EXHIBIT C
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ASSET PURCHASE AGREEMENT
dated as of September 20, 2002
among
MTV NETWORKS ON CAMPUS
(A SUBSIDIARY OF VIACOM INTERNATIONAL INC.),
VIACOM INTERNATIONAL INC.
and
CTN MEDIA GROUP, INC.
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS.....................................................2
SECTION 1.02. OTHER DEFINED TERMS.............................................9
SECTION 1.03. TERMS GENERALLY................................................11
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE..............................................11
SECTION 2.02. EXCLUDED ASSETS................................................13
SECTION 2.03. ASSUMED LIABILITIES............................................15
SECTION 2.04. EXCLUDED LIABILITIES...........................................15
SECTION 2.05. ASSIGNMENT OF CONTRACTS AND RIGHTS.............................16
SECTION 2.06. PURCHASE PRICE.................................................17
SECTION 2.07. CLOSING........................................................17
SECTION 2.08. PRORATION......................................................18
SECTION 2.09. PURCHASE PRICE ADJUSTMENT......................................20
SECTION 2.10. ESCROW.........................................................22
SECTION 2.11. DEPOSIT........................................................22
SECTION 2.12. PRE-CLOSING AUDIT OF COLLEGES..................................25
SECTION 2.13. COLLECTION OF ACCOUNTS RECEIVABLE..............................26
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 3.01. CORPORATE EXISTENCE AND POWER..................................28
SECTION 3.02. CORPORATE AUTHORIZATION........................................28
SECTION 3.03. GOVERNMENTAL AUTHORIZATION.....................................28
SECTION 3.04. NONCONTRAVENTION...............................................29
SECTION 3.05. OWNERSHIP OF EQUITY............................................29
SECTION 3.06. CONTRACTS......................................................29
SECTION 3.07. INTANGIBLE PROPERTY............................................31
SECTION 3.08. REAL PROPERTY..................................................32
SECTION 3.09. TITLE TO PURCHASED ASSETS; LIENS...............................33
SECTION 3.10. SUFFICIENCY OF ASSETS..........................................33
SECTION 3.11. CONDITION OF EQUIPMENT.........................................33
SECTION 3.12. SEC FILINGS....................................................33
SECTION 3.13. FINANCIAL INFORMATION..........................................34
SECTION 3.14. INTERCOMPANY ACCOUNTS..........................................34
SECTION 3.15. ABSENCE OF CERTAIN CHANGES OR EVENTS...........................34
SECTION 3.16. ABSENCE OF LITIGATION..........................................36
SECTION 3.17. COMPLIANCE WITH LAWS...........................................36
SECTION 3.18. EMPLOYEES; LABOR MATTERS.......................................36
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SECTION 3.19. EMPLOYEE BENEFIT PLANS.........................................37
SECTION 3.20. ENVIRONMENTAL MATTERS..........................................38
SECTION 3.21. SELLER INFORMATION STATEMENT...................................39
SECTION 3.22. INSURANCE......................................................39
SECTION 3.23. TAXES..........................................................40
SECTION 3.24. BROKERS........................................................40
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
SECTION 4.01. CORPORATE EXISTENCE AND POWER..................................40
SECTION 4.02. CORPORATE AUTHORIZATION........................................40
SECTION 4.03. GOVERNMENTAL AUTHORIZATION.....................................40
SECTION 4.04. NONCONTRAVENTION...............................................41
SECTION 4.05. ABSENCE OF LITIGATION..........................................41
SECTION 4.06. SELLER INFORMATION STATEMENT...................................41
SECTION 4.07. OPERATIONS OF BUYER............................................41
SECTION 4.08. BROKERS........................................................41
ARTICLE V
COVENANTS OF SELLER
SECTION 5.01. OPERATIONS PENDING CLOSING.....................................41
SECTION 5.02. ACCESS TO INFORMATION..........................................44
SECTION 5.03. PHASE I REPORT.................................................45
SECTION 5.04. FINANCIAL REPORTS..............................................45
SECTION 5.05. EMPLOYEES......................................................45
SECTION 5.06. ESTOPPEL CERTIFICATE...........................................45
SECTION 5.07. RISK OF LOSS...................................................45
SECTION 5.08. STOCKHOLDER APPROVAL...........................................46
SECTION 5.09. SELLER INFORMATION STATEMENT...................................47
SECTION 5.10. TRANSITION SERVICES............................................47
SECTION 5.11. EXCLUDED LIABILITIES...........................................48
SECTION 5.12. USE OF PROGRAM LIBRARY CONTENT.................................48
SECTION 5.13. EXTENSIONS OF OR AMENDMENTS TO CONTRACTS.......................48
ARTICLE VI
COVENANTS OF PARENT AND BUYER
SECTION 6.01. ACCESS TO INFORMATION..........................................48
SECTION 6.02. SELLER INFORMATION STATEMENT...................................48
ARTICLE VII
COVENANTS OF PARENT, BUYER AND SELLER
SECTION 7.01. COMMERCIALLY REASONABLE EFFORTS; FURTHER ASSURANCES............48
SECTION 7.02. CERTAIN FILINGS; FURTHER ACTIONS...............................49
SECTION 7.03. CONTROL PRIOR TO CLOSING.......................................49
SECTION 7.04. PUBLIC ANNOUNCEMENTS...........................................49
SECTION 7.05. NOTICES OF CERTAIN EVENTS......................................49
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ARTICLE VIII
PENSION, EMPLOYEE AND UNION MATTERS
SECTION 8.01. EMPLOYMENT.....................................................50
SECTION 8.02. SAVINGS PLAN...................................................51
SECTION 8.03. EMPLOYEE WELFARE PLANS.........................................51
SECTION 8.04. VACATION.......................................................51
SECTION 8.05. SEVERANCE LIABILITY............................................51
SECTION 8.06. NON-SOLICITATION BY SELLER.....................................52
ARTICLE IX
TAX MATTERS
SECTION 9.01. BULK SALES.....................................................52
SECTION 9.02. TRANSFER TAXES.................................................52
ARTICLE X
CONDITIONS TO CLOSING
SECTION 10.01. CONDITIONS TO OBLIGATIONS OF PARENT, BUYER AND SELLER..........52
SECTION 10.02. CONDITIONS TO OBLIGATIONS OF SELLER............................53
SECTION 10.03. CONDITIONS TO OBLIGATIONS OF PARENT AND BUYER..................53
ARTICLE XI
TERMINATION
SECTION 11.01. TERMINATION....................................................55
SECTION 11.02. EFFECT OF TERMINATION..........................................56
ARTICLE XII
SURVIVAL; INDEMNIFICATION
SECTION 12.01. SURVIVAL.......................................................57
SECTION 12.02. INDEMNIFICATION BY PARENT......................................57
SECTION 12.03. INDEMNIFICATION BY SELLER......................................58
SECTION 12.04. NOTIFICATION OF CLAIMS.........................................59
SECTION 12.05. DISTRIBUTIONS FROM ESCROW FUND.................................60
ARTICLE XIII
GENERAL PROVISIONS
SECTION 13.01. EXPENSES.......................................................60
SECTION 13.02. NOTICES........................................................60
SECTION 13.03. HEADINGS ......................................................61
SECTION 13.04. SEVERABILITY...................................................61
SECTION 13.05. ENTIRE AGREEMENT...............................................61
SECTION 13.06. SUCCESSORS AND ASSIGNS.........................................62
SECTION 13.07. NO RECOURSE....................................................62
SECTION 13.08. NO THIRD-PARTY BENEFICIARIES...................................62
SECTION 13.09. AMENDMENTS AND WAIVERS.........................................62
SECTION 13.10. GOVERNING LAW; JURISDICTION....................................63
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SECTION 13.11. WAIVER OF JURY TRIAL...........................................63
SECTION 13.12. COUNTERPARTS...................................................63
SECTION 13.13. NO PRESUMPTION.................................................63
EXHIBITS
Assumption Agreement.............................................................A
▇▇▇▇ of Sale.....................................................................B
Lease Assignment and Assumption Agreement........................................C
Trademark Assignment.............................................................D
Escrow Agreement.................................................................E
Irrevocable Letter of Credit.....................................................F
Action by Written Consent of the Majority Stockholder............................G
Press Releases...................................................................H
Responsible Property Transfer Law Certification..................................I
Industrial Site Recovery Act Certification.......................................J
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ASSET PURCHASE AGREEMENT
AGREEMENT ("AGREEMENT") dated as of September 20, 2002 among Viacom
International Inc., a Delaware corporation ("PARENT"), MTV Networks on Campus
Inc., a Delaware corporation and a subsidiary of Parent ("BUYER"), and CTN Media
Group, Inc., a Delaware corporation ("SELLER").
W I T N E S S E T H :
WHEREAS, Seller is solely engaged in the business (the "BUSINESS") of
operating a commercial satellite television network delivered to educational
institutions in the United States and operates and owns all of the assets used
in the operation of the College Television Network (the "NETWORK");
WHEREAS, U-C Holdings, L.L.C., a Delaware limited liability company (the
"MAJORITY STOCKHOLDER"), legally and beneficially owns, as of the date of this
Agreement, approximately 90.8% of the issued and outstanding common stock, $0.03
par value ("SELLER COMMON STOCK"), of Seller on a fully diluted basis;.
WHEREAS, the Special Committee (i) has determined that the transactions
contemplated by this Agreement are expedient and in the best interests of Seller
and its Stockholders, (ii) has determined that this Agreement and the
transactions contemplated by this Agreement should be approved and declared
advisable and (iii) has resolved to recommend that the Board of Directors of
Seller approve and declare the advisability of this Agreement and the
transactions contemplated by this Agreement;
WHEREAS, the Board of Directors of Seller by majority vote, in
consideration of the advice of the Special Committee, (a) has determined that
the transactions contemplated by this Agreement are expedient and in the best
interests of Seller and its Stockholders and has approved this Agreement and the
transactions contemplated by this Agreement, (b) has resolved to recommend that
the Stockholders approve the transactions contemplated by this Agreement and
adopt this Agreement and (c) has taken all actions necessary to exempt this
Agreement, the Voting Agreement and the transactions contemplated hereby and
thereby from Section 203 of the Delaware Law and from any other antitakeover or
similar statute or regulation that applies or purports to apply to this
Agreement, the Voting Agreement or the transactions contemplated hereby or
thereby;
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and an inducement to Parent and Buyer to enter into this Agreement,
Parent, Buyer and the Majority Stockholder have entered into the Voting
Agreement pursuant to which the Majority Stockholder has agreed to (i) grant
written consent with respect to all of the shares of Seller Common Stock and
shares of Seller Preferred Stock beneficially owned by it in favor of the
adoption of this Agreement and approval of the transactions contemplated hereby
(the "MAJORITY STOCKHOLDER WRITTEN CONSENT") or (ii) vote all of such shares in
favor of such approval and adoption at any annual or special meeting of the
Stockholders at which a proposal relating to such approval and adoption shall be
submitted to a vote of the Stockholders, in each case in accordance with the
constituent documents of Seller;
WHEREAS, Buyer desires to purchase from Seller and Seller desires to sell
to Buyer, substantially all of the property and assets of the Business and, in
connection therewith, Buyer is willing to assume certain specified liabilities
of Seller related to the Business, all upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, Buyer and Seller hereby agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"ACCOUNTING FIRM" means (a) KPMG LLP, (b) if KPMG LLP shall decline or is
unable to act or is not, at the time of submission by Seller to Buyer of the
Notice of Disagreement, independent of Buyer and Seller, to another independent
certified public accounting firm in the United States of national recognition
(other than a firm that then serves as the independent auditor for Buyer, Seller
or any of their respective Affiliates) mutually acceptable to Buyer and Seller
or (c) if Buyer and Seller are unable to agree upon such a firm, then the
regular independent auditors for Buyer and Seller shall mutually agree upon a
third independent certified public accounting firm, in which event, "Accounting
Firm" shall mean such third firm; PROVIDED that in the case of (b) or (c), the
Accounting Firm shall be agreed to no later than the date the Notice of
Disagreement is delivered by Seller to Buyer.
"ACCOUNTS PAYABLE" means all accounts payable, accrued expenses and all
other liabilities or obligations to make payments, in each case arising out of
expenses incurred in the conduct of the Business prior to the Effective Time.
"ACCOUNTS RECEIVABLE" means all accounts receivable and all rights to
receive payments under any notes, bonds and other evidences of Indebtedness and
all other rights to receive payments, in each case arising out of sales
occurring in the conduct of the Business prior to the Effective Time.
"ACTION" means any claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority.
"AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly Controlling, Controlled by or under common Control with such other
Person.
"ANCILLARY AGREEMENTS" means, collectively, the Assumption Agreement, the
▇▇▇▇ of Sale, the Trademark Assignment, the Lease Assignment and Assumption
Agreement, the Escrow Agreement, the Voting Agreement, such other documents or
instruments required to be entered into and delivered under this Agreement and
such other agreements to effectuate the transactions contemplated hereby and
thereby.
"ASSUMPTION AGREEMENT" means the Assumption Agreement to be executed by
Buyer and Seller on the Closing Date in substantially the form attached as
Exhibit A hereto.
"BALANCE SHEET" means the audited balance sheet of Seller and its
Subsidiaries as of the Balance Sheet Date.
"BALANCE SHEET DATE" means December 31, 2001.
A "BANKRUPTCY EVENT" means any instance where (a) Seller shall make a
general assignment for the benefit of creditors, (b) Seller shall file or any
Person shall file against Seller any proceeding (i) seeking to adjudicate Seller
a bankrupt or insolvent, (ii) seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of Seller or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debts, (iii) seeking an entry of an order for relief of bankruptcy or
(iv) seeking an entry of an order for the appointment of a receiver, trustee or
other similar
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official for Seller or for any substantial part of its property and, in the case
of any such proceeding instituted against Seller (but not instituted by Seller)
that is being diligently contested by Seller in good faith, either such
proceeding shall remain undismissed or unstayed for a period of thirty (30) days
or any of the actions sought in such proceeding (including the appointment of a
receiver, trustee, custodian or other similar official for, it or any
substantial part of its property) shall occur, or (c) Seller shall take any
corporate action to authorize any of the actions set forth above in clause (b),
except to the extent any such action would take place after the Closing or the
termination of this Agreement.
"▇▇▇▇ OF SALE" means the ▇▇▇▇ of Sale and Assignment to be executed by
Buyer and Seller on the Closing Date in substantially the form attached as
Exhibit B hereto.
"BRIDGE NOTE" means the Subordinated Bridge Note Purchase Agreement dated
November 26, 2001 between Seller and U-C Holdings, L.L.C, as amended, and any
related agreements.
"BRIDGE NOTE AMOUNT" means the entire amount owing to the Majority
Shareholder pursuant to the Bridge Note necessary to pay off in full the
obligations outstanding thereunder, which amount is equal to $5.915 million plus
accrued and unpaid interest (such interest is estimated to be approximately
$600,000 as of the date of this Agreement).
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by Law to be closed in the City of
New
York.
"CAPITAL LEASE OBLIGATION" means any liability or obligation of Seller as
lessee under leases relating to the Business that have been or should have been
recorded as capital leases in accordance with GAAP.
"CERCLA" means The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 ET SEQ.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLEGE AFFILIATE DATABASE" means the CTN affiliate access database by
which Seller keeps track of its relationships with each College.
"COLLEGES" means those educational institutions which Seller or the
Business considers an "affiliate" and is referred to in the College Affiliate
Database.
"CONFIDENTIALITY AGREEMENT" means the confidentiality agreement between
Viacom Inc. and Seller dated as of March 4, 2002.
"CONTROL" means, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. The terms "CONTROLLED"
and "CONTROLLING" shall have a correlative meaning.
"COPYRIGHTS" means all copyrights, copyright applications, registrations
and similar rights used by the Business (other than those included in the
Excluded Assets), including those registered copyrights and copyright
applications identified on Schedule 3.07(e)(1).
"▇▇▇▇▇▇▇▇ AGREEMENT" means the Agreement dated as of July 24, 1998 between
College Television Network, Inc. and ▇▇▇▇▇▇▇▇ Communications, Inc.
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"▇▇▇▇▇▇▇▇ FACILITY" means such facility or facilities as ▇▇▇▇▇▇▇▇
Communications, Inc., a Georgia corporation, may own, use or operate in
connection with the Business pursuant to the ▇▇▇▇▇▇▇▇ Agreement.
"DELAWARE LAW" means the General Corporation Law of the State of Delaware.
"DEFERRED REVENUE" means the amount of the current liabilities of the
Business for deferred revenue as of the Effective Time, where such amount is
calculated in accordance with the accounting policies and practices consistent
with those used in the preparation of the amounts set forth in the line items
"Deferred revenue" under "Current Liabilities" on the Balance Sheet.
"DEPOSIT LETTER AGREEMENT" means that certain Letter Agreement dated as of
the date of this Agreement among Seller, Parent and ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners II,
L.P.
"DOMAIN NAMES" means all internet domain name registrations and similar
rights used in connection with the Business, including those identified on
Schedule 3.07(e)(3).
"EFFECTIVE TIME" means 12:01 A.M. local
New York City time, on the Closing
Date.
"EMPLOYEE PLAN" means any (a) employee benefit plan, arrangement or policy
subject to ERISA, including any retirement, pension, deferred compensation,
severance, profit sharing, savings, group health, dental, life insurance,
disability or cafeteria plan, policy or arrangement, (b) any stock option, stock
purchase or equity-based compensation plan, (c) any bonus, commission or
incentive arrangement and (d) any other employee-related plan, program or
arrangement, including any employment, severance or termination agreements,
policies or arrangements that are not covered by ERISA, in each case maintained
or contributed to by Seller or any of its Affiliates for the benefit of any
current or former Network Employee.
"ENVIRONMENTAL LAWS" means any applicable statute, ordinance, rule,
regulation, decision, judgment, decree, permit or license, in each case, in
effect on the date of this Agreement or the Closing Date, as applicable, whether
local, state, or federal relating to: (a) Releases or threatened Releases of
Hazardous Materials into the indoor or outdoor environment; (b) the use,
treatment, storage, disposal, handling, discharging or shipment of Hazardous
Material; (c) the regulation of storage tanks; or (d) otherwise relating to
pollution or protection of human health, occupational safety and the indoor or
outdoor environment.
"ENVIRONMENTAL LIABILITIES" means any and all liabilities arising in
connection with or in any way relating to Seller (or any predecessor of Seller
or any prior owner of all or part of Seller's business and assets), the
Business, any activities or operations (including offsite disposal) occurring or
conducted at the Real Property or any other property now or previously owned,
leased or operated by the Business or Seller in connection with the Business (as
currently or previously conducted), whether accrued, contingent, absolute,
determined, determinable or otherwise, that (a) arise under or relate to any
Environmental Law and (b) relate to actions occurring or conditions existing on
or prior to the Closing Date (including any matter disclosed or required to be
disclosed in Schedule 3.20(a).
"ENVIRONMENTAL PERMITS" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of Governmental
Authorities relating to or required by Environmental Laws and affecting, or
relating in any way to, the Network, the Business or the business of Seller as
currently conducted.
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"EQUIPMENT" means all machinery, equipment, satellite dishes, television
monitors, computers, servers, furniture, fixtures, furnishings, parts, blank
films and tapes and other items of tangible personal property (other than those
included in the Excluded Assets), whether at the ▇▇▇▇▇▇▇▇ Facility, any of the
Colleges, the St. Louis warehouse, or any other location, that is owned or
leased by Seller and used or held or intended for use in the Business, including
those items listed on Schedule 1.01(a).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" means, as to any Person any other Person that, together
with such Person, would be treated as a single employer under Section 414 of the
Code.
"ESCROW AGENT" means the Bank of
New York, a
New York banking corporation.
"ESCROW AMOUNT" means $1,200,000.
"ESCROW FUND" means the Escrow Amount deposited with the Escrow Agent, as
such sum may be increased or decreased as provided in the Escrow Agreement.
"ESPN AGREEMENT" means the License Agreement dated as of December 1, 2001
by and between Seller and ESPN Enterprises, Inc.
"EXCLUDED PROGRAM RIGHTS AGREEMENTS" means (1) the ▇▇▇▇▇▇ Programming
Agreement, (2) the ESPN Agreement and (3) the Agreement between Seller and The
History Channel as of February 19, 2002.
"GAAP" means United States generally accepted accounting principles as in
effect on the Balance Sheet Date, consistently applied.
"GOVERNMENTAL AUTHORITY" means any federal, state or local or any foreign
government, governmental, regulatory or administrative authority, agency or
commission or any court, tribunal, or judicial or arbitral body.
"GOVERNMENTAL ORDER" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"HAZARDOUS MATERIAL" means hazardous or toxic wastes, chemicals,
substances, constituents, pollutants or related material, whether solids,
liquids, or gases, including polychlorinated biphenyls (PCBs), asbestos,
radioactive materials and wastes, and petroleum products (including crude oil
and any fraction thereof), defined or regulated under Section 101(14) of CERCLA;
the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 ET SEQ.; the
Toxic Substances Control Act, 15 U.S.C. Sections 2601 ET SEQ.; the Safe Drinking
Water Act, 42 U.S.C. Sections 300f ET SEQ.; the Clean Air Act, as amended, 42
U.S.C. Sections 7401 ET SEQ.; the Federal Water Pollution Control Act, 33 U.S.C.
