after a final settlement or agreement as to the amount owed is
executed, or, in cases not involving a third-party action, suit, claim or
demand, with ten (10) days of the notice provided pursuant to Section 13.3.1
hereof.
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14. TERMINATION
-----------
14.1. Termination by Mutual Consent. At any time before the Closing,
this Agreement may be terminated by the mutual written consents of Buyer and
Seller.
14.2. Termination on Default. As used herein, "Default" means, with
respect to Seller on the one hand, or with respect to Buyer on the other hand,
that any of the representations and warranties made by such parties in or
pursuant to this Agreement is or becomes false or misleading in any material
respect, or any provision of this Agreement to be satisfied or performed by such
parties is not substantially satisfied or performed in a timely manner, in
either case for reasons within the reasonable control of such parties. If a
Default occurs and is not cured within ten days after notice is given by the
non-Defaulting party to the Defaulting party specifying the nature of the
Default (or on or before the Closing Date if sooner), then the non-Defaulting
party may terminate this Agreement immediately upon notice to the Defaulting
party.
14.3. Termination at Closing. If any of the conditions set forth in
Section 8 is not satisfied on or before the Closing Date, then Seller may
terminate this Agreement by notifying Buyer on the Closing Date. If any of the
conditions set forth in Section 9 is not satisfied on or before the Closing
Date, then Buyer may terminate this Agreement by notifying Seller on the Closing
Date.
15. OTHER PROVISIONS
-----------------
15.1. Confidentiality. During the period from the date of this
Agreement to the Closing Date, (a) each of the parties shall maintain the
confidentiality of all information normally maintained as confidential and
exchanged among them in connection with this Agreement, in the same manner that
the recipient of the information maintains the confidentiality of its own
confidential information, and (b) none of the parties will discuss the existence
or nature of this Agreement or the transaction contemplated hereby with any of
REP's customers, prospects, suppliers, employees, contractors, salesmen, agents
or representatives, except in the manner reasonably determined by Buyer or as
otherwise required by law. If this Agreement is terminated in accordance with
Section 14, then each party shall promptly return all confidential information
and materials of the other party and the provisions of the foregoing sentence
shall survive such termination indefinitely.
15.2. Fees and Expenses. Buyer shall pay all of the fees and
expenses incurred by them, and Seller, shall pay all of the fees and expenses
incurred by it, in negotiating and preparing this Agreement (and all other
Contracts executed in connection herewith) and in consummating the transactions
contemplated by this Agreement.
15.3. Notice. All notices, consents or other communications required
or permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, (b) three business
days after being mailed by first class certified mail, return receipt requested,
postage prepaid, or (c) one business day after being sent by a reputable
overnight delivery service, postage or delivery charges prepaid, to the parties
at their
30
respective addresses stated on the first page of this Agreement. Notices may
also be given by prepaid telegram or facsimile and shall be effective on the
date transmitted if confirmed within 24 hours thereafter by a signed original
sent in the manner provided in the preceding sentence. Notice sent to Seller or
Buyer at the respective address specified on page one of this Agreement shall
suffice as notice to Seller or Buyer, as the case may be. Any party may change
its address for notice and the address to which copies must be sent by giving
notice of the new addresses to the other parties in accordance with this
Section, except that any such change of address notice shall not be effective
unless and until received.
15.4. Survival of Representations. All representations and
warranties made in this Agreement or pursuant hereto shall survive the date of
this Agreement, the Closing Date, the consummation of the transactions
contemplated by this Agreement, subsequent transfers of the Specified Assets,
and assignments by Buyer of this Agreement.
15.5. Interpretation of Representations. Each representation and
warranty made in this Agreement or pursuant hereto is independent of all other
representations and warranties made by the same parties, whether or not covering
related or similar matters, and must be independently and separately satisfied.
Exceptions or qualifications to any such representation or warranty shall not be
construed as exceptions or qualifications to any other representation or
warranty.
15.6. Reliance by Buyer. Notwithstanding the right of Buyer to
investigate REP and the Specified Assets and financial condition of Seller, and
notwithstanding any knowledge determined or determinable by Buyer as a result of
such investigation, Buyer shall have the unqualified right to rely upon, and
have relied upon, each of the representations and warranties made by Seller in
this Agreement or pursuant hereto.
15.7. Entire Understanding. This Agreement, together with the
Exhibits and Schedules hereto, states the entire understanding among the parties
with respect to the subject matter hereof, and supersedes all prior oral and
written communications and agreements, and all contemporaneous oral
communications and agreements, with respect to the subject matter hereof,
including without limitation all confidentiality letter agreements and letters
of intent previously entered into among some or all of the parties hereto. No
amendment or modification of this Agreement shall be effective unless in writing
and signed by the party against whom enforcement is sought.
15.8. Publicity. All voluntary public announcements concerning the
transactions contemplated by this Agreement shall be mutually acceptable to both
Buyer and Seller. Unless required by Law, the parties shall not make any public
announcement or issue any press release concerning the transactions contemplated
by this Agreement without the prior written consent of the other parties. With
respect to any announcement that any of the parties is required by Law or stock
exchange or NASDAQ SmallCap Market regulation to issue, such party shall, to the
extent possible under the circumstances, review the necessity for and the
contents of the announcement with the other parties before issuing the
announcement.
15.9. Assignment. Neither Buyer nor Seller may assign this Agreement
without the written consent of the other, except that (a) Buyer may assign this
Agreement to an affiliated
31
corporation without the prior written consent of Seller and (b) Seller can
assign it to one or more Investors who have (i) executed an Investment Intent
Letter and (ii) if Seller has otherwise complied with applicable securities laws
in transferring to such Investor the related Common Stock or Option Shares. This
Agreement shall bind, benefit, and be enforceable by and against the parties
hereto, and their respective successors and consented-to assigns.
15.10. Waivers. Except as otherwise expressly provided herein, no
waiver with respect to this Agreement shall be enforceable unless in writing and
signed by the party against whom enforcement is sought. Except as otherwise
expressly provided herein, no failure to exercise, delay in exercising, or
single or partial exercise of any right, power or remedy by any party, and no
course of dealing between or among any of the parties, shall constitute a waiver
of, or shall preclude any other or further exercise of, any right, power or
remedy.
15.11. Severability. If any provision of this Agreement is construed
to be invalid, illegal or unenforceable, then the remaining provisions hereof
shall not be affected thereby and shall be enforceable without regard thereto.
15.12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.
15.13. Section Headings. The section and subsection headings in this
Agreement are used solely for convenience of reference, do not constitute a part
of this Agreement, and shall not affect its interpretation.
15.14. References. All words used in this Agreement shall be
construed to be of such number and gender as the context requires or permits.
Unless a particular context clearly requires otherwise, the words "hereof" and
"hereunder" and similar references refer to this Agreement in its entirety and
not to any specific section or subsection of this Agreement.
15.15. Controlling Law. THIS AGREEMENT IS MADE UNDER, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
15.16. Process. In any action between or among any of the parties,
whether arising out of this Agreement or otherwise, (a) each of the parties
irrevocably waives the right to trial by jury; (b) each of the parties
irrevocably consents to service of process by first class certified mail, return
receipt requested, postage prepaid, to the address at which such party is to
receive notice in accordance with this Agreement; and (c) the prevailing parties
shall be entitled to recover their reasonable attorney's fees (including, if
applicable, charges for in-house counsel) and court costs from the other
parties.
