ASSET PURCHASE AGREEMENT AMONG PROELITE, INC., ELITEXC LIVE, AND EXPLOSION ENTERTAINMENT, LLC FEBRUARY 5, 2009
Execution
Version
AMONG
ELITEXC
LIVE,
AND
EXPLOSION
ENTERTAINMENT, LLC
FEBRUARY
5, 2009
PORTIONS OF THIS AGREEMENT
IDENTIFIED BY THE SYMBOL "[***]" HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
U.S. SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST.
This
Asset Purchase Agreement is made as of February 5, 2009, among ProElite, Inc., a
New Jersey corporation (“ProElite”), EliteXC Live, a
California corporation and a wholly-owned subsidiary of ProElite (“EliteXC” and together with
ProElite, the “Sellers”
and each a “Seller”) and
Explosion Entertainment, LLC, a California limited liability company (“Buyer”). This Asset Purchase
Agreement, including all schedules and exhibits hereto, is referred to as the
“Agreement.”
WITNESSETH:
WHEREAS, the Sellers presently are
engaged, among other things, in the business of promoting mixed martial arts
live events under the EliteXC and ProElite brands, which includes the broadcast
of such events on various broadcast elements including premium cable television,
commercial television, cable television and pay-per-view, but does not include
any martial art live events promoted under ProElite’s “Icon,” “King of the
Cage,” “Cage Rage,” and “SpiritMC” brands and by ProElite’s Malaysian
subsidiary, Online Winners Sdn. Bhd. (the “Excluded ProElite Business”)
(collectively, excluding the Excluded ProElite Business, the “EliteXC
Business”);
WHEREAS, the Sellers desire to sell to
Buyer and Buyer desires to purchase and acquire from the Sellers certain of the
assets, properties, rights and interests relating to the EliteXC Business, upon
the terms and subject to the conditions hereinafter set forth, in consideration
of certain payments by Buyer, the assumption by Buyer of certain liabilities and
obligations of Seller specifically disclosed in this Agreement, and other
consideration contemplated by this Agreement and the Related Agreements, the
validity and sufficiency of which is hereby acknowledged by the Parties;
and
WHEREAS, the Boards of Directors of
each of ProElite, EliteXC and Buyer believe it is in the best interests of its
respective corporation or company that Buyer and each Seller enter into this
Agreement to effect the transaction contemplated by this Agreement and the
Related Agreements and, in furtherance thereof, have unanimously approved this
Agreement and the transaction contemplated by this Agreement and the Related
Agreements.
NOW, THEREFORE, in consideration of the
premises and the mutual covenants hereinafter contained and other good and
valuable consideration had and received, Buyer, and each Seller, on the basis
of, and in reliance upon, the representations, warranties, covenants,
obligations and agreements set forth in this Agreement, and upon the terms and
subject to the conditions contained herein, hereby agree as
follows:
1. CERTAIN DEFINED
TERMS. As used in this Agreement, the following terms shall
have the meanings set forth below.
1.1 “Affiliate” of a Person
means: (a) a director, officer, partner, member, manager, executor or
trustee of a Person and (b) any Person directly or indirectly controlling,
controlled by, or under common control with, that Person. For
purposes of this definition, “control,” “controlling,” and “controlled” mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether by contract, by virtue
of share ownership or otherwise.
1.2 “Applicable Law” means each
applicable provision of any constitution, statute, law, ordinance, code, rule,
regulation, decision, order, decree, judgment, award, injunction, verdict,
subpoena, release, license or other legally binding pronouncement of any
Governmental Body.
1.3 “Business Day” means any day
other than Saturday, Sunday or any public or legal holiday, whether federal or
state, in the place in which a duty or obligation is to be
performed.
1.4 “Contract” means any oral or
written contract, agreement, commitment, arrangement, undertaking or
understanding of any kind whatsoever, together with all related amendments,
modifications, supplements, waivers and consents.
1.5 “Damages” means (A) any loss,
whether in the nature of a cost, damage, expense, payment, diminution in value,
liability or obligation or otherwise, and related attorneys’, accountants’ and
other professional advisors’ fees and expenses (including those as to
investigation, prosecution or defense of any claim or threatened claim), whether
or not involving a third-party claim, and (B) only in the case of third-party
claims, special, incidental, consequential, punitive or any other
damages.
1.6 “Encumbrance” means any charge,
claim, condition, equitable interest, lien, option, pledge, security interest,
right of refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.
1.7 “Explosion Showtime Agreement”
means the Exclusive Distribution Agreement by and between Buyer and Showtime
dated February 5, 2009.
1.8 “Escrow Agent” means U.S. Bank
National Association.
1.9 “Governmental Authorization”
means any consent, license, permit or other authorization issued, granted, given
or otherwise made available by or under the authority of any Governmental Body
or pursuant to any Applicable Law.
1.10 “Governmental Body” means any
governmental or quasi-governmental body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power.
1.11 “Intellectual Property” means
any or all of the following and all rights in, arising out of, or associated
therewith (i) all United States, international and foreign patents and
applications therefor and all reissues, divisions, divisionals, renewals,
extensions, provisionals, continuations and continuations-in-part thereof, and
all patents, applications, documents and filings claiming priority to or serving
as a basis for priority thereof, (ii) all inventions (whether or not
patentable), invention disclosures, improvements, trade secrets, proprietary
information, know how, computer software programs (in both source code and
object code form), technology, business methods, technical data and customer
lists, tangible or intangible proprietary information, and all documentation
relating to any of the foregoing, (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto throughout
the world, (iv) all industrial designs and any registrations and applications
therefor throughout the world, (v) all trade names, logos, common law trademarks
and service marks, trademark and service ▇▇▇▇ registrations and applications
therefor throughout the world, (vi) all databases and data collections and all
rights therein throughout the world, (vii) all moral and economic rights of
authors and inventors, however denominated, throughout the world, (viii) all Web
addresses, sites and domain names and numbers, and (ix) any similar or
equivalent rights to any of the foregoing anywhere in the world.
1.12 “Knowledge,” with respect to an
individual, means knowledge of a particular fact or other matter
if:
(a) that
individual is actually aware of that fact or other matter; or
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(b) a
reasonably prudent individual would have conducted a reasonably comprehensive
investigation of that fact or other matter and, in the course of doing so, would
reasonably be expected to become aware of that fact or other
matter.
A Person
(other than an individual) will be deemed to have “Knowledge” of a particular
fact or other matter if any individual who is serving as a director, officer,
partner, member, manager or trustee of such Person (or in any similar capacity)
has, at the time with respect to which the term is used, “Knowledge” of such
fact or other matter (as set forth in (a) and (b) above); provided, however, that with
respect to the Sellers such individuals are deemed to be limited to the members
of the Board of Directors of each Seller and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇▇; and further provided,
that with respect to the Buyer such individuals are deemed to be limited to
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇.
1.13 “Order” means any award,
decision, injunction, judgment, ruling or verdict entered, issued, made or
rendered by any Governmental Body or by any arbitrator.
1.14 “Ordinary Course of Business”
means an action taken by a Person only if it is consistent with the past
practices of that Person and is taken in the ordinary course of the normal
day-to-day operations of that Person.
1.15 “Organizational Documents”
means: (a) the articles or certificate of incorporation and the
bylaws of a corporation; (b) the partnership agreement and any statement of
partnership of a general partnership; (c) the limited partnership agreement and
the certificate of limited partnership of a limited partnership; (d) any charter
or similar document adopted or filed in connection with the creation, formation,
or organization of a Person; and (e) any amendment to any of the
foregoing.
1.16 “Outstanding Obligations” means
any and all “claims” (used in its broadest sense, as contemplated by and defined
in Section 101(5) of the U.S. Bankruptcy Code, but without regard to whether
such claim would be disallowed under the U.S. Bankruptcy Code) against ProElite
and EliteXC, whether joint, several, or joint and several, whether fixed or
indeterminate, due or not yet due, contingent or non-contingent, matured or
unmatured, liquidated or unliquidated, or disputed or undisputed, whether under
a guaranty or a letter of credit, and whether arising under contract, in tort,
by law, or otherwise, any interest or fees thereon (including interest or fees
that accrue after the filing of a petition by or against ProElite and EliteXC
under the U.S. Bankruptcy Code, irrespective of whether allowable under the U.S.
Bankruptcy Code), any costs of enforcement actions, including reasonable
attorneys’ fees and costs, and any prepayment or termination
premiums.
1.17 “Party” or “Parties” means each or all, as
applicable, of the entities who have executed and delivered this Agreement, each
permitted successor or assign of a party and, when appropriate to effect the
binding nature of this Agreement for the benefit of another party, any other
successor or assign of a party.
1.18 “Permitted Encumbrance” means
liens for current Taxes not yet due and payable.
1.19 “Person” means any person or
entity of every kind and is to be construed as broadly as possible.
1.20 “ProElite Fighter” means the
Sellers’ fighters listed on Exhibit
A attached hereto.
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1.21 “Proceeding” means any action,
arbitration, audit, hearing, investigation, litigation or suit (whether civil,
criminal, administrative, investigative or informal) commenced by or before, or
otherwise involving, any Governmental Body or arbitrator.
1.22 “Related Agreements” means each
of the following agreements:
(a) Escrow
Agreement;
(b) ▇▇▇▇
of Sale and Assignment Agreement;
(c) Assignment
of Copyrights;
(d) Assignment
of Unregistered Copyrights;
(e) Trademark
License Agreement;
(f) Information
License Agreement; and
(g) ShoXC
License.
1.23 “Showtime” means Showtime
Networks, Inc.
1.24 “Showtime License Fee” means
the fees payable by Showtime to Explosion for the production of a Strikeforce
Event (as defined in the Explosion Showtime Agreement) or ShoXC Event (as
defined in the Explosion Showtime Agreement) under the terms of the Explosion
Showtime Agreement.
1.25 “Tax” or “Taxes” means any and all
taxes, charges, fees, levies or other assessments, including all net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, social security,
unemployment, excise, estimated, severance, stamp, occupation, property or other
taxes, customs, duties, fees, assessments or charges of any kind whatsoever,
including all interest and penalties thereon, and additions to tax or additional
amounts imposed by and Governmental Body.
2. RULES OF
CONSTRUCTION. For purposes of this Agreement:
2.1 The
phrase “breach of a representation” includes a misrepresentation and the failure
of a representation to be accurate.
2.2 “Including”
and any other words or phrases of inclusion will not be construed as terms of
limitation, so that references to “included” matters will be regarded as
non-exclusive, non-characterizing illustrations.
2.3 “Copy”
or “copies” means that the copy or copies of the material to which it relates
are true, correct and complete.
2.4 “Will”
has the same meaning as “shall” and, thus, connotes an obligation and an
imperative and not a futurity.
2.5 “Commercially
reasonable efforts” do not, without limitation, require a Party to make payments
to third parties outside of its Ordinary Course of Business.
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2.6 Acknowledging
that the Parties have participated jointly in the negotiation and drafting of
this Agreement, if an ambiguity or question of intent or interpretation arises
as to any aspect of this Agreement, then it will be construed as if drafted
jointly by the Parties and no presumption or burden of proof will arise favoring
or disfavoring any Party by virtue of the authorship of any provision of this
Agreement.
3. PURCHASE AND
SALE.