Sections 1251 ET SEQ.; the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. Sections 11001 ET SEQ.; the Occupational Safety and Health Act
of 1970, 29 U.S.C. Sections 651 ET SEQ., or any similar federal, state or local
Environmental Laws.
"INDEBTEDNESS" means, with respect to any Person, (a) all indebtedness of
such Person, whether or not contingent, for borrowed money, (b) all obligations
of such Person for the deferred purchase price of property or services, (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and
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remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all obligations of
such Person as lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases, (f) all obligations, contingent or
otherwise, of such Person under acceptance, letter of credit or similar
facilities and (g) all obligations under direct or indirect guaranties in
respect of indebtedness of others.
"INSTALLED" means any College being characterized in the College Affiliate
Database as having, as of the date of this Agreement, the Network "installed"
(having the Network installed at least at one location), it being understood
that a College will not be deemed to be Installed if it is characterized in the
College Affiliate Database as having a "contract signed" (Colleges waiting on
either the Network or Equipment to be installed and not having at least one
location with the Network already installed), "De-install Pending" (Colleges
waiting on the removal of the Network or Equipment from all of such College's
locations) or "temporarily de-installed" (Colleges with the Network temporarily
de-installed at all locations) or characterized in a fashion similar thereto.
"INSTALLATION" shall have a correlative meaning.
"INTANGIBLE PROPERTY" means: (a) the Copyrights; (b) the Patents; (c) the
Trademarks; (d) the Trade Secrets; (e) all Domain Names; (f) all computer
software; and (g) all goodwill, if any, associated therewith.
"IRS" means the Internal Revenue Service.
"JUNE 30 BALANCE SHEET" means the balance sheet of Seller and its
Subsidiaries as at June 30, 2002 included in Seller's quarterly report on Form
10-Q for its fiscal quarter ended June 30, 2002.
"KNOWLEDGE OF SELLER" means the knowledge of ▇▇▇ ▇▇▇▇▇, President of
Seller, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer of Seller, ▇▇▇▇▇ ▇▇▇▇▇▇▇, Senior
Vice President/Affiliate Relations and Operations of Seller, and ▇▇▇▇▇▇▇ ▇▇▇▇,
Director of Human Resources of Seller, in each case after reasonable inquiry.
"LASALLE AMOUNT" means the entire amount owing to LaSalle Bank pursuant to
the LaSalle Credit Agreement necessary to pay off in full the obligations
outstanding thereunder, which amount is equal to $5 million plus accrued and
unpaid interest (such interest is estimated to be approximately $16,000 as of
the date of this Agreement).
"LASALLE BANK" means LaSalle Bank, N.A., a national banking association.
"LASALLE CREDIT AGREEMENT" means the $5,000,000 Amended and Restated Credit
Agreement dated as of August 14, 2001 between Seller and LaSalle Bank, amended
by the Consent, Waiver and First Amendment dated November 26, 2001 between
Seller (Borrower) and LaSalle Bank (Lender), as each may be further amended,
modified, renewed, refunded, replaced or refinanced from time to time.
"LAW" means any United States (federal, state, local) or non-United States
statute, law, ordinance, regulation, rule, code, order, judgment, injunction or
decree.
"LEASE ASSIGNMENT AND ASSUMPTION AGREEMENT" means the Lease Assignment and
Assumption Agreement to be executed by Buyer and Seller on the Closing Date in
substantially the form attached as Exhibit C hereto.
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"LIEN" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, whether
voluntarily incurred or arising by operation of Law or otherwise, in respect of
such property or asset.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on: (a) the
condition (financial or otherwise), business, assets, or results of operations
of the Business; PROVIDED, HOWEVER, that any material adverse effect primarily
attributable to (i) any change or development generally applicable to the
advertising-supported cable network industry or (ii) general economic conditions
shall not constitute a Material Adverse Effect; (b) the ability of Buyer to
operate or conduct the Business in the manner in which it is currently operated
or conducted by Seller or (c) the ability of Seller to perform its obligations
under this Agreement or any Ancillary Agreement. In furtherance and not in
limitation of the foregoing, it shall be a Material Adverse Effect if, at any
time after the date of this Agreement and prior to the Effective Time, fewer
than 95% of the Colleges that are Installed as of the date of this Agreement are
Installed.
"MATERIAL CONSENTS" means the consents to the assignment of each of the
agreements set forth on Schedule 10.03(e).
"MULTIEMPLOYER PLAN" means each Employee Plan that is a multiemployer plan,
as defined in Section 3(37) of ERISA.
"NAIA AGREEMENT" means the Agreement dated as of January 22, 1998 by and
between the National Association of Intercollegiate Athletics and College
Television Network, Inc. and the Payment Agreement executed on May 31, 2002 by
the National Association of Intercollegiate Athletics, Seller, f/k/a College
Television Network, Inc., and the Majority Shareholder.
"NETWORK EMPLOYEES" means the full-time, part-time and per-diem employees
employed by the Seller in the Business.
"1933 ACT" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"1934 ACT" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"OFFICE SPACES" means those office premises leased by Seller at the
following locations: ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇; ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇; ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇; and
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇.
"PATENTS" means all patents, patent applications, registrations and similar
rights used by the Business, including those patents, patent registrations and
patent applications identified on Schedule 1.01(b).
"PERMITTED LIENS" means, as to any property or asset: (a) Liens disclosed
on the Balance Sheet; (b) Liens for Taxes, assessments or other governmental
charges or levies not yet due and payable or being contested in good faith by
appropriate proceedings (and for which adequate accruals or reserves have been
established on the Balance Sheet); (c) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen, repairmen and other Liens
imposed by Law and on a basis consistent with past practice amounts not yet due;
(d) Liens incurred or deposits made in the ordinary course of the Business and
on a basis consistent with past practices in connection with workers'
compensation, unemployment insurance or other types of social security; (e)
Liens, other than a Lien
7
securing a monetary obligation, not materially interfering with such property or
asset as currently used in the Business and (f) in the case of any leased asset,
(A) the rights of any lessor under the applicable lease agreement or any Lien
granted by any lessor and (B) any statutory Lien for amounts that are not yet
due and payable or are being contested in good faith.
"PERSON" means any natural person, general or limited partnership,
corporation, limited liability company, firm, association, trust or other legal
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
"PROGRAM LIBRARY" means any and all copies or clips of all music videos,
any third-party produced content (except such content to the extent subject to
any of the Excluded Program Rights Agreements), and any content produced by or
for the Business, including content produced with respect to the Business's
on-campus events, in each case that has aired or was contemplated for airing on
the Network.
"PROGRAM RIGHTS" means all rights of Seller or the Business presently
existing to transmit television programming or shows, music videos or clips
thereof and programming produced by or for the Business.
"REAL PROPERTY" means all real property owned, leased, subleased or
licensed by Seller or any Affiliate of Seller used or held for use in the
conduct of the Business, and all buildings, towers, improvements and fixtures
owned, leased, subleased or licensed thereon, together with all strips and
gores, rights of way, easements, privileges and appurtenances pertaining
thereto.
"RELEASE" means any release, spill, emission, leaking, dumping, injection,
pouring, deposit, disposal, discharge, dispersal, leaching or migration into the
environment (including ambient air, surface water, groundwater, land surface or
subsurface strata) or within any building, structure, facility or fixture.
"SEC" means the Securities and Exchange Commission.
"SPECIAL COMMITTEE" means the special committee of the Board of Directors
of Seller consisting solely of directors independent of Seller or its
Affiliates.
"ST. LOUIS LEASE" means that certain Commercial Lease dated January 7, 2002
by and between Seller and the Enco Group, Inc. d/b/a Park Warehouse Service of
St. Louis, Mo. for premises located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
"STOCKHOLDERS" means holders of shares of Seller Common Stock or shares of
Seller Preferred Stock.
"SUBSIDIARY" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock or equivalent interest
having ordinary voting power to elect a majority of the board of directors or
similar governing body of such corporation or such partnership, joint venture or
limited liability company (irrespective of whether at the time capital stock or
equivale nt interest of any other class or classes of such corporation or such
partnership, joint venture or limited liability company shall or might have
voting power upon the occurrence of any contingency), (b) the interest in the
capital or profits of such corporation, partnership, joint venture or limited
liability company or (c) the beneficial interest in such trust or estate, in
each case, is at the time directly or indirectly owned or Controlled by such
Person.
8
"TAX" or "TAXES" means all income, excise, gross receipts, AD VALOREM,
sales, use, employment, franchise, profits, gains, property, transfer, payroll,
intangibles or other taxes, fees, stamp taxes, duties, charges, levies or
assessments of any kind whatsoever (whether payable directly or by withholding),
together with any interest and any penalties, additions to tax or additional
amounts imposed by any Tax authority with respect thereto.
"TAX RETURNS" means all returns and reports (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to a Tax authority relating to Taxes.
"TITLE IV PLAN" means an Employee Plan subject to Title IV of ERISA other
than any Multiemployer Plan.
"TRADEMARK ASSIGNMENT" means the Trademark Assignment to be executed by
Seller on the Closing Date in substantially the form attached as Exhibit D
hereto.
"TRADEMARKS" means all of those trade names, trademarks, service marks,
jingles, slogans, logos, trademark and service ▇▇▇▇ registrations and trademark
and service ▇▇▇▇ applications owned, used, held for use, licensed by or leased
by Seller relating to the Business, including those identified on Schedule
3.07(e)(2) and the goodwill appurtenant thereto.
"TRADEOUT AGREEMENT" means any contract, agreement or commitment, oral or
written, other than film and program barter agreements, pursuant to which Seller
or the Business has agreed to sell or trade air time or production services of
the Network in consideration for any property or service in lieu of or in
addition to cash.
"TRADE SECRETS" means all proprietary information of Seller necessary to
the operation of the Business (other than as included in the Excluded Assets)
that is not generally known and is used or useful in the Business, as to which
reasonable best efforts have been made to prevent unauthorized disclosure and
that provides a competitive advantage to those who know or use it.
"TRANSFER TAXES" means all excise, sales, use, value added, registration
stamp, recording, documentary, conveyancing, franchise, property, transfer,
gains and similar Taxes, levies, charges and fees.
"▇▇▇▇▇▇ PROGRAMMING AGREEMENT" means the Programming and Services Agreement
dated as of January 1, 1998 between College Television Network, Inc. (formerly
known as UC Television Network Corp.) and ▇▇▇▇▇▇ Private Networks Inc.
"VOTING AGREEMENT" means the Voting Agreement effective as of the date of
this Agreement among Parent, Buyer, the Majority Stockholder and ▇▇▇▇▇▇ ▇▇▇▇▇ &
Partners, L.P.
"WARN ACT" means the Workers Adjustment and Retraining Notification Act, as
amended.
"▇▇▇▇▇▇ ▇▇▇▇▇" means ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners L.P.
SECTION 1.02. OTHER DEFINED TERMS. The following terms have the meanings
defined for such terms in the Sections set forth below:
Term Section
---- -------
Advertising Agreements 3.06(a)(i)
9
Term Section
---- -------
Agreement Preamble
Assumed Liabilities 2.03
Audited Financial Statements 3.13(a)
Board Recommendation 5.08(b)
Business Recitals
Buyer Preamble
Buyer Representative 2.12(a)
Buyer's 401(k) Plan 8.03
Buyer Indemnified Parties 12.03(a)
Buyer Warranty Breach 12.02(a)(i)
Closing 2.07
Closing Date 2.07
Closing Date Deduction Amount 2.07(a)
Collection Period 2.13(a)
College Contacts 2.12(a)
College Surveyor 2.12(a)
College Question One 2.12(c)
Contracts 2.01(b)
Deposit 2.11
Escrow Agreement 2.10
Estimated Deferred Revenue Amount 2.08(a)
Excluded Assets 2.02
Excluded Liabilities 2.04
Filed SEC Documents 3.12(a)
Final Adjustment Payment Date 2.09(b)
Final Deferred Revenue 2.09(a)(ii)
Final Prorated Assets 2.09(a)(i)
Final Prorated Liabilities 2.09(a)(i)
Financial Statements 3.13(a)
Indemnified Party 12.04(a)
Indemnifying Party 12.04(a)
Irrevocable Letter of Credit 2.11(g)
LOC Expiration Date 2.11(g)(i)(A)
Leased Premises 3.08(a)
Lockbox Accounts 2.01(j)
Losses 2.02(a)
Majority Stockholder Recitals
Maturity Date 2.11(f)
Non-Scheduled Amount Certification 2.11(e)(i)
Notice of Disagreement 2.08(c)
Permits 2.01(d)
Previously Validated Colleges 2.12(a)
Primary College Contact 2.12(a)
Prorated Assets 2.08(b)
Prorated Liabilities 2.08(b)
Purchased Assets 2.01
Purchase Price 2.06(a)
Record Date 3.02(c)
Repayment Amount 2.11(a)
10
Term Section
---- -------
Required Announcement 7.04
Scheduled Amount Certification 2.11(b)
Secondary College Contact 2.12(a)
Seller Preamble
Seller Common Stock Recitals
Seller's 401(k) Plan 8.03
Seller Indemnified Parties 12.02(a)
Seller Information Statement 3.21
Seller Preferred Stock 3.05(a)
Seller Representative 2.12(a)
Seller Series A Preferred Stock 3.05(a)
Seller Series B Preferred Stock 3.05(a)
Seller Warranty Breach 12.03(a)(i)
Termination Date 11.01(b)(i)
Third Party Claim 12.04(a)
Transferred Employees 8.01(a)
Unaudited Financial Statements 3.13(a)
SECTION 1.03. TERMS GENERALLY. (a) Words in the singular shall be held to
include the plural and vice versa and words of one gender shall be held to
include the other gender as the context requires, (b) the terms "hereof,"
"herein," and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole (including the
Ancillary Agreements, Disclosure Schedules and exhibits hereto) and not to any
particular provision of this Agreement, and Article, Section, paragraph, Exhibit
and Schedule references are to the Articles, Sections, paragraphs, Exhibits and
Schedules to this Agreement unless otherwise specified and (c) the word
"including" and words of similar import when used in this Agreement means
"including, without limitation," unless otherwise specified.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE. Except as otherwise provided below, upon
the terms and subject to the conditions of this Agreement, Buyer agrees to
purchase from Seller and Seller agrees to sell, convey, transfer, assign and
deliver, or cause to be sold, conveyed, transferred, assigned and delivered, to
Buyer at the Closing, free and clear of all Liens, other than Permitted Liens,
all of Seller's right, title and interest in, to and under the assets,
contracts, properties and business, of every kind and description, wherever
located, real, personal or mixed, tangible or intangible, owned, held, belonging
to or used in the Business by Seller as the same shall exist on the date of this
Agreement, including all assets shown on the Balance Sheet and not disposed of
in accordance with Section 5.01(b)(viii), and all assets of the Business
hereafter acquired by Seller, but excluding the Excluded Assets (the "PURCHASED
ASSETS"), and including all right, title and interest of Seller in, to and
under:
(a) all Equipment (excluding the furniture, fixtures and other assets
in the Atlanta Office Space as set forth on Schedule 2.01(a));
11
(b) except as set forth herein, all rights under all contracts,
agreements, leases other than leases for Real Property (except the St.
Louis Lease), licenses, commitments, sales and purchase orders and other
instruments, whether oral or written, relating to the Business, including
the items listed on Schedule 3.06(a) (collectively, the "CONTRACTS");
(c) only those personal service or employment Contracts relating to
the Transferred Employees as set forth on Schedule 2.01(c);
(d) all transferable municipal, state and federal franchises,
licenses, permits or other governmental authorizations affecting, or
relating in any way to, the Business, including the items listed on
Schedule 2.01(d) (the "PERMITS");
(e) all Intangible Property;
(f) all internet web sites and related agreements, content and
databases, as and to the extent relating to the Business, including those
set forth on Schedule 2.01(f);
(g) the ▇▇▇▇▇▇▇ Media Research agreement for Fall 2002 traffic
measurement;
(h) all rights to insurance proceeds relating to the Purchased
Assets, including in accordance with Section 5.07, other than such proceeds
relating to the Harder litigation referred to in Section 2.04(o) below;
(i) all prepaid expenses and deposits, including any deposits under
the St. Louis Lease and including AD VALOREM taxes, leases and rentals
except as set forth in Sections 2.02(e) and 2.02(f) below;
(j) the lock box accounts utilized in connection with Seller's
collection of Accounts Receivables (the "LOCKBOX ACCOUNTS");
(k) all of Seller's rights, claims, credits, causes of action or
rights of set-off against third parties relating to the Purchased Assets,
including unliquidated rights under manufacturers' and vendors' warranties,
in each case to the extent Buyer incurs Losses (as defined below) relating
thereto;
(l) the Program Library and all books, records, files and papers,
whether in hard copy or computer format, used in the Business, including
engineering information, sales and promotional literature, manuals and
data, sales and purchase correspondence, lists of present and former
suppliers (including the database of technical subcontractors), lists of
present and former customers, personnel and employment records for
Transferred Employees (to the extent permitted by Law), and any information
relating to any Tax imposed on the Purchased Assets;
(m) all management and other systems (including computers and
peripheral equipment), databases, computer software (including the custom
IRD authorization/de-authorization software and the custom "▇▇▇▇▇▇▇" local
messaging system), computer disks and similar assets, related to the
Business and all licenses and rights in relation thereto; and
(n) all goodwill associated with the Business or the Purchased
Assets.
12
SECTION 2.02. EXCLUDED ASSETS. Notwithstanding anything in Section 2.01 to
the contrary, Buyer expressly understands and agrees that the following assets
and properties of Seller (the "EXCLUDED ASSETS") shall be excluded from the
Purchased Assets:
(a) rights and obligations arising under the Stock Purchase Agreement
dated July 16, 1999 between College Television Network, Inc., Armed Forces
Communications, Inc. d/b/a Market Place Media and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇) and related agreements;
(b) rights and obligations arising under the Stock Purchase Agreement
dated June 1, 2002 between College Television Network, Inc., Armed Forces
Communications, Inc. d/b/a Market Place Media and MPM Holdings, Inc., as
amended, and related agreements;
(c) the Access Service Agreement and Service Order between Seller and
Verio and any other contract, agreement or commitment Seller has with
Verio.
(d) the Letter Agreement dated July 13, 1998 between Seller and ▇▇▇▇
Atlantic regarding internet access;
(e) the Excluded Program Rights Agreements and all prepaid expenses
relating to the ▇▇▇▇▇▇ Programming Agreement;
(f) all interest in the Real Property, including (i) the deposits and
prepaid expenses relating to the Real Property, (ii) the furniture,
fixtures and other assets identified on Schedule 2.01(a), and (iii) the
leases for the Office Spaces and all deposits thereunder, but not including
the St. Louis Lease and the deposits and prepaid expenses relating thereto;
(g) any intercompany accounts owing by and among, and all agreements
between, Seller on the one hand and any Affiliate of Seller on the other
hand, including those identified on Schedule 2.02(g);
(h) all Tradeout Agreements;
(i) (A) the Employment Agreement between Seller and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
dated as of August 6, 1997, as amended, (B) the Employment Agreement
between Seller and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ dated as of December 1, 2000, (C) the
Amended and Restated Employment Agreement between Seller and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ dated as of May 8, 2002, (D) the Employment Agreement between Seller
and ▇▇▇▇▇▇ ▇▇▇▇▇ dated as of May 27, 2002, (E) the Employment Agreement
between Seller and ▇▇▇▇▇ ▇▇▇▇▇▇ dated as of January 12, 1998, as it may
have been amended or modified, including the Amendment dated as of January
11, 2001, and (F) the Payment Agreement and General Release between Seller
and ▇▇▇▇ ▇▇▇▇▇▇▇ dated as of April 15, 2002, in each case as set forth on
Schedule 2.02(i);
(j) any assets of any Employee Plan sponsored by Seller or any of its
Affiliates, including any amounts due to such Employee Plan from Seller or
any of its Affiliates;
(k) insurance policies relating to the Business and all claims,
credits, causes of action or rights thereunder except as provided in
Sections 2.01(h) and 5.07 and all rights to insurance proceeds relating to
the Excluded Assets and Excluded Liabilities;
13
(l) all current assets that would be classified as a current asset in
accordance with GAAP that are itemized under the category "Miscellaneous
Receivables" on the working papers, trial balances and reports of Seller
relating to the unaudited interim balance sheet of Seller and its
Subsidiaries as at June 30, 2002 and unaudited interim statements of income
and cash flow for the period then ended in an amount equal to $86,291.94;
(m) all minute books and the Tax Returns of Seller;
(n) all rights of Seller arising under this Agreement or the
Ancillary Agreements;
(o) all books, records, files and papers, whether in hard copy or
computer format, prepared in connection with this Agreement or the
transactions contemplated hereby;
(p) all of Seller's cash and cash equivalents on hand and in banks
(other than the insurance proceeds that are Purchased Assets as set forth
in Section 2.01(h) above);
(q) the equity interest in and the promissory note receivable
relating to Omnipod, Inc. and the equity interest in Campus Books, Inc., in
each case held by Seller;
(r) the loan closing costs identified in the line item "Closing
Costs; Accumulated Amortization - Loan Closing Costs" on the working
papers, trial balances and reports of Seller relating to the unaudited
interim balance sheet of Seller and its Subsidiaries as at June 30, 2002
and unaudited interim statements of income and cash flow for the period
then ended in an amount equal to $21,395;
(s) all Accounts Receivables;
(t) the SESAC internet license agreement relating to
▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇;
(u) the Engagement Letter Agreement dated as of May 22, 2002 between
PricewaterhouseCoopers LLP and Seller;
(v) any and all agreements, whether verbal or written, Seller may
have with Pepper Dance Productions relating to "Paydirt", including the
agreement made as of August 20, 2002;
(w) any and all agreements, whether verbal or written, Seller may
have with MediaMark Research Inc.;
(x) any and all agreements, whether verbal or written, Seller may
have with ASCAP;
(y) any and all agreements, whether verbal or written, Seller may
have with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or the ▇. ▇▇▇▇▇▇▇ Company;
(z) the Consulting and Equity Purchase Agreement dated as of March
26, 1999 between Seller and ▇▇▇▇▇▇ ▇▇▇▇▇;
14
(aa) the Leasing and Commission Agreement dated as of November 9, 2001
between ▇▇▇▇▇▇▇ & Wakefield of Georgia, Inc. and Seller relating to the
sublease by ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ of the Atlanta Office Space; and
(bb) any asset sold or otherwise disposed of in accordance with
Section 5.01(b)(viii).