32
15.17. No Third-Party Beneficiaries. No provision of this Agreement
is intended to or shall be construed to grant or confer any right to enforce
this Agreement, or any remedy for breach of this Agreement, to or upon any
Person other than the parties hereto and the Investors, including, but not
limited to, any customer, prospect, supplier, employee, contractor, salesman,
agent or representative of Seller or REP.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK --
SIGNATURE PAGE FOLLOWS]
33
EACH PARTY IDENTIFIED BELOW HAS CAUSED THIS AGREEMENT TO BE
EXECUTED ON ITS BEHALF BY A DULY AUTHORIZED OFFICER AS OF THE DATE
FIRST STATED ABOVE.
SELLER:
MILLENNIUM MEDIA GROUP HOLDINGS, INC.
By: _____________________________
Title: __________________________
Date: ___________________________
BUYER:
MICROLEAGUE MULTIMEDIA, INC.
By: _____________________________
Title: __________________________
Date: ___________________________
34
LIST OF SCHEDULES
-----------------
1.1 Seller Retained Accounts Receivable
1.15 Investment Intent Letter
1.16 Investor Schedule
1.29 REP Titles
2.1.1(c) Specified Contracts
3.1(b) Form of First Redeemable Option Agreement
3.1(c) Form of Second Redeemable Option Agreement
4.4 Financial Statements
4.5 Certain Intangible Property
4.7 REP Litigation
10.2.1 Certain Assets Not in Seller's Possession
10.2.10 Form of Guaranty
Acknowledgment and Release by Rabbit Ears
-----------------------------------------
Rabbit Ears Productions, Inc., a Delaware Corporation ("REP"),
hereby acknowledges and agrees that: 1) REP has received all required notices
with respect to the sale of REP's assets by Millennium Media Group Holdings,
Inc. (the "Creditor") pursuant to the Asset Acquisition Agreement (the
"Agreement"), dated February , 1997, between the Creditor and Microleague
Multimedia, Inc. (the "Buyer"), 2) REP is and was in default under the Security
Documents (as defined in the Agreement; 3) the Creditor has the right to sell
all of REP's assets under the Security Documents; and 4) following the sale to
Buyer pursuant to the Agreement, REP will not have, and will not claim, any
right, title or interest in, to or under the Specified Assets (as defined in the
Agreement) and releases Buyer from all claims, charges and causes of action
arising from Buyer's acquisition of the Specified Assets.
Therefore, intending to be legally bound hereby, REP has caused this
Acknowledgment and Release to be executed on its behalf by its duly authorized
officer undersigned.
RABBIT EARS PRODUCTIONS, INC.
By: __________________________
Name: __________________________
Title:__________________________
Date: __________________________
Schedule 1.1: Seller Retained Accounts Receivable
-------------------------------------------------
1. All amounts payable to REP from Resolution, Inc. on account of
sales prior to the Closing Date.
2. All amounts of cash actually received by REP from any licensee of
the REP Titles and attributable to the license period ended on or
before December 31, 1996. Such amount does not include, and Seller
shall not be entitled to any cash payment for, any non-cash credit
against prepaid license fees.
Schedule 1.15: Form of Investment Intent Letter
-----------------------------------------------
Schedule 1.16: Investor Schedule
--------------------------------
SCHEDULE 1.29 - REP TITLES
--------------------------
Aladdin and the Magic Lamp Rip Van Winkle
Anansi Road to Nashville
Annie Oakley Rumpelstiltskin
The Boy Who Drew Cats Sacajawea
The Bremen-Town Musicians Santabear's First Christmas
Brer Rabbit & Boss Lion The Savior is Born
Brer Rabbit and the Wonderful Tar Baby Songs My Children Taught Me
The Creation Squanto and the First Thanksgiving
David and Goliat The Steadfast Tin Soldier
Davy Crockett Stormalong
East of the Sun, West of the Moon The Tailor of Gloucester
The Elephant's Child The Tale of Peter Rabbit &
The Emperor's New Clothes The Tale of Mr. Jeremy Fisher and
The Emperor and the Nightingale Two Bad Mice
Finn McCoul The Talking Eggs
The Firebird The Three Billy Goats Gruff and The
The Fisherman and His Wife Three Little Pigs
The Five Chinese Brothers Thumbelina
Follow the Drinking Gourd - A Story The Tiger and the Brahmin
of the Underground Railroad The Tiger, the Brahmin, and the
The Fool and the Flying Ship Jackal
A Gingerbread Christmas Tom Thumb
The Gingham Dog and the Calico Cat Two Tales from Rudyard Kipling's
Goldilocks Just So Stories
Happy Trails Two Tales by Beatrix Potter
How the Camel Got his Hump/How the The Ugly Duckling
Rhinoceros Got His Skin The Velveteen Rabbit
How the Leopard Got His Spots The White Cat
Jack and the Beanstalk
John Henry
Johnny Appleseed
Jonah and the Whale
Joseph and His Brothers
King Midas and the Golden Touch
Koi and Kola Nuts
The Legend of Sleepy Hollow
The Lion and the Lamb
The Monkey People
Mose the Fireman
Moses in Egypt
Moses the Lawgiver
The Night Before Christmas
Noah and the Ark
Parables that Jesus Told
Paul Bunyan
Peachboy
Pecos Bill
Pinocchio
P.J. Rabbit
Princess Scargo & The Birthday Pumpkin
Puss in Boots
Red Riding Hood & Goldilocks
Schedule 2.1.1(c): Specified Contracts
--------------------------------------
1. REP - Random House, Inc. (March 12, 1985)
2. REP - Dancing Cat Productions, Inc. (January 1, 1985)
3. REP - Windham Hill Productions, Inc. - Random House,Inc.
(October 15, 1986)
4. REP - Sony Video Software Company (June 1, 1987)
5. REP - Sony Video Software Company (October 15, 1987)
6. REP - Sony Video Software Company (November 1, 1988)
7. REP - Showtime Networks, Inc. (December 28, 1989; amended January 3, 1991;
amended April 4, 1992)
8. REP - PBS (July 29, 1994)
9. REP - Eternal World Television Network, Inc. (December 1, 1994)
10. REP - Simon & Schuster (4 agreements)(December 31, 1991)
11. REP - Simon & Schuster (March 31, 1989)
12. REP - Random House (December 12, 1990)
13. REP - Atlantis Releasing, Inc. (March 20, 1995)
14. REP - International Television Enterprises London (December 31, 1994)
15. REP - Atlantis Releasing, Inc. (March 20, 1995)
16. REP - Microsoft Corporation (April 26, 1993; amended June 9, 1995)
17. REP - American Interactive Media, Inc. (October 12, 1990)
18. REP - MacMillan/McGraw-Hill School Publishing Co. (January 1, 1994)
19. REP - The Lightspan Partnership, Inc. (July 17, 1995)
20. REP - Bliss House, Inc. (January 17, 1994)
21. REP - Public Radio International (May 1, 1996)
22. REP - Sunburst Communications (September, 1995)
23. REP - Buena Vista Television, Inc., Bill Nye, James McKenna,
Erren Gottlieb, KCTS Television (March 31, 1993, amended
May 16, 1995)
24. REP - Resolution, Inc. (unsigned, undated)
25. REP - Atlantis Films Limited, Atlantis Projects Development
(WGA) Limited (July 14, 1995)
26. REP - Devillier Donegan Enterprises, L.P. (December 22, 1993)
Schedule 3.1(b): Form of First Redeemable Option Agreement
----------------------------------------------------------
MICROLEAGUE MULTIMEDIA, INC.,
a Pennsylvania corporation
and
MILLENNIUM MEDIA GROUP HOLDINGS, INC.,
a Delaware corporation
FIRST REDEEMABLE OPTION AGREEMENT
FIRST REDEEMABLE OPTION AGREEMENT
---------------------------------
This First Redeemable Option Agreement (the "Agreement") is made as of
February 18, 1997 between Microleague Multimedia, Inc., a Pennsylvania
corporation, with offices at 750 Dawson Drive, Newark, Delaware 19713
("Company"), and Millennium Media Group Holdings, Inc., a Delaware corporation,
with offices at 234 North Columbus Boulevard, Philadelphia, Pennsylvania 19106
(the "Initial Holder").