3.1 Purchase of
Assets. At the Closing (as defined in Section 4.1), the Sellers will sell,
transfer, and convey to Buyer, and Buyer will purchase from the Sellers, all of
each Seller’s right, title, and interest in and to certain assets and rights of
the Sellers described below (collectively, the “Assets”), excluding the
Excluded Assets (as defined in and identified in Section 3.3). The Assets
shall include the following assets, properties, and rights of the Sellers used
directly or indirectly in the conduct of, or generated by, or constituting any
part of, the EliteXC Business, excluding the Excluded Assets:
(a) Contracts. To
the extent permitted by applicable law, all rights as of the Closing Date under
the Contracts listed on Exhibit
C under the heading “Assumed Contracts” (the “Assumed
Contracts”).
(b) Media
Assets. The media assets listed on Exhibit
C under the heading “Media Assets” (the “ProElite Fight
Library”).
(c) Promotional Materials,
Marketing Materials and Other Personal Property. All tangible
personal property and other goods listed on Exhibit
C under the heading labeled “Promotional Materials, Marketing Materials
and Other Personal Property”.
(d) Inventories. All
supplies and inventories listed on Exhibit
C under the heading “Inventories” or otherwise related to the Assets,
including work-in-progress, the Sellers’ entire DVD inventory pertaining to or
related to the EliteXC Business and all such items shipped from vendors on or
prior to the Closing Date but not yet received by the Sellers.
(e) Intellectual
Property. All Intellectual Property listed on Exhibit
C under the heading “EliteXC Intellectual Property.”
(f) Claims. All
rights and claims of the Sellers against any third parties relating to the
Assets, including without limitation, all rights under express or implied
warranties relating to the Assets except (x) for those claims which arose prior
to the Closing and as are listed on Schedule 3.1(f) of this
Agreement and (y) those claims which arose prior to the Closing and which are
made by Sellers as a counterclaim to, or seeking declaratory relief in response
to, a written threatened claim or actual claim relating to the Assets made after
Closing (“Counterclaims”), provided that
such Counterclaims shall be owned jointly by Buyer and Sellers and Buyer and
Sellers shall have the right to assert such Counterclaims after
Closing. Sellers hereby covenant not to initiate suit against any of
the ProElite Fighters whose Contract with a Seller has been assigned to Buyer;
provided, however, that Sellers
shall not be precluded from initiating suit or taking similar action in response
to a written threatened claim or actual claim made by such a ProElite
Fighter.
(g) Books and
Records. All information, files, records, dates, plans,
contracts and recorded information relating to the Assets.
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(h) Prepaids. All
prepaid expenses, advance payments, deposits, surety accounts and other similar
assets relating to the Assets, including, without limitation, prepaid deposits
with suppliers and vendors.
(i) Accounts
Receivable. All accounts receivable (including royalties
receivable and advances) of the Sellers relating to the Assets that accrue after
the date of Closing, any payments received with respect thereto after the
Closing, unpaid interest accrued on any such accounts receivable and any
security or collateral relating thereto. Sellers shall transfer to
Buyer all rights to all accounts receivable (including any royalties receivable
and advances) and all contractual rights pertaining to any and all Assets
(including any audit rights), unpaid interest accrued on such accounts
receivable and any security or collateral relating thereto that accrue and are
paid after the date of Closing under any Contract to which the Sellers are a
party or are otherwise bound, and at Closing, the Sellers shall direct each
paying party to any such Contract in writing (in form and content acceptable to
Buyer) to account and pay directly to Buyer all such accounts receivable and
advances pertaining to such Assets that accrue subsequent to
Closing. Each Party shall promptly turn over to the other Party all
remittances or payments received by a Party to which such party is not entitled
under the terms of this Agreement and the Related Agreements at any time after
Closing. Notwithstanding the above:
(i) with
regards to that certain Agreement by and between IMG Media LTD. (“IMG”) and ProElite dated as of
October 22, 2007 (the “IMG
Agreement”), if direct payments as to EliteXC titles cannot be
specifically determined by title then the direct payment from IMG to Buyer shall
be made (which shall be reflected in the associated written direction from
Sellers to IMG) based upon a percentage of royalties or advances of 60% to Buyer
and 40% to Sellers; and
(ii) with
regards to that certain Agreement by and between The Fight Network and ProElite
dated January 16, 2007, the Sellers shall retain all accounts receivable (and
claims therein) accrued prior to the Closing Date.
(j) Certain Rights Under
Confidentiality Agreements and Warranties. All rights, claims
and benefits of each Seller in, to or under any: (i) confidentiality or secrecy
agreements entered into by a Seller with third parties that relate to the use or
disclosure of information, in each case to the extent concerning or otherwise
relating to the Assets (the “Confidentiality Agreement
Rights”); and (ii) express or implied warranties from the suppliers of
goods or services relating to the Assets.
3.2 Optional
Contracts.
(a) Within
45 days after the later of Closing or receipt (the “Election Period”), upon notice from
Buyer to ProElite, each Seller, as applicable, shall assign for no additional
consideration any or all of the Contracts listed on Exhibit
D (the “Optional
ProElite Contracts”) as determined by Buyer in its sole discretion
pursuant to the execution of an assignment agreement, in a form reasonably
agreed to by Buyer.
(b) Each
Seller shall use its commercially reasonable efforts to ensure that during the
Election Period, the Optional ProElite Contracts (i) are maintained in
accordance with past practices, (ii) are not transferred, terminated by Seller
or otherwise amended or modified by seller in any manner without the prior
written consent of Buyer and (iii) remain in full force and effect without
breach by either ProElite or EliteXC.
(c) In
addition, during the Election Period, each Seller shall not incur any material
liabilities, Encumbrance or commitments that affect the Optional ProElite
Contracts.
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(d) Optional
ProElite Contracts that are assigned to Buyer under Section 3.2(a) are deemed to be an
Assumed Contract and an Asset for all purposes of this Agreement, including
Section 5.12 hereof.
(e) Each
Seller hereby agrees to take and perform any action reasonably required,
including giving notice or receiving consent, for the assignment of any of the
Optional ProElite Contracts to Buyer.
3.3 Excluded
Assets. Notwithstanding the foregoing, the Assets shall not
include, without limitation, (i) the assets of the Excluded ProElite Business to
the extent such assets are not a part of or do not relate to the EliteXC
Business and (ii) any of the following (the “Excluded
Assets”):
(a) Corporate Records.
Each Seller’s seal, certificate of incorporation or articles of incorporation,
minute books, stock books, Tax returns, books of account or other records having
to do with the organization of such Seller.
(b) Cash and Cash
Equivalents. All cash and cash equivalents of the Sellers
currently in possession of either Seller. Cash and cash equivalents
of the Sellers shall not include any rights to receive cash or any other cash
equivalent pursuant to or by way of any Asset after the Closing
Date.
(c) Certain
Claims. All rights and claims: (i) of the Sellers relating to
the Excluded Assets or the Unassumed Liabilities, (ii) those claims and rights
listed in Exhibit
E or on Schedule
3.1(f), and (iii) claims for federal, state or foreign Tax
refunds.
(d) Rights under this
Agreement. The rights that will accrue to the Sellers under
this Agreement and the Related Agreements.
(e) Certain Rights Under
Confidentiality Agreements and Warranties. All rights, claims
and benefits under the Confidentiality Agreement Rights to the extent not
subject to Section
3.1(j).
(f) Other. Any
other assets, properties or rights, if any, expressly listed on in Exhibit
E.
3.4 Assumption of
Liabilities.
(a) Assumed
Liabilities. At the Closing, Buyer shall assume and agree to
pay, perform, and discharge all obligations and liabilities of the Sellers
(excluding any Unassumed Liabilities) arising after Closing under (i) the
Assumed Contracts (ii) the Assets or (iii) the operation of the business of
Buyer but only to the extent expressly related to Buyer’s ownership of the
Assets (the “Assumed
Liabilities”).
(b) Unassumed
Liabilities. Except for the Assumed Liabilities, Buyer shall
not assume and shall not be obligated to pay, discharge, or indemnify any party
with respect to, any liability, obligation, or commitment of any nature of the
Sellers, whether now or hereafter existing or created, whether known or unknown
and whether absolute, accrued, contingent or otherwise (the “Unassumed Liabilities”), including but
not limited to:
(i) Any
claims under any express or implied Contracts relating to products or services
sold or provided by the Sellers prior to the Closing, including without
limitation claims with respect to product warranties or product
liabilities;
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(ii) Any
of the rights and interests, and all of the liabilities and obligations, of each
Seller in, under or pursuant to any license, lease, contract, agreement,
commitment or undertaking that is not an Assumed Contract;
(iii) Any
obligation to issue any warrant or other security of any kind under an Assumed
Contract;
(iv) Taxes
of any nature whatsoever of the Sellers arising from the operation of the
EliteXC Business or the ownership of the Assets for any period (or portion of
any period) ending on or prior to the Closing Date and any Taxes incurred by the
Sellers that will arise as a result of the purchase, sale or transfer of the
Assets pursuant to this Agreement;
(v) Obligations
under any employee agreements, including but not limited to, director and
officer indemnification agreements, and profit sharing, pension, stock option,
or any other equity benefit or ERISA plan;
(vi) Any
other claims or liabilities arising out of the operation of the EliteXC Business
(including but not limited to any real property leases or subleases) or the
ownership of the Assets, including any unpaid obligations and liabilities due
and payable under the Assumed Contracts by either Seller, at or prior to
Closing;
(vii) Any
liabilities and obligations, known or unknown, fixed, contingent or otherwise,
the existence of which is a breach of any representation, warranty, covenant,
obligation or agreement of Seller set forth in this Agreement or in any of the
other documents or agreements contemplated hereby (provided that nothing in this
subparagraph (vii) shall diminish the indemnification limits set forth in Section 8.4(b));
(viii) Any
liabilities and obligations relating to, based in whole or in part on events or
conditions occurring or existing in connection with, or arising out
of, any and all assets, properties, rights and interests which are not being
acquired by Buyer hereunder, including, without limitation, the Excluded Assets;
and
(ix) All
liabilities and obligations incurred by each Seller or its Affiliates or their
respective directors, officers, shareholders, agents or employees after the
Closing Date.
(c) Acknowledgement. Without
increasing any liability Sellers may have to Buyer hereunder, Sellers
acknowledge that with respect to ProElite Fighters as to which Sellers cannot
delegate Seller’s duties to the fighter, Sellers may have future obligations to
such fighters under the applicable Assumed Contract with such ProElite Fighters
as currently in effect and to the extent set forth therein, even though (as
between Buyer and Sellers) Buyer is providing certain indemnities hereunder with
respect to such future obligations. Sellers do not purport by
entering into this Agreement to change its contractual obligations with such
ProElite Fighters.
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3.5 Assignability and
Consents.
(a) Required
Consents. Other than consents required to be delivered at
Closing, Schedule 3.5(a)
of this Agreement sets forth a list of all Assets, including Assumed
Contracts, which are non-assignable or non-transferable to Buyer without the
consent of some other Person. Each Seller has commenced and shall
continue to use commercially reasonable efforts to take or to cause to be taken
by others, all necessary actions required to obtain or satisfy, at the earliest
practicable date, all consents from any Persons necessary to authorize, approve
or permit the full and complete sale, conveyance, assignment, sublease or
transfer of the Assets, and to consummate and make effective the transactions
contemplated by this Agreement and to continue such efforts as may be required
under this Agreement after the Closing Date to facilitate the full and
expeditious transfer of legal title of the Assets to Buyer. To the extent
that Buyer cannot be granted possession by a Seller with respect to certain
Assets as of the Closing Date, such Assets shall be held by a Seller for the
sole benefit of and on behalf of Buyer until such time as Buyer or its designee
is granted possession thereof.