SECTION 2.03. ASSUMED LIABILITIES. Upon the terms and subject to the
conditions of this Agreement, Buyer agrees, effective at the Effective Time, to
assume only the following liabilities (the "ASSUMED LIABILITIES"):
(a) the liabilities and obligations of Seller under the Contracts and
Permits to the extent arising with respect to the Business on and after the
Effective Time, except those Contracts and Permits, if any, included in the
Excluded Assets;
(b) all Deferred Revenue; and
(c) any liability or obligation of Seller related to the Business as
of the Effective Time to the extent of the amount of credit directly
related to that liability or obligation received by Buyer pursuant to
Sections 2.08 and 2.09.
SECTION 2.04. EXCLUDED LIABILITIES. Notwithstanding any provision in this
Agreement or any other writing to the contrary, Buyer is assuming only the
Assumed Liabilities and is not assuming any other liability or obligation of
Seller (or any predecessor of Seller or any prior owner of all or part of
Seller's businesses and assets) of whatever nature, whether presently in
existence or arising hereafter. All such other liabilities and obligations shall
be retained by and remain obligations and liabilities of Seller (all such
liabilities and obligations not being assumed being herein referred to as the
"EXCLUDED LIABILITIES"), and, notwithstanding anything to the contrary in
Section 2.03, none of the following shall be Assumed Liabilities for the
purposes of this Agreement:
(a) any liability or obligation relating to or arising out of the
period prior to the Effective Time (other than Deferred Revenue);
(b) any liability or obligation relating to or in connection with
ASCAP, BMI or SESCAC or other collecting societies;
(c) any liability or obligation under or with respect to any Contract
or Permit to the extent required by the terms thereof to be discharged on
or prior to the Effective Time;
(d) any Accounts Payable and accrued expenses relating to or arising
with respect to the Business prior to the Effective Time;
(e) any liability or obligation for which Seller has already received
the partial or full benefit of the asset to which such liability or
obligation relates, but only to the extent of such benefit received, other
than Deferred Revenue;
(f) any liability or obligation for borrowed money, including
interest, costs and fees, including those arising out of the transactions
contemplated by the LaSalle Credit Agreement or the Bridge Note;
15
(g) all Capital Lease Obligations;
(h) any liability or obligation to the extent relating to or arising
out of any of the Excluded Assets;
(i) any liability or obligation to two former stockholders of Seller,
▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇;
(j) any intercompany payables;
(k) any amount set forth in the line item "Dividends Payable" under
"Current Liabilities" and in the line item "Long-term dividend payable" on
the June 30 Balance Sheet and any other amounts of the current and
noncurrent liabilities of the Business for dividends payable, where such
amounts are calculated in accordance with the accounting policies and
practices consistent with those used in the preparation of the amounts set
forth in such line items;
(l) any Environmental Liabilities;
(m) any liability or obligation relating to payroll, payroll taxes,
vacation, bonuses, commissions and other employee-related benefits,
including any severance liability or obligation to the extent relating to
or arising out of the period prior to the Effective Time;
(n) any liability or obligation relating to or arising out of any
Employee Plan other than any liability or obligation relating to the
matters set forth in Section 2.01(c).
(o) any liability or obligation relating to or arising out of the
lawsuit brought by ▇▇▇▇▇ ▇▇▇▇▇▇ and filed on March 22, 2001 in the United
States District Court for the Northern District of Illinois, Eastern
Division, against Seller and the Majority Stockholder and any related
Actions;
(p) any Tax liability or obligation (except as expressly provided in
Section 9.02); and
(q) any liability or delegation of Seller arising under or relating
to this Agreement or the Ancillary Agreements or the transactions
contemplated hereby and thereby.
SECTION 2.05. ASSIGNMENT OF CONTRACTS AND RIGHTS. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any Purchased Asset or any claim or right or any benefit
arising thereunder or resulting therefrom if such assignment, without the
consent of a third party thereto, would constitute a breach or other
contravention of such Purchased Asset or in any way adversely affect the rights
of Buyer or Seller thereunder. Seller will use its reasonable best efforts to
obtain the consent of the other parties to any such Purchased Asset or any claim
or right or any benefit arising thereunder for the assignment thereof to Buyer
as Buyer may request. If such consent is not obtained, or if an attempted
assignment thereof would be ineffective or would adversely affect the rights of
Seller thereunder so that Buyer would not in fact receive all such rights,
Seller shall (A) provide to Buyer the rights and benefits of such Purchased
Asset and, if so provided, Buyer shall assume the corresponding obligations
thereunder in accordance with this Agreement, or (B) Seller shall enforce for
the benefit of Buyer, with Buyer assuming Seller's obligations and reasonable
expenses, any and all rights of Seller against a third party thereto; PROVIDED
that the parties agree that, upon Buyer's written notice to Seller, such
Purchased Asset will be deemed an Excluded Asset hereunder if Buyer determines
in its discretion that such enforcement is too costly. Seller will promptly pay
to
16
Buyer when received all monies received by Seller under any Purchased Asset or
any claim or right or any benefit arising thereunder.
SECTION 2.06. PURCHASE PRICE. The purchase price for the purchase of the
Purchased Assets is $15 million payable in cash (the "PURCHASE PRICE") plus the
assumption of the Assumed Liabilities. The Purchase Price shall be paid as
provided in Section 2.07 and 2.11 and shall be subject to adjustment as provided
in Sections 2.08 and 2.09.
SECTION 2.07. CLOSING. The closing (the "CLOSING") of the sale and
purchase of the Purchased Assets and the assumption of the Assumed Liabilities
hereunder shall take place at 1:00 P.M. (
New York City time) as soon as
possible, but in no event later than three Business Days, following the
satisfaction or waiver of the conditions to the obligations of the parties set
forth in Article X, at the offices of Buyer, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇,
or at such other time or place as Seller and Buyer may mutually agree upon in
writing (the day on which the Closing takes place being the "CLOSING DATE").
Within two (2) Business Days prior to the Closing Date, Seller shall, and shall
cause LaSalle Bank and the Majority Stockholder to, notify Buyer in writing of
the exact amount of the LaSalle Amount and the Bridge Note Amount, respectively,
as of the Closing. At the Closing:
(a) (i) Parent shall, on behalf of Buyer, deliver to Seller the
Purchase Price MINUS the sum of (A) the Escrow Amount, (B) the LaSalle
Amount, (C) the Bridge Note Amount and (D) the amount of the Deposit drawn
and outstanding as of the Closing Date PLUS interest thereon calculated
using the Deposit Interest Rate from the date(s) of the draw-down by Seller
of such amount to the Closing Date (such sum, the "CLOSING DATE DEDUCTION
AMOUNT"), in immediately available funds by wire transfer to an account of
Seller, by notice to Buyer, received no later than one (1) Business Day
prior to the Closing Date; (ii) Parent shall, on behalf of Buyer, deliver
to LaSalle Bank the LaSalle Amount in immediately available funds by wire
transfer to an account that Seller shall cause LaSalle Bank to designate,
by written notice to Buyer, received no later than one (1) Business Day
prior to the Closing Date; and (iii) Parent shall, on behalf of Buyer,
deliver to the Majority Stockholder the Bridge Note Amount in immediately
available funds by wire transfer to an account that Seller shall cause the
Majority Shareholder to designate, by written notice to Buyer, received no
later than one (1) Business Day prior to the Closing Date.
(b) Parent shall, on behalf of Buyer, deliver to the Escrow Agent, in
accordance with the Escrow Agreement, the Escrow Amount by wire transfer in
immediately available funds to the account designated therefor in the
Escrow Agreement.
(c) Buyer and Seller shall enter into each Ancillary Agreement to
which it is to be a party, and Seller shall deliver to Buyer such deeds,
consents, assignments, releases of Liens other than Permitted Liens and
other good and sufficient instruments of conveyance and assignment as the
parties and their respective counsel shall deem reasonably necessary to
vest in Buyer all right, title and interest in, to and under the Purchased
Assets. Buyer shall have the right to designate an Affiliate of Buyer or
any other person described in Section 13.06 to accept title to any
Purchased Asset.
(d) Seller shall deliver to Buyer valid signature cards for each
Lockbox Account and/or such other documents reasonably requested by Buyer
to transfer ownership and control of the Lockbox Accounts to Buyer.
(e) Seller shall deliver to Buyer a good standing certificate for
Seller from the Secretary of State of the State of Delaware and from the
Secretary of State in each other jurisdiction in which the operation of its
business in such jurisdiction requires Seller to qualify to
17
do business as a foreign corporation, in each case dated as of a date not
earlier than five Business Days prior to the Closing Date.
(f) Buyer and Seller shall deliver, as the case may be, the opinion,
certificates and other documents required to be delivered pursuant to
Sections 10.02 and 10.03.
(g) Seller shall deliver to Buyer a receipt for the Purchase Price
MINUS the Closing Date Deduction Amount, and Seller shall cause LaSalle
Bank and the Majority Stockholder to deliver to Buyer a receipt for the
LaSalle Amount and the Bridge Note Amount, respectively.
SECTION 2.08. PRORATION.
(a) DELIVERY OF SCHEDULE OF ESTIMATED DEFERRED REVENUE AMOUNT. At
least five (5) Business Days prior to the Closing Date, Seller shall
deliver to Buyer a schedule of the Estimated Deferred Revenue Amount.
"ESTIMATED DEFERRED REVENUE AMOUNT" means the amount of the current
liabilities of the Business for deferred revenue as of the last day in the
latest full month preceding the Closing Date, where such amount is
calculated in accordance with the accounting policies and practices
consistent with those used in the preparation of the amount set forth in
the line item "Deferred revenue" on the Balance Sheet and in accordance
with GAAP.
(b) DELIVERY OF SETTLEMENT STATEMENT.
(i) All Purchased Assets that would be classified as a
current asset in accordance with GAAP (the "PRORATED ASSETS") and all
Assumed Liabilities (except Deferred Revenue, which is addressed
separately in this Section 2.08) and all excluded vacation liabilities
of Seller, including related fringe benefits (the "PRORATED
LIABILITIES") (other than Assumed Liabilities and Purchased Assets
that are the subject of Section 5.07) shall be prorated, in each case
between Buyer and Seller as of the Effective Time. Such Prorated
Assets and Prorated Liabilities relating to the period prior to the
Effective Time shall be for the account of Seller and those relating
to the period on and after the Effective Time for the account of Buyer
and shall be prorated accordingly and shall take into account the
elapsed time or consumption of an asset during the month in which the
Effective Time occurs.
(ii) In accordance with this Section 2.08: (A) Buyer shall be
required to pay to Seller the amount of any Prorated Asset to the
extent Buyer will receive a benefit on or after the Effective Time,
PROVIDED that such amount should not have been recognized as an
expense in accordance with GAAP prior to the Effective Time; (B)
Seller shall be required to pay to Buyer the amount of any Prorated
Liabilities assumed by Buyer to the extent they arise with respect to
the Business prior to the Effective Time; and (C) Seller shall be
required to pay to Buyer the amount of any Deferred Revenue assumed by
Buyer to the extent the obligations relating thereto arise with
respect to the Business on or after the Effective Time for which
Seller received a benefit prior to the Effective Time (it being
understood that Buyer shall be paid for purposes of this clause (C) in
the manner set forth in Section 2.09(a)(ii) below).
(iii) Prorations relating to the Prorated Assets and Prorated
Liabilities shall include all AD VALOREM and other property taxes,
utility expenses, liabilities and obligations under Contracts, rents
and similar prepaid and deferred items and all other expenses and
obligations, such as prepayments and fringe employee benefits,
attributable
18
to the Business that straddle the period before and after the
Effective Time. To the extent not known, real estate and personal
property taxes shall be apportioned on the basis of Taxes assessed for
the preceding year, with a reapportionment as soon as the new Tax rate
and valuation can be ascertained even if such is ascertained after the
Final Settlement Statement is so determined.
(iv) For the avoidance of doubt, if amounts relating to
Prorated Assets were prepaid by Seller prior to the Effective Time and
Buyer will receive a benefit on or after the Effective Time with
respect to such amounts, then Seller shall receive a credit for such
amounts equal to such benefits. If Seller was entitled to receive a
benefit as to any Prorated Asset prior to the Effective Time and such
amounts will be paid by Buyer after the Effective Time, Buyer will
receive a credit for such amounts equal to such benefits.
(v) Within sixty (60) days after the Closing Date, Buyer
shall prepare and deliver to Seller a proposed pro rata adjustment of
assets and liabilities (the "SETTLEMENT STATEMENT") setting forth in
the manner described in clauses (i) through (iv) of this Section
2.08(b):
(A) the Prorated Assets and Prorated Liabilities,
together with a schedule setting forth, in reasonable detail, the
components thereof; and
(B) the Deferred Revenue.
(c) SELLER REVIEW PERIOD. During the thirty (30) calendar day period
following Buyer's delivery of the Settlement Statement to Seller: (A)
Seller and its independent auditors, if any, at Seller's sole cost and
expense, shall be permitted to review (i) the working papers, trial
balances and reports of Buyer and its independent auditors, if any,
relating to the Settlement Statement, (ii) the books and records of Buyer
relating to the Settlement Statement and (iii) any supporting schedules,
analyses and other documentation relating to the Settlement Statement; and
(B) Buyer shall provide or cause to be provided reasonable access upon
reasonable advance notice and during normal business hours to such
employees of Seller and its independent auditors, if any, as Seller
reasonably believes is necessary or desirable in connection with its review
of the Settlement Statement.
(d) NOTICE OF DISAGREEMENT. If Seller disagrees with Buyer's
calculation of Prorated Assets, Prorated Liabilities or Deferred Revenue
delivered pursuant to Section 2.08(a), Seller may, within thirty (30) days
after delivery of the Settlement Statement, give written notice of its
disagreement with the Settlement Statement (the "NOTICE OF DISAGREEMENT")
to Buyer. If no Notice of Disagreement is delivered within such time
period, the Settlement Statement and Buyer's calculation of Prorated
Assets, Prorated Liabilities or Deferred Revenue shall be deemed final and
binding on the parties hereto. The Notice of Disagreement shall (i) specify
in reasonable detail the nature of any disagreement so asserted and (ii)
only be based on the Settlement Statement not being calculated in
accordance with this Section 2.08. Seller shall be deemed to have agreed
with all other items and amounts contained in the Settlement Statement and
the calculation of Prorated Assets, Prorated Liabilities or Deferred
Revenue to the extent not affected by the items or amounts in dispute.
(e) BUYER REVIEW PERIOD. During the thirty (30) calendar day period
following the delivery of a Notice of Disagreement that complies with the
preceding paragraph, Buyer and Seller shall seek in good faith to resolve
in writing any differences that they may have with respect to the matters
specified in the Notice of Disagreement. During such period, (A) Buyer
19
and its independent auditors, if any, at Buyer's sole cost and expense,
shall be permitted to review (i) the working papers, trial balances and
reports of Seller and its independent auditors, if any, relating to the
Notice of Disagreement, (ii) the books and records of Seller relating to
the Notice of Disagreement and (iii) any supporting schedules, analyses and
other documentation relating to the Notice of Disagreement; and (B) Seller
shall provide or cause to be provided reasonable access, upon reasonable
advance notice and during normal business hours to such employees of Buyer
and its independent auditors, if any, as Buyer reasonably believes is
necessary or desirable in connection with its review of the Notice of
Disagreement.
(f) ARBITRATION. If, at the end of such thirty (30) calendar day
period, Buyer and Seller shall not have resolved such differences or
mutually agreed in writing to extend the resolution period, Buyer and
Seller shall thereafter promptly submit to the Accounting Firm for review
and resolution any and all matters that remain in dispute and that were
properly included in the Notice of Disagreement. Buyer and Seller shall use
reasonable efforts to cause the Accounting Firm to render a decision
resolving the matters disputed within thirty (30) calendar days following
submission of such matters to the Accounting Firm. Buyer and Seller agree
that judgment may be entered upon the determination of the Accounting Firm
in any court having jurisdiction over the party against which such
determination is to be enforced. Except as specified in the following
sentence, the cost of any arbitration (including fees and expenses of the
Accounting Firm pursuant to this Section 2.08) shall be borne by Buyer and
Sellers in inverse proportion as they may prevail on matters resolved by
the Accounting Firm, which such proportional allocations shall also be
determined by the Accounting Firm at the time the determination of the
Accounting Firm is rendered on the matters submitted. The fees and expenses
(if any) of Buyer's independent auditors and attorneys incurred in
connection with their review of any Notice of Disagreement shall be borne
by Buyer, and the fees and expenses (if any) of Seller's independent
auditors and attorneys incurred in connection with their review of the
Settlement Statement and preparation and review of any Notice of
Disagreement shall be borne by Seller.
SECTION 2.09. PURCHASE PRICE ADJUSTMENT.
(a) (i) If Final Prorated Liabilities for Buyer's account exceed
Final Prorated Assets for Buyer's account, Seller shall pay to Buyer, as an
adjustment to the Purchase Price, in the manner and with interest as
provided in Section 2.09(b), the amount of such excess. If Final Prorated
Assets for Buyer's account exceed Final Prorated Liabilities for Buyer's
account, Buyer shall pay to Seller, as an adjustment to the Purchase Price,
in the manner and with interest as provided in Section 2.09(b), the amount
of such excess. "FINAL PRORATED ASSETS" and "FINAL PRORATED LIABILITIES"
means, as the case may be, the Prorated Assets and Prorated Liabilities (x)
as shown in Buyer's calculation delivered pursuant to Section 2.08(b), if
no Notice of Disagreement with respect thereto is duly delivered by Seller
to Buyer pursuant to Section 2.08(d); or (y) if a Notice of Disagreement is
delivered, (A) as agreed by Buyer and Seller pursuant to Section 2.08(e) or
(B) in the absence of such agreement, as determined by the Accounting Firm
pursuant to Section 2.08(f).
(ii) (A) If Final Deferred Revenue exceeds the Collected
Deferred Revenue Amount, Seller shall pay to Buyer, as an adjustment
to the Purchase Price, in the manner and with interest as provided in
Section 2.09(b), the amount of such excess to the extent Buyer was
unable to offset such excess from its collection of Accounts
Receivables pursuant to the second sentence of Section 2.13(b) below;
(B) if the Collected Deferred Revenue Amount exceeds Final Deferred
Revenue, Buyer shall pay to Seller, as an adjustment to the Purchase
Price, in the manner and with interest as provided in Section
20
2.09(b), the amount of such excess. "FINAL DEFERRED REVENUE" means
the Deferred Revenue (i) as shown in Buyer's calculation delivered
pursuant to Section 2.08(b), if no Notice of Disagreement with respect
thereto is duly delivered by Seller to Buyer pursuant to Section
2.08(d); or (ii) if a Notice of Disagreement is delivered, (A) as
agreed by Buyer and Seller pursuant to Section 2.08(e) or (B) in the
absence of such agreement, as determined by the Accounting Firm
pursuant to Section 2.08(f). "COLLECTED DEFERRED REVENUE AMOUNT" means
the amount of money offset by Buyer from its collection of Accounts
Receivable pursuant to the second sentence of Section 2.13(b) below.
Neither party shall be entitled to offset any payments owing pursuant
to Section 2.09(a)(i) from any payment owing pursuant to Section
2.09(a)(ii) or vice versa.