BACKGROUND
----------
A. Pursuant to an Asset Acquisition Agreement, dated as of February 18,
1997, between the Company and the Initial Holder (the "Acquisition Agreement"),
the Company has agreed to grant the Initial Holder an option to acquire up to
125,000 shares of the Company's common stock, $.01 par value per share ("Common
Stock");
B. The Company and Initial Holder desire to provide for the terms upon
which such option may be exercised.
AGREEMENT
---------
THEREFORE, in consideration of the mutual agreements herein contained,
and intending to be legally bound, the parties hereto agree as follows:
Section 1. Grant of Option. The Company hereby grants to the Initial
Holder, subject to the terms and conditions of this Agreement and the
Acquisition Agreement, an option to acquire up to 125,000 shares (subject to
adjustment) of Common Stock for an exercise price of $7.46 per share (subject to
adjustment)(the "Option"). The Initial Holder or any permitted assignee
hereunder (any one of which shall be referred to herein as the "Holder") may
exercise the Option in whole or in part at any time after the date of this
Agreement and prior to its termination.
Section 2. Method of Exercise. To exercise the Option, the Holder must
deliver to the Company written notice of exercise of the Option as to a
specified number of shares of Common Stock and tender cash in the amount of the
aggregate exercise price therefor. No person other than a Holder may exercise
the Option.
Section 3. Termination.
(a) Expiration. The Option shall automatically
terminate, to the extent that the Company has not received notice of exercise in
accordance herewith, at midnight, Eastern Time, on February 16, 1999.
2
(b) Other Termination. The Option shall immediately
terminate at any time during the six-month period ending August 16, 1997 if all
shares of Common Stock issued pursuant to the Acquisition Agreement, and all
shares of Common Stock issued pursuant to any option granted under the
Acquisition Agreement (including the Option) have been forfeited to satisfy the
indemnification obligations of Initial Holder to the Company pursuant to the
Acquisition Agreement.
Section 4. Forfeiture of Shares. As provided in the Acquisition
Agreement, any Common Stock issued pursuant to the Option is subject to
forfeiture, during the six-month period ending August 16, 1997, to satisfy the
indemnification obligations of Initial Holder to Company pursuant to the
Acquisition Agreement.
Section 5. Registration. (a) Common Stock issued pursuant to this
Agreement will be unregistered under the Federal and state securities laws and
will constitute restricted shares until registered. Except as otherwise
expressly provided in Section 5(b) below or in the Acquisition Agreement, the
Company is under no obligation to register Common Stock issued pursuant to the
Option under the Federal or any state securities laws or with any securities
exchange.
(b) If the Company issues a notice of redemption
pursuant Section 10 hereof, and the Holder gives notice of exercise pursuant to
Section 10(c), then the Holder may request, in its notice of exercise,
registration of the Common Stock as to which the Option has been so exercised,
as provided in this Section.
(c) All registrations requested pursuant to this
Section are referred to herein as "Demand Registrations". The Company shall pay
all Registration Expenses in connection with Demand Registrations. The Company
may include in any Demand Registration any other Common Stock which the Company
desires to register. The Company shall have the right to select the investment
banker(s) and manager(s) to administer the offering.
(d) Registration Procedures. Whenever the Holder has
requested Demand Registration, the Company shall use its best efforts to effect
the registration and the sale of the related Common Stock in accordance with the
intended method of disposition thereof, and pursuant thereto the Company shall
expeditiously as possible:
(i) prepare and file with the Securities and
Exchange Commission a registration statement with respect to such Common Stock
and use its best efforts to cause such registration statement to become
effective;
(ii) notify the Holder of the effectiveness
of the registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 90 days and comply with the provisions of the Securities Act with respect
to the disposition of
3
all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(iii) furnish the Holder with a copy of the
registration statement, each amendment and supplement thereto, and the
prospectus included in such registration statement (including each preliminary
prospectus);
(iv) use its best efforts to register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions as any Holder reasonably requests; provided that the
Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction;
(v) notify the Holder at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of the Holder, the Company shall prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of the related Common Stock, such prospectus shall not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading.
(vi) permit the Holder, if it might be
deemed to be an underwriter or a controlling person of the Company, to
participate in the preparation of such registration or comparable statement and
to require the insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of the Company's counsel should be
included; and
(vii) in the event of the issurance of any
stop order suspending the effectiveness of a registration statement, or of any
order suspending or preventing the use of any related prospectus or suspending
the qualification of any common stock included in such registration statement
for sale in any jurisdiction, the Company shall use its best efforts promptly to
obtain the withdrawal of such order.
(d) Registration Expenses.
---------------------
(i) All expenses incident to the Company's
performance of or compliance with this Section, including without limitation all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, fees and
disbursements of custodians, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"), shall be borne
by the Company. All underwriting discounts and selling
4
commissions shall be borne by the Holder (pro rata on the basis of the number of
their shares registered if the Company has registered additional shares not
belonging to the Holder) and (2) the selling security holders shall be
responsible for their own costs, including attorneys' fees and expenses.
(ii) in connection with any Demand
Registration the Holder shall furnish to the Company in writing such information
and affidavits as the Company reasonably requests for use in connection with any
such registration statement or prospectus and shall indemnify the Company, its
directors and officers and each person or entity who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in any information or
affidavit so furnished in writing by the Holder.
(e) Participation in Underwritten Registrations. The Holder
may participate in any registration hereunder which is underwritten only if the
Holder (i) agrees to sell the Holder's Common Stock on the basis provided in any
underwriting arrangements reached by the Company and its selected underwriter
and (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements.
Section 6. Representations of the Holder. (a) The Holder represents and
warrants that it is acquiring the Option, and will acquire Common Stock issuable
under the Option, solely for investment for its own account and not with a view
to, or for resale in connection with, the distribution or other disposition
thereof, and there is except as provided in the Acquisition Agreement no current
plan or intention by the Holder to sell, exchange, or otherwise dispose of the
Option or any Common Stock issued thereunder.
(b) The Holder's knowledge and experience in
financial and business matters are such that the Holder is capable of evaluating
the merits and risks of acquiring the Option and the related Common Stock. In
making its decision to acquire the Option, and in exercising the Option for
Common Stock, the Holder has and will rely upon independent investigations made
by it. The Holder has been given the opportunity to examine, to ask questions
of, and to receive answers from the Company concerning the terms and conditions
of the Option and the Common Stock issuable thereunder.
(c) Unless Common Stock is to be registered
hereunder, the Company may, in its discretion, require the Holder to provide
representations similar to those contained in this Section upon exercise of the
Option from time to time and as a condition to issuance of Common Stock
thereunder.
5
Section 7. Issuance of Certificates. As soon as practicable after an
exercise of the Option, the Company shall issue to the Holder a certificate or
certificates for the number of shares of Common Stock to which the Holder is
entitled. Such certificates will contain legends indicating that the shares
represented thereby are restricted shares and are subject to forfeiture under
the Acquisition Agreement. The Option may not be exercised by, and Common Stock
will not be issued to, the Holder or any permitted assigns in any state in which
such exercise would be unlawful.
Section 8. Adjustments.
(a) Stock Dividends and Split-Ups. If after the date
hereof the number of outstanding shares of Common Stock is increased by a stock
dividend payable in shares of Common Stock or by a split-up of shares of Common
Stock or other similar event, then, on the date fixed for the determination of
holders of Common Stock entitled to receive such stock dividend or split-up, the
number of shares issuable on exercise of the Option shall be increased in
proportion to such increase in outstanding shares and the then applicable
exercise price shall be correspondingly decreased.