(b) Fighter
Statements. [***]
(c) Consent of Third
Parties. Notwithstanding anything in this Agreement to the
contrary, this Agreement will not constitute an agreement to assign any of the
Assumed Contracts or any claim or right or any benefit arising thereunder or
resulting therefrom if the assignment thereof is adjudicated by a court of
competent jurisdiction to be a breach or contravention thereof or if such
assignment is adjudicated by a court of competent jurisdiction to be ineffective
or requiring consent of a party to any such Assumed Contract (a “Required Consenting Party”)
(each, an “Assignment
Rejection”). In the event of an Assignment Rejection or in the
event that a controversy arises between Buyer or a Seller and a party to an
Assumed Contract claiming that the assignment of such Assumed Contract was
ineffective, or requires the consent of such party (such party an “Objecting Party”), then each
Seller shall use their commercially reasonable efforts to obtain the consent of
any Required Consenting Party or any Objecting Party for the assignment to Buyer
of any such Assumed Contract. If a subsequent consent to the
assignment of such Assumed Contract could not be obtained from a Required
Consenting Party, thereby resulting in Buyer not in fact receiving all of the
rights and benefits of such Assumed Contract, each Seller shall, from and after
the consummation of the Closing or, with respect to any Optional Pro Elite
Contract, from and after the Election Date, provide Buyer with all the rights
and the benefits under such Assumed Contract so affected consistent with the
terms of such Assumed Contract, as if such Assumed Contract had been effectively
assigned to Buyer at Closing or, with respect to any Optional Pro Elite
Contract, on the Election Date, and Buyer agrees to perform at its sole expense
all of the obligations of the applicable Seller (excluding any Unassumed
Liabilities) arising after Closing or, with respect to any Optional Pro Elite
Contract, on or after the Election Date. Each Seller shall pay
promptly to Buyer when received all monies received by a Seller, from and after
the consummation of the Closing, under any of the Assumed Contracts or any claim
or right or any benefit arising thereunder to the fullest extent that Buyer
would be entitled thereto pursuant hereto as if all assignments are effective as
of the Closing. In addition, each Seller shall direct in writing (in
form and content previously approved by Buyer) each paying party to any Assumed
Contract that has not been effectively assigned to Buyer to pay all amounts
payable under such Contract directly to Buyer. Each Seller shall also
supply to Buyer any and all services of any party to an Assumed Contract
consistent with the terms of such Assumed Contract to the fullest extent that
Buyer would be entitled thereto pursuant hereto as if all assignments are
effective as of the Closing or, with respect to any Optional Pro Elite Contract,
from and after the Election Date. Each Seller hereby agrees that it
shall not use any of the Assumed Contracts for its benefit. From and
after the consummation of the Closing, if and when any such required consents
from a Required Consenting Party shall be obtained, the Sellers shall promptly
assign their rights thereunder to Buyer without payment of consideration and
Buyer shall, without payment of any consideration therefor, assume from and
after the date of such assignment the obligations thereunder arising exclusively
from, and accruing exclusively with respect to, the period after such assignment
and assumption (but only to the extent such obligations would constitute Assumed
Liabilities). Buyer shall make no claim against Seller solely arising
from the Sellers’ inability to assign an Assumed Contract with a ProElite
Fighter who is a Required Consenting Party in connection with an Assignment
Rejection.
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3.6 Purchase Price;
Escrow. The initial purchase price for the Assets (the “Purchase Price”) shall be
Three Million Dollars ($3,000,000). At the Closing, Buyer shall (i)
pay Two Hundred Thousand Dollars ($200,000) of the Purchase Price to Sellers by
wire transfer of immediately available funds and (ii) deposit the remaining
amount of the Purchase Price into an interest bearing escrow account (the “Escrow Fund”) with the Escrow
Agent by wire transfer of immediately available funds. The Escrow
Fund shall be governed and controlled by the Escrow Agreement, dated as of the
date hereof, among the Escrow Agent, Buyer and ProElite in substantially the
form attached hereto as Exhibit
F (the “Escrow
Agreement”). The Escrow Fund shall be held for such period as
is required to satisfy any Outstanding Obligations in accordance with the Escrow
Agreement. On or after Closing, ProElite shall provide to Buyer and
the Escrow Agent copies of applicable payoff letters in substantially the forms
attached hereto as Exhibit
G (each a “Payoff
Letter”) from those
creditors listed on the Schedule of Creditors to the Escrow Agreement, which
provides for the payment in full of all Outstanding Obligations to such
creditors and a waiver with respect to any unpaid amounts (such payments, the
“Creditor
Payments”). Each Seller agrees that any portion of the
Purchase Price received by Sellers at Closing or after Closing from a
distribution from the Escrow Fund shall be used only for working capital
purposes only and shall not be used to pay any bonuses to employees and
directors of the Sellers or their Affiliates.
3.7 Additional
Consideration. Subject to Section 8.7 below, as
additional consideration for the purchase of the Assets from the Sellers, Buyer
hereby agrees that ProElite shall be entitled to receive [***] of the
Showtime License Fees that Buyer receives from Showtime (the “ProElite License Payment”)
pursuant to the Explosion Showtime Agreement for the duration of the Explosion
Showtime Agreement. Buyer shall direct Showtime to pay the ProElite
License Payment on Buyer’s behalf directly to ProElite at the same time any
Showtime License Fees are paid to Buyer, but if Showtime pays the ProElite
License Payment directly to Buyer, Buyer shall pay such ProElite License Payment
received from Showtime to ProElite. ProElite is only entitled to the ProElite
License Payment and is not entitled to any other consideration received by or
consideration paid to Buyer under the Explosion Showtime Agreement or under any
other broadcast agreement to which Buyer may be a party other than an Amended
License Agreement (as defined below). This ProElite License Payment
shall only be payable to ProElite for the original term of the Explosion
Showtime Agreement and any extended term as a result of the exercise of any
option (the “License
Term”), which options only extend the License Term of the Explosion
Showtime Agreement to December 31, 2013. For clarity purposes, if the
Explosion Showtime Agreement’s original term is until December 31, 2011 and
Showtime extends the term for one additional year, then ProElite will be
entitled to the ProElite License Payment from the aggregate of the Showtime
License Fee received by Buyer until December 31, 2012. Any separate
agreement entered into by and between Buyer and Showtime outside the Explosion
Showtime Agreement shall not give rise to ProElite of any third-party
beneficiary rights or any other rights (monetary or otherwise) received under
such separate agreement; provided, however, that in the
event Buyer and Showtime, or any of their respective Affiliates, enter into any
successor, supplemental, amended or other agreement covering substantially the
same licensing rights as the Explosion Showtime Agreement with respect to any
portion of the License Term (each an “Amended License Agreement”),
(i) Buyer shall promptly advise ProElite of such fact and (ii) ProElite shall
continue to receive for the duration of the License Term aggregate payments,
measured over a 12-month period, equal to the ProElite License Payment that
would otherwise be payable under the Explosion Showtime Agreement as if still
then in effect during such 12-month period. For clarity purposes, if
after December 31, 2013, Buyer and Showtime enter into another agreement for the
production of any mixed martial arts event, then ProElite shall not be entitled
to receive any further residual payments or other compensation, but if during
the License Term Buyer and Showtime enter into an Amended License
Agreement, ProElite shall continue to have the right to payment of the ProElite
License Payment or equivalent payment pursuant to such agreement until the
expiration of the License Term.
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3.8 Allocation of Purchase
Price. Buyer shall deliver to ProElite, no later than thirty
(30) days after the Closing Date, a proposed allocation, for U.S. federal income
Tax purposes and pursuant to Section 1060 of the Code and the regulations
thereunder, of the Purchase Price, the ProElite License Payment and Assumed
Liabilities (together, the “Total Consideration”) between the
Sellers and among the Assets (the “Proposed Allocation”). Promptly
following receipt of the Proposed Allocation, ProElite shall review the same
and, within ten (10) days after ProElite’s receipt of such Proposed Allocation,
may deliver to Buyer a certificate executed by ProElite (on its behalf and
EliteXC) setting forth objections to the proposed allocation (an “Objection Notice”), together with a
summary of the reasons therefor and calculations which, in the Sellers’ view,
are necessary to eliminate such objections. If ProElite does not
deliver an Objection Notice within such 10-day period, the Proposed Allocation
shall be the final allocation of the Total Consideration among the Assets (the
“Final Allocation”). If
ProElite delivers an Objection Notice within such 10-day period, Buyer and the
Sellers shall use their reasonable attempts to resolve by written agreement any
differences identified in the Objection Notice within the succeeding five (5)
days and, if they are able to resolve all such differences, the allocation
agreed to shall be the Final Allocation. If any objections raised by
ProElite (on its behalf or EliteXC) in the Objection Notice are not resolved
within the 5-day period next following such 5-day period, then Buyer and
ProElite shall submit the objections that are then unresolved (together with any
agreed adjustments) to an independent certified public accountant mutually
agreed to by Buyer and ProElite, who shall be directed by Buyer and ProElite to
resolve the unresolved objections within the next ten (10) days and to deliver
written notice to each of Buyer and ProElite setting forth its resolution of the
disputed matters. The allocation resulting from the decision of the
independent certified public accountant shall be the Final
Allocation. Any allocation that becomes the Final Allocation pursuant
to the preceding provisions of this Section 3.8 shall attach to
this Agreement after Closing. No party to this Agreement will take a
position on any federal or state Tax return, before any Governmental Body
charged with the collection of any income Tax, or in any judicial Proceeding
that is in any way inconsistent with the Final Allocation.
4. CLOSING.
4.1 The Closing. The
closing of the purchase of the Assets (the “Closing”) shall be held at the
offices of DLA Piper LLP (US), ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ at 2:00 p.m. local time on the date of this Agreement, or such
other place and time as the Parties shall agree (the “Closing Date”).
4.2 Items to be Delivered at
Closing.
(a) Transfer of
Assets. At the Closing, the Sellers will take all actions
reasonably necessary and appropriate to transfer, assign and convey the Assets
to Buyer, including execution and delivery of a ▇▇▇▇ of sale, contract
assignments and other appropriate documents in form and content reasonably
satisfactory to Buyer and its counsel, which shall include, but shall not
limited to:
(i) the
▇▇▇▇ of Sale, Assignment and Assumption Agreement in substantially the form
attached hereto as Exhibit
H (the “▇▇▇▇ of Sale and
Assignment Agreement”);
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(ii) the
Assignment of Copyrights in the form attached hereto as Exhibit
I-1 (the “Assignment of
Copyrights”) and the Assignment of Unregistered Copyrights in the form
attached hereto as Exhibit
I-2 (the “Assignment of
Unregistered Copyrights”); and
(iii) the
Trademark License Agreement in the form attached hereto as Exhibit
I-3 (the “Trademark
License Agreement”).