(b) Any payment owing from Buyer to Seller or Seller to Buyer
pursuant to this Section 2.09 shall be made at a mutually convenient time
and place within ten (10) Business Days (the "FINAL ADJUSTMENT PAYMENT
DATE") after the Final Prorated Assets, Final Prorated Liabilities and
Final Deferred Revenue have been determined, (i) in the case of any payment
owing pursuant to Section 2.09(a)(i) or Section 2.09(a)(ii)(B), by wire
transfer in immediately available funds to the account of Buyer if payment
is owed by Seller or to the account of Seller if payment is owed by Buyer
designated by such receiving party, by notice to the other, received no
later than one (1) Business Day prior to the Final Adjustment Payment Date,
together with interest thereon at the prime rate (as reported by the WALL
STREET JOURNAL or, if not reported thereby, by another authoritative
source) as in effect from time to time from the Effective Time to the date
of actual payment, which interest shall be calculated daily on the basis of
a year of 360 days and the actual number of days elapsed, and (ii) in the
case of any amount owing to Buyer pursuant to Section 2.09(a)(ii)(A), by
wire transfer in the manner and with interest as set forth in clause (i) of
this Section 2.09(b) to the extent Buyer is unable to offset such amount
from its collection of Accounts Receivable pursuant to the second sentence
of Section 2.13(b) below.
(c) Notwithstanding the foregoing, in the event that Seller delivers
a Notice of Disagreement and either Seller or Buyer shall be required to
make a payment of any undisputed amount to the other regardless of the
resolution of the items contained in the Notice of Disagreement, then
Seller or Buyer, as applicable, shall within ten (10) Business Days of the
receipt of the Notice of Disagreement make payment to the other by wire
transfer in immediately available funds of such undisputed amount owed by
Seller or Buyer to the other, as the case may be, pending resolution of the
Notice of Disagreement together with interest thereon at the prime rate (as
reported by the WALL STREET JOURNAL or, if not reported thereby, by another
authoritative source) as in effect from time to time from the Effective
Time to the date of actual payment. Such interest shall be calculated daily
on the basis of a year of 360 days and the actual number of days elapsed.
21
(d) At Buyer's option, in the event of a downward adjustment to the
Purchase Price pursuant to Section 2.09(a), Buyer shall deliver written
notice to the Escrow Agent and Seller specifying the amount of such
downward adjustment of the Purchase Price, and the Escrow Agent shall,
within three Business Days of receipt thereof and in accordance with the
terms of the Escrow Agreement, pay such amount to Buyer out of the Escrow
Fund by wire transfer in immediately available funds. In the event that the
Escrow Fund is insufficient to cover the amount of such downward
adjustment, then the Escrow Agent shall distribute the entire Escrow Fund
to Buyer as provided above and Seller shall pay, on or prior to the same
date as the Escrow Agent distributes the Escrow Fund to Buyer, an amount to
Buyer, by wire transfer in immediately available funds, equal to the amount
of such deficiency.
SECTION 2.10. ESCROW. Prior to the Closing Date, Seller, Parent and Buyer
shall enter into an Escrow Agreement with the Escrow Agent substantially in the
form of Exhibit E (the "ESCROW AGREEMENT").
SECTION 2.11. DEPOSIT. Parent, on behalf of Buyer, irrevocably and
unconditionally agrees to fund to Seller, as of the date of this Agreement, as a
deposit on the Purchase Price to be paid by Parent, on behalf of Buyer, at
Closing, an aggregate amount no greater than $1.5 million (the "DEPOSIT")
subject to the following terms and conditions:
(a) DEDUCTION AT CLOSING. Should the Closing occur pursuant to this
Agreement, any amount drawn and outstanding on the Deposit as of the
Closing Date PLUS interest thereon at a rate equal to 6.75% from the
date(s) such amount(s) are drawn to the date of actual payment(s), which
interest shall be calculated daily on the basis of a year of 360 days and
the actual number of days elapsed (such principal amount drawn and
outstanding plus interest, the "REPAYMENT AMOUNT"), shall be deducted from
the Purchase Price upon the Closing in accordance with Section 2.07 of this
Agreement. Should the Closing occur, Parent and Buyer are released from any
obligation pursuant to this Section 2.11.
(b) APPROVED PURPOSES. The Deposit, and any portion thereof, may be
used solely for the purposes and the amounts set forth on Schedule 2.11(b)
and not any other purpose without the prior written approval of Buyer.
Without limiting the generality of the foregoing, no portion of the Deposit
may be used to pay any amounts owing (i) pursuant to any of the Excluded
Liabilities, (ii) to the Majority Stockholder or any other Affiliate of
Seller, (iii) to any member of Seller's Board of Directors or (iv) to any
investment bankers, attorneys, accountants, consultants or other agents or
advisors of Seller or any of its Affiliates, whether or not in connection
with this Agreement, the Ancillary Agreements or the transactions
contemplated hereby or thereby, in each case except to the extent set forth
on Schedule 2.11(b). The parties agree that notwithstanding that Schedule
2.11(b) identifies a total amount greater than $1.5 million, neither Buyer
nor Parent is obligated in any way or for any reason to increase the
Deposit above $1.5 million.
(c) AMOUNT IMMEDIATELY AVAILABLE. As an initial draw on the Deposit,
on the date of this Agreement, Parent, on behalf of Buyer, shall wire
transfer to Seller $444,727 in immediately available funds to an account
of Seller designated by Seller to be used solely for the purpose(s) and
amount(s) set forth on Schedule 2.11(b) in the column labeled "Signing".
Seller represents to Parent and Buyer that it does not have, as of the date
of this Agreement, sufficient monies in its possession, including monies
from accounts receivable collections, to satisfy such obligations.
(d) PRE-SCHEDULED AMOUNTS. After the initial draw pursuant to Section
2.11(c) above, each ▇▇▇▇ ▇▇▇▇▇▇ wishes to draw any portion of the Deposit
for the purpose(s) and
22
amount(s) set forth on Schedule 2.11(b), Seller must first provide to
Buyer, no earlier than five (5) Business Days and no later than two (2)
Business Days prior to the date Seller desires to draw for such purpose(s)
and such amount(s), a written statement (the "SCHEDULED AMOUNT
CERTIFICATION"), certified by the Chief Financial Officer of Seller as to
the accuracy thereof, that (i) such amount(s) are due and payable on the
date set forth next to such amount(s), (ii) Seller does not reasonably
believe it will have sufficient monies in its possession, including monies
from projected accounts receivable collections, to satisfy such obligations
and (iii) Seller shall use the Deposit drawn solely to pay such amount(s).
Upon the receipt of a Scheduled Amount Certification, Parent, on behalf of
Buyer, shall be obligated within one (1) Business Day thereof to wire
transfer in immediately available funds to an account of Seller designated
by Seller the amount of the Deposit drawn pursuant to such Scheduled Amount
Certification.
(e) OTHER AMOUNTS.
(i) Each ▇▇▇▇ ▇▇▇▇▇▇ wishes to draw any portion of the
Deposit to pay any amount or for a purpose not set forth on Schedule
2.11(b), Seller must first provide to Buyer a written statement (the
"NON-SCHEDULED AMOUNT CERTIFICATION"), certified by the Chief
Financial Officer or other senior executive officer of Seller as to
the accuracy thereof, setting forth (i) in specific detail the
obligation(s) for which Seller requests such amount, the dollar value
of such amount, the date such obligation(s) are due and payable and
reasonable supporting documentation therefor, (ii) that Seller does
not reasonably believe it will have sufficient monies in its
possession, including monies from projected accounts receivable
collections, to satisfy such obligations and (iii) that Seller shall
use the Deposit drawn solely to pay such obligation(s).
(ii) Buyer shall have no more than three (3) Business Days to
review each Non-Scheduled Amount Certification. During such period:
(i) Buyer and its independent auditors, if any, shall be permitted to
review any financial statements, working papers, trial balances,
reports, books and records and any other supporting schedules,
analyses and other documentation of Seller relating to such
Non-Scheduled Amount Certification; and (ii) Seller shall provide or
cause to be provided full access to such employees of Seller and its
independent auditors, if any, as Buyer reasonably believes is
necessary or desirable in connection with its review of such
Non-Scheduled Amount Certification. After such review period, to the
extent Buyer does not dispute any particular amount(s) or purpose(s)
set forth on such Non-Scheduled Amounts Certification, Parent, on
behalf of Buyer, shall remit within one (1) Business Day to Seller, by
wire transfer in immediately available funds to an account of Seller
designated by Seller, such undisputed amount(s).
(iii) To the extent any item or amount set forth in any
Non-Scheduled Amount Certification is related to the ongoing
operations of the Business (other than for any purpose prohibited by
clauses (ii) through (iv) set forth in Section 2.11(b) to the extent
not related to the transactions contemplated by this Agreement), Buyer
will reasonably approve such item or amount. To the extent any item or
amount set forth in any Non-Scheduled Amount Certification is not
related to the ongoing operations of the Business, Buyer may disagree
with such item or amount (including whether any item or amount
satisfies the criteria set forth in Section 2.11(b) above) in its sole
discretion. In the event of a disagreement, Buyer and Seller shall use
their commercially reasonable efforts to resolve promptly any such
dispute, and Seller shall have reasonable access to such of Buyer's
employees and/or such other information as Seller reasonably believes
is
23
necessary or desirable in connection with its review of Buyer's
disagreement. Upon the resolution thereof, Parent, on behalf of Buyer,
shall remit within one (1) Business Day to Seller, by wire transfer in
immediately available funds to an account of Seller designated by
Seller, the amount of the Deposit drawn pursuant to such Non-Scheduled
Amounts Certification agreed to by Buyer and Seller and not already
distributed to Seller pursuant to clause (ii) of this Section 2.11(e).
(f) RE-PAYMENT OF DEPOSIT. In the event that (i) this Agreement is
terminated in accordance with its terms or (ii) there is a Bankruptcy
Event, neither Parent nor Buyer shall be obligated to make available to
Seller any portion of the Deposit, and Seller shall pay or cause to be paid
the Repayment Amount to Parent no later than April 30, 2003 (the "MATURITY
DATE") by wire transfer in immediately available funds to an account
designated by Parent, provided that in no event shall the thirty (30) day
cure period set forth in clause (b)(iv) of the definition of "Bankruptcy
Event" or any other event operate to delay the Maturity Date beyond April
30, 2003.
(g) IRREVOCABLE LETTER OF CREDIT.
(i) (A) Seller hereby delivers to Parent, on behalf of Buyer,
on the date hereof an unconditional and irrevocable standby letter of
credit (the "IRREVOCABLE LETTER OF CREDIT") attached hereto as Exhibit
F in favor of Parent, on behalf of Buyer, in the total amount of
$1,591,125 from LaSalle Bank supporting the re-payment obligations of
Seller of the Repayment Amount and that expires on August 15, 2003,
unless extended to August 29, 2003 by the parties to allow Parent, on
behalf of Buyer, to comply with any notice from LaSalle Bank that a
demand by Parent for payment does not satisfy the terms and conditions
of the Irrevocable Letter of Credit, and in the case of such
extension, August 29, 2003 (such date, as may be extended, the "LOC
EXPIRATION DATE"). (B) Seller hereby consents to and agrees that if
(x) Parent in good faith presents on or before August 15, 2003 to
LaSalle Bank a demand for payment that Parent believes in good faith
complies with the terms and conditions for payment under the
Irrevocable Letter of Credit, (y) Parent receives a notice from
LaSalle Bank that Parent's demand for payment does not satisfy the
terms and conditions of the Irrevocable Letter of Credit and (z)
Parent does not believe that it has a reasonable period of time to
cure such defect, Parent may notify LaSalle Bank that Parent and
Seller agree that the expiration date of the Irrevocable Letter of
Credit must be extended from August 15, 2003 to August 29, 2003.
(ii) In the event that payment of the Repayment Amount is
triggered by Section 2.11(f) above and Seller has not paid or caused
to be paid to Parent or Buyer the Repayment Amount on or before April
30, 2003, beginning on May 1, 2003 Parent or Buyer may draw against
the Irrevocable Letter of Credit in accordance with the terms thereof
up to the amount of the Repayment Amount.
(iii) In the event that Parent, on behalf of Buyer, has been
paid all or any portion of the Repayment Amount prior to the Maturity
Date, the parties agree that the Irrevocable Letter of Credit
nevertheless shall not terminate until the LOC Expiration Date.
24
(iv) Upon the Closing, (A) Parent, on behalf of Buyer, and
Seller will send a joint notice to LaSalle Bank notifying it that the
transactions contemplated by this Agreement have closed and the
Irrevocable Letter of Credit may be cancelled and (B) Parent will
surrender the original of the Irrevocable Letter of Credit to LaSalle
Bank.
(v) All fees and expenses arising in connection with the
Irrevocable Letter of Credit shall be paid or caused to be paid by
Seller.
SECTION 2.12. PRE-CLOSING AUDIT OF COLLEGES.
(a) Buyer and Seller will designate a mutually acceptable third party
surveyor (the "COLLEGE SURVEYOR") to provide an independent, objective
calculation of the number of Colleges that are Installed. As soon as
practicable after the date of this Agreement, the College Surveyor will be
provided with a copy of Schedule 2.12(a)(i), which identifies the Colleges
that are Installed at the date of this Agreement, including such Colleges
that Buyer has visited prior to the date of this Agreement (the "PREVIOUSLY
VALIDATED COLLEGES", which are set forth on Schedule 2.12(a)(ii)). Schedule
2.12(a)(iii) includes the name, title, telephone number and e-mail address
of each of a representative of Buyer (the "BUYER REPRESENTATIVE"), a
representative of Seller (the "SELLER REPRESENTATIVE"), the contact person
at each College with which Seller primarily communicates (the "PRIMARY
COLLEGE CONTACT") and a secondary contact person (the "SECONDARY COLLEGE
CONTACT" and, with the Primary College Contact, the "COLLEGE CONTACTS") at
each College and will be updated no earlier than five (5) Business Days
prior to being provided to the College Surveyor.
(b) Beginning no earlier than the date the Seller Information
Statement (as hereinafter defined) is filed with the SEC, the College
Surveyor will contact, by phone and e-mail (with a copy to the Buyer
Representative and the Seller Representative of any outgoing or incoming
e-mails), the Primary College Contact at each College, and, if such Primary
College Contact does not respond to such phone call(s) and/or e-mail(s)
within one (1) Business Day, the College Surveyor shall contact by phone
and e-mail (with a copy to the Buyer Representative and the Seller
Representative of any outgoing or incoming e-mails) the Secondary College
Contact at such College. The College Surveyor shall call each of the
Previously Validated Colleges after all other Colleges on Schedule
2.12(a)(i) have been contacted. For purposes of this Section 2.12, the
College Surveyor shall not make, and Seller shall not cause the College
Surveyor to make, any communication with any of the Colleges without a
representative of Buyer (the "BUYER REPRESENTATIVE") and a representative
of Seller (the "SELLER REPRESENTATIVE") being a party to all such
communications, whether by phone, e-mail (as a copy) or otherwise and no
response shall be valid in the absence of such Representatives (whether by
phone or e-mail).
25
(c) When the College Surveyor contacts the appropriate College
Contact, the College Surveyor will ask such College Contact to respond in
the affirmative or negative to the following question: "Is the College
Television Network currently installed at a location on your campus?"
("COLLEGE QUESTION ONE") The College Surveyor shall record such College
Contact's response(s) along with the name and title of the College Contact
providing the information. If a College indicates a negative response to
College Question One, the College Surveyor shall notify Seller and Buyer,
and Seller and Buyer shall jointly determine whether to call such College
Contact together to verify both the response and whether such College is
Installed, PROVIDED that the response received on such joint call shall not
be valid unless Buyer is reasonably satisfied. The response of such College
on such joint call shall be the final determination as to whether such
College is Installed.
(d) If both the Primary College Contact and the Secondary College
Contact are contacted as set forth above, and no response from either has
been duly received, the Seller employee primarily responsible for such
College Contact's College shall contact the Primary College Contact
directly by phone and email. Upon direct contact, such Seller employee
shall ask such College Contact College Question One and record such College
Contact's response. As long as a Buyer Representative is a party to all
communications with such College, such response shall be the final
determination as to whether such College is Installed.
(e) If the Seller employee is unable to make direct contact with such
College Contact within two (2) Business Days of his/her initial try, Buyer
and Seller shall jointly determine whether a mutually acceptable third
Person (the cost and expense of which shall be borne equally by Buyer and
Seller) or each of the Buyer Representative (at Buyer's cost and expense)
and the Seller Representative (at Seller's cost and expense) shall
physically visit such College together to determine whether such College is
Installed; PROVIDED, HOWEVER, that Buyer and Seller agree that such a
physical visit shall not occur if by such time, the number of Installed
Colleges is verified in accordance with this Section 2.12 to be more than
95% of the number of Colleges Installed on the date of this Agreement,. In
the event of a physical visit, the determination made (whether by such
third Person or jointly by Buyer and Seller) as to such College's
Installation shall be final.
(f) Seller represents and warrants that it has not indicated, and
from and after the date of this Agreement, Seller agrees that it shall not
indicate, to any College how such College should respond to the questions
posed or to be posed pursuant to this Section 2.12.
(g) Each party shall be responsible for fifty percent (50%) of the
fees and expenses of the College Surveyor for the services to be provided
pursuant to this Section 2.12.
(h) After the conclusion of the survey conducted pursuant to this
Section 2.12 and within three (3) Business Days of the Closing Date, the
College Surveyor shall compile and provide to Buyer and Seller
simultaneously the results of such survey. The number of Colleges deemed to
be Installed at the time of Closing will be equal to the sum of (i) the
number of Colleges listed on Schedule 2.12(a)(i) and (ii) the number of
Previously Validated Colleges that each responded affirmatively to College
Question One.
SECTION 2.13. COLLECTION OF ACCOUNTS RECEIVABLE.
(a) Effective as of the Closing, Seller hereby designates Buyer as
its agent solely for purposes of collecting on behalf of Seller the
Accounts Receivable. Seller shall deliver to Buyer on the Closing Date a
complete and detailed statement of the Accounts Receivable. Buyer shall
26
use reasonable best efforts to collect the Accounts Receivable during the
period (the "COLLECTION PERIOD") beginning at the Effective Time and ending
on the last day of the sixth full calendar month following the Closing Date
consistent with Buyer's practices for collection of its accounts
receivables; PROVIDED, HOWEVER, that such efforts shall not include hiring
attorneys, additional personnel or collection agencies (or other third
parties) to collect such Accounts Receivable. Any payment received by Buyer
at any time following the Effective Time (i) from a customer of the
Business after the Effective Time that was also a customer of the Business
prior to the Effective Time and that is obligated with respect to any
Accounts Receivable and (ii) that is not designated as a payment of a
particular invoice or invoices or as a security deposit or other
prepayment, shall be presumptively applied to the accounts receivable for
such customer outstanding for the longest amount of time and, if such
accounts receivable shall be an Accounts Receivable, remitted to Seller in
accordance with Section 2.13(b); PROVIDED FURTHER, HOWEVER, that if, prior
to the Effective Time, Seller or, after the Effective Time, Seller or Buyer
received or receives a written notice of dispute from a customer with
respect to an Accounts Receivable that has not been resolved, then Buyer
shall apply any payments from such customer to such customer's oldest,
non-disputed accounts receivable, whether or not an Accounts Receivable.
Except as otherwise provided herein, Buyer shall incur no liability to
Seller for any collected or uncollected Accounts Receivable. During the
Collection Period, neither Seller nor any of its agents, without the
consent of Buyer, shall make any solicitation of any customers owing the
Accounts Receivable for collection purposes.
(b) On or before the tenth (10th) Business Day following the end of
each calendar week in the Collection Period, Buyer shall deposit into an
account identified by Seller at the time of Closing the amounts collected
during the preceding week of the Collection Period with respect to the
Accounts Receivable. Buyer shall not offset against any amounts collected
pursuant to this Section 2.13 and otherwise payable to Seller other than an
amount equal to the Estimated Deferred Revenue Amount or the Final Deferred
Revenue, whichever is higher, it being understood that, once the Final
Deferred Revenue amount is determined pursuant to Sections 2.08 and 2.09,
if Buyer has retained an amount greater than an amount equal to the Final
Deferred Revenue, Buyer shall pay Seller such excess in accordance with
Sections 2.08 and 2.09 above. Buyer shall furnish Seller with a complete
and detailed statement of the amounts collected during such calendar week
and in any prior calendar weeks during the Collection Period with respect
to the Accounts Receivable and a complete and detailed schedule of the
amount remaining outstanding under each particular account. Seller shall be
entitled during the sixty-day period following the Collection Period to
inspect and/or audit the books and records maintained by Buyer pursuant to
this Section 2.13 and shall have reasonable access to Buyer's employees in
connection with its review, in each case at its own expense, during normal
business hours and upon reasonable advance written notice.
(c) Following the expiration of the Collection Period, Buyer shall
have no further obligations under this Section 2.13, except that Buyer
shall pay over to Seller any amounts subsequently paid to it that are
designated as payment of any Accounts Receivable. Following the Collection
Period, upon notice to Buyer at least five (5) Business Days prior thereto,
Seller may pursue collections of all the Accounts Receivable, and Buyer
shall at Seller's expense deliver to Seller all files, records, notes and
any other materials relating to the Accounts Receivable and shall otherwise
reasonably cooperate with Seller for the purpose of collecting any
outstanding Accounts Receivable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
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Seller represents and warrants to Parent and Buyer as follows:
SECTION 3.01. CORPORATE EXISTENCE AND POWER. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all requisite powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted except for such licenses, authorizations, permits,
consents and approvals the absence of which would not have or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Seller is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where such qualification is
necessary, except for those jurisdictions where failure to be so qualified would
not have or would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Seller has heretofore delivered to Buyer
true and complete copies of its organizational documents as currently in effect.