(b) Aggregation of Shares. If after the date hereof
the number of outstanding shares of Common Stock is decreased by a
consolidation, combination or reclassification of shares of Common Stock or
other similar event, then, on the effect date of such consolidation, combination
or reclassification, the number of shares issuable on exercise of the Option
shall be decreased in proportion to such decrease in outstanding shares and the
then applicable exercise price shall be correspondingly increased.
(c) Reorganization, etc. If after the date hereof (1)
there occurs any capital reorganization or reclassification of the Common Stock
of the Company, or any consolidation or merger of the Company with another
corporation, and (2) such transaction results in an exchange of outstanding
Common Stock of the Company for other shares of stock, then, the Company shall
provide that the Holder shall thereafter have the option (subject to the terms
and conditions specified herein) to purchase (in lieu of Common Stock) shares of
the stock given in exchange for the Common Stock in the transaction. The number
of such shares of exchanged stock subject to become subject to the Option and
the exercise price therefor shall be determined by adjusting the then effective
number of shares and exercise price in proportion to the exchange ratio by which
Common Stock is exchanged for the stock being offered.
(d) Adjustment of Redemption Price. Upon the
occurrence of any event specified in the preceding paragraphs of this Section 8,
then the redemption price per share shall be adjusted accordingly.
(e) No Fractional Shares. Notwithstanding any
provision contained in this Agreement to the contrary, the Company shall not
issue fractional shares upon exercise of the Option. If, by reason of any
adjustment made pursuant to this Section, the Holder would be entitled,
6
upon the exercise of the Option, to receive a fractional interest in a share,
the Company shall, upon such exercise, purchase such fractional interest,
determined as follows:
(i) if the Common Stock is listed on a
National Securities Exchange or listed for trading on NASDAQ (including the
NASDAQ SmallCap Market), the current value shall be the last reported sale price
of the Common Stock on such exchange on the last business day prior to the date
of exercise of the Option or if no such sale is made on such day, the average of
the closing bid and asked prices for such day on such exchange; or
(ii) if the Common Stock is not listed, the
current value shall be the mean of the last reported bid and asked prices
reported by the National Quotation Bureau, Inc. on the last business day prior
to the date of the exercise of the Option; or
(iii) if the Common Stock is not so listed
and bid and asked prices are not so reported, the current value shall be an
amount determined in such reasonable manner as may be prescribed by the Board of
Directors of the Company.
Section 10. Redemption.
(a) Redemption Price. The Option may be redeemed in
whole or in part, at the sole discretion of the Company, at the price of $.01
per share remaining subject to the Option (and as to which the Option has not
been exercised), at any time after the date hereof the closing sale price per
share of Common Stock (as reported by the principal exchange on which the Common
Stock is traded) has been at least $10.44 per share for not fewer than fifteen
(15) consecutive trading days. If on any trading day there have not been any
sales, the last sales price on such day shall be the last sales price per share
of Common Stock on the next preceding trading day.
(b) Notice of Redemption. In the event the Company
shall elect to redeem all or any part of the Option, the Company shall fix a
date for the redemption. Notice of redemption shall be mailed by first class
mail, postage prepaid by the Company not less than 30 days prior to the date
fixed for redemption to the Holder at its last address as it appears on the
Company's books. Any notice mailed in the manner herein provided shall be
conclusively presumed to have been duly given whether or not the Holder actually
received such notice.
(c) Exercise After Notice of Redemption. The Option may be
exercised in accordance with this Agreement at any time after notice of
redemption shall have been given by the Company and prior to the date fixed for
redemption. If the Option is so exercised, the Company shall either (1) deliver
shares pursuant thereto that have been registered pursuant to applicable
securities laws, or (2) delay delivery of the shares, and the Holder shall not
be required to pay the exercise price, until shares that have been so registered
are available for issue to the Holder.
Section 11. No Rights as Shareholder. The Option does not entitle the
Holder to any of the rights of a shareholder of the Company, including, without
limitation, the right to receive dividends,
7
or other distributions, exercise any right to vote or to consent or to receive
notice of the meetings of shareholders or the election of directors of the
Company or any other matter.
Section 12. Miscellaneous Provisions.
(a) Successors. All the covenants and provisions
of this Agreement by or for the benefit of the Company or the InitialHolder
shall bind and inure to the benefit of their respective successors and permitted
assigns. The Initial Holder may assign this Agreement to one or more Investors,
as identified in the Acquisition Agreement, provided that each intended assignee
has executed and delivered to the Company an Investment Intent Letter and an
executed assignment or similar conveyance from the Initial Holder to the
Investor.
(b) Notices. Any notice, statement or demand
authorized by this Agreement to be given to the Initial Holder or the Company
shall be sufficiently given or made if sent by certified mail, or overnight or
personal courier service, postage prepaid, addressed as follows:
If to the Company:
Microleague Multimedia, Inc.
750 Dawson Drive
Newark, DE 19713
Attn: Mr. Neil B. Swartz
If to the Initial Holder:
Millennium Media Group Holdings, Inc.
234 North Columbus Boulevard
Philadelphia, PA 19106
If to any other Holder, then notice
shall be sent to the last address provided for notices in writing to such
Holder.
(c) Applicable Law. The validity, interpretation,
and performance of this Agreement shall be governed in all respects by the laws
of the State of Delaware, without giving effect to its conflict of laws rules.
(d) Counterparts. This Agreement may be executed
in any number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
(e) Effect of Headings. The Section headings
herein are for convenience only and are not part of this Agreement and shall not
affect the interpretation thereof.
8
IN WITNESS WHEREOF, this First Redeemable Option Agreement has been
duly executed on behalf of the parties hereto by their respective duly
authorized officers as of the day and year first written above.
MICROLEAGUE MULTIMEDIA, INC.
By:______________________________
Name:____________________________
Title:___________________________
MILLENNIUM MEDIA GROUP HOLDINGS, INC.
By:______________________________
Name:____________________________
Title:___________________________
9
Schedule 3.1(c): Form of Second Redeemable Option Agreement
-----------------------------------------------------------
MICROLEAGUE MULTIMEDIA, INC.,
a Pennsylvania corporation
and
MILLENNIUM MEDIA GROUP HOLDINGS, INC.,
a Delaware corporation
SECOND REDEEMABLE OPTION AGREEMENT
SECOND REDEEMABLE OPTION AGREEMENT
----------------------------------
This Second Redeemable Option Agreement (the "Agreement") is made as of
February 18, 1997 between Microleague Multimedia, Inc., a Pennsylvania
corporation, with offices at 750 Dawson Drive, Newark, Delaware 19713
("Company"), and Millennium Media Group Holdings, Inc., a Delaware corporation,
with offices at 234 North Columbus Boulevard, Philadelphia, Pennsylvania 19106
(the "Initial Holder").
BACKGROUND
----------
A. Pursuant to an Asset Acquisition Agreement, dated as of February 18,
1997, between the Company and the Initial Holder (the "Acquisition Agreement"),
the Company has agreed to grant the Initial Holder an option to acquire up to
125,000 shares of the Company's common stock, $.01 par value per share ("Common
Stock");
B. The Company and Initial Holder desire to provide for the terms upon
which such option may be exercised.
AGREEMENT
---------
THEREFORE, in consideration of the mutual agreements herein contained,
and intending to be legally bound, the parties hereto agree as follows:
Section 1. Grant of Option. The Company hereby grants to the Initial
Holder, subject to the terms and conditions of this Agreement and the
Acquisition Agreement, an option to acquire up to 125,000 shares (subject to
adjustment) of Common Stock for an exercise price of $8.95 per share (subject to
adjustment)(the "Option"). The Initial Holder or any permitted assignee
hereunder (any one of which shall be referred to herein as the "Holder") may
exercise the Option in whole or in part at any time after the date of this
Agreement and prior to its termination.