(b) Payment of Purchase
Price. At the Closing, Buyer shall (i) deliver $2,800,000 of
the Purchase Price to the Escrow Fund, (ii) deliver $200,000 of the Purchase
Price to ProElite, (iii) deliver the ▇▇▇▇ of Sale and Assignment Agreement by
which Buyer will undertake to assume and agree to pay, discharge or perform, as
appropriate, the Assumed Liabilities, and (iv) deliver the fully executed
Explosion Showtime Agreement by which Buyer will pay or cause to be paid the
ProElite License Payment.
(c) Escrow
Agreement. At the Closing, ProElite and the Buyer shall
execute and deliver to each other the Escrow Agreement, which shall have been
executed by the Escrow Agent.
(d) Information License
Agreement. At the Closing, the Sellers and Buyer shall execute
and deliver to each other the Information License Agreement in substantially the
form attached hereto as Exhibit J
(the “Information
License Agreement”).
(e) ShoXC Asset License
Agreement. At the Closing, the Sellers and Buyer shall execute
and deliver to each other the ShoXC Asset License Agreement in substantially the
form attached hereto as Exhibit
K (the “ShoXC
License”).
(f) Termination of Financing
Statements. Each Seller shall deliver written evidence
previously reviewed and approved by Buyer that (i) UCC-2 or UCC-3 termination
statements, as applicable, have been filed or the related secured party has
irrevocably authorized such filing with respect to each of the UCC-1 financing
statements filed in order to perfect security interests in the Assets that have
not yet expired and (ii) all Encumbrances on Assets other than Permitted
Encumbrances shall be released prior to or simultaneously with the
Closing.
(g) Other
Documents. At the Closing, the Sellers shall deliver to Buyer
the following additional documents:
(i) Secretary’s Certificates. A
certificate from the Secretary of each Seller having attached thereto: (A) each
Seller’s Certificate of Incorporation (or Articles of Incorporation) and Bylaws,
each as in effect immediately prior to the Closing, and (B) resolutions of each
Seller’s Board of Directors unanimously approving the transactions contemplated
hereby, in a form satisfactory to Buyer.
(ii) Good Standing
Certificates. Certificates from the State of New Jersey (in
the case of ProElite) and the State of California (in the case of each Seller)
dated as of a date not earlier than the fifth (5th) Business Day before the
Closing as to the good standing of each Seller and payment of all applicable
state Taxes by each Seller, executed by the appropriate officials of the
respective states.
(h) Originals of Assumed
Contracts. On or prior to the Closing, ProElite shall deliver
to Buyer originals or true copies of all Assumed Contracts not previously
delivered to Buyer, if any.
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4.3 Delivery of
Assets. The Sellers shall take all such steps as may be
required to put Buyer in actual possession and operating control of the Assets
at Closing (or at such later date as is permitted by this
Agreement).
4.4 Further
Assurances. Following the Closing, each of the Parties will
cooperate with and execute and deliver to the other party such other instruments
and documents and take such actions as may be reasonably requested from time to
time as necessary to carry out, evidence and confirm the intended purposes of
this Agreement and the Related Agreements. In particular, at Buyer’s
request, the Sellers will execute, acknowledge and deliver to Buyer such other
instruments of conveyance and transfer, certificate and other documents, and
will take such other actions, as Buyer may reasonably require in order to vest
more effectively in Buyer, or to put Buyer more fully in possession of, any of
the Assets, to obtain permits and licenses required by any Governmental Body, or
to better enable Buyer to complete or perform any of the liabilities or
obligations assumed by Buyer under this Agreement.
5. REPRESENTATIONS AND
WARRANTIES OF THE SELLERS.
Except as
set forth in the corresponding sections or subsections of the disclosure letter
delivered by the Sellers to Buyer prior to entering into this Agreement and
attached hereto as Exhibit L,
(the “ProElite Disclosure
Letter”), each Seller jointly and severally represents and warrants to
Buyer as follows:
5.1 Organization and Good
Standing.
(a) ProElite
is a corporation duly organized, validly existing, and in good standing under
the laws of New Jersey, with full corporate power and authority (a) to conduct
its business as it is now being conducted to the extent related to the EliteXC
Business and the Assets and (b) to perform all its obligations under this
Agreement and the Related Agreements to which it is a party. ProElite
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction that is required by
reason of (i) the ownership or use of the properties owned or used by it, (ii)
the nature of the activities conducted by it (to the extent related to the
EliteXC Business), or (iii) the Assets.
(b) EliteXC
is a corporation duly organized, validly existing, and in good standing under
the laws of California, with full corporate power and authority (a) to conduct
its business as it is now being conducted to the extent related to the EliteXC
Business or the Assets, and (b) to perform all its obligations under this
Agreement and the Related Agreements to which it is a party. EliteXC
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction that is required by
reason of (i) the ownership or use of the properties owned or used by it, (ii)
the nature of the activities conducted by it (to the extent related to the
EliteXC Business) or (iii) the Assets.
5.2 Authority; Enforceability; No
Conflict.
(a) Authority. Each
Seller has the absolute and unrestricted corporate right, power, authority, and
capacity to execute, deliver and enter into this Agreement and the Related
Agreements to which it is a party and to consummate and perform the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement, the Related Agreements to which it is a party and the consummation
and performance of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of each Seller and
no further action is required on the part of a Seller to approve the Agreement,
the Related Agreements to which it is a party and the consummation and
performance of the transactions contemplated hereby and thereby. The
Board of Directors of each Seller has unanimously approved this Agreement, the
Related Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby.
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(b) Enforceability. This
Agreement and the Related Agreements to which it is a party constitute the
legal, valid, and binding obligations of each Seller, enforceable against each
Seller in accordance with their respective terms, subject to the effect of (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to rights of creditors generally and
(ii) rules of law and equity governing specific performance, injunctive relief
and other equitable remedies.
(c) No Conflict,
etc. Except as set forth in Schedule 5.2 of the ProElite
Disclosure Letter, neither the execution and delivery of this Agreement or the
Related Agreements nor the consummation or performance of any of the
transactions contemplated by this Agreement or the Related Agreements will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene,
conflict with, or result in a violation of (i) any provision of the
Organizational Documents of ProElite or EliteXC or (ii) any resolution adopted
by the board of directors or the shareholders of ProElite or
EliteXC;
(ii) contravene,
conflict with, or result in a material violation of, or give any Governmental
Body or other Person the right to challenge any of the transactions contemplated
by this Agreement or the Related Agreements or to exercise any remedy or obtain
any relief under, any Applicable Law or any Order to which ProElite, EliteXC, or
any of the Assets, may be subject;
(iii) contravene,
conflict with, or result in a material violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental Authorization that is
held by ProElite and relates to the EliteXC Business or the ownership or use of
any of the Assets in any material respect;
(iv) contravene,
conflict with, or result in a material violation or breach of any provision of,
or give any Person the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel, terminate, or
modify, any Contract (i) under which ProElite has or may acquire any rights,
(ii) under which ProElite or EliteXC has or may become subject to any
obligations or liability, or (iii) by which ProElite, EliteXC or any of the
assets owned or used by ProElite or EliteXC is or may become bound;
or
(v) result
in the imposition or creation of any Encumbrance upon the Assets.
Except as
set forth in Schedule
5.2 of the ProElite
Disclosure Letter, following the Closing, Buyer will be permitted to exercise
all of the Sellers’ rights under the Assumed Contracts without the payment of
any additional amounts or consideration other than ongoing fees, royalties or
payments or obligations that ProElite or EliteXC would otherwise be required to
pay or perform for obligations that accrue or become due and payable from and
after the Closing pursuant to the terms of such Assumed Contracts had the
transactions contemplated by this Agreement or the Related Agreements not
occurred.
5.3 Consents and
Notices. Except as set forth on Schedule 5.3 of the ProElite
Disclosure Letter, neither ProElite nor EliteXC is required to give any notice
to or obtain any approval, consent, ratification, waiver or other authorization
of any Person (including any Governmental Authorization) in connection with the
execution and delivery of this Agreement and the Related Agreements or the
consummation or performance of any of the transactions contemplated by this
Agreement or the Related Agreements. Schedule 5.3 of the ProElite
Disclosure Letter lists all consents, waivers and approvals under any of the
Assumed Contracts required to be obtained in order to transfer or assign to
Buyer the benefits or delegate performance with regard thereto and to consummate
the transactions contemplated by this Agreement.
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5.4 Title to Properties;
Encumbrances. The Sellers own or, with respect to leased personal
property and assets, hold valid and enforceable leasehold interests in, all of
the Assets and at Closing will transfer to Buyer good, marketable and exclusive
title to the Assets (as to all Assets owned by the Sellers) or full right to
possess and use (as to all Assets not owned by the Seller). All of
the Assets are free and clear of all Encumbrances other than Permitted
Encumbrances. The delivery to Buyer of the instruments of transfer of ownership
contemplated by this Agreement will vest good, marketable and exclusive title
(as to all Assets owned by the Sellers) or full right to possess and use (as to
all Assets not owned by the Seller) to the Assets in Buyer, free and clear of
all Encumbrances of any kind or nature whatsoever, except Permitted
Encumbrances.
5.5 Fair Value; Bulk
Sale.
(a) Fair Value; No Insolvency
Proceeding. The Total Consideration represents fair and
reasonably equivalent value for the Assets. None of the Sellers has
entered into this Agreement with the actual intent to hinder, delay, or defraud
any creditor or any other person. There has been no voluntary or
involuntary insolvency, bankruptcy, receivership, custodianship, liquidation,
dissolution, reorganization, assignment for the benefit of creditors or similar
proceeding (an “Insolvency
Proceeding”) commenced with respect to any of the Sellers. No
Seller is currently planning to commence an Insolvency Proceeding. To
each Seller’s Knowledge, no other Person is currently planning to commence an
Insolvency Proceeding with respect to a Seller.
(b) No Bulk
Sale. The bulk sale provisions of Applicable Law are not
applicable to the transactions contemplated by this Agreement.
5.6 No Undisclosed
Liabilities. Each of ProElite and EliteXC has no liabilities
or obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) arising out of or relating to the EliteXC
Business or the Assets, except for those liabilities listed on Schedule 5.6 of the ProElite Disclosure
Letter.
5.7 Outstanding Obligations.
Schedule 5.7 of the
ProElite Disclosure Letter lists (i) the amount of principal, interest and other
obligations of all Outstanding Obligations that are in the nature of debt for
money borrowed, accounts payable or liabilities accrued as of the date hereof,
(ii) the Encumbrances that relate to such Outstanding Obligations, and (iii) the
name of each lender or payee party thereof.
5.8 Compliance with Applicable
Laws.
(a) The
business operations related to the Assets are, in material compliance with each
Applicable Law that is or was applicable to it or to the conduct or operation of
the EliteXC Business or the ownership or use of any of the Assets;
(b) No
event has occurred or circumstance exists that (with or without notice or lapse
of time) could be reasonably expected to result in a violation by ProElite or
EliteXC of, or a failure on the part of ProElite or EliteXC to comply with, any
Applicable Law to the EliteXC Business or the Assets, or may give rise to any
obligation on the part of ProElite or EliteXC to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature with respect to
the EliteXC Business or the Assets; and
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(c) Neither
ProElite nor EliteXC has received any written notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding any actual, alleged, or potential violation of, or failure to comply
with, any Applicable Law with respect to the EliteXC Business or the Assets, or
any actual, alleged, or potential obligation on the part of ProElite or EliteXC
to undertake, or to bear all or any portion of the cost of, any remedial action
of any nature with respect to the EliteXC Business or Assets.