SECTION 3.02. CORPORATE AUTHORIZATION.
(a) The execution and delivery by Seller of this Agreement and each
Ancillary Agreement, the performance by Seller of its obligations hereunder
and thereunder and the consummation by Seller of the transactions
contemplated hereby and thereby are within Seller's powers and have been
duly authorized by all requisite corporate action on the part of Seller,
other than the adoption of this Agreement by the affirmative vote or
consent of a majority of (i) the voting power of the outstanding shares of
Seller Common Stock and shares of Seller Preferred Stock entitled to vote
thereon (voting together as a single class), (ii) the outstanding shares of
Seller Series A Preferred Stock and (iii) the outstanding shares of Seller
Series B Preferred Stock.
(b) This Agreement has been, and at the Closing each Ancillary
Agreement to which Seller will be a party will be, duly executed and
delivered by Seller. This Agreement (assuming due authorization, execution
and delivery by Parent and Buyer) constitutes, and each Ancillary Agreement
will constitute when executed and delivered by Seller, the legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with
its terms.
(c) (i) the Special Committee has been duly authorized and
constituted, (ii) the Special Committee, at a meeting thereof duly called
and held on September 17, 2002 (A) determined that the transactions
contemplated by this Agreement are expedient and in the best interests of
Seller and its Stockholders, (B) determined that this Agreement and the
transactions contemplated by this Agreement should be approved and declared
advisable and (C) resolved to recommend that the Board of Directors of
Seller approve and declare the advisability of this Agreement and the
transactions contemplated by this Agreement, and (iii) the Board of
Directors of Seller, at a meeting thereof duly called and held on September
17, 2002, by majority vote, in consideration of the advice of the Special
Committee, (A) determined that the transactions contemplated by this
Agreement are expedient and in the best interests of Seller and its
Stockholders, (B) approved and declared advisable this Agreement and the
transactions contemplated by this Agreement, (C) resolved to recommend that
the Stockholders approve the transactions contemplated by this Agreement
and adopt this Agreement and (D) established September 23, 2002 as the
record date (the "RECORD DATE") for the taking of all action necessary to
seek approval of the transactions contemplated by this Agreement and
adoption of this Agreement by the requisite vote of the Stockholders.
SECTION 3.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Seller of this Agreement and each Ancillary Agreement to which
Seller shall be party and the consummation of the transactions contemplated
hereby and thereby require no action by or in respect of, or filing with or
notification to, any Governmental Authority other than (a) compliance with any
28
applicable requirements of the 1934 Act and (b) any such action by or in respect
of or filing with any Governmental Authority as to which the failure to take,
make or obtain would not have or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 3.04. NONCONTRAVENTION.
(a) Except as set forth in Schedule 3.04, the execution, delivery and
performance of this Agreement do not, and the execution, delivery and
performance of each Ancillary Agreement by Seller will not, and the
consummation of the transactions contemplated hereby and thereby do not and
will not (i) violate, conflict with or result in the breach of any
provision of the certificate of incorporation or by-laws of Seller, (ii)
assuming compliance with the matters referred to in Section 3.03, conflict
with or violate any Law or Governmental Order applicable to Seller or the
Business, (iii) require any consent or other action by or notification to
any Person under, constitute a default under, or give to any Person any
rights of termination, amendment, acceleration or cancellation of any right
or obligation of Seller or to a loss of any benefit relating to the
Business to which Seller is entitled under, any provision of any agreement
or other instrument binding upon the Business or Seller or by which any of
the assets thereof is or may be bound or (iv) result in the creation or
imposition of any Lien on any asset of Seller or the Business other than
Permitted Liens, except, in the cases of clauses (i), (ii) and (iii), for
any such violations, consents, actions, defaults, rights or losses as would
not have or would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.
(b) None of the restrictions on business combinations contained in
any antitakeover or similar statute or regulation (including the provisions
of Section 203 of the Delaware Law, as to which the Board of Directors of
Seller has taken all action necessary to exempt the transactions
contemplated hereby therefrom) applies or purports to apply to the Voting
Agreement, this Agreement or the transactions contemplated hereby or
thereby.
(c) Seller has not entered into, and its Board of Directors has not
adopted or authorized the adoption of, a shareholder rights or similar
agreement.
SECTION 3.05. OWNERSHIP OF EQUITY.
(a) The authorized capital stock of Seller consists of 50,000,000
shares of Seller Common Stock, 10,023,334 shares of undesignated preferred
stock, 2,510,000 shares of Series A Preferred Stock, par value $.001 per
share (the "SELLER SERIES A PREFERRED STOCK"), and 266,666 shares of Series
B Preferred Stock, par value $.001 per share (the "SELLER SERIES B
PREFERRED STOCK, and together with Seller Series A Preferred Stock, the
"SELLER PREFERRED STOCK").
(b) The Majority Stockholder owns a majority of the Seller Common
Stock and all of the Seller Preferred Stock, all of which have been validly
issued and are fully paid and nonassessable, and has sufficient voting
power to approve each of the transactions contemplated by this Agreement
and the Ancillary Agreements for purposes of the requirements of the 1934
Act and Delaware Law.
SECTION 3.06. CONTRACTS.
(a) Except for the Contracts disclosed on Schedule 3.06(a), with
respect to the Business, Seller is not a party to or bound by:
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(i) (A) any agreement for the sale of advertising or other
purposes for cash ("ADVERTISING AGREEMENTS") and (B) any agreement
with any College other than any College set forth on Schedule
2.12(a)(i);
(ii) any agreement with a term of more than three (3) months
from the date of this Agreement;
(iii) as of the date of this Agreement, any agreement involving
payments or receipts over the remaining term of such agreement (other
than Advertising Agreements) of (A) $15,000 or more with respect to
any single agreement or (B) $100,000 or more in the aggregate for all
agreements not required to be disclosed under clause (a)(iii)(A) of
this Section 3.06;
(iv) any agreement for Program Rights;
(v) any agreement involving the purchase, sale or lease of
real property other than the St. Louis Lease and the leases for each
of the Office Spaces;
(vi) any lease, sublease or similar agreement under which
Seller is a lessor or sublessor of, or makes available for use to any
third party, any portion of the Real Property or any premises
otherwise occupied by Seller;
(vii) any lease for personal property providing for annual
rentals of $30,000 or more;
(viii) any agreement for the purchase or license of, or
provision by Seller of, materials, supplies, goods, equipment or other
assets providing for payments by Seller of $15,000 or more;
(ix) any agreement relating to the acquisition or disposition
of any business (whether by merger, sale of stock, sale of assets or
otherwise);
(x) any partnership, joint venture or other similar agreement
or arrangement;
(xi) any agreement that is a Capital Lease Obligation;
(xii) any agreement pursuant to which Seller has, directly or
indirectly, made any loan, extension of credit or capital contribution
to, or investment in, any third party;
(xiii) any agreement relating to Indebtedness of Seller or the
deferred purchase price of property (in either case, whether incurred,
assumed, guaranteed or secured by any asset);
(xiv) any agreement for any mortgage, pledge or security
agreement, deed of trust or other instrument granting a Lien (other
than Permitted Liens) upon any asset or property of the Business;
(xv) any agency, dealer, sales representative, marketing or
other similar agreement;
30
(xvi) any agreement that limits the freedom of Seller to
compete in any line of business or with any Person or in any area or
to own, operate, sell, transfer, pledge or otherwise dispose of or
encumber any Purchased Asset or that would so limit the freedom of
Buyer or any of its Affiliates upon or as a result of the consummation
of the transactions contemplated by this Agreement;
(xvii) any agreement for any guarantee or indemnification
obligation that may bind Buyer or any of its Affiliates upon or as a
result of the consummation of the transactions contemplated by this
Agreement;
(xviii) any agreement with or for the benefit of any Affiliate of
Seller or any stockholder thereof;
(xix) any agreement involving compensation to any employee or
consultant;
(xx) any agreement involving any labor agreement or collective
bargaining agreement; or
(xxi) any other agreement, commitment, arrangement or plan not
made in the ordinary course of business that is material to the
Business.
(b) Except as disclosed on Schedule 3.06(b), no material default
(with the lapse of time or giving of a notice or both) on the part of
Seller and, to the Knowledge of Seller, any other party thereto, exists
under any of the Contracts identified on Schedule 3.06(a)(iii) and Seller
has not received any notice of termination, cancellation, breach or default
under any such Contract.
(c) Except as disclosed on Schedule 3.06(c), each Contract included
as a Purchased Asset is in full force and effect and constitutes the legal
and binding obligation of, and is legally enforceable against, Seller in
accordance with its terms and, to the Knowledge of Seller, is legally
enforceable against the other parties thereto. Each Contract identified on
Schedule 3.06(a)(iii) shall continue in full force and effect without
penalty or other adverse consequence.
(d) Seller has previously furnished to Buyer prior to the date of
this Agreement true and complete copies of all written Contracts listed on
Schedule 3.06(a), including all amendments, modifications and supplements
thereto, and any assignments thereof, and Schedule 3.06(d) contains
complete and accurate summaries of the material provisions of all oral and
pending Contracts.
(e) There are no leasing commissions or similar payments due, arising
out of, resulting from or with respect to the Leased Premises that are owed
by Seller or any of its Affiliates.
(f) Seller represents that the amounts set forth on Schedule 2.11(b)
are due and payable on or before the dates set forth thereon to the
creditors named thereon.
SECTION 3.07. INTANGIBLE PROPERTY.
(a) There are no claims, demands or proceedings instituted, pending
or, to the Knowledge of Seller, threatened by any third party pertaining to
or challenging Seller's right to use any of the Intangible Property or that
any Intangible Property or any services provided,
31
processes used or products manufactured, produced or used or sold by Seller
do or may conflict with, or infringe or otherwise violate the rights of
third parties.
(b) Except as set forth on Schedule 3.07(b), there is no trademark,
trade name, domain name, patent or copyright that Seller is using in the
Business without license to do so, including licenses from ASCAP, BMI,
SESAC or other collecting society licenses.
(c) Except for any Intangible Property included in the Excluded
Assets, the Intangible Property includes all Copyrights, Patents and
Trademarks necessary for or used in the Business.
(d) Except as set forth on Schedule 3.07(d), all material Intangible
Property has been duly applied for or registered in, filed with or issued
by, as applicable, the appropriate Governmental Authority where such
registration, filing or issuance is necessary for the Business, and all
such filings, registrations and issuances are valid and in good standing.
(e) All material Copyrights, Trademarks and Domain Names that are
registered or filed are described, listed or set forth on Schedule
3.07(e)(1), 3.07(e)(2) and 3.07(e)(3), respectively, all of which are
transferable to Buyer without the consent of any third party, including any
Governmental Authority, and, other than the "CTN" and "College Television"
Trademarks pursuant to the agreements set forth on Schedule 3.07(e)(2),
none of such Intangible Property has been licensed to any third party. None
of the Patents is material to the Business.
(f) None of the Intangible Property is the subject of a judicial or
administrative finding, opinion or office action or has been adjudged
invalid, unenforceable or unregistrable in whole or in part. Each
Intangible Property owned by Seller is valid and enforceable.
SECTION 3.08. REAL PROPERTY.
(a) Seller has previously furnished to Buyer a true and complete copy
of the St. Louis Lease, including all amendments, modifications and
supplements thereto, and any assignments thereof. The rental and other fees
set forth in the St. Louis Lease are the actual amounts being paid, and
there are no separate agreements or understandings with respect to the
same. Seller enjoys peaceful and quiet possession of the premises leased or
licensed under the St. Louis Lease (the "LEASED PREMISES").
(b) To the Knowledge of Seller, there are no condemnation
proceedings, eminent domain proceedings, lawsuits or legal proceedings of
any kind pending or, to the best Knowledge of Seller, threatened, in
connection with the Leased Premises.
(c) The Leased Premises are occupied under a valid and current
occupancy permit or the like. There are no facts known to Seller that would
prevent any portion of the Leased Premises from being occupied by Buyer
after the Closing in substantially the same manner as before or as
currently contemplated.
(d) Seller has paid, or shall have paid prior to Closing, all amounts
owing to any architect, contractor, subcontractor or materialman for labor
or materials performed, rendered or supplied to or in connection with the
Leased Premises. There are no construction, architect, engineering and
other agreements relating to uncompleted construction projects entered into
by Seller in connection with the Leased Premises. All contributions
required to have been paid by a
32
landlord or Seller in connection with the construction of, installation of
equipment on, or modification to, the Leased Premises have been paid.
(e) Except as set forth on Schedule 3.08(e), there are no parties in
possession of any portion of the Leased Premises other than Seller, whether
as lessees, sublessees, licensees, or tenants at will.
SECTION 3.09. TITLE TO PURCHASED ASSETS; LIENS. Except as set forth on
Schedule 3.09(a)(1), Seller has good, valid and marketable title to or valid
leasehold interests in all of the Purchased Assets, free and clear of any and
all Liens (other than Permitted Liens and Liens that will be discharged by
Seller on or prior to the Closing Date). Except as set forth on Schedule
3.09(a)(2), Seller has complete and unrestricted power and unqualified right to
sell, transfer, convey and deliver the Purchased Assets to Buyer without penalty
or other adverse consequences. At the Closing, Buyer will have acquired valid
title to, or a valid leasehold interest in, each of the Purchased Assets, free
and clear of all Liens (other than Permitted Liens) and without incurring any
penalty or other adverse consequence.
SECTION 3.10. SUFFICIENCY OF ASSETS. The Purchased Assets constitute all
of the property, assets and rights (other than the Excluded Assets) forming a
part of, used, held or intended to be used in the Business and constitute all of
the properties, assets and rights necessary for the continued operation of the
Business as currently conducted.
SECTION 3.11. CONDITION OF EQUIPMENT. The Equipment, in the aggregate in
all material respects, is in working condition and repair, ordinary wear and
tear excepted, and is not in need of imminent repair or replacement, and those
items of Equipment constituting transmitting equipment are operating in
accordance with their intended use. All operating systems and computer software
are (A) operating satisfactorily for the task to which they are being applied
and in accordance with all vendor warranties and vendor-supplied user
documentation, (B) reasonably capable of handling existing and currently
contemplated work volumes and (C) not in imminent need of material upgrade,
enhancement, repair or replacement.
SECTION 3.12. SEC FILINGS.
(a) Seller has filed all forms, reports and documents required to be
filed by it with the SEC since December 31, 1999, and has heretofore
furnished to Buyer, in the form filed with the SEC, (i) its annual reports
on Form 10-K for the fiscal years ended December 31, 1999, 2000 and 2001,
(ii) its quarterly reports on Form 10-Q for its fiscal quarters ended March
31, 2002 and June 30, 2002, (iii) all of its proxy or information
statements relating to meetings of, or actions taken without a meeting by,
Seller's Stockholders (whether annual or special) held since December 31,
2000 and (iv) all of its other forms, reports, statements, schedules and
registration statements filed by Seller with the SEC since December 31,
2000 (collectively, the "FILED SEC DOCUMENTS").
(b) As of its filing date (or, if amended or superceded by a filing
prior to the date hereof, on the date of such filing), each Filed SEC
Document did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
33
SECTION 3.13. FINANCIAL INFORMATION.
(a) True and complete copies of the audited balance sheets as at
December 31, 1999, 2000 and 2001 and the related audited statements of
income and cash flows for each of the years ended December 31, 2000 and
2001 of Seller and its Subsidiaries, together with all related notes and
schedules thereto, accompanied by the reports thereon of Seller's
independent accountants (collectively, the "AUDITED FINANCIAL STATEMENTS"),
and the unaudited interim balance sheet as at June 30, 2002 and July 31,
2002, the related unaudited interim consolidated statement of income for
the six month and seventh month periods ending on such dates and the
related unaudited interim consolidated statement of cash flows for the six
month period ending on June 30, 2002 of Seller (collectively, the
"UNAUDITED FINANCIAL STATEMENTS" and with the Audited Financial
Statements, the "FINANCIAL STATEMENTS"), together with all related
schedules thereto, are all attached as Schedule 3.13(a).
(b) The Financial Statements (A) are in accordance with the books and
records of Seller and its Subsidiaries, (B) have been prepared in
accordance with GAAP (except as may be indicated in the notes thereto, it
being understood that the Unaudited Financial Statements do not contain
footnotes), (C) fairly present in all material respects the financial
condition of Seller and its Subsidiaries as at the dates indicated and the
results of its operations and cash flows for the periods then ended
(subject to normal year-end adjustments in the case of the Unaudited
Financial Statements) and (D) do not reflect any (i) unusual or
infrequently occurring items or (ii) related party transactions, in each
case, except as set forth on Schedule 3.13(b).
(c) The books and records of Seller and its Subsidiaries (A) reflect
all items of income and expense and all assets and liabilities required to
be reflected therein in accordance with GAAP except as set forth on
Schedule 3.13(c) and (B) are in all material respects complete and correct.
(d) Seller has previously furnished to Buyer a true and complete copy
of the 2002 and 2003 annual budgets received by Buyer on April 2, 2002 for
the Business setting forth in reasonable detail all monthly budgeted
expenditures for the Business for such periods, including all budgeted
capital expenditures, as set forth in full on Schedule 3.13(d). The amounts
set forth therein were prepared as of April 2002, and Seller makes no
representation as to the achievability of such amounts.
SECTION 3.14. INTERCOMPANY ACCOUNTS. Schedule 3.14(a) contains a complete
statement of all intercompany balances as of the Balance Sheet Date between
Seller and its Affiliates. Except as disclosed in Schedule 3.14(b), since the
Balance Sheet Date, there has not been any accrual of liability or other
transaction by or between Seller or the Business and any Affiliate of Seller.
SECTION 3.15. ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as disclosed in Schedule 3.15(a), since the Balance Sheet
Date, the Business has been conducted in the ordinary course consistent
with past practice.
(b) Since the Balance Sheet Date, except as set forth in Schedule
3.15(b) or as contemplated by this Agreement, there has not been:
34
(i) any event, occurrence, development or state of
circumstances or facts that, individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect;
(ii) any incurrence, assumption or guarantee by Seller of any
Indebtedness with respect to the Business;
(iii) any making of any loan, advance or capital contributions
to or investment in any Person by Seller;
(iv) any damage, destruction or loss, whether or not covered
by insurance, with respect to the property and assets of the Business
having a replacement cost of more than $10,000 for any single loss or
$100,000 for all such losses;
(v) (A) through the date of this Agreement (i) any
transaction or commitment made, or any contract or agreement entered
into, by Seller relating to the Business or Purchased Assets
(including the acquisition or disposition of any assets) other than in
the ordinary course of business consistent with past practices or (ii)
any amendment, termination or relinquishment by Seller of any Contract
or other right; and (B) after the date of this Agreement and through
the Closing Date (x) any transaction or commitment made, or any
contract or agreement entered into, by Seller relating to the Business
or Purchased Assets (including the acquisition or disposition of any
assets) other than in the ordinary course of business consistent with
past practices or (y) any amendment, termination or relinquishment by
Seller of any Contract or other right, in each case other than with
respect to the Excluded Assets and Excluded Liabilities, to the extent
the Purchased Assets are not or could not reasonably be expected to be
adversely affected thereby and the Assumed Liabilities are not or
could not reasonably be expected to be increased thereby;
(vi) the creation or other incurrence by Seller of any Lien on
any Purchased Asset other than Permitted Liens;
(vii) any (A) establishment of any bonus, insurance,
employment, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including any grant of any stock
options, stock appreciation rights, performance awards or restricted
stock awards), stock purchase or other employee benefit plan (or any
amendment to any such existing agreement), (B) grant of any severance
or termination pay to any officer of Seller or Network Employee, or
(C) increase or change to the rate or nature of the compensation
(including wages, salaries and bonuses) that is paid or payable or to
become payable to any Person employed by the Business, except in each
case, as may be required by Law or existing contracts or applicable
collective bargaining agreements, copies of which have previously been
furnished to Buyer, other than such increases or changes that in the
aggregate do not exceed $30,000;
(viii) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any Network Employee, which Network
Employees were not subject to a collective bargaining agreement at the
Balance Sheet Date, or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to any Network
Employee;
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(ix) any change in any method of accounting or accounting
practice by Seller with respect to the Business except for any such
change after the date hereof required by reason of a concurrent change
in U.S. generally accepted accounting principles;
(x) any change in the method or practice of compiling data
for, entering data into or maintaining the College Affiliate Database.
(xi) (A) through the date of this Agreement, any failure to
pay any creditor any material amount owed to such creditor when due;
and (B) after the date of this Agreement and through the Closing Date,
any failure to pay any creditor any material amount owed to such
creditor when due other than with respect to the Excluded Assets and
Excluded Liabilities, to the extent the Purchased Assets are not or
could not reasonably be expected to be adversely affected thereby and
the Assumed Liabilities are not or could not reasonably be expected to
be increased thereby; or
(xii) any agreement or commitment to do anything set forth in
this Section 3.15(b).