Section 2. Method of Exercise. To exercise the Option, the Holder must
deliver to the Company written notice of exercise of the Option as to a
specified number of shares of Common Stock and tender cash in the amount of the
aggregate exercise price therefor. No person other than a Holder may exercise
the Option.
Section 3. Termination.
(a) Expiration. The Option shall automatically
terminate, to the extent that the Company has not received notice of exercise in
accordance herewith, at midnight., Eastern Time, on February 16, 2000.
2
(b) Other Termination. The Option shall immediately
terminate at any time during the six-month period ending August 16, 1997 if all
shares of Common Stock issued pursuant to the Acquisition Agreement, and all
shares of Common Stock issued pursuant to any option granted under the
Acquisition Agreement (including the Option) have been forfeited to satisfy the
indemnification obligations of Initial Holder to the Company pursuant to the
Acquisition Agreement.
Section 4. Forfeiture of Shares. As provided in the Acquisition
Agreement, any Common Stock issued pursuant to the Option is subject to
forfeiture, during the six-month period ending August 16, 1997, to satisfy the
indemnification obligations of Initial Holder to Company pursuant to the
Acquisition Agreement.
Section 5. Registration. (a) Common Stock issued pursuant to this
Agreement will be unregistered under the Federal and state securities laws and
will constitute restricted shares until registered. Except as otherwise
expressly provided in Section 5(b) below or in the Acquisition Agreement, the
Company is under no obligation to register Common Stock issued pursuant to the
Option under the Federal or any state securities laws or with any securities
exchange.
(b) If the Company issues a notice of redemption
pursuant Section 10 hereof, and the Holder gives notice of exercise pursuant to
Section 10(c), then the Holder may request, in its notice of exercise,
registration of the Common Stock as to which the Option has been so exercised,
as provided in this Section.
(c) All registrations requested pursuant to this
Section are referred to herein as "Demand Registrations". The Company shall pay
all Registration Expenses in connection with Demand Registrations. The Company
may include in any Demand Registration any other Common Stock which the Company
desires to register. The Company shall have the right to select the investment
banker(s) and manager(s) to administer the offering.
(d) Registration Procedures. Whenever the Holder has
requested Demand Registration, the Company shall use its best efforts to effect
the registration and the sale of the related Common Stock in accordance with the
intended method of disposition thereof, and pursuant thereto the Company shall
expeditiously as possible:
(i) prepare and file with the Securities and
Exchange Commission a registration statement with respect to such Common Stock
and use its best efforts to cause such registration statement to become
effective;
(ii) notify the Holder of the effectiveness
of the registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 90 days and comply with the provisions of the Securities Act with respect
3
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(iii) furnish the Holder with a copy of the
registration statement, each amendment and supplement thereto, and the
prospectus included in such registration statement (including each preliminary
prospectus);
(iv) use its best efforts to register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions as any Holder reasonably requests; provided that the
Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction;
(v) notify the Holder at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of the Holder, the Company shall prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of the related Common Stock, such prospectus shall not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading.
(vi) permit the Holder, if it might be
deemed to be an underwriter or a controlling person of the Company, to
participate in the preparation of such registration or comparable statement and
to require the insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of the Company's counsel should be
included; and
(vii) in the event of the issurance of any
stop order suspending the effectiveness of a registration statement, or of any
order suspending or preventing the use of any related prospectus or suspending
the qualification of any common stock included in such registration statement
for sale in any jurisdiction, the Company shall use its best efforts promptly to
obtain the withdrawal of such order.
(d) Registration Expenses.
(i) All expenses incident to the Company's
performance of or compliance with this Section, including without limitation all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, fees and
disbursements of custodians, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters
(excluding
4
discounts and commissions) and other Persons retained by the Company (all such
expenses being herein called "Registration Expenses"), shall be borne by the
Company. All underwriting discounts and selling commissions shall be borne by
the Holder (pro rata on the basis of the number of their shares registered if
the Company has registered additional shares not belonging to the Holder) and
(2) the selling security holders shall be responsible for their own costs,
including attorneys' fees and expenses.
(ii) in connection with any Demand
Registration the Holder shall furnish to the Company in writing such information
and affidavits as the Company reasonably requests for use in connection with any
such registration statement or prospectus and shall indemnify the Company, its
directors and officers and each person or entity who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in any information or
affidavit so furnished in writing by the Holder.
(e) Participation in Underwritten Registrations. The Holder
may participate in any registration hereunder which is underwritten only if the
Holder (i) agrees to sell the Holder's Common Stock on the basis provided in any
underwriting arrangements reached by the Company and its selected underwriter
and (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements.
Section 6. Representations of the Holder. (a) The Holder represents and
warrants that it is acquiring the Option, and will acquire Common Stock issuable
under the Option, solely for investment for its own account and not with a view
to, or for resale in connection with, the distribution or other disposition
thereof, and there is except as provided in the Acquisition Agreement no current
plan or intention by the Holder to sell, exchange, or otherwise dispose of the
Option or any Common Stock issued thereunder.
(b) The Holder's knowledge and experience in
financial and business matters are such that the Holder is capable of evaluating
the merits and risks of acquiring the Option and the related Common Stock. In
making its decision to acquire the Option, and in exercising the Option for
Common Stock, the Holder has and will rely upon independent investigations made
by it. The Holder has been given the opportunity to examine, to ask questions
of, and to receive answers from the Company concerning the terms and conditions
of the Option and the Common Stock issuable thereunder.
(c) Unless Common Stock is to be registered
hereunder, the Company may, in its discretion, require the Holder to provide
representations similar to those contained in
5
this Section upon exercise of the Option from time to time and as a condition to
issuance of Common Stock thereunder.
Section 7. Issuance of Certificates. As soon as practicable after an
exercise of the Option, the Company shall issue to the Holder a certificate or
certificates for the number of shares of Common Stock to which the Holder is
entitled. Such certificates will contain legends indicating that the shares
represented thereby are restricted shares and are subject to forfeiture under
the Acquisition Agreement. The Option may not be exercised by, and Common Stock
will not be issued to, the Holder or any permitted assigns in any state in which
such exercise would be unlawful.
Section 8. Adjustments.
(a) Stock Dividends and Split-Ups. If after the date
hereof the number of outstanding shares of Common Stock is increased by a stock
dividend payable in shares of Common Stock or by a split-up of shares of Common
Stock or other similar event, then, on the date fixed for the determination of
holders of Common Stock entitled to receive such stock dividend or split-up, the
number of shares issuable on exercise of the Option shall be increased in
proportion to such increase in outstanding shares and the then applicable
exercise price shall be correspondingly decreased.
(b) Aggregation of Shares. If after the date hereof
the number of outstanding shares of Common Stock is decreased by a
consolidation, combination or reclassification of shares of Common Stock or
other similar event, then, on the effect date of such consolidation, combination
or reclassification, the number of shares issuable on exercise of the Option
shall be decreased in proportion to such decrease in outstanding shares and the
then applicable exercise price shall be correspondingly increased.
(c) Reorganization, etc. If after the date hereof (1)
there occurs any capital reorganization or reclassification of the Common Stock
of the Company, or any consolidation or merger of the Company with another
corporation, and (2) such transaction results in an exchange of outstanding
Common Stock of the Company for other shares of stock, then, the Company shall
provide that the Holder shall thereafter have the option (subject to the terms
and conditions specified herein) to purchase (in lieu of Common Stock) shares of
the stock given in exchange for the Common Stock in the transaction. The number
of such shares of exchanged stock subject to become subject to the Option and
the exercise price therefor shall be determined by adjusting the then effective
number of shares and exercise price in proportion to the exchange ratio by which
Common Stock is exchanged for the stock being offered.