5.9 Governmental
Authorization. Schedule 5.9(i) of the
ProElite Disclosure Letter lists each Governmental
Authorization that is held by ProElite and EliteXC and that pertains to the
EliteXC Business or the Assets. Each Governmental Authorization
listed or required to be listed in the ProElite Disclosure Letter is valid and
in full force and effect. Except as set forth in the Schedule 5.9(ii) of the
ProElite Disclosure Letter:
(a) Neither
ProElite nor EliteXC has received any written notice regarding any actual,
alleged or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization with respect to the EliteXC
Business or any of the Assets, or any actual, proposed or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
such Governmental Authorization; and
(b) All
applications required to have been filed for the renewal of the Governmental
Authorizations listed or required to be listed in the ProElite Disclosure Letter
have been duly filed on a timely basis with the appropriate Governmental Bodies,
and all other filings required to have been made with respect to those
Governmental Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies.
(c) The
Governmental Authorizations listed in Schedule 5.9(i) of the
ProElite Disclosure Letter collectively constitute all material Governmental
Authorizations necessary to permit ProElite to lawfully conduct and operate the
EliteXC Business in the manner ProElite and EliteXC currently conducts and
operates the EliteXC Business and to permit ProElite and EliteXC to own and use
the Assets in the manner in which they currently own and use the
Assets.
5.10 Legal Proceedings;
Orders.
(i) Generally. Other
than those matters listed in Schedule 5.10 of the ProElite
Disclosure Letter, there is no pending Proceeding:
(A) that
has been commenced by or against ProElite or EliteXC that relates to or may
reasonably be seen to affect the EliteXC Business or any of the Assets in any
material respects; or
(B) that
challenges, or that may reasonably be seen to have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the transactions
contemplated by this Agreement or the Related Agreements.
To the
Knowledge of each Seller, (i) no such Proceeding has been threatened, and (ii)
no event has occurred or circumstance exists that may reasonably give rise to or
serve as a basis for the commencement of any such Proceeding. Each
Seller has delivered to Buyer copies of (a) all releases, dismissals, stipulated
judgments and all other documents related to the termination of any Proceeding
by or against ProElite or EliteXC that relates to or may reasonably be seen to
affect the EliteXC Business or any of the Assets in any material respects and
(b) all pending pleadings relating to each Proceeding listed in the ProElite
Disclosure Letter; provided, that with respect to subsection (a) only, such
disclosure obligation is subject to reasonable confidentiality restrictions (it
being understood that any such restriction shall not diminish any other
representation or warranty of a Seller herein).
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(ii) Orders. Except
as set forth in Schedule
5.10 of the ProElite Disclosure Letter:
(A) There
is no Order to which ProElite or EliteXC is subject that relates to or may
reasonably be seen to affect the EliteXC Business or any of the Assets in any
material respects;
(B) No
officer, director, agent, or employee of ProElite or EliteXC is subject to any
Order that prohibits that officer, director, agent, or employee from engaging in
or continuing any conduct, activity, or practice relating to the EliteXC
Business;
(C) Each
of ProElite and EliteXC is, and at all times has been, in full compliance with
all of the terms and requirements of each Order to which it is or has been
subject that relates to or affects the EliteXC Business or to which any of the
Assets is or has been subject;
(D) No
event has occurred or circumstance exists that could reasonably be expected to
result in (with or without notice or lapse of time) a violation of or failure to
comply with any term or requirement of any Order to which ProElite or EliteXC is
or has been subject that relates to or affects the EliteXC Business or to which
any of the Assets is subject; and
(E) Neither
ProElite nor EliteXC has received any notice or other communication (whether
oral or written) from any Governmental Body or any other Person regarding any
actual, alleged, possible, or potential violation of, or failure to comply with,
any term or requirement of any Order to which ProElite or EliteXC is or has been
subject that relates to or materially adversely affects the EliteXC Business or
as to which any of the Assets is or has been subject.
5.11 Intellectual
Property.
(a) Schedule 5.11(a) of the
ProElite Disclosure Letter lists and separately identifies all Intellectual
Property that constitutes or is embodied in the Assets and that has been used or
is being used in connection with the operation or conduct of the EliteXC
Business by category or event as applicable (setting forth, for each item, the
full legal name of the owner of record, applicable jurisdiction, status,
application or registration number, and date of application, registration or
issuance, as applicable), and including the following information: (A) for each
registered trademark, trade name or service ▇▇▇▇, the class of goods covered;
(B) for each URL or domain name, any renewal date and the name of registry; and
(C) for each registered copyright, title of the work (the “EliteXC Intellectual
Property”).
(b) Each
item of EliteXC Intellectual Property is either: (i) owned solely by the Sellers
free and clear of any Encumbrances other than Permitted Encumbrances, or (ii)
rightfully used and authorized for use by the Sellers pursuant to a valid and
enforceable written license. Each Seller has and has had all rights
in the EliteXC Intellectual Property necessary to carry out the EliteXC Business
as previously and presently conducted by the Sellers, including in each case
rights to make, use, exclude others from using, reproduce, modify, adapt, create
derivative works based on, translate, distribute (directly and indirectly),
transmit, display and perform publicly, license, sublicense, rent, lease, assign
and sell the EliteXC Intellectual Property in all geographic locations and
fields of use.
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(c) Each
Seller is in compliance with and has not breached, violated or defaulted under,
or received written notice that it has breached, violated or defaulted under,
any of the terms or conditions of any license, sublicense or other agreement to
which such Seller is a party or is otherwise bound relating to any of the
EliteXC Intellectual Property, nor does any Seller have Knowledge of any event
or occurrence that would reasonably be expected to constitute such a breach,
violation or default (with or without the lapse of time, giving of notice or
both). Each such agreement is in full force and effect, and no Seller
is in default thereunder, nor is any party obligated to a Seller pursuant to any
such agreement in default thereunder. Immediately following the Closing Date,
Buyer will be permitted to exercise all of each Seller’s rights under such
contracts, licenses and agreements to the same extent each Seller would have
been able to had the transactions contemplated by this Agreement not occurred
and without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments or obligations which each Seller would
otherwise have been required to pay had the transactions contemplated by this
Agreement not occurred. No Seller is obligated to provide any
consideration (whether financial or otherwise) to any third party, nor is any
third party otherwise entitled to any consideration, with respect to any
exercise of rights by each Seller, as successor to such Seller in the EliteXC
Intellectual Property.
(d) There
are no patents or patent applications (including provisional applications)
applicable to the EliteXC Business. The use of the EliteXC
Intellectual Property by the Sellers as previously and currently used, has not
infringed and does not infringe or violate any other Person’s copyrights, trade
secret rights, right of privacy, right in personal data, moral right, patent,
trademark, service ▇▇▇▇, trade name, firm name, logo, trade dress, mask work or
other intellectual property right, or give rise to any claim of unfair
competition under any applicable Law. No claims (i) challenging the
validity, enforceability, effectiveness or ownership by either Seller of any of
the EliteXC Intellectual Property or (ii) to the effect that the use,
reproduction, modification, manufacture, distribution, licensing, sublicensing,
sale, or any other exercise of rights in any the EliteXC Intellectual Property
by either Seller or by any licensee of either Seller infringes or will infringe
on any Intellectual Property or other proprietary or personal right of any
Person have been asserted against either Seller or threatened by any Person, nor
does there exist any valid basis for such a claim. There are no legal
or governmental Proceedings, including interference, re-examination, reissue,
opposition, nullity, or cancellation proceedings pending that relate to any
registered EliteXC Intellectual Property, other than review of pending patent
and trademark applications, and no such Proceedings are threatened or
contemplated by any Governmental Body or any other Person. All
registered EliteXC Intellectual Property is valid and subsisting. To
the Sellers’ Knowledge, there is no unauthorized use, infringement, or
misappropriation by any third party or by any employee of any the EliteXC
Intellectual Property owned by Sellers.
(e) Each
Seller has obtained from all parties (including employees) who have created any
portion of, or otherwise who would have any rights in or to, the EliteXC
Intellectual Property owned by either the Sellers, valid and enforceable written
assignments of any such work, invention, improvement or other rights to either
Sellers and have made available true and complete copies of such assignments to
Buyer. No employee, former employee, consultant or former consultant
of either Seller has ever excluded any Intellectual Property from any written
assignment executed by any such Person in connection with work performed for or
on behalf of either Seller. All amounts payable by the Sellers to consultants
and former consultants regarding the EliteXC Intellectual Property have been
paid in full.
(f) The
consummation of the transactions contemplated by this Agreement will not alter,
impair or otherwise adversely affect any rights in any EliteXC Intellectual
Property.
(g) Each
Seller has taken reasonable measures to protect its ownership of, and rights in,
all the EliteXC Intellectual Property owned by the Sellers in accordance with
industry standards. Without limiting the foregoing, no Seller has
made any of their respective trade secrets or other confidential or proprietary
information that such Sellers intended to maintain as confidential (including
source code with respect to the EliteXC Intellectual Property) available to any
other Person except pursuant to written agreements requiring such Person to
maintain the confidentiality of such information.
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(h) Except
as provided in Schedule
5.11(h) of the ProElite Disclosure Schedule each Seller has obtained all
rights, releases, consents and authorizations related to the use of any Person’s
name, likeness, voice and/or image in connection with the EliteXC Intellectual
Property, and the use of the EliteXC Intellectual Property does not and will not
violate any Person’s right of privacy, right of publicity or any other personal
right related to the use of such Person’s name, likeness, voice and/or image in
the EliteXC Intellectual Property. No claims to the effect that the
use, reproduction, modification, distribution, licensing, sublicensing, sale, or
any other exercise of rights in any of the EliteXC Intellectual Property by
either Seller or by any licensee of either Seller infringes, violates or
misappropriates any Person’s right of privacy, right of publicity or any other
personal right related to the use of such Person’s name, likeness, voice and/or
image in the EliteXC Intellectual Property, nor does there exist any valid basis
for such a claim.
(i) Except
as otherwise indicated in Schedule 5.11(i) of the
ProElite Disclosure Letter, Schedule 5.11(i) of the
ProElite Disclosure Letter contains a true and complete list of all third-party
Intellectual Property (i) sold with, incorporated into, distributed in
connection with, or used in the development of the ProElite Fight Library or
(ii) used or held for use by the Sellers for any other purpose relating to the
EliteXC Business or the Assets (excluding, for purposes of clause (ii) only, any
generally available, off-the-shelf software programs licensed to the Sellers on
standard terms), setting forth for each such item (A) all licenses and similar
agreements pursuant to which either Seller holds rights thereto, (B) the asset
in the ProElite Fight Library to which the item relates, if any, and (C) such
Seller’s payment obligations in connection the item, if any.
5.12 Contracts; No
Defaults.
(a) Generally.
(i) Schedule 5.12(a) of the
ProElite Disclosure Letter sets forth a complete and accurate list of all
Contracts that are material to which the Sellers or their Affiliates are a party
or otherwise bound which relate to the EliteXC Business or the
Assets.