SECTION 3.16. ABSENCE OF LITIGATION. Except as set forth on Schedule 3.16,
there is no Action (or any basis therefor) pending or, to the Knowledge of
Seller, threatened against, affecting or relating to the Business, any Purchased
Asset or Seller or any of its properties or assets before any Governmental
Authority. Seller is not, and none of its properties or assets is, under or
subject to any Governmental Order that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, or could affect the
legality, validity or enforceability of this Agreement, any Ancillary Agreement
or the transactions contemplated hereby or thereby or seeks to delay or prevent
the consummation of the transactions contemplated by this Agreement.
SECTION 3.17. COMPLIANCE WITH LAWS.
(a) Seller is not in material violation of, and has not since January
1, 2001 materially violated, and is not under investigation with respect to
and has not been threatened to be charged with or given notice of any
material violation of, any Law or Governmental Order applicable to Seller,
the Purchased Assets or the Business.
(b) Schedule 3.17(b) sets forth a brief description of each
Governmental Order applicable to Seller as it may relate to the Business,
the Business or any Purchased Asset.
SECTION 3.18. EMPLOYEES; LABOR MATTERS.
(a) Schedule 3.18(a) sets forth a true and complete list, dated as of
a date no more than five (5) days prior to the date of this Agreement, of
all individuals employed by the Business, including the names, date of
hire, current rate of compensation, employment status (i.e., active,
disabled, on authorized leave and reason therefor), department, title,
location, whether covered by a collective bargaining agreement and whether
full-time, part-time or per-diem.
(b) The Network Employees are not covered or bound by any labor
agreement or collective bargaining agreement, and no collective bargaining
agreement or other labor agreement is currently being discussed or
negotiated with respect to the Network Employees. Seller is in material
compliance with all currently applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours, and is not engaged in any
36
unfair labor practice, except for such compliance the failure of which or
the engagement of which would not have or would not reasonably be expected
to have a Material Adverse Effect. There is no unfair labor practice
complaint pending or, to the Knowledge of Seller, threatened against Seller
before the National Labor Relations Board or any comparable state agency.
No strike, work stoppage or other labor dispute relating to the Business is
pending or, to the Knowledge of Seller, threatened, and, to the Knowledge
of Seller, there is no activity involving any Network Employee seeking to
certify a collective bargaining unit or engaging in any other
organizational activity.
SECTION 3.19. EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.19(a) identifies each Employee Plan. Seller has
previously furnished to Buyer copies of the Employee Plans (and, if
applicable, related trust agreements) and all amendments thereto and
written interpretations thereof together with the three most recent annual
reports (Form 5500 including, if applicable, Schedule B thereto) and the
most recent actuarial valuation report prepared in connection with any
Employee Plan. Seller has provided Buyer with complete age, salary, service
and related data as of September 16, 2002 for all employees covered under
any Employee Plan.
(b) None of Seller and any of its ERISA Affiliates currently
maintains or has ever maintained or contributed to any Employee Plan that
is (i) a Multiemployer Plan, (ii) a Title IV Plan or (iii) maintained in
connection with any trust described in Section 501(c)(9) of the Code. The
assets of Seller are not now, nor will they after the passage of time be,
subject to any Lien imposed under Code Section 412(n) by reason of a
failure of Seller to make timely installments or other payments required
under Code Section 412.
(c) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the
period since its adoption; each trust created under any such Plan is exempt
from Tax under Section 501(a) of the Code and has been so exempt since its
creation. Seller has previously provided Buyer with the most recent
determination letter of the IRS relating to each such Employee Plan. Except
as would not have or would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect, each Employee Plan has been
maintained in substantial compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules
and regulations, including but not limited to ERISA and the Code.
(d) Seller does not have any current or projected liability in
respect of post-employment or post-retirement health or medical or life
insurance benefits for retired, former or current employees of Seller,
except as required to avoid excise tax under Section 4980B of the Code. No
condition exists that would prevent Seller from amending or terminating any
Employee Plan providing health or medical benefits in respect of any active
employee of the Business other than limitations imposed under the terms of
a collective bargaining agreement.
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(e) All contributions and payments accrued under each Employee Plan,
determined in accordance with prior funding and accrual practices, as
adjusted to include proportional accruals for the period ending on the
Closing Date, will be discharged and paid on or prior to the Closing Date
except to the extent retained by Seller. There has been no amendment to,
written interpretation of or announcement (whether or not written) by
Seller or any of its Affiliates relating to, or change in employee
participation or coverage under, any Employee Plan that would increase
materially the expense of maintaining such Employee Plan above the level of
the expense incurred in respect thereof for the most recent fiscal year
ended prior to the date hereof.
(f) There is no contract, plan or arrangement (written or otherwise)
covering any employee or former employee of the Business that, individually
or collectively, could give rise to the payment of any amount that would
not be deductible pursuant to the terms of Section 280G of the Code.
(g) Except as disclosed on Schedule 3.19(g), no employee or former
employee of the Business will become entitled to any bonus, retirement,
severance, job security or similar benefit or enhanced such benefit
(including acceleration of vesting or exercise of an incentive award) as a
result of the transactions contemplated hereby.
SECTION 3.20. ENVIRONMENTAL MATTERS.
(a) Except as disclosed on Schedule 3.20(a):
(i) no notice, demand, request for information, citation,
summons or order has been received, no complaint has been filed, no
penalty has been assessed and no investigation or Action or review is
pending or, to the Knowledge of Seller, threatened by any Governmental
Authority or other Person with respect to any matters relating to
Seller or the Business and relating to or arising out of any
Environmental Law;
(ii) there are no liabilities of or relating to Seller or the
Business of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, arising under or
relating to any Environmental Law, and, to the Knowledge of Seller,
there are no facts, conditions, situations or set of circumstances
that could reasonably be expected to result in or be the basis for any
such liability;
(iii) (A) to the Knowledge of Seller, no Hazardous Material,
incinerator, sump, surface impoundment, lagoon, landfill, septic,
wastewater treatment or other disposal system or underground storage
tank (active or inactive) is or has been present at, on or under the
Leased Premises or any property now or previously leased by the
Business or Seller; and (B) no Hazardous Material, incinerator, sump,
surface impoundment, lagoon, landfill, septic, wastewater treatment or
other disposal system or underground storage tank (active or inactive)
is or has been present at, on or under any property now or previously
owned by the Business or Seller;
(iv) (A) to the Knowledge of Seller, no Hazardous Material has
been Released at, on or under any property now or previously leased by
Seller or the Business; and (B) no Hazardous Material has been
Released at, on or under any property now or previously owned by
Seller or the Business;
(v) (A) to the Knowledge of Seller, no property now or
previously leased by Seller or the Business is listed or proposed for
listing, on the National Priorities List
38
promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or
on any similar federal, state or local list of sites requiring
investigation or clean-up; and (B) no property now or previously owned
by Seller or the Business nor any property to which Seller or the
Business has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Material is listed or, to the
Knowledge of Seller, proposed for listing, on the National Priorities
List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA)
or on any similar federal, state or local list of sites requiring
investigation or clean-up;
(vi) both the Business and Seller are in material compliance
with all Environmental Laws and have obtained and are in material
compliance with all Environmental Permits; such Environmental Permits
are valid and in full force and effect and will not be terminated or
impaired or become terminable, in whole or in part, as a result of the
transactions contemplated hereby;
(vii) all property that is or has previously been occupied by
Seller or the Business is or was, respectively, either owned or leased
by Seller or the Business.
(b) There has been no environmental investigation, study, audit,
test, review or other analysis conducted of which Seller has Knowledge in
relation to the Business or any property or facility now or previously
owned or leased by the Business that has not been previously delivered to
Buyer.
(c) With respect to any facility or real property that is owned,
leased or operated by Seller and that is located in the State of
Connecticut, none is subject to the Connecticut Responsible Property
Transfer Law, IC 13-7-22.5 et seq.
(d) With respect to any facility or real property that is owned,
leased or operated by Seller and that is located in the State of New
Jersey, none is subject to the New Jersey Industrial Site Recovery Act,
NJSA 13:1K-6 et seq.
SECTION 3.21. SELLER INFORMATION STATEMENT. The information statement or
the proxy statement, as applicable, of Seller to be filed with the SEC in
connection with this Agreement and the transactions contemplated hereby (the
"SELLER INFORMATION STATEMENT") and any amendments or supplements thereto will,
when filed, comply as to form in all material respects with the applicable
requirements of the 1934 Act. At the time the Seller Information Statement or
any amendment or supplement thereto is first mailed to the Stockholders, and at
the Effective Time, the Seller Information Statement, as supplemented or
amended, if applicable, will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties contained in this Section 3.21
will not apply to information supplied in writing by Parent or Buyer concerning
Parent or Buyer specifically for inclusion in the Seller Information Statement.
SECTION 3.22. INSURANCE. Seller has furnished to Buyer a list of, and true
and complete copies of, all insurance policies and fidelity bonds relating to
the Purchased Assets, the business, operations, employees, officers or directors
of Seller or the Business. There is no claim by or on behalf of Seller or the
Business pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds or in respect of which such underwriters have reserved their rights.
Seller does not know of any threatened termination of, premium increase with
respect to, or material alteration of coverage under, any of such policies or
bonds. Except as disclosed in
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Schedule 3.22, after the Closing Seller and the Business shall continue to have
coverage under such policies and bonds with respect to events occurring prior to
the Closing.
SECTION 3.23. TAXES. (a) Seller has timely filed or been included in, or,
except as disclosed in Schedule 3.23, will timely file or be included in, all
material Tax Returns required to be filed by it or in which it is to be included
with respect to Taxes for any period ending on or before the Closing Date other
than pursuant to valid extensions; (b) all material Taxes that are due with
respect to Seller have been paid except to the extent such Taxes are being
contested in good faith; (c) no deficiency for any material amount of Tax has
been asserted or assessed by a Tax authority against Seller or for which Seller
may be liable; (d) there are no judicial proceedings with respect to material
Taxes due from Seller; and (e) there is no contract, agreement, plan or
arrangement covering any Person that, individually or collectively, could give
rise to the payment of any amount that would not be deductible by reason of
Section 280G of the Code.
SECTION 3.24. BROKERS. There is no broker, finder, investment banker or
other intermediary who or that has been retained by or is authorized to act on
behalf of Seller who or that might be entitled to any fee or commission from
Buyer or any of its Affiliates in connection with the transactions contemplated
by this Agreement or the Ancillary Agreements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
As to Sections 4.01, 4.02, 4.03, 4.04, 4.06 and 4.08, Buyer and Parent
jointly and severally represent and warrant to Seller, and as to the remaining
sections, Buyer represents and warrants to Seller, in each case, as follows:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. Each of Parent and Buyer is a
corporation duly incorporated, validly existing and in good standing under the
Laws of the State of Delaware and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted, except for any such licenses, authorizations,
permits, consents and approvals the absence of which would not have or would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the ability of Buyer and Parent to perform its respective
obligations under this Agreement or the Ancillary Agreements.
SECTION 4.02. CORPORATE AUTHORIZATION.
(a) The execution and delivery of this Agreement and the Ancillary
Agreements by Parent and Buyer, the performance by Parent and Buyer of
their respective obligations hereunder and thereunder and the consummation
by Parent and Buyer of the transactions contemplated hereby and thereby are
within such party's corporate powers and have been duly authorized by all
requisite corporate action on the part of Parent and Buyer, respectively.
(b) This Agreement has been, and at the Closing each Ancillary
Agreement to which Parent or Buyer will be a party will be, duly executed
and delivered by Buyer and Parent, as the case may be. This Agreement
(assuming due authorization, execution and delivery by Seller) constitutes,
and each Ancillary Agreement to which Parent or Buyer will be a party will
constitute when executed and delivered by such party, the legal, valid and
binding obligation of such party.
SECTION 4.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance of this Agreement by Parent and Buyer and each Ancillary Agreement
to which Parent or Buyer shall be a party and the consummation of the
transactions contemplated hereby and thereby by such party require no
40
action by or in respect of, or filing with or notification to, any Governmental
Authority other than any such action by or in respect of or filing with any
Governmental Authority as to which the failure to take, make or obtain would not
have or would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the ability of Parent or Buyer to
perform its respective obligations under this Agreement or the Ancillary
Agreements.
SECTION 4.04. NONCONTRAVENTION. The execution, delivery and performance of
this Agreement do not, and the execution, delivery and performance of each
Ancillary Agreement by Parent and Buyer will not, and the consummation of the
transactions contemplated hereby and thereby do not and will not (a) violate or
conflict with (i) as to Parent, the Amended Certificate of Incorporation or
By-laws of Parent and (ii) as to Buyer, the Certificate of Incorporation or
By-laws of Buyer, (b) assuming compliance with the matters referred to in
Section 4.03, conflict with or violate any Law or Governmental Order applicable
to Parent or Buyer, (c) require any consent or other action by or notification
to any Person under, constitute a default under, or give to any Person any
rights of termination, amendment, acceleration or cancellation of any right or
obligation of Parent or Buyer or to a loss of any benefit to which Parent or
Buyer is entitled under, any provision of any agreement or other instrument
binding upon Parent or Buyer or by which any of the assets of Parent or Buyer is
or may be bound or (d) result in the creation or imposition of any Lien on any
asset of Parent or Buyer other than Permitted Liens, except, in the cases of
clauses (b), (c) and (d), for any such violations, consents, actions, defaults,
rights or losses as would not have or would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the ability of
Parent or Buyer to perform its respective obligations under this Agreement or
the Ancillary Agreements.
SECTION 4.05. ABSENCE OF LITIGATION. There are no Actions pending or, to
the knowledge of Parent or Buyer, threatened against Parent or Buyer before any
Governmental Authority that in any manner challenges or seeks to prevent,
enjoin, alter or delay materially the transactions contemplated by this
Agreement.
SECTION 4.06. SELLER INFORMATION STATEMENT. None of the information
provided in writing by Parent or Buyer concerning Parent or Buyer specifically
for inclusion in the Seller Information Statement or any amendment or supplement
thereto, at the time the Seller Information Statement or any amendment or
supplement thereto when filed, when first mailed to the Stockholders and at the
Effective Time will contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
SECTION 4.07. OPERATIONS OF BUYER. Buyer is a direct wholly owned
subsidiary of Parent, was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement and the Ancillary Agreements and has
engaged in no business activity other than in connection with the performance of
its obligations hereunder.
SECTION 4.08. BROKERS. There is no broker, finder, investment banker or
other intermediary who or that has been retained by or is authorized to act on
behalf of Parent or Buyer who or that might be entitled to any fee or commission
from either Seller or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements.
ARTICLE V
COVENANTS OF SELLER
SECTION 5.01. OPERATIONS PENDING CLOSING.
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(a) Seller hereby covenants and agrees that, from the date of this
Agreement and prior to the Closing, unless otherwise expressly contemplated
by this Agreement, Seller shall:
(i) operate the Business in the usual and ordinary course
consistent with past practices (other than with respect to the
Excluded Assets and Excluded Liabilities, to the extent the Purchased
Assets are not or could not reasonably be expected to be adversely
affected thereby and the Assumed Liabilities are not or could not
reasonably be expected to be increased thereby);
(ii) use its reasonable best efforts to preserve substantially
intact its business organization, maintain its rights and franchises,
retain the services of its principal officers and key employees and
maintain its relationships with its principal customers, suppliers and
other third Persons with which it has business relations; and
(iii) use its reasonable best efforts to maintain and keep its
Equipment, properties and other assets in working repair and condition
as at present, ordinary wear and tear excepted, and replace with a
substantially equivalent asset of substantially equivalent quality or
utility any of the Equipment, properties and other assets that shall
be worn out, lost, stolen or destroyed.
(b) Without limiting the generality of the matters set forth in
Section 5.01(a), from the date of this Agreement and prior to the Closing,
Seller shall and shall cause the Business to, except with Buyer's prior
written consent:
(i) not enter into any new agreements for Program Rights or
more than twenty (20) Contracts for the Installation of the Network at
any College;
(ii) (A) air Programming that is of the same substance and
style as is consistent with past practice (it being understood that
Seller may not be able to air Programming pursuant to the ESPN
Agreement if such agreement is terminated by ESPN Enterprises, Inc.
prior to the Closing Date) and (B) not make payments on Program Rights
agreements and other agreements except in accordance with this
Agreement;
(iii) not enter into any new Tradeout Agreement relating to the
Business that will not be fully performed prior to the Closing without
Buyer's prior written consent;
(iv) (A) promptly notify Buyer of any attempted or actual
collective bargaining organizing activity with respect to any Network
Employees and (B) not enter into or permit any Person to enter into
any collective bargaining agreement applicable to any Network
Employees that provides that it shall be binding upon any "successor"
employer of such Network Employees;
(v) follow the Business' usual and customary policy with
respect to (A) extending credit for sales of commercial time on the
Network and (B) collecting accounts receivable relating to the
Business arising from such extension of credit;
42
(vi) not make any change in any method of accounting or
accounting practice utilized in the preparation of the Financial
Statements, except for any such change required by reason of a
concurrent change in generally accepted accounting principles, which,
for the avoidance of doubt, shall not result in any change in GAAP;
(vii) not acquire an amount of assets material to the Business,
individually or in the aggregate, from any other Person;
(viii) not sell, lease, license or otherwise dispose of any
asset or property relating to the Business except pursuant to existing
contracts or commitments and as provided in Section 5.10(a); PROVIDED
that Buyer's consent shall not be unreasonably withheld to the extent
such sale, lease, license or other disposition relates to the Excluded
Assets and Excluded Liabilities, to the extent the Purchased Assets
are not or could not reasonably be expected to be adversely affected
thereby and the Assumed Liabilities are not or could not reasonably be
expected to be increased thereby; PROVIDED FURTHER that such consent
is not required for the sale, lease, license or other disposal of the
Atlanta Office Space and the furniture, fixtures and other assets set
forth on Schedule 2.01(a);
(ix) not enter into or agree to enter into any agreement to
sell, purchase or encumber any parcel of real property;
(x) not enter into any agreements or transactions on behalf
of the Business with any Affiliate of Seller and not make any
distributions of any amounts to any Affiliate of Seller or to any
investment bankers, attorneys, accountants, consultants or other
agents or advisors to which any amount is owed by or on behalf of
Seller or any of its Affiliates;
(xi) (A) not hire or terminate any Person; (B) not increase or
otherwise change the rate or nature of, or prepay, the compensation
(including wages, salaries, commissions and bonuses) that is paid or
payable to any Person employed by the Business, except pursuant to
existing compensation and fringe benefit plans, practices and
arrangements that have been furnished (in the case of such plans) or
disclosed (in the case of such practices and arrangements) to Buyer
prior to the date of this Agreement; (C) not enter into, renew or
allow the renewal of or entering into, any employment or consulting
agreement or other contract or arrangement with respect to the
performance of personal services for the Business; and (D) not
increase or otherwise change the rate or nature of severance or other
termination benefits that are paid or payable to any Person employed
by the Business.
(xii) not adopt any Employee Plan or other pension, profit
sharing, deferred compensation or similar plan, program or trust on
behalf of the Network Employees or modify the existing Plans insofar
as they relate to the Network Employees;
(xiii) not make any capital expenditure;
(xiv) except as set forth on Schedule 5.01(b)(xiv) or Schedule
2.11(b), not make any cash expenditure greater than $3,000 without
Buyer's prior written consent;
43
(xv) utilize the Deposit only in accordance with the
provisions of Section 2.11 of this Agreement;
(xvi) not do any of the things that would constitute a breach
of Section 3.15(b);
(xvii) (A) not enter into any agreement or Contract (except as
set forth herein) and (B) not change, amend, terminate or otherwise
modify any Contract in any material respect except for those Contracts
either that terminate or expire prior to the Effective Time by their
own terms or that are Excluded Assets, to the extent the Purchased
Assets are not or could not reasonably be expected to be adversely
affected thereby and the Assumed Liabilities are not or could not
reasonably be expected to be increased thereby; and
(xviii) except as set forth on Schedule 5.01(b)(xviii), not
agree, commit or arrange to do any of the things set forth in clauses
(b)(ii)(B), (iii), (iv)(B) or (vi) through (xvii) of this Section
5.01(b);
SECTION 5.02. ACCESS TO INFORMATION.
(a) From the date hereof until the Closing Date, upon reasonable
notice, Seller shall cause each of its Affiliates, officers, directors,
employees, agents, representatives, accountants, counsel and financial
advisors to (i) give Buyer, its counsel, financial advisors, auditors and
other authorized representatives full access during normal business hours
to the offices, properties, books and records of the Business, (ii) furnish
to Buyer, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information
relating to the Business as such Persons may from time to time reasonably
request and (iii) instruct the officers, directors, employees, agents,
representatives, accountants, counsel and financial advisors of Seller or
any of its Affiliates to cooperate with Buyer in its investigation of the
Business; PROVIDED, HOWEVER, that any investigation pursuant to this
Section 5.02 shall be conducted in such manner as not to unreasonably
interfere with the Business and shall be subject to the terms of the
Confidentiality Agreement. No investigation by Buyer or other information
received by Buyer shall operate as a waiver or otherwise affect any
representation, warranty or agreement given or made by either Seller or the
Majority Stockholder hereunder or the Voting Agreement, respectively.