(d) Adjustment of Redemption Price. Upon the
occurrence of any event specified in the preceding paragraphs of this Section 8,
then the redemption price per share shall be adjusted accordingly.
6
(e) No Fractional Shares. Notwithstanding any
provision contained in this Agreement to the contrary, the Company shall not
issue fractional shares upon exercise of the Option. If, by reason of any
adjustment made pursuant to this Section, the Holder would be entitled, upon the
exercise of the Option, to receive a fractional interest in a share, the Company
shall, upon such exercise, purchase such fractional interest, determined as
follows:
(i) if the Common Stock is listed on a
National Securities Exchange or listed for trading on NASDAQ (including the
NASDAQ SmallCap Market), the current value shall be the last reported sale price
of the Common Stock on such exchange on the last business day prior to the date
of exercise of the Option or if no such sale is made on such day, the average of
the closing bid and asked prices for such day on such exchange; or
(ii) if the Common Stock is not listed, the
current value shall be the mean of the last reported bid and asked prices
reported by the National Quotation Bureau, Inc. on the last business day prior
to the date of the exercise of the Option; or
(iii) if the Common Stock is not so listed
and bid and asked prices are not so reported, the current value shall be an
amount determined in such reasonable manner as may be prescribed by the Board of
Directors of the Company.
Section 10. Redemption.
(a) Redemption Price. The Option may be redeemed in
whole or in part, at the sole discretion of the Company, at the price of $.01
per share remaining subject to the Option (and as to which the Option has not
been exercised), at any time after the date hereof the closing sale price per
share of Common Stock (as reported by the principal exchange on which the Common
Stock is traded) has been at least $12.53 per share for not fewer than fifteen
(15) consecutive trading days. If on any trading day there have not been any
sales, the last sales price on such day shall be the last sales price per share
of Common Stock on the next preceding trading day.
(b) Notice of Redemption. In the event the Company
shall elect to redeem all or any part of the Option, the Company shall fix a
date for the redemption. Notice of redemption shall be mailed by first class
mail, postage prepaid by the Company not less than 30 days prior to the date
fixed for redemption to the Holder at its last address as it appears on the
Company's books. Any notice mailed in the manner herein provided shall be
conclusively presumed to have been duly given whether or not the Holder actually
received such notice.
(c) Exercise After Notice of Redemption. The Option
may be exercised in accordance with this Agreement at any time after notice of
redemption shall have been given by the Company and prior to the date fixed for
redemption. If the Option is so exercised, the Company shall either (1) deliver
shares pursuant thereto that have been registered pursuant to applicable
securities laws, or (2) delay delivery of the shares, and the Holder shall not
be
7
required to pay the exercise price, until shares that have been so registered
are available for issue to the Holder.
Section 11. No Rights as Shareholder. The Option does not entitle the
Holder to any of the rights of a shareholder of the Company, including, without
limitation, the right to receive dividends, or other distributions, exercise any
right to vote or to consent or to receive notice of the meetings of shareholders
or the election of directors of the Company or any other matter.
Section 12. Miscellaneous Provisions.
(a) Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the InitialHolder shall
bind and inure to the benefit of their respective successors and permitted
assigns. The Initial Holder may assign this Agreement to one or more Investors,
as identified in the Acquisition Agreement, provided that each intended assignee
has executed and delivered to the Company an Investment Intent Letter and an
executed assignment or similar conveyance from the Initial Holder to the
Investor.
(b) Notices. Any notice, statement or demand
authorized by this Agreement to be given to the Initial Holder or the Company
shall be sufficiently given or made if sent by certified mail, or overnight or
personal courier service, postage prepaid, addressed as follows:
If to the Company:
Microleague Multimedia, Inc.
750 Dawson Drive
Newark, DE 19713
Attn: Mr. Neil B. Swartz
If to the Initial Holder:
Millennium Media Group Holdings, Inc.
234 North Columbus Boulevard
Philadelphia, PA 19106
If to any other Holder, then notice
shall be sent to the last address provided for notices in writing to such
Holder.
(c) Applicable Law. The validity, interpretation,
and performance of this Agreement shall be governed in all respects by the laws
of the State of Delaware, without giving effect to its conflict of laws rules.
8
(d) Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
(e) Effect of Headings. The Section headings herein
are for convenience only and are not part of this Agreement and shall not affect
the interpretation thereof.
IN WITNESS WHEREOF, this Second Redeemable Option Agreement has been
duly executed on behalf of the parties hereto by their respective duly
authorized officers as of the day and year first written above.
MICROLEAGUE MULTIMEDIA, INC.
By: ______________________________
Name: ____________________________
Title: ___________________________
MILLENNIUM MEDIA GROUP HOLDINGS,INC.
By:________________________________
Name:______________________________
Title:_____________________________
9
Schedule 4.4: Financial Statements
----------------------------------
Schedule 4.5: Certain Intangible Property
-----------------------------------------
Trademarks
Trademark Country Registration No. Serial No. Registration Date
- ------------------------------------------------------------------------------------------------------------------------------
Rabbit Ears Storybook Classics USA 1,561,955 73-777,062 10/24/89
- ------------------------------------------------------------------------------------------------------------------------------
We All Have Tales USA 1,688,348 74-110,241 05/19/92
- ------------------------------------------------------------------------------------------------------------------------------
We All Have Tales (and design) USA 1,674,903 74-147,544 02/11/92
- ------------------------------------------------------------------------------------------------------------------------------
Rabbit Ears Books USA 1,560,874 73-776,693 10/17/89
- ------------------------------------------------------------------------------------------------------------------------------
The Velveteen Rabbit JAP 2,377,899 N/A 02/28/92
- ------------------------------------------------------------------------------------------------------------------------------
The Velveteen Rabbit JAP 2,440,301 N/A 07/31/92
- ------------------------------------------------------------------------------------------------------------------------------
The Velveteen Rabbit JAP Pending 1-142,412 Pending
- ------------------------------------------------------------------------------------------------------------------------------
Rabbit Ears Productions USA 1,468,855 73-625,522 12/15/87
- ------------------------------------------------------------------------------------------------------------------------------
Rabbit Ears USA 1,658,896 74-116,273 10/01/91
- ------------------------------------------------------------------------------------------------------------------------------
Design Only USA 1,573,072 73-793,777 12/26/89
- ------------------------------------------------------------------------------------------------------------------------------
Rabbit Ears Music USA N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
Rabbit Ears Videos JAP Pending 1-57,401 Pending
- ------------------------------------------------------------------------------------------------------------------------------
24 Carrot Family Entertainment USA 1870077 74-489587 12/27/94
- ------------------------------------------------------------------------------------------------------------------------------
Hare Brained Hobbies USA Pending 74-579873 09/29/94
- ------------------------------------------------------------------------------------------------------------------------------
Hare Brained Hobbies USA Pending 74-579766 09/29/94
- ------------------------------------------------------------------------------------------------------------------------------
P.J. Rabbit USA Pending 74-555566 08/01/94
- ------------------------------------------------------------------------------------------------------------------------------
Design Only USA Pending 74-555567 08/01/94
- ------------------------------------------------------------------------------------------------------------------------------
Rabbit Ears Radio USA Pending 74-517559 04/26/94
- ------------------------------------------------------------------------------------------------------------------------------
Rabbit Ears Radio USA Pending 74-517560 04/26/94
- ------------------------------------------------------------------------------------------------------------------------------
Rabbit Ears USA Pending 74-589363 10/24/94
- ------------------------------------------------------------------------------------------------------------------------------
The Greatest Stories Ever Told USA 1,864,565 74-424,465 11/29/94
and Design
- ------------------------------------------------------------------------------------------------------------------------------
Rabbit Ears Presents The Greatest USA 1,846,605 74-424-346 07/26/94
Stories Ever Told
- ------------------------------------------------------------------------------------------------------------------------------
Footprints Across USA Pending 74-054-169 Pending
America
- ------------------------------------------------------------------------------------------------------------------------------
Schedule 4.5: Certain Intangible Property
-----------------------------------------
Copyrights
Title Registration Date Registered Holders of Other Interests
- ----- ------------ --------------- --------------------------
Aladdin and The Magic Lamp TX4,018,521
Aladdin PA701,832
Aladdin and the Wonderful Magic Lamp PAu1,699,454 12/28/92
- --------------------------------------------------------------------------------------------------------------
Anansi PA624,862 03/24/93 Showtime Networks, Inc.