(ii) No
officer, director, agent, employee, consultant, or contractor of either Seller
is bound by any Contract that purports to limit the ability of that officer,
director, agent, employee, consultant, or contractor to engage in or continue
any conduct, activity, or practice relating to the EliteXC Business, or assign
to either Seller or to any other Person any rights affecting the EliteXC
Business.
(b) Enforceability.
(i) Each
Assumed Contract is in full force and effect and is valid and enforceable in
accordance with its terms;
(ii) Each
of ProElite and EliteXC is, and at all times has been, in full compliance with
all applicable terms and requirements of each Assumed Contract;
(iii) To
the Knowledge of each Seller, each other Person that has or had any obligation
or liability under any Assumed Contract is, and at all times has been, in full
compliance with all applicable terms and requirements of the
Contract;
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(iv) No
event has occurred or circumstance exists that (with or without notice or lapse
of time) may contravene, conflict with, or result in a violation or breach of,
or give ProElite, EliteXC or any other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify any Assumed Contract; and
(v) Except
as set forth in Schedule
5.12(b)(iv) of the ProElite Disclosure Letter, neither ProElite nor
EliteXC has given to or received from any other Person, at any time any notice
or other communication (whether oral or written) regarding any actual, alleged,
or potential violation or breach of, or default under, any Assumed
Contract.
(c) Renegotiations. Except
as set forth in Schedule
5.12(c) of the ProElite Disclosure Letter, there are no renegotiations
of, attempts to renegotiate or outstanding rights to renegotiate any material
amounts paid or payable to ProElite or EliteXC under any current or completed
Assumed Contract that constitutes an Asset and no written demand for such
renegotiation has been made.
(d) Other. Each
of the Assumed Contracts has been entered into in the Ordinary Course of
Business and has been entered into without the commission of any act alone or in
concert with any other Person, or any consideration having been paid or
promised, that is or would be in violation of any Applicable Law.
(e) Obligations
Current. Each obligation to pay any amount (including any
signing bonus or other consideration) that is due and payable under each of the
Assumed Contracts has been paid in full and all payments required under such
Assumed Contracts are current and are not delinquent in any manner.
5.13 Employee
Benefits. Buyer shall not be liable for or required to pay or
accrue any salaries, employee benefits of any kind, or other compensation of or
to any of the employees who are employed in the EliteXC Business with respect to
any services rendered to the Sellers or any of their Affiliates.
5.14 Taxes. Buyer shall
not be liable for or required to pay or accrue any Taxes or governmental fees or
charges of any nature (a) as to which ProElite or EliteXC is liable or arising
out of ProElite’s or EliteXC’s ownership or operation of the EliteXC Business or
the assets thereof, or (b) imposed as a result of the transfer of the Assets to
Buyer, in each case relating to Tax periods on or prior to the
Closing. All Tax returns required to be filed on or prior to the
Closing by the Sellers with respect to any Tax that, if not paid, might result
in an Encumbrance other than a Permitted Encumbrance upon any of the Assets or
in any liability of Buyer for such Taxes have been (or will be as of the Closing
Date) duly and timely filed and will be true, correct and
complete, All Taxes associated with the Assets for all taxable
periods ending on or before the Closing that, if not paid, might result in an
Encumbrance other than a Permitted Encumbrance upon any of the Assets or in any
liability of Buyer for such Taxes thereto have been paid in full or will be paid
in full before the Closing. Without limiting the foregoing, (i) each
Seller has filed all Tax Returns that it was required to file, (ii) all such Tax
Returns are correct and complete in all respects, (iii) all Taxes owed (whether
or not shown on any Tax Return) have been paid, and (iv) no claim has ever been
made by an authority in a jurisdiction where each Seller does not file Tax
Returns that it is or may be subject to taxation by that
jurisdiction. The Sellers have withheld and will withhold from
amounts paid or payable to or benefits conferred upon employees, independent
contractors, creditors, shareholders and third parties and timely paid to the
appropriate authority, in compliance with all Tax withholding provisions under
Applicable Law, all amounts, if any, which should have been withheld for all
periods through the Closing.
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5.15 Certain
Payments. Since March 3, 2008, neither the Sellers nor any
director, officer, agent, or employee of the Sellers or to each Seller’s
Knowledge any other Person associated with or acting for or on behalf of the
Sellers in connection with the EliteXC Business, has directly or indirectly (a)
made any contribution, gift, bribe, rebate, payoff, influence payment, kickback,
or other payment to any Person, private or public, regardless of form, whether
in money, property, or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of the Sellers or any Affiliate of the Sellers, or (iv) otherwise in
violation of any Applicable Law, or (b) established or maintained any fund or
asset that has not been recorded in the books and records of the
Sellers.
5.16 Disclosure. No
representation or warranty of either Seller in this Agreement and no statement
in the ProElite Disclosure Letter to Seller’s Knowledge omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
5.17 Brokers or
Finders. Each Seller and their respective agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders’
fees or agents’ commissions or other similar payment in connection with this
Agreement or the transactions contemplated hereby.
6. REPRESENTATIONS AND
WARRANTIES OF BUYER.
Buyer
represents and warrants to ProElite as follows:
6.1 Organization and Good
Standing. Buyer is a limited liability company duly organized,
validly existing, and in good standing under the laws of California, with full
limited liability company power and authority (a) to conduct its business as it
is now being conducted and (b) to perform all its obligations under this
Agreement. Buyer is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction that is required by reason of (i) the ownership or use of the
properties owned or used by it, (ii) the nature of the activities conducted by
it.
6.2 Authority; No
Conflict.
(a) Authority. Buyer
has the absolute and unrestricted limited liability company right, power,
authority, and capacity to execute, deliver and enter into this Agreement and
the Related Agreements to which it is a party and to consummate and perform the
transactions contemplated hereby and thereby. The execution and
delivery of this Agreement, the Related Agreements to which it is a party and
the consummation and performance of the transactions contemplated hereby and
thereby have been duly authorized by all necessary limited liability company
action on the part of Buyer and no further action is required on the part of
Buyer to approve the Agreement, the Related Agreements to which it is a party
and the consummation and performance of the transactions contemplated hereby and
thereby. The members, General Manager and the Management Committee of
Buyer have unanimously approved this Agreement, the Related Agreements to which
it is a party and the consummation of the transactions contemplated hereby and
thereby.
(b) Enforceability. This
Agreement and the Related Agreements to which it is a party constitute the
legal, valid, and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms, subject to the effect of (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to rights of creditors generally and (ii) rules of
law and equity governing specific performance, injunctive relief and other
equitable remedies.
(c) No Conflict,
etc. Neither the execution and delivery of this Agreement or
the Related Agreements to which it is a party nor the consummation or
performance of any of the transactions contemplated by this Agreement and the
Related Agreements to which it is a party will, directly or indirectly (with or
without notice or lapse of time):
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(i) contravene,
conflict with, or result in a violation of (A) any provision of the
Organizational Documents of Buyer or (B) any resolution adopted by the members
of Buyer; or
(ii) contravene,
conflict with, or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the transactions contemplated by this
Agreement or the Related Agreements or to exercise any remedy or obtain any
relief under any Applicable Law or any Order to which Buyer may be
subject.
6.3 Consents and
Notices. Buyer is not required to give any notice to or obtain
any approval, consent, ratification, waiver or other authorization of any Person
(including any Governmental Authorization) in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
transactions contemplated by this Agreement or the Related
Agreements.
6.4 Legal Proceedings; Orders.
There is no pending Proceeding that has been commenced or any Order by or
against Buyer that challenges, or that may reasonably be seen have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated by this Agreement or the Related
Agreements. To the Knowledge of Buyer, (i) no such Proceeding or
Order has been threatened in writing, and (ii) no event has occurred or
circumstance exists that may reasonably give rise to or serve as a basis for the
commencement of any such Proceeding or Order.
6.5 No Beneficial
Ownership. Neither Buyer nor its Affiliates currently holds
any beneficial ownership as defined under Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and the
regulations thereunder of any securities of ProElite.
7. COVENANTS RELATING TO THE
PURCHASE OF ASSETS.
7.1 Employee Confidentiality
Agreements. After Closing, the Sellers shall use their
commercially reasonably efforts to cause each employee of a Seller who is party
to an employee confidentiality agreement with a Seller to comply with the terms
of such agreement to the extent that any right or claim of a Seller thereunder
relates to the Assets.
7.2 Obligation to Issue
Warrants. Each Seller hereby covenants that it shall fully
perform its obligations under the Assumed Contracts that pertain to the issuance
of warrants to purchase shares of ProElite capital stock, which obligation to
issue warrants shall not be assumed by Buyer.
7.3 Press
Releases. Except as may be required by Applicable Law
(including the Exchange Act and the regulations thereunder), the Sellers and
Buyer shall consult with each other before issuing any press releases or
otherwise any public statements or other public (or non-confidential)
disclosures (whether or not in response to an inquiry) regarding the terms of
this Agreement and the transactions contemplated by this Agreement and the
Related Agreements and no Party shall issue a press release or make any
statements or disclosures without the prior written approval of the other
Parties (which consent shall not be unreasonably withheld, delayed or
conditioned (it being understood that Sellers will make a filing on Form 8-K
disclosing the terms hereof and making any subsequent exhibit filing of this
Agreement required by the Exchange Act)) regarding the terms of this Agreement
and the transactions contemplated by this Agreement and the Related
Agreements. Notwithstanding the foregoing, ProElite shall use its
commercially reasonable efforts to consult with Buyer before filing any report
or other filing thereunder triggered by the Closing with the Securities and
Exchange Commission under the Exchange Act and the regulations
thereunder. Furthermore, each Party hereby agrees that if it issues a
press release following the date hereof in connection with the consummation of
the transactions contemplated by this Agreement, it will issue a press release
in substantially the form set forth in Exhibit
M or in any form reasonably approved in writing by the other Party prior
to the issuance of such press release.
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7.4 Confidentiality. Each
Seller will hold in confidence and use commercially reasonable efforts to have
all of their respective employees, consultants, agents and representatives hold
in confidence and not disclose or use, or permit others to use or disclose, any
and all confidential information related to the EliteXC Business or the Assets.
Each Seller an the Buyer each confirm that they have entered into or are bound
by that certain Confidentiality and Nondisclosure Agreement dated as of December
5, 2008 between ProElite and Buyer (the “NDA”) and that they are each
bound by, and shall abide by, the provisions of such NDA.
7.5 Use of Assets After Closing; Fighter
Contracts. Each Seller hereby covenants that it shall cease
and shall cause its controlled Affiliates to cease use of any of the Assets
after the Closing and that any use of the Assets by a Seller requires prior
written approval of Buyer. Each Seller will remove and shall cause
its controlled Affiliates to remove any of the Assets from its websites and use
its commercially reasonable efforts to promptly remove (but in any event within
five (5) days after Closing) any of the Assets from any other websites and any
other broadcast medium that the Sellers may have made such Assets available
including, but not limited to, ▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇ and ▇▇▇.▇▇▇▇▇▇▇.▇▇▇ (with
respect to ▇▇▇.▇▇▇▇▇▇▇.▇▇▇, to the extent a Seller placed content relating to
any of the Assets on such site). In addition, each Seller hereby
covenants that it shall take no action and shall cause its controlled Affiliates
to take no action to prevent any ProElite Fighter from endorsing Buyer’s brands
or wearing Buyer’s apparel or appearing on Buyer’s or its television partners’
websites, and shall release all ProElite Fighters from any obligation to provide
services to such Seller or its controlled Affiliates if the provision of such
services would act as a limitation on a ProElite Fighter from endorsing Buyer’s
brands or wearing its apparel or appearing on Buyer’s or its television
partners’ websites. Except as set forth in Schedule 7.5 of this
Agreement, each Seller hereby covenants that for sixty (60) months after Closing
such Seller and its Affiliates shall not enter into a Contract with any ProElite
Fighter relating to the provision of services as a professional fighter or
unarmed combatant or in any other professional capacity to any mixed martial
arts, boxing, martial arts, professional wrestling, or any other fighting
competition, show or exhibition without the prior written consent of Buyer, and
except as required by Section 3.5 of this
Agreement.