(b) On and after the Closing Date, Seller and its Affiliates will
hold, and will use their reasonable best efforts to cause their respective
officers, directors, employees, accountants, counsel, consultants, advisors
and agents to hold, in confidence, unless compelled to disclose by judicial
or administrative process or by other requirements of law, all confidential
documents and information concerning the Buyer, Buyer's Affiliates and the
Business.
(c) On and after the Closing Date, Seller will, for a period of seven
(7) years after the Closing Date (i) retain the books of account, financial
and other records (including accountants' work papers) of Seller that
relate to the Business and the Purchased Assets for periods prior to the
Closing in a manner reasonably consistent with prior practice of Seller or
send such books and records to Buyer, who shall retain such books and
records for such period and (ii) afford promptly to Buyer and its agents
reasonable access to its books of account, financial and other records
(including accountant's work papers), information, employees and auditors
to the extent necessary or useful for Buyer in connection with any audit,
investigation, dispute or litigation or
44
any other reasonable business purpose relating to the Business; PROVIDED
that any such access by Buyer shall not unreasonably interfere with the
conduct of the businesses or operations of Seller.
SECTION 5.03. PHASE I REPORT. For the thirty-day period beginning on the
date hereof, Seller shall cooperate with Buyer so that Buyer can promptly
obtain (at Buyer's expense) a Phase I Environmental Site Assessment Report
prepared consistent with ASTM Standard 1527-00 concerning the Leased Premises
from an environmental engineering firm acceptable to Buyer that shall confirm,
in a manner reasonably satisfactory to Buyer, the non-existence of any Hazardous
Materials on or about the Leased Premises or any violation of Environmental
Laws. Any audit report beyond a Phase I Report shall be conducted by Buyer only
with the prior written consent of Seller.
SECTION 5.04. FINANCIAL REPORTS.
(a) Within thirty (30) days after the end of each month following the
date of this Agreement until the Closing Date, Seller shall furnish Buyer
with a copy of the monthly unaudited financial reports for the Business
(including balance sheet and income statement) for each such month and the
fiscal year to the end of such month, including a comparison to the
appropriate prior year period, PROVIDED that Seller shall furnish Buyer
with quarterly financial reports within forty-five (45) days following the
end of the relevant quarter. All of the foregoing financial statements
shall comply with the requirements concerning financial statements set
forth in Section 3.13(b) concerning "Unaudited Financial Statements" and
shall be deemed to be "Unaudited Financial Statements" for all purposes of
such Section.
(b) Between the date of this Agreement and the Closing Date, Seller
shall deliver to Buyer the pacing reports relating to the Business no later
than two (2) Business Days after each such pacing report is prepared.
SECTION 5.05. EMPLOYEES. Seller shall deliver to Buyer an updated list,
dated as of a date no more than ten (10) days prior to the Closing Date, of all
Network Employees, including the names, date of hire, current rate of
compensation, employment status (i.e., active, disabled, on leave and reason
therefor), location, department, title, whether covered by a collective
bargaining agreement and whether full-time, part-time or per-diem.
SECTION 5.06. ESTOPPEL CERTIFICATE. Seller shall use reasonable best
efforts to obtain and deliver promptly to Buyer prior to the Closing Date an
estoppel certificate, in a form acceptable to Buyer, executed by the landlord
under the St. Louis Lease.
SECTION 5.07. RISK OF LOSS.
(a) Upon the occurrence prior to the Closing of any casualty loss,
damage or destruction material to the operation of the Business to the
extent such lost, damaged or destructed item is included as a Purchased
Asset, it being understood that loss of or damage or destruction to, a
location at which the Network is Installed will not be deemed material in
the aggregate unless more than thirty-six (36) such locations are lost or
have suffered damage or destruction, Seller shall promptly give Buyer
written notice setting forth in detail the extent of such loss, damage or
destruction and the cause thereof if known. Seller shall use its reasonable
best efforts to commence promptly and thereafter to proceed diligently to
repair or replace any such lost, damaged or destroyed property, whether
such loss, damage or destruction occurs prior to, on or after the date of
this Agreement but prior to the Closing Date, such efforts to include the
payment of any applicable insurance policy deductibles. However, in the
event that such repair or replacement is not fully completed prior to the
Closing Date, or the loss, damage or destruction
45
causes the Network to fail to transmit for forty-eight (48) consecutive
hours or more, then Buyer may elect to (i) consummate the transactions
contemplated hereby on the Closing Date, in which event Seller shall assign
to Buyer the portion of the insurance proceeds, if any, not previously
expended by Seller to repair or replace the damaged or destroyed property,
(ii) terminate this Agreement, or (iii) delay the Closing Date until up to
fifteen (15) calendar days after Seller gives written notice to Buyer of
completion of the repair or replacement of the damaged or destroyed
property, PROVIDED that if Seller is unable through its reasonable best
efforts to complete such repair or replacement within sixty (60) days after
the casualty, Buyer may then terminate this Agreement.
(b) If the Closing does occur as contemplated under Section
5.07(a)(i), the Purchase Price shall not be adjusted upward by reason of
such assignment of the insurance proceeds to Buyer.
SECTION 5.08. STOCKHOLDER APPROVAL.
(a) In accordance with the Delaware Law and Seller's certificate of
incorporation and bylaws, Seller shall take all action necessary to seek
approval of the transactions contemplated by this Agreement and adoption of
this Agreement by the requisite vote of the Stockholders, immediately after
the Record Date, by submitting to the Majority Stockholder an Action by
Written Consent in the form attached hereto as Exhibit G.
(b) (i) The Board of Directors of Seller shall recommend by majority
vote that the Majority Stockholder vote in favor of the approval of the
transactions contemplated by this Agreement and the adoption of this
Agreement (the "BOARD RECOMMENDATION"); and (ii) the Board of Directors of
Seller shall not withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Buyer, the Board
Recommendation.
(c) Notwithstanding anything to the contrary contained in this
Agreement, the obligation of Seller to take all action necessary to seek
approval of the transactions contemplated by this Agreement and the
adoption of this Agreement by the requisite vote of the Stockholders as
provided in this Section 5.08 shall not be limited or otherwise affected by
any change, event, occurrence, development or state of circumstances or
facts, including any withdrawal, amendment or modification of the Board
Recommendation. Seller shall not submit, or propose to submit, to the vote
of its Stockholders any agreement or transaction other than this Agreement,
the Ancillary Agreements and the transactions contemplated hereby and
thereby.
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SECTION 5.09. SELLER INFORMATION STATEMENT.
(a) Seller shall (i) promptly, after execution of this Agreement, but
in no event later than ten (10) Business Days after the date of this
Agreement, prepare and file with the SEC, use its reasonable best efforts
to have cleared by the SEC and thereafter mail to its Stockholders as
promptly as practicable but in no event later than two (2) Business Days
after receiving clearance by the SEC the Seller Information Statement
notifying the Stockholders of the approval of the transactions contemplated
by this Agreement and adoption of this Agreement by the Majority
Stockholder Written Consent and (ii) prior to filing with the SEC, provide
Parent and Buyer a reasonable opportunity to review and comment on the
Seller Information Statement, as may be amended or supplemented from time
to time, which comments shall not be unreasonably delayed so as to cause
Seller to be unable to comply with the time deadline set forth in this
Section 5.09(a) so long as Buyer is provided a reasonable opportunity for
review.
(b) Seller shall advise Parent and Buyer, promptly after it receives
notice thereof (but in no event later than one (1) Business Day
thereafter), that the SEC has requested any amendment or supplement to the
Seller Information Statement or any additional information relating
thereto, or has otherwise provided any comments thereto, or that the SEC
has cleared the Seller Information Statement and provide to Parent, Buyer
and their counsel any copies of correspondence received from the SEC.
Seller shall not file any amendment or supplement to the Seller Information
Statement or other correspondence related thereto without the prior
approval of Parent or Buyer as to any information contained therein that
may reflect upon the transactions contemplated hereby, Parent, Buyer, any
of their Affiliates or the businesses of Parent, Buyer or any of their
Affiliates (such approval not to be unreasonably withheld or delayed so
long as Parent or Buyer is provided a reasonable opportunity for review and
Seller engages in good faith discussions with respect thereto).
(c) If, at any time prior to the Effective Time, any event or
circumstance relating to Seller or the Business, or their respective
officers or directors, should be discovered by Seller, which, pursuant to
the 1934 Act, should be set forth in an amendment or a supplement to the
Seller Information Statement, Seller shall promptly inform Parent and Buyer
thereof but in no event later than one (1) Business Day after the discovery
thereof.
(d) To the extent required by the 1934 Act, the Seller Information
Statement shall include the Board Recommendation.
SECTION 5.10. TRANSITION SERVICES.
(a) As to each of the Office Spaces other than the
New York Office
Space, for a period of 120 days after the Closing Date, at Buyer's option,
Seller shall provide or cause to be provided, to the extent approved by the
respective lessor, to Buyer full access to each of the Office Spaces in the
manner the Business currently enjoys such access for a monthly rental
amount equal to $45,218.40, in the case of the Atlanta Office Space, and
$2,721.87, in the case of the Chicago Office Space, in each case (A) unless
Seller obtains a sublease or can terminate such lease for such Office
Space, in which case Buyer shall vacate upon thirty (30) days' written
notice and (B) as such monthly rental amounts may be prorated in the event
Buyer vacates such premise(s) before the end of any month.
(b) As to the
New York Office Space, for a period beginning on the
Closing Date and ending on the earlier of (i) the date Buyer elects to
vacate such premises (upon thirty (30)
47
days' notice) and (ii) 120 days after the Closing Date, at Buyer's option,
Seller shall provide or cause to be provided to Buyer full access to such
Office Space in the manner the Business currently enjoys such access for a
monthly rental amount equal to $23,932.07, as may be prorated in the event
Buyer vacates such premises before the end of any month.
SECTION 5.11. EXCLUDED LIABILITIES. On and after the Effective Time,
Seller shall pay and discharge the Excluded Liabilities as and when they become
due and payable (taking into account any terms or conditions that Seller may
renegotiate with respect thereto other than with respect to any Contract with a
College).
SECTION 5.12. USE OF PROGRAM LIBRARY CONTENT. Seller shall not, on or
after the date of this Agreement, sell, transfer, dispose, license or otherwise
allow any third Person to air any content with respect to which Seller has
exclusive rights included in the Program Library.
SECTION 5.13. EXTENSIONS OF OR AMENDMENTS TO CONTRACTS. Seller shall use
its reasonable best efforts to extend in writing the term of each of the
▇▇▇▇▇▇▇▇ Agreement and the Transponder Use Agreement dated April 30, 1998
between Seller and Public Broadcasting Service through December 31, 2003. Seller
shall use its reasonable best efforts to amend the Agreement between Seller and
Time Warner Cable of
New York City dated as of April 10, 2001 to provide that
Time Warner consents to the assignment thereof to Buyer effective as of the
Closing.
ARTICLE VI
COVENANTS OF PARENT AND BUYER
SECTION 6.01. ACCESS TO INFORMATION. In order to facilitate the resolution
of any claims made against or incurred by Seller prior to the Effective Time,
for a period of seven years after the Closing Date, upon reasonable notice,
Buyer will afford promptly to Seller and its agents reasonable access to its
properties, books and records relating to the Business in connection exclusively
with any period ending on or before the Closing Date and to employees of Buyer
to the extent reasonably necessary to establish facts related to such period;
PROVIDED that any such access shall not unreasonably interfere with the conduct
of the businesses or operations of Parent or Buyer.
SECTION 6.02. SELLER INFORMATION STATEMENT. Each of Parent and Buyer shall
furnish such information concerning Parent and Buyer, respectively, as Seller
may reasonably request in connection with the preparation and clearance by the
SEC of the Seller Information Statement.
ARTICLE VII
COVENANTS OF PARENT, BUYER AND SELLER
SECTION 7.01. COMMERCIALLY REASONABLE EFFORTS; FURTHER ASSURANCES.
(a) Subject to the terms and conditions of this Agreement, Parent,
Buyer and Seller shall use their respective commercially reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done,
all things reasonably necessary or desirable under applicable Law to
consummate the transactions contemplated by this Agreement and the
Ancillary Agreements; PROVIDED that notwithstanding anything to the
contrary contained in this Agreement, none of Parent, Buyer and any of its
or their Affiliates or stockholders, directors or officers shall be
required to sell or otherwise dispose of, hold separate (through the
establishment of a trust or
48
otherwise), divest itself of, or limit the ownership or operations of all
or any portion of its businesses, assets or operations or any assets or
business to be acquired hereunder.
(b) Parent, Buyer and Seller agree to execute and deliver such other
documents, certificates, agreements and other writings and to take such
other actions as may be necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement and
to vest in Buyer good and marketable title to the Purchased Assets.
SECTION 7.02. CERTAIN FILINGS; FURTHER ACTIONS. (a) Parent, Buyer and
Seller shall cooperate with one another in determining whether any action by or
in respect of, or filing with, any Governmental Authority is required in
connection with the consummation of the transactions contemplated by this
Agreement and in taking such actions or making any such filings, furnishing
information required in connection therewith and (b) Seller shall use its
reasonable best efforts in determining whether any actions, consents, approvals
or waivers are required to be obtained from parties to any material Contracts
and in seeking timely to obtain any such actions, consents, approvals or
waivers; PROVIDED, HOWEVER, that, in each case, none of Parent, Buyer and Seller
shall be required to pay consideration to obtain any such consent, approval or
waiver, and Seller shall not agree to or permit the amendment of any Contract
relating to the Business in order to obtain any consent or approval.
SECTION 7.03. CONTROL PRIOR TO CLOSING. The parties acknowledge and agree
that, for the purposes of any applicable Law, this Agreement, including the
covenants in Article V, are not intended to and shall not be construed to
transfer control of the Business from Seller to Buyer prior to the Effective
Time.
SECTION 7.04. PUBLIC ANNOUNCEMENTS. The parties shall agree on the terms
of the press releases that announce the transactions contemplated hereby, which
shall be substantially in the form attached hereto as Exhibit H, and thereafter
Seller agrees not to issue, and to cause its Affiliates not to issue, any press
release or make any public announcement with respect to this Agreement or the
transactions contemplated hereby, including any press releases or public
statements the making of which may be required by applicable Law or any listing
agreement with any national securities exchange (a "REQUIRED ANNOUNCEMENT"),
without Parent's prior consent; PROVIDED, HOWEVER, that as to any Required
Announcement, Parent agrees, so long as it is provided a reasonable opportunity
for review and Seller and its Affiliates engage in good faith discussions with
respect thereto, that it shall provide its consent in a timely fashion.
SECTION 7.05. NOTICES OF CERTAIN EVENTS. Each party hereto shall promptly
notify each other party hereto of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement;
(c) in the case of Seller, any Action commenced or, to the Knowledge
of Seller, threatened against, relating to or involving or otherwise
affecting the Business that, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section 3.16 or
that relates to the consummation of the transactions contemplated by this
Agreement; and
49
(d) in the case of Parent and Buyer, any Action commenced or, to its
knowledge, threatened against, relating to or involving or otherwise
affecting Parent or Buyer that, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section 4.05 or
that relates to the consummation of the transactions contemplated by this
Agreement.
ARTICLE VIII
PENSION, EMPLOYEE AND UNION MATTERS
SECTION 8.01. EMPLOYMENT.
(a) Immediately prior to the Effective Time, Seller shall terminate
all Network Employees, except those employees whose employment Contracts
are set forth in Schedule 2.01(c), in accordance with applicable Laws and,
before the Closing, shall provide any required notices in a timely manner
in connection therewith. Seller shall indemnify and hold Buyer harmless
from and against all costs and liabilities resulting from the termination
of such Network Employees.
(b) As of the Effective Time, Buyer shall offer employment to any
Network Employee unless such Network Employee has committed a wrongful act
and may, at its option, offer employment to any of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇. For the purposes
hereof, all such Employees who accept Buyer's offer of employment are
hereinafter referred to as the "TRANSFERRED EMPLOYEES". For purposes of
eligibility and vesting in any of Buyer's benefit plans, program or
arrangements for which a Transferred Employee may be eligible, Buyer agrees
that each Transferred Employee shall be credited as of the Closing Date
with service equal to the service credited to such employee for such
purposes under the comparable plan, program or arrangement of Seller.
Notwithstanding the foregoing, Buyer shall assume all written Contracts for
employment with respect to Network Employees that are set forth on Schedule
2.01(c), other than any Contract relating to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇. Buyer shall
provide salary or wages and benefits that in the aggregate are comparable
to that provided by Seller immediately prior to the Effective Time, subject
to any enrollment periods, exclusions or limitations as are generally
applied by Buyer and /or the pertinent employee benefit plan.
(c) Seller agrees to use reasonable best efforts to facilitate the
transition of the Transferred Employees to employment with Buyer as of the
Effective Time. Such reasonable efforts shall include affording Buyer
reasonable opportunities prior to the Closing Date to (i) review employment
records (other than medical and individual performance or evaluation
records), as permitted by Law, of the Transferred Employees, (ii) discuss
the terms and conditions of employment with Buyer to take effect as of the
Closing Date and (iii) present information and distribute to the
Transferred Employees forms and documents relating to employment with
Buyer.
(d) Except as prohibited by Law, after the Closing, Seller shall
promptly deliver to Buyer originals or copies of all personnel files and
records (including medical records, if any, but excluding benefit plan
records) related to the Transferred Employees, and Seller shall have
reasonable continuing access to such files and records thereafter.
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(e) Seller agrees to waive in writing prior to the Closing Date any
non-competition or similar restrictions in any employment agreement for
▇▇▇▇▇▇ ▇▇▇▇▇ to allow ▇▇. ▇▇▇▇▇ to be employed by Buyer or any of its
Affiliates as an employee or consultant.
SECTION 8.02. SAVINGS PLAN. Buyer shall cause one or more tax-qualified
defined contribution plans established or maintained by Buyer ("BUYER'S 401(k)
PLAN") to accept rollover contributions from the Transferred Employees of any
account balances distributed to them by the College Television Network 401k
("SELLER'S 401(k) Plan"). The distribution and rollover described herein shall
comply with applicable Law, and each party shall make all filings and take any
actions required of such party by applicable Law in connection therewith.
Buyer's 401(k) Plan shall credit Transferred Employees with service credit for
eligibility and vesting purposes for service recognized for the equivalent
purposes under Seller's 401(k) Plan.
SECTION 8.03. EMPLOYEE WELFARE PLANS. Seller shall be responsible for: (x)
claims for medical and dental benefits, disability benefits, life insurance
benefits and workers compensation that are incurred prior to the Effective Time;
and (y) claims related to "COBRA" coverage attributable to "qualifying events"
occurring prior to the Effective Time, in each case with respect to any
Transferred Employees and their beneficiaries and dependents. Buyer shall be
solely responsible for: (i) medical and dental benefits, disability benefits,
life insurance benefits and workers compensation benefits for claims incurred
from and after the Effective Time; and (ii) claims relating to "COBRA" coverage
attributable to "qualifying events" occurring from and after the Effective Time,
in each case with respect to any Transferred Employees and their beneficiaries
and dependents. For purposes of the foregoing, a medical/dental claim shall be
considered incurred when the medical services are rendered or medical supplies
are provided, and not when the condition arose. A life insurance or workers
compensation claim shall be considered incurred prior to a particular date if
the event giving rise to the claim occurs prior to such date. A disability claim
shall be deemed to be incurred when the employee is declared disabled under the
terms of the applicable disability plan. Transferred Employees shall be given
credit under Buyer's welfare plans for deductibles and out-of-pocket expenses
incurred while employed by Seller in the relevant plan year.
SECTION 8.04. VACATION. Buyer will assume all liabilities for unpaid,
accrued vacation of each Transferred Employee as of the Closing Date to the
extent such accrued vacation does not exceed the vacation to which such
Transferred Employee would be entitled under the terms of Buyer's vacation
policy as currently in effect, giving credit under Buyer's vacation policy for
service with Seller, and shall permit Transferred Employees to use their
vacation entitlement accrued as of the Closing Date until six (6) months from
the Closing Date or the end of the calendar year during which the Closing
occurs, whichever is later. Any additional unpaid accrued vacation to which any
Transferred Employee is entitled shall be retired in consideration of payment
thereof by Seller to such Transferred Employee on the Closing Date. Service with
both Seller and Buyer shall be taken into account in determining Transferred
Employees' vacation entitlement under Buyer's vacation policy after the Closing
Date.
SECTION 8.05. SEVERANCE LIABILITY. Seller agrees to pay and be responsible
for all liability, cost or expense for severance and like costs under Seller's
severance pay plans, policies or arrangements that arise from or relate to the
termination of employment of any Network Employee by Seller prior to and
including the Effective Time. Buyer agrees to pay and be responsible for all
liability, cost or expense for severance under Buyer's severance pay plans,
policies or arrangements that arise from or relate to the termination of any
Transferred Employee by Buyer after the Effective Time. Buyer agrees to pay and
be responsible for all liability, cost, expense and sanctions resulting from any
failure to comply with the WARN Act, and regulations thereunder, that are
attributable to actions taken by Buyer on or after the Effective Time.
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SECTION 8.06. NON-SOLICITATION BY SELLER.