PAu1,409,241 08/31/90
- --------------------------------------------------------------------------------------------------------------
Annie Oakley TX4,231,909
PAu1,699,459 12/28/92
PA595,582 12/30/92
- --------------------------------------------------------------------------------------------------------------
The Boy Who Drew Cats TX3,293,134 03/24/92
PAu1,409,244 08/31/90
PAu1,584,979 12/10/91
- --------------------------------------------------------------------------------------------------------------
The Bremen-Town Musicians PAu1,699,380 12/28/92
PA701,827
- --------------------------------------------------------------------------------------------------------------
Brer Rabbit & Boss Lion TX4,240,061 Showtime Networks, Inc.
PAu1,699,456 12/28/92 Tristar Pictures
PA604,313 01/15/93
- --------------------------------------------------------------------------------------------------------------
Brer Rabbit and the Wonderful Tar Baby SR125,181 12/19/90
TX3,133,908 07/29/91
PAu1,375,881 04/12/90
- --------------------------------------------------------------------------------------------------------------
The Creation PA701,826
- --------------------------------------------------------------------------------------------------------------
David and Goliath SR168,037
TX4,240,062
PA625,524
- --------------------------------------------------------------------------------------------------------------
Davy Crockett TX4,163,662 Showtime Networks, Inc.
Legends of Davey Crockett PA595,580 12/30/92
Davy Crockett PAu1,699,372 12/28/92
- --------------------------------------------------------------------------------------------------------------
East of the Sun, West of the Moon PAu1,520,412 05/22/91 Showtime Networks, Inc.
PAu1,409,246 08/31/90
- --------------------------------------------------------------------------------------------------------------
The Elephant's Child SR82,684 06/08/87 Random House, Inc.
PAu943,972 12/16/87 Bobby McFerrin
PA363,194 12/16/87 Random House, Inc.
VA287,464 12/16/87 Random House, Inc.
- --------------------------------------------------------------------------------------------------------------
The Emperor's New Clothes SR125,180 12/19/90
TX3,110,459 07/29/91
TX4,147,319
PAu1,427,109 08/31/90
- --------------------------------------------------------------------------------------------------------------
The Emperor and the Nightingale SR91,114 05/27/88
TX2,637,521 08/18/89
PAu996,714 07/20/87
- --------------------------------------------------------------------------------------------------------------
Title Registration Date Registered Holders of Other Interests
- -----------------------------------------------------------------------------------------------------------------
Finn McCoul TX4,163,663 Showtime Networks, Inc.
PAu1,699,378 12/28/92
PAu1,669,546 08/13/92
- -----------------------------------------------------------------------------------------------------------------
The Firebird PAu1,699,455 12/28/92
PAu1,992,070
- -----------------------------------------------------------------------------------------------------------------
The Fisherman and His Wife SR109,417 12/22/89
TX3,111,785 07/29/91
PAu1,267,944 08/04/89
- -----------------------------------------------------------------------------------------------------------------
The Five Chinese Brothers PAu1,992,079
- -----------------------------------------------------------------------------------------------------------------
Follow the Drinking Gourd - A Story of the PAu1,699,374 12/28/92
Underground Railroad PA624,859 03/24/93
- -----------------------------------------------------------------------------------------------------------------
The Fool and the Flying Ship PAu1,409,245 08/31/90 Showtime Networks, Inc.
PAu1,518,524 05/22/91
- -----------------------------------------------------------------------------------------------------------------
A Gingerbread Christmas PA701,829
- -----------------------------------------------------------------------------------------------------------------
The Gingham Dog and the Calico Cat PA722,911
PAu1,699,379 12/28/92
- -----------------------------------------------------------------------------------------------------------------
Goldilocks TX3,600,786 07/01/93
TX3,119,689 07/29/91
TX4,147,320
- -----------------------------------------------------------------------------------------------------------------
How the Camel Got his Hump/How the Rhinoceros SR91,161 04/28/88 American Interactive Media,
Got His Skin TX2,638,001 08/18/89 Inc.
TX2,591,802 02/23/89
- -----------------------------------------------------------------------------------------------------------------
How the Leopard Got His Spots SR109,418 12/22/89
PAu1,315,052 08/30/89
TX3,129,339 07/29/91
- -----------------------------------------------------------------------------------------------------------------
Jack and the Beanstalk TX3,285,025 03/24/92 Showtime Networks, Inc.
PAu1,409,240 08/31/90
PAu1,512,716 05/22/91
- -----------------------------------------------------------------------------------------------------------------
John Henry TX4,163,660 Showtime Networks, Inc.
PA624,857 03/24/93
John Henry --Steel Driving Man PAu1,699,375 12/28/92
- -----------------------------------------------------------------------------------------------------------------
Johnny Appleseed TX4,030,654 Showtime Networks, Inc.
PA624,861 03/24/93
- -----------------------------------------------------------------------------------------------------------------
Jonah and the Whale SR168,038
PA625,526
- -----------------------------------------------------------------------------------------------------------------
Joseph and His Brothers TX4,018,520
PA750,216
- -----------------------------------------------------------------------------------------------------------------
King Midas and the Golden Touch PAu1,587,914 12/10/91 Showtime Networks, Inc.
PAu1,409,239 08/31/90
- -----------------------------------------------------------------------------------------------------------------
Title Registration Date Registered Holders of Other Interests
- -------------------------------------------------------------------------------------------------------------------
Koi and Kola Nuts PAu1,669,548 08/13/92
PAu1,409,242 08/31/90
- -------------------------------------------------------------------------------------------------------------------
The Legend of Sleepy Hollow TX4,157,737
SR97,867 09/19/88
TX3,129,338 07/29/91
PAu1,152,111 08/29/88
- -------------------------------------------------------------------------------------------------------------------
The Monkey People SR139,125 02/27/92 Rhino Records, Inc.
TX4,244,901
PAu1,669,538 08/13/92
Pau1,699,377 12/28/92
- -------------------------------------------------------------------------------------------------------------------
Mose the Fireman PAu1,777,551 03/24/93
PA701,831
- -------------------------------------------------------------------------------------------------------------------
Moses in Egypt PA701,825
- -------------------------------------------------------------------------------------------------------------------
Moses the Lawgiver PA701,824
- -------------------------------------------------------------------------------------------------------------------
The Night Before Christmas PA722,847
- -------------------------------------------------------------------------------------------------------------------
Noah and the Ark SR168,039
PA625,525
- -------------------------------------------------------------------------------------------------------------------
Paul Bunyan SR125,178 12/19/90
TX3,111,784 07/29/91
PAU-1-381-953 06/04/90
PA-533-187 07/15/91 Round Wound Sound and Little
Ears Music
- -------------------------------------------------------------------------------------------------------------------
Peachboy TX4,163,661 Showtime Networks, Inc.
PAu1,409,247 08/31/90
PAu1,519,525 05/22/91
- -------------------------------------------------------------------------------------------------------------------
Pecos Bill SR92,804 06/06/88 American Interactive Media,
TX2,513,415 02/23/89 Inc.