7.6 Rights of
Personality. Each Seller hereby covenants to use its
commercially reasonable efforts to obtain all rights, releases, consents and
authorizations related to the use of any Person’s name, likeness, voice and/or
image in connection with the Assets.
7.7 Joint Claims. Each
Seller and Buyer agrees that with regards to shared claims among the Parties,
the Parties shall use commercially reasonable efforts to provide reasonable
cooperation to enforce such claims.
7.8 Venue and Sponsorship
Rights. Each Seller shall at Buyer’s direction assign or
otherwise transfer any and all rights of each Seller in and to any license or
other Contract regarding the use of names, logos and other third-party
Intellectual Property related to venues or sponsorships associated with the
Assets.
7.9 Perfection of
Ownership. Each Seller shall use commercially reasonable
efforts to provide Buyer with all documentation reasonably requested by Buyer
providing for the ownership of and the administration of copyrights in and to
the (i) music libraries, compositions and sound recordings and (ii) video and
image libraries and video and photos footage, transferred to Buyer herein
including but not limited to work made for hire agreements, assignments of
copyright, recording agreements, publishing agreements, co-publishing
agreements, songwriter/composer agreements, administration agreements
synchronization agreements, side person agreements, performing rights society
agreements of any kind and nature and any and all licenses pertaining thereto.
Seller shall at Buyer’s direction assign or otherwise transfer any or all of the
foregoing agreements and licenses to Buyer without payment of additional
consideration, at which time such agreements and licenses shall become Assumed
Contracts.
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8. INDEMNIFICATION AND RELATED
MATTERS.
8.1 Survival; Effect of
Knowledge.
(a) Survival. The
representations and warranties of each Seller and Buyer contained in this
Agreement, the Related Agreements and in any certificate or document delivered
pursuant to this Agreement, shall survive and remain in full force and effect,
regardless of any investigation or disclosure made by or on behalf of any of the
Parties, after the Closing only (i) for the time periods specified in Section 8.4 and (ii) as to claims made
within those time periods, until resolved.
(b) Effect of
Knowledge. The right to indemnification based upon
representations, warranties, covenants and agreements in this Agreement, the
Related Agreements and in any certificate or document delivered pursuant to this
Agreement will not be affected by any investigation or by any Knowledge acquired
at any time.
8.2 Seller
Indemnification. Each Seller will jointly and severally
indemnify and hold harmless and pay promptly to Buyer and its Affiliates and
also their respective officers, directors, agents, representatives,
shareholders, affiliates and employees, and each person, if any, who controls or
may control Buyer (each a “Buyer Indemnified Person”) the
amount of any Damages arising from or in connection with:
(a) Breach of Representations or
Warranties: any failure of any representation or warranty made
by a Seller in this Agreement, the Related Agreements, the ProElite Disclosure
Letter or any certificate delivered pursuant to this Agreement made by the
Sellers in connection with the Closing to be true and correct as of the date of
this Agreement and as of the Closing Date (as though such representation or
warranty were made as of the Closing Date, except in the case of representations
and warranties which by their terms speak only as of a specific date or
dates);
(b) Breach of
Covenants: any breach by any Seller in the performance of its
covenants or obligations in this Agreement, the Related Agreements or in any
certificate or document delivered pursuant to this Agreement in connection with
the Closing;
(c) Unassumed Liabilities of the
Sellers: the failure of a Seller to assume, pay, perform and
discharge the Unassumed Liabilities; and
(d) Insolvency Proceeding or
Claims of Fraudulent Transfer or Conveyance: any Insolvency Proceeding
commenced with respect to any of the Sellers or any claim relating to fraudulent
transfers or conveyance regarding the Assets, in each case excluding claims for
Damages that are in no way related, directly or indirectly, to the Assets, the
EliteXC Business, this Agreement, the Related Agreements or the transactions
contemplated by this Agreement and the Related Agreements).
8.3 Buyer
Indemnification. Buyer will indemnify and hold harmless and
pay promptly to the Sellers and their Affiliates and also their respective
officers, directors, agents, representatives, shareholders, affiliates and
employees, and each person, if any, who controls or may control a Seller (each a
“Seller Indemnified
Person” and together with a Buyer Indemnified Person, each being an
“Indemnified Person”)
the amount of any Damages arising from or in connection with:
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(a) Breach of Representations or
Warranties: any failure of any representation or warranty made
by Buyer in this Agreement, the Related Agreements or any certificate delivered
pursuant to this Agreement made by Buyer in connection with the Closing to be
true and correct as of the date of this Agreement and as of the Closing Date (as
though such representation or warranty were made as of the Closing Date, except
in the case of representations and warranties which by their terms speak only as
of a specific date or dates);
(b) Breach of
Covenants: any breach by Buyer in the performance of its
covenants or obligations in this Agreement the Related Agreements or in any
certificate or document delivered pursuant to this Agreement in connection with
the Closing; and
(c) Assumed
Liabilities: the failure of Buyer to assume, pay, perform and
discharge the Assumed Liabilities.
8.4 Survival; Other
Limitations.
(a) The
representations and warranties of the Sellers and Buyer contained in this
Agreement and the Related Agreements shall survive the Closing and continue in
full force and effect for a period of 18 months. Notwithstanding
anything to the contrary in this Section 8.4, no limitations as to the
time for making claims applies to (i) the Assumed Liabilities, (ii) the
Unassumed Liabilities, (iii) each Seller’s representations or warranties under
Sections 5.2(a), (iv)
each Seller’s representations or warranties under Sections 5.4, 5.5, 5.7, 5.11(b) (but solely with
respect to the first sentence thereof and including the related representation
and warranty of the Sellers in the Related Agreements), and 5.14 (each a “Fundamental Representation”),
(v) any claims involving any covenant to be performed and complied with after
the Closing, or (vi) any claims arising out of any fraud, willful breach or
intentional misrepresentation, in each case until the expiration of the
applicable statute of limitations.
(b) Notwithstanding
anything to the contrary, (i) the Sellers will not have any liability for
indemnification under this Section 8 unless Buyer gives notice to
ProElite pursuant to Sections 8.5 or 8.6 of this Agreement of facts
that Buyer in good faith believes constitute a reasonable basis for
indemnification to an Buyer Indemnified Person within 30 days after the
expiration of the statute of limitation (including extensions of it) or by the
date of the applicable survival period applicable to any such violations, as
applicable, (ii) the Sellers shall have no further liability (for
indemnification or otherwise) under this Section 8 with respect to a
breach of any of the representations and warranties or covenants or obligations
of the Sellers under this Agreement or the Related Agreements once the aggregate
amount of Damages paid by the Sellers for claims for indemnification by the
Buyer Indemnified Parties (including any offsets permitted under Section 8.7) exceeds (X)
$1,000,000 in the case of claim for a breach of a representation or warranty
under this Agreement or the Related Agreements that is not a Fundamental
Representation, and (Y) $3,000,000 in the case of a claim for a breach of a
Fundamental Representation or of any covenants or obligations under this
Agreement or the Related Agreements; provided, however, that such
limitations shall not apply to claims for fraud, willful breach or intentional
misrepresentation.
(c) Notwithstanding
anything to the contrary, (i) the Buyer will not have any liability for
indemnification under this Section 8 unless ProElite gives notice
to Buyer pursuant to Sections 8.5 or 8.6 of this Agreement of facts
that ProElite in good faith believes constitute a reasonable basis for
indemnification to a Seller Indemnified Person within 30 days after the
expiration of the statute of limitation (including extensions of it) or by the
date of the survival period applicable to any such violations, as applicable,
(ii) the Buyer shall have no further liability (for indemnification or
otherwise) under this Section
8 with respect to a breach of any of the representations and warranties
or covenants or obligations of the Buyer under this Agreement or the Related
Agreements once the aggregate amount of Damages paid by the Buyer for claims for
indemnification by the Seller Indemnified Parties exceeds (X) $1,000,000 in the
case of claim for a breach of a representation or warranty or of any covenants
or obligations under this Agreement or the Related Agreements, and (Y)
$3,000,000 in the case of a claim for Assumed Liabilities; provided, however, that such
limitations shall not apply to claims for fraud, willful breach or intentional
misrepresentation.
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8.5 Procedure for Indemnification—Third
Party Claims.
(a) Notice. Promptly,
and in any event no later than fifteen (15) Business Days after receipt by Buyer
or a Seller, as applicable, of notice of the commencement of any Proceeding
against it or any other related Indemnified Person, the indemnified party will,
whether for its own Damages or for Damages incurred by any other related
Indemnified Person, if a claim is to be made against the indemnifying party,
give notice to such indemnifying party of the commencement of such claim; provided, however, that the
failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any Indemnified Person, except to the
extent that the indemnifying party demonstrates that the defense of the
Proceeding is materially prejudiced by the indemnified party’s failure to give
the notice timely. For purposes of this Section 8, the term
“indemnifying party” means, in the context of a claim by a Buyer Indemnified
Person, a Seller, and the term “indemnified party” or Indemnified Person means a
Buyer Indemnified Person and, in the context of a claim by a Seller Indemnified
Person, Buyer, and the term “indemnified party” or Indemnified Person means a
Seller Indemnified Person.
(b) Participation. If
any Proceeding referred to in Section 8.5(a) is brought against an
Indemnified Person and the indemnified party gives notice to the indemnifying
party of the commencement of the Proceeding, the indemnifying party may (i)
participate in the Proceeding and (ii) elect by notice to the indemnified party
to assume the defense of the Proceeding with lawyers reasonably satisfactory to
the indemnified party unless (A) the indemnifying party is also a party to the
Proceeding and the indemnified party determines in reasonable good faith that
joint representation would be inappropriate or (B) the indemnifying party fails
to provide, promptly after giving notice to the indemnified party, reasonable
assurance to the indemnified party of its financial capacity to defend the
Proceeding and provide indemnification with respect to the
Proceeding. If the indemnifying party assumes the defense of the
Proceeding with the prior written consent of the indemnified party, (1) the
indemnifying party will not, as long as the indemnifying party diligently
conducts the defense, be liable to the Indemnified Person under this Section 8 for any fees of other
lawyers or any other expenses with respect to the defense of the Proceeding
subsequently incurred by any Indemnified Person in connection with the defense
of the Proceeding, other than reasonable costs of investigation and (2) no
compromise or settlement of the claims may be effected by the indemnifying party
without the indemnified party’s written consent (which consent will not be
unreasonably withheld or delayed) unless (x) there is no finding or admission of
any violation of legal requirements or any violation of the rights of any Person
and no effect on any other claims that may be made against any such Indemnified
Person and (y) the sole relief provided is monetary damages that are paid in
full by the indemnifying party.
(c) Right of Indemnified Person
to Defend. Notwithstanding the foregoing, if an Indemnified
Person determines in reasonable good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its Affiliates other
than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, such Indemnified Person may, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle the Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which will not be unreasonably withheld or
delayed).
-27-
8.6 Procedure for Indemnification—Other
Claims. A claim for indemnification for any matter not
involving a third-party claim will be asserted by written notice to ProElite
from Buyer or to Buyer from ProElite, as applicable, in either case on its own
behalf or on behalf of any other related Indemnified Person, whom
indemnification is sought promptly after becoming aware of the acts or omissions
or facts and circumstances on which the claim is based, but the failure to
notify the indemnifying party will not relieve the indemnifying party of any
liability that they may have to any Indemnified Person, except to the extent
that the indemnifying party demonstrates that it is materially prejudiced by
such failure.
8.7 Satisfaction of Indemnification
Obligations. Subject to the procedures set forth above and in
accordance with the deadlines specified in the preceding subsections, the
indemnifying party will satisfy their liability to an Indemnified Person for
indemnified Damages such party is required to pay under this Section 8 by promptly paying
the amount of the liability to such Person. Payments pursuant to the
foregoing will be by wire transfer or by check, as the recipient may
direct. Notwithstanding the foregoing, Buyer may, in its sole
discretion after five (5) day’s prior notice to ProElite, offset any portion of
a liability determined in accordance with this Section 8 of a Seller to pay
Damages to a Buyer Indemnified Person from the payment of any ProElite License
Payment (pursuant to instructions from Buyer to Showtime to effect such
offset). The Escrow Funds shall not be available to satisfy any
indemnity claim of a Buyer Indemnified Person against a Seller.
8.8 Remedies
Exclusive. Each Indemnified Person’s rights to
indemnification under this Section 8 with respect to any Damages shall be their
sole and exclusive remedy for money damages under this Agreement; except, that
notwithstanding the foregoing, the limitation shall not apply to claims for
fraud, willful breach or intentional misrepresentation. It is
understood that nothing in this Agreement shall eliminate the ability of any
party hereto to apply for equitable or injunctive remedies to enforce the other
Parties’ obligations under this Agreement.
9. MISCELLANEOUS.
9.1 Representation by
Counsel. The Sellers and Buyer have each been represented by
separate counsel and have negotiated this Agreement, and the transactions
contemplated herein at arms length.
9.2 Specific
Performance. The Parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the Parties shall be entitled
to seek an injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions hereof in any court having
jurisdiction. Each Party hereby waives any requirement that the
Person seeking equitable relief post a bond or other security.
9.3 Sales and Use Taxes on the
Assets. ProElite and the Buyer will each pay fifty percent
(50%) of the cost of any sales, use, transfer or similar Taxes payable in
connection with the receipt of payment for the Assets or the sale, assignment,
or transfer of the Assets.
9.4 Expenses. Each
party shall pay its own expenses incidental to the preparation of this
Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby, including legal,
accounting and any investment banker or finder fees or commissions.
-28-
9.5 Notices. All
notices and other communications required or permitted under this Agreement
shall be in writing and shall be either hand delivered in person, sent by
facsimile, sent by certified or registered first-class mail, postage pre-paid,
or sent by nationally recognized express courier service. Such
notices and other communications shall be effective upon receipt if hand
delivered or sent by facsimile, three (3) days after mailing if sent by mail,
and one day after dispatch if sent by express courier, to the following
addresses, or such other addresses as any Party may notify the other Party in
accordance with this Section 9.5:
If to
Buyer, to:
Explosion
Entertainment, LLC
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇. ▇
▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇
▇▇▇▇▇, Chief Executive Officer
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a
copy to (which shall not constitute notice):
Silicon
Valley Sports & Entertainment
▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention: ▇▇▇
▇▇▇▇▇▇▇, Executive Vice President / General Counsel
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone
No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
DLA Piper
LLP (US)
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇
▇. Do, Esq.
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Esq.
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone
No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to a
Seller, to:
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Attention: Chief
Executive Officer
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a
copy to:
Manatt,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: T.
▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Esq.
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
-29-
9.6 Dispute
Resolution. Any dispute, claim or controversy arising out of
or relating to this Agreement or the breach, termination, enforcement,
interpretation or validity thereof, including the determination of the scope or
applicability of this agreement to arbitrate, shall be determined by arbitration
in Los Angeles County, California, before three arbitrators. At the option of
the first to commence an arbitration, the arbitration shall be administered by
JAMS pursuant to its Comprehensive Arbitration Rules and
Procedures. Judgment on the Award may be entered in any court having
jurisdiction. This clause shall not preclude the Parties from seeking
provisional remedies in aid of arbitration from a court of appropriate
jurisdiction.
9.7 Jurisdiction; Service of
Process. All actions or Proceedings relating to this Agreement
(whether to enforce a right or obligation or obtain a remedy or otherwise) that
are not subject to Section 9.6 of this Agreement will be
brought solely in the state or federal courts located in or for Los Angeles
County, California. Each Party hereby unconditionally and irrevocably
consents to the jurisdiction of those courts and waives its rights to bring any
action or Proceeding against the other Party except in those
courts. Process in any action or Proceeding referred to in the
preceding sentence may be served on any Party anywhere in the
world.
9.8 Waiver of Jury
Trail. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AND ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY
PARTY HERETO IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
If any Party seeks to enforce its rights under this Agreement by joining another
Person to a Proceeding before a jury in which the third party is a party, the
Parties will request the court to try the claims between the Parties without
submitting the matter to the jury.
9.9 Waiver. Neither
the failure nor any delay by any Person in exercising any right, power or
privilege under this Agreement or the documents referred to in this Agreement
will operate as a waiver of the right, power or privilege, and no single or
partial exercise of any right, power or privilege will preclude any other or
further exercise of the right, power or privilege or the exercise of any other
right, power or privilege. To the extent permitted by Applicable
Law: (a) no claim or right arising out of this Agreement or the
documents referred to in this Agreement can be discharged by one Person, in
whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other Person; (b) no waiver that may be given by a Person
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one Person will be deemed to be a waiver of any
obligation of that Person or of the right of the Person giving the notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
9.10 Entire Agreement and
Amendment. This Agreement (a) supersedes all prior agreements
between the Parties with respect to their subject matter and (b) constitutes a
complete and exclusive statement of the terms of the agreement between the
Parties with respect to their subject matter. This Agreement may not
be amended except by a written agreement executed by Buyer and
ProElite.
9.11 Assignments,
Successors. Except as expressly provided in this Agreement,
neither Party may assign any of its rights under this Agreement without the
prior written consent of the other Party (which consent shall not be
unreasonably withheld), provided that Buyer shall have the right to assign this
Agreement without the prior written consent of any Seller to any successor to,
or assignee of, all or substantially all of the business and assets of
Buyer. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon and inure to the benefit of the successors
and permitted assigns of the Parties. Any assignment in violation of
this provision shall be void.
-30-
9.12 Third Party
Rights. Nothing expressed or referred to in this Agreement
will be construed to give any Person other than the Parties any legal or
equitable right, remedy or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions
and conditions are for the sole and exclusive benefit of the Parties and their
successors and assigns.
9.13 Severability. If
any provision of this Agreement not essential to accomplishing its purposes is
held invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and
effect. Any provision of this Agreement held invalid or unenforceable
only in part or degree will remain in full force and effect to the extent not
held invalid or unenforceable.
9.14 Attorneys’
Fees. Should suit, alternative dispute resolution or
arbitration be brought to enforce or interpret any part of this Agreement, the
prevailing Party shall be entitled to recover, as an element of the costs of
suit and not as damages, reasonable attorneys’ fees to be fixed by the court,
mediator or arbitrator(s) (including costs, expenses and fees on any
appeal). The prevailing Party shall be entitled to recover its costs
of suit, alternative dispute resolution or arbitration, regardless of whether
such suit, alternative dispute resolution or arbitration proceeds to final
judgment.
9.15 Governing Law. The
internal laws of the State of California, irrespective of its conflicts of law
principles, shall govern the validity of this Agreement, the construction of its
terms, and the interpretation and enforcement of the rights and duties of the
Parties
9.16 Counterparts. This
Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same
agreement. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all Parties reflected hereon as signatories. The exchange of a
fully executed Agreement (in counterparts or otherwise) by facsimile or by
electronic delivery in PDF format shall be sufficient to bind the Parties to the
terms and conditions of this Agreement.
9.17 No Joint
Venture. Nothing contained in this Agreement or the Related
Agreements shall be deemed or construed as creating a joint venture or
partnership between any of the Parties hereto or thereto. No party is
by virtue of this Agreement or the Related Agreements authorized as an agent,
employee or legal representative of any other party. No party shall
have the power to control the activities and operations of any other and their
status is, and at all times shall continue to be, that of independent
contractors with respect to each other. No party shall have any power
or authority to bind or commit any other party. No party shall hold
itself out as having any authority or relationship in contravention of this
Section 9.17.
[Remainder
of Page Intentionally Left Blank]
-31-
IN
WITNESS WHEREOF, the Parties have executed this Asset Purchase Agreement as of
the date first written above.
|
BUYER:
EXPLOSION ENTERTAINMENT,
LLC,
a
California Limited Liability Company
|
SELLERS:
a
New Jersey Corporation
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|||
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By:
|
/s/ ▇▇▇▇▇ ▇▇▇▇▇ |
By:
|
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
|
Name:
|
▇▇▇▇▇ ▇▇▇▇▇ |
|
Name:
|
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ |
|
Title:
|
Chief Executive Officer |
|
Title:
|
Chief Executive Officer |
|
ELITEXC
LIVE,
a
California Corporation
|
||||
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |||
|
Name:
|
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |||
|
Title:
|
Chief Executive Officer | |||
[Signature Page to Asset Purchase
Agreement]
EXHIBITS AND
SCHEDULES
|
Exhibit
A
|
Schedule
of ProElite Fighters
|
|
Exhibit
B
|
Form
of Fighter Statement
|
|
Exhibit
C
|
Schedule
of Assets
|
|
Exhibit
D
|
Schedule
of Optional ProElite Contracts
|
|
Exhibit
E
|
Schedule
of Certain Excluded Assets
|
|
Exhibit
F
|
Form
of Escrow Agreement
|
|
Exhibit
G
|
Form
of Payoff Letter
|
|
Exhibit
H
|
Form
of ▇▇▇▇ of Sale and Assignment Agreement
|
|
Exhibit
I-1
|
Form
of Assignment of Copyrights
|
|
Exhibit
I-2
|
Form
of Assignment of Unregistered Copyrights
|
|
Exhibit
I-3
|
Form
of Trademark License Agreement
|
|
Exhibit
J
|
Form
of Information License Agreement
|
|
Exhibit
K
|
Form
of ShoXC License
|
|
Exhibit
L
|
ProElite
Disclosure Letter
|
|
Exhibit
M
|
Form
of Press Releases
|
|
Schedule
3.1(f)
|
Claims
Retained by the Sellers
|
|
Schedule
3.5(a)
|
Required
Consents
|
|
Schedule
7.5
|
Permitted
Contracts with ProElite Fighters
|