TX3,586,526 05/18/92
PAu1,125,902 05/11/88 Tristar Pictures
- -------------------------------------------------------------------------------------------------------------------
Pinocchio TX4,429,163 Showtime Networks, Inc.
PAu1,699,453 12/28/92
PA624,860 03/24/93
- -------------------------------------------------------------------------------------------------------------------
P.J. Rabbit VAu305,695 07/28/94
- -------------------------------------------------------------------------------------------------------------------
Princess Scargo & The Birthday Pumpkin PAu1,699,376 12/28/92
PA624,858 03/24/93
- -------------------------------------------------------------------------------------------------------------------
Puss in Boots SR139,127 02/27/92 Rhino Records, Inc.
PAu1,465,223 08/31/90 Showtime Networks, Inc.
Pau1,669,540 08/13/92
- -------------------------------------------------------------------------------------------------------------------
Red Riding Hood & Goldilocks SR125,179 12/19/90
PAu1,375,882 04/12/90
- -------------------------------------------------------------------------------------------------------------------
Title Registration Date Registered Holders of Other Interests
- ---------------------------------------------------------------------------------------------------------------------
Red Riding Hood TX3,110,446 0729/91
TX4,157,725
Meg Ryan Reads Red Riding Hood TX3,600,786 07/01/93
- ---------------------------------------------------------------------------------------------------------------------
Rip Van Winkle TX4,086,410 Showtime Networks, Inc.
PA624,856 03/24/93
PAu1,699,552 12/28/92
- ---------------------------------------------------------------------------------------------------------------------
Rumpelstiltskin TX4,018,515 Showtime Networks, Inc.
PAu1,409,238 08/31/90
PAu1,669,539 08/13/92
- ---------------------------------------------------------------------------------------------------------------------
Sacajawea PAu1,699,551 12/28/92
Song of Sacajawea PA624,855 03/24/93
- ---------------------------------------------------------------------------------------------------------------------
Santabear's First Christmas PA331,282 04/06/87 Michael Hedges d/b/a Naked
Ear Music
- ---------------------------------------------------------------------------------------------------------------------
The Savior is Born SR168,040
PAu1,584,969
- ---------------------------------------------------------------------------------------------------------------------
Songs My Children Taught Me SR133,149 04/08/91
- ---------------------------------------------------------------------------------------------------------------------
Squanto and the First Thanksgiving PAu1,699,457 12/28/92
PA701,828
- ---------------------------------------------------------------------------------------------------------------------
The Steadfast Tin Soldier SR79,728 04/06/87 Random House, Inc.
VA309,723 12/16/87 Random House, Inc.
PA360,340 12/16/87 Random House, Inc.; Mark
Isham
- ---------------------------------------------------------------------------------------------------------------------
Stormalong PAu1,699,458 12/28/92 Showtime Networks, Inc.
PA595,581 12/30/92
- ---------------------------------------------------------------------------------------------------------------------
The Tailor of Gloucester SR97,881 09/19/88
TX2,591,800 02/23/89
PAu1,129,314 03/11/88
- ---------------------------------------------------------------------------------------------------------------------
The Tale of Peter Rabbit & The Tale of Mr. Jeremy SR92,289 05/31/88
Fisher and Two Bad Mice TX2,591,801 02/23/89
TX2,638,033 08/18/89
PA370,833
- ---------------------------------------------------------------------------------------------------------------------
The Tale of Two Bad Mice PA-370-833 05/31/88 Will Ackerman and Anne
Robinson d/b/a Windham Hill
Music
- ---------------------------------------------------------------------------------------------------------------------
The Talking Eggs PAu1,699,373 12/28/92 Showtime Networks, Inc.
PAu1,992,069
- ---------------------------------------------------------------------------------------------------------------------
The Three Billy Goats Gruff and The Three Little Pigs SR105,289 06/14/89
- ---------------------------------------------------------------------------------------------------------------------
The Three Billy Goats Gruff TX3,600,787 07/01/93
TX4,056,576
PAu1,267,945 08/04/89
TX-3-111-945 07/29/91
- ---------------------------------------------------------------------------------------------------------------------
Title Registration Date Registered Holders of Other Interests
- -----------------------------------------------------------------------------------------------------------------
Three Little Pigs TX3,111,783 07/29/91
TX3,558,111 04/30/93
- -----------------------------------------------------------------------------------------------------------------
Thumbelina TX3,546,249 04/28/93
SR102,768 04/17/89
TX3,129,337 07/29/91
PAu1,230,606 04/21/89
- -----------------------------------------------------------------------------------------------------------------
The Tiger and the Brahmin PAu1,587,912 12/10/91
- -----------------------------------------------------------------------------------------------------------------
The Tiger, the Brahmin, and the Jackal PAu1,409,423 08/31/90
- -----------------------------------------------------------------------------------------------------------------
Two Tales from Rudyard Kipling's Just So Stories PAu996,728 07/20/87
- -----------------------------------------------------------------------------------------------------------------
Two Tales by Beatrix Potter PAu996,730 07/20/87
- -----------------------------------------------------------------------------------------------------------------
The Ugly Duckling SR91,162 04/28/88 Random House, Inc.
VA290,944 12/16/87 Random House, Inc.
PA361,448 12/16/87 Random House, Inc.
- -----------------------------------------------------------------------------------------------------------------
The Velveteen Rabbit VA287,465 12/16/87 Random House, Inc.
VA280,281 09/17/87 Random House, Inc.
PA363,191 12/16/87 Random House, Inc.
- -----------------------------------------------------------------------------------------------------------------
The White Cat PAu1,992,063
- -----------------------------------------------------------------------------------------------------------------
Schedule 4.7: REP Litigation
----------------------------
1. REP received notice of a threatened claim against REP and Microsoft
Corporation by The Learning Company/SoftKey International, Inc. arising from the
use by Microsoft Corporation, as a licensee of certain REP Titles, of
Microsoft's "P.J. Rabbit" logo.
2. A default judgment in the amount of $5,000 was entered against REP by
the court for the Judicial District of Fairfield at Bridgeport, Connecticut on
or about October 22, 1996 in the matter entitled Rabbit Ears Productions v.
Burkhartz and Christy Advertising, Docket No. CV940313698-S. To the best
knowledge of Seller, no lien has been filed in connection with such default
judgment.
3. A case is pending in the Superior Court for the State of Connecticut at
Bridgeport entitled Rabbit Ears Productions v. Michael Pogue. This suit will
likely be withdrawn by REP prior to the Closing Date.
Schedule 10.2.1: Certain Assets Not in Seller's Possession
----------------------------------------------------------
1. Inventory located at Resolution, South Burlington, Vermont
2. Point of purchase displays located at Eastern Distribution, Greenville,
South Carolina
3. Masters located at Color Film, Norwalk, Connecticut, and at Bonded
Services, Fort Lee, New Jersey
4. DAT radio tapes held by Jeff Sheridan, engineer, Los Angeles, California
5. Royalty reports and files located at KP Consulting, Greenwich, Connecticut
6. Artwork located at Simon & Schuster Childrens Book Publishing Division,
New York, New York
Schedule 10.2.10: Form of Guaranty
----------------------------------
GUARANTY
Intending to be legally bound hereby, the undersigned hereby guarantees
performance of the obligations of Millennium Media Group Holdings, Inc.
("Holdings") under the Asset Acquisition Agreement dated February __, 1997,
between Holdings and Microleague Multimedia, Inc.
MILLENNIUM MEDIA GROUP, INC.
a Pennsylvania corporation
By:______________________________
Name:____________________________
Title:___________________________
Dated: February __, 1997
- ---------------------------------