(a) Seller agrees that for a period of one (1) year after the Closing
Date, it will not, and will cause its Affiliates and each of its and their
officers, directors and employees not to, directly or indirectly, solicit
for employment or employ, either as an employee or a consultant, any
employee of the Business who was a Network Employee as of the Closing Date,
unless such person has been terminated by Buyer; PROVIDED that nothing
contained in this Section 8.07(a) shall prohibit Seller or any of its
officers, directors or employees from (i) general solicitation of employees
over any medium not specifically targeted toward the Business or the
Transferred Employees, including without limitation, newspaper, television,
radio and similar forms of mass media or (ii) employing ▇▇▇▇▇▇▇ ▇▇▇▇▇,
either as an employee or consultant, for twenty (20%) of his time.
(b) The parties acknowledge and agree that the restrictions contained
in Section 8.07(a) are a reasonable and necessary protection of the
immediate interests of Buyer, and any violation of these restrictions would
cause substantial injury to Buyer and Buyer would not have entered into
this Agreement without receiving the additional consideration offered by
Seller binding itself to these restrictions. In the event of a breach or a
threatened breach by Seller or any of its Affiliates of these restrictions,
Buyer shall be entitled to apply to any court of competent jurisdiction for
an injunction restraining such Person from such breach or threatened breach
(without the necessity of proving the inadequacy of money damages as a
remedy); PROVIDED, HOWEVER, that the right to apply for injunctive relief
shall not be construed as prohibiting Buyer from pursuing any other
available remedies for such breach or threatened breach.
ARTICLE IX
TAX MATTERS
SECTION 9.01. BULK SALES. Seller and Buyer hereby waive compliance with
the provisions of any applicable bulk sales law. Seller hereby agrees to
indemnify, defend and hold Buyer and its Affiliates harmless from and against
any and all Losses (as defined below) arising out of or relating to claims
asserted against Buyer pursuant to any applicable bulk sales law with respect to
the Purchased Assets.
SECTION 9.02. TRANSFER TAXES. All Transfer Taxes arising out of or in
connection with the transactions effected pursuant to this Agreement shall be
divided equally between Buyer and Seller. The party that has the primary
responsibility under applicable law for the collection and/or remittance of any
particular Transfer Tax shall prepare and file the relevant Tax Return and
notify the other party in writing of the Transfer Taxes shown on such Tax
Return. The other party shall pay the first party an amount equal to one-half of
such Transfer Taxes in immediately available funds no later than the date that
is the later of (a) five (5) Business Days after the date of such notice or (b)
two (2) Business Days prior to the due date for such Transfer Taxes. The first
party shall promptly remit the Transfer Taxes to the proper Governmental
Authority.
ARTICLE X
CONDITIONS TO CLOSING
SECTION 10.01. CONDITIONS TO OBLIGATIONS OF PARENT, BUYER AND SELLER. The
obligations of Parent, Buyer and Seller to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or waiver, at
or prior to the Closing, of each of the following conditions:
52
(a) No provision of any applicable Law and no Governmental Order
shall prohibit the consummation of the Closing or make the transactions
contemplated by this Agreement illegal.
(b) There shall not be pending any Action challenging this Agreement
or the transactions contemplated hereby or seeking to restrain, alter,
prohibit or otherwise materially interfere with the Closing by any Person
before any Governmental Authority.
(c) This Agreement and the transactions contemplated by this
Agreement and the Ancillary Agreements shall have been approved and adopted
by the requisite affirmative vote or consent of the Stockholders required
by the 1934 Act, Delaware Law and Seller's certificate of incorporation.
SECTION 10.02. CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment or waiver, at or prior to the Closing, of each of the
following further conditions:
(a) (i) Each of Parent and Buyer shall have performed and complied
with in all material respects all of its respective obligations hereunder
required to be performed by it at or prior to the Closing Date; (ii) the
representations and warranties of each of Parent and Buyer contained in
this Agreement and in any certificate or other writing delivered by such
party pursuant hereto (A) that are qualified by materiality or Material
Adverse Effect shall be true and correct and (B) that are not qualified by
materiality or Material Adverse Effect shall be true and correct in all
material respects, in each case at and as of the Closing Date as if made at
and as of such date (except that representations and warranties that by
their terms speak as of the date of this Agreement or some other date need
be true and correct, or true and correct in all material respects, as the
case may be, only as of such specified date); and (iii) Seller shall have
received a certificate signed by a senior executive officer of each of
Parent and Buyer to the foregoing effect.
(b) Seller shall have received, in form and substance reasonably
satisfactory to Seller, (i) a true and complete copy, certified by the
Secretary or Assistant Secretary of Buyer, of the resolutions duly and
validly adopted by the Board of Directors of Buyer evidencing its
authorization of the execution and delivery of this Agreement and
consummation of the transactions contemplated hereby and (ii) a certificate
of the Secretary or Assistant Secretary of each of Parent and Buyer
certifying the names and signatures of the officers of such party
authorized to sign this Agreement, the Ancillary Agreements to which it is
a party and the other documents to be delivered hereunder and thereunder.
(c) Seller shall have received all of the documents and instruments
contemplated to be delivered by Parent and Buyer pursuant to Section 2.07.
SECTION 10.03. CONDITIONS TO OBLIGATIONS OF PARENT AND BUYER. The
obligations of Parent and Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following further conditions:
(a) (i) Seller, as to this Agreement, and each of the Majority
Stockholder and ▇▇▇▇▇▇ ▇▇▇▇▇, as to the Voting Agreement, shall have
performed and complied with in all material respects all of their
respective obligations thereunder required to be performed by such Person
at or prior to the Closing Date; (ii)(A) the representations and warranties
of Seller contained in this Agreement and in any certificate or other
writing delivered by Seller pursuant hereto or thereto,
53
(B) the representations and warranties of the Majority Stockholder or
▇▇▇▇▇▇ ▇▇▇▇▇ contained in the Voting Agreement and in any certificate or
other writing delivered by the Majority Stockholder and ▇▇▇▇▇▇ ▇▇▇▇▇
pursuant thereto, in each case, (x) that are qualified by materiality or
Material Adverse Effect shall be true and correct and (y) that are not
qualified by materiality or Material Adverse Effect shall be true and
correct in all material respects, in each case at and as of the Closing
Date as if made at and as of such date (except that representations and
warranties that by their terms speak as of the date of this Agreement or
some other date need be true and correct, or true and correct in all
material respects, as the case may be, only as of such specified date); and
(iii) Buyer shall have received a certificate signed by a senior executive
officer of each of Seller, the Majority Stockholder and ▇▇▇▇▇▇ ▇▇▇▇▇ to the
foregoing effect, solely to the extent the foregoing relates to such
Person as described above.
(b) All actions, notifications and filings shall have been made and
all consents, authorizations or approvals from any Governmental Authority
referred to in Section 3.03 shall have been received in form and substance
reasonably satisfactory to Buyer, and no such consent, authorization or
approval shall have been revoked.
(c) Parent and Buyer shall have received an opinion of Lord, Bissell
and Brook, counsel to Seller, dated the Closing Date and such other
appropriate counsel, in form and substance reasonably satisfactory to
Buyer, with respect to the matters relating to Seller specified in Sections
3.01, 3.02, 3.03, 3.04 and 3.05.
(d) Parent and Buyer shall have received, in form and substance
reasonably satisfactory to Parent and Buyer, (i) a true and complete copy,
certified by the Secretary or Assistant Secretary of each of Seller and the
Majority Stockholder, of the resolutions duly and validly adopted by the
Board of Directors of such party evidencing its authorization of the
execution and delivery of this Agreement and the Voting Agreement,
respectively, and consummation of the transactions contemplated hereby and
thereby and (ii) a certificate of the Secretary or Assistant Secretary of
each of Seller and the Majority Stockholder certifying the names and
signatures of the officers of such party authorized to sign, as to Seller,
this Agreement and the Ancillary Agreements to which it is a party, as to
the Majority Stockholder, the Voting Agreement, and the other documents to
be delivered hereunder and thereunder.
(e) Seller shall have received all Material Consents, each in form
and substance reasonably satisfactory to Buyer.
(f) (A) Seller shall have received, in a form reasonably satisfactory
to Buyer, effective as of the Effective Time, an agreement from LaSalle
Bank to release all Liens on the Purchased Assets granted in favor of the
administrative agent under the LaSalle Credit Agreement and related
documents upon the receipt of funds in an amount equal to the LaSalle
Amount; and (B) Buyer shall have received copies of all pay-off letters for
all existing secured Indebtedness of Seller or the Business.
(g) (A) Seller shall have received, in a form reasonably satisfactory
to Buyer, effective as of the Effective Time, an agreement from the
Majority Stockholder to release all Liens on the Purchased Assets granted
in favor of the Majority Stockholder under the Bridge Note upon the receipt
of funds in an amount equal to the Bridge Note Amount; and (B) Buyer shall
have received copies of all pay-off letters for all existing secured
Indebtedness of Seller or the Business.
54
(h) The Escrow Agent and Seller shall have entered into the Escrow
Agreement.
(i) In accordance with the survey conducted pursuant to Section 2.12
of this Agreement, at least 95% of the Colleges Installed on the date of
this Agreement are Installed on the Closing Date.
(j) Buyer shall have received, in respect of each facility or Real
Property owned, leased or operated by Seller with respect to the Purchased
Assets and located in the State of Connecticut or the State of New Jersey,
a Responsible Property Transfer Law Certification and an Industrial Site
Recovery Act Certification from Seller, each of which shall be in the form
attached hereto as Exhibits I and J, respectively, and neither of which
shall impose upon Buyer any obligations or liabilities to which Buyer shall
not have consented in writing prior to the Closing.
(k) Buyer shall have received (A) Trademark Assignments for each of
the Trademarks listed on Schedule 3.07(e)(2) other than "Link - the
Interactive College Magazine" documenting, in separate Trademark Assignment
forms, the accurate chain of title from the currently named registrant as
set forth on such Schedule to Seller (if not already Seller), or any other
party in the chain of title, to LaSalle Bank to Buyer and (B) any other
documents Buyer may reasonably request to to give effect to and record the
assignment of such Trademarks to Buyer.
(l) Seller shall have obtained the consent of the landlord to the
New
York Office Space for the purpose set forth in Section 5.10(b) of this
Agreement.
(m) Buyer shall have received all the documents and instruments
contemplated to be delivered by Seller pursuant to Section 2.07.
ARTICLE XI
TERMINATION
SECTION 11.01. TERMINATION. This Agreement may be terminated at any time
prior to the Closing as follows:
(a) by the mutual written consent of Seller, Buyer and Parent;
(b) by Seller or Buyer:
(i) if the Closing shall not have occurred on or before
December 31, 2002 (the "TERMINATION DATE") or such other date
contemplated by Section 5.07 of this Agreement; PROVIDED, HOWEVER,
that the right to terminate this Agreement under this Section
11.01(b)(i) shall be suspended as to any party whose breach,
misrepresentation or failure to fulfill any material obligation under
this Agreement shall have been the cause of, or shall have resulted
in, the failure of the Closing to occur prior to the Termination
Date; or
(ii) if there shall be any Law that restrains or prohibits
consummation of the transactions contemplated hereby or if a final,
nonappealable Governmental Order is issued restraining or otherwise
prohibiting consummation of the transactions contemplated hereby;
55
(c) by Seller upon a breach of any representation, warranty, covenant
or agreement on the part of either Buyer or Parent set forth in this
Agreement, or if any representation or warranty of either Buyer or Parent
shall have become untrue, in either case such that the condition set forth
in Section 10.02(a) would not be satisfied, unless such breach or untruth
can be cured prior to Closing and after receipt of notice thereof Buyer or
Parent, as the case may be, proceeds in good faith to cure such breach or
untruth as promptly as practicable;
(d) (A) by Buyer upon a breach of any representation, warranty,
covenant or agreement (x) on the part of Seller set forth in this Agreement
or (y) on the part of the Majority Stockholder or ▇▇▇▇▇▇ ▇▇▇▇▇ set forth in
the Voting Agreement, or (B) if any representation or warranty of Seller,
the Majority Stockholder or ▇▇▇▇▇▇ ▇▇▇▇▇ shall have become untrue, in each
case such that the condition set forth in Section 10.03(a) would not be
satisfied, unless such breach or untruth can be cured prior to Closing and
after receipt of notice thereof Seller or the Majority Stockholder, as
applicable, proceeds in good faith to cure such breach or untruth as
promptly as practicable;
(e) by Buyer if Seller or the Majority Stockholder shall have
breached any of its respective obligations under Sections 5.08 or 5.09 of
this Agreement or Sections 1.01 and 1.02 of the Voting Agreement or if the
Stockholders fail to approve this Agreement and the transactions
contemplated hereby, whether by vote or written consent, as contemplated by
Section 5.08 of this Agreement.
(f) by Buyer as set forth in Section 5.07(a).
(g) by Buyer upon the filing of an insolvency proceeding by Seller or
Seller having taken any corporate action to authorize such action.
(h) by Buyer if, in accordance with the survey conducted pursuant to
Section 2.12 of this Agreement, fewer than 95% of Colleges Installed on the
date of this Agreement are Installed on the Closing Date.
Notwithstanding the foregoing, no party may terminate this Agreement
pursuant to clause (c) or (d) of this Section 11.01 if any representation or
warranty of the party seeking to terminate is materially inaccurate or breached
or such party has failed to comply with or satisfy, in all material respects,
its covenants and agreements made hereunder.
The party desiring to terminate this Agreement pursuant to this Section
11.01 (other than pursuant to Section 11.01(a)) shall give notice of such
termination to each other party.
SECTION 11.02. EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 11.01, such termination shall be without liability of any
party hereto (or any stockholder, director, officer, employee, agent, consultant
or representative of such party) to any other party to this Agreement except as
provided in Section 13.01; PROVIDED that if such termination shall result from
fraud or from the willful (i) failure of any party to fulfill a condition to the
performance of the obligations of any other party, (ii) failure to perform a
covenant of this Agreement or (iii) breach by any party hereto of any
representation or warranty or agreement contained herein, such party shall be
fully liable for any and all Losses (as defined below) incurred or suffered by
any other party as a result of such failure or breach. The provisions of
Sections 2.11(f) and (g), this Section 11.02, Article XIII and the
Confidentiality Agreement shall survive any termination hereof pursuant to
Section 11.01.
56
ARTICLE XII
SURVIVAL; INDEMNIFICATION
SECTION 12.01. SURVIVAL. The representations and warranties of the parties
hereto contained in or made pursuant to this Agreement or in any certificate
furnished pursuant hereto or in connection herewith shall survive in full force
and effect until the first anniversary of the Closing Date; PROVIDED that (i)
any and all covenants and agreements shall survive until the second anniversary
of the Closing Date except that any covenants and agreements that by their terms
extend beyond such period shall survive in accordance with their terms, (ii) the
representations and warranties in Sections 3.01, 3.02, 3.05, 3.09, 3.10, 3.18,
3.19, 3.20, 3.23, 3.24, 4.01, 4.02 and 4.08 and the representations and
warranties contained in Articles VIII and IX shall survive until the second
anniversary of the Closing Date; and (iii) Sections 2.08 and 2.09 shall survive
until the earlier of (A) the adjustment contemplated therein has been completed
and (B) the second anniversary of the Closing Date. Notwithstanding the
preceding sentence, any covenant, agreement, representation or warranty in
respect of which indemnity may be sought under this Agreement shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if written notice of the inaccuracy or breach thereof giving rise to such right
of indemnity shall have been given by the party seeking indemnification to the
party against whom such indemnity may be sought prior to such time in accordance
with Section 12.04 below.
SECTION 12.02. INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify against and hold Seller, its Affiliates
and their respective employees, officers and directors (collectively, the
"SELLER INDEMNIFIED PARTIES") harmless from, and agrees to promptly defend
any Seller Indemnified Party from and reimburse any Seller Indemnified
Party for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including any Action brought by any
Governmental Authority or Person and including reasonable attorneys' fees
and expenses reasonably incurred) (collectively, "LOSSES"), which such
Seller Indemnified Party may at any time suffer or incur, or become subject
to, as a result of or in connection with:
(i) any failure of any representation or warranty of Parent
or Buyer (whether made in or pursuant to this Agreement or in any
instrument or certificate delivered by Buyer at the Closing in
accordance herewith) to be true when made and at and as of the Closing
Date as if made at and as of such date (except that representations
and warranties that by their terms speak as of the date of this
Agreement or some other date need be true only as of such specified
date), in each case, determined without regard to any materiality or
material adverse effect qualification contained in any representation
or warranty (each such misrepresentation or breach of warranty, or
such failure of any representation or warranty to be true, a "BUYER
WARRANTY BREACH");
(ii) any failure by Parent or Buyer to carry out, perform,
satisfy and discharge any of its covenants, agreements, undertakings,
liabilities or obligations under this Agreement or the Ancillary
Agreements;
(iii) the Assumed Liabilities; and
(iv) the conduct or operation of the Purchased Assets by Buyer
to the extent arising from and after the Effective Time, except to the
extent indemnified by Seller under Section 12.03.
57
(b) Notwithstanding any other provision to the contrary, Parent shall
not be required to indemnify and hold harmless any Seller Indemnified Party
pursuant to Section 12.02(a)(i): (A) unless such Seller Indemnified Party
has asserted a claim in accordance with Section 12.04 below with respect to
such matters within the applicable survival period set forth in Section
12.01 and (B) until the aggregate amount of the Seller Indemnified Parties'
Losses resulting from any single Buyer Warranty Breach or set of related
Buyer Warranty Breaches exceeds $225,000; PROVIDED, HOWEVER, that the
cumulative indemnification obligation of Buyer under this Article XII shall
in no event exceed $15 million. Except with respect to fraud or willful
breach, the rights and remedies of the Seller Indemnified Parties for a
Loss relating to a Buyer Warranty Breach shall be limited as set forth in
this Article XII.
SECTION 12.03. INDEMNIFICATION BY SELLER.
(a) Seller shall indemnify against and hold Parent, Buyer, each of
their Affiliates and respective employees, officers and directors
(collectively, the "BUYER INDEMNIFIED PARTIES") harmless from, and agrees
to promptly defend any Buyer Indemnified Party from and reimburse any Buyer
Indemnified Party for, any and all Losses that such Buyer Indemnified Party
may at any time suffer or incur, or become subject to, as a result of or in
connection with:
(i) any failure of any representation or warranty of Seller
or the Majority Stockholder (whether made in or pursuant to this
Agreement, the Voting Agreement or in any instrument or certificate
delivered by Seller at the Closing in accordance herewith) to be true
when made and at and as of the Closing Date as if made at and as of
such date (except that representations and warranties that by their
terms speak as of the date of this Agreement or some other date need
be true only as of such specified date), in each case, determined
without regard to any materiality or Material Adverse Effect
qualification contained in any representation or warranty (other than
Section 3.15(b)(i)) (each such misrepresentation or breach of
warranty, or such failure of any representation or warranty to be
true, a "SELLER WARRANTY BREACH");
(ii) any failure by Seller, the Majority Stockholder or ▇▇▇▇▇▇
▇▇▇▇▇ to carry out, perform, satisfy and discharge any of its
respective covenants, agreements, undertakings, liabilities or
obligations under this Agreement or the Ancillary Agreements;
(iii) the Excluded Assets;
(iv) the Excluded Liabilities;
(v) Taxes of Seller for periods or portions thereof ending on
or before the Closing Date; and
(vi) the Business or the operation of the Network to the
extent arising before the Effective Time other than any Assumed
Liability.
(b) Notwithstanding any other provision to the contrary, Seller shall
not be required to indemnify and hold harmless any Buyer Indemnified Party
pursuant to Section 12.03(a)(i): (A) unless such Buyer Indemnified Party
has asserted a claim in accordance with Section 12.04 below with respect to
such matters within the applicable survival period set forth in Section
12.01 and (B) until the aggregate amount of the Buyer Indemnified Parties'
Losses resulting from any single Seller Warranty Breach or set of related
Seller Warranty Breaches exceeds $225,000; PROVIDED,
58
HOWEVER, that the cumulative indemnification obligation of Seller under
this Article XII shall in no event exceed $15 million. Except with respect
to fraud or willful breach, the rights and remedies of the Buyer
Indemnified Parties for a Loss relating to a Seller Warranty Breach shall
be limited, for all purposes as set forth in this Article XII.
SECTION 12.04. NOTIFICATION OF CLAIMS.
(a) A party entitled to be indemnified pursuant to Section 12.02 or
12.03 (the "INDEMNIFIED PARTY") shall promptly notify the party liable for
such indemnification (the "INDEMNIFYING PARTY") in writing of any claim or
demand that the Indemnified Party has determined has given or could give
rise to a right of indemnification under this Agreement; PROVIDED, HOWEVER,
that a failure to give prompt notice or to include any specified
information in any notice will not affect the rights or obligations of any
party hereunder except and only to the extent that, as a result of such
failure, any party that was entitled to receive such notice was materially
damaged as a result of such failure. Subject to the Indemnifying Party's
right to defend in good faith third party claims as hereinafter provided,
the Indemnifying Party shall satisfy its obligations under this Article XII
within thirty (30) days after the receipt of written notice thereof from
the Indemnified Party.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any action, claim or demand pursuant to Section 12.04(a), and if such claim
or demand relates to a claim or demand asserted by a third party (such
action, claim or demand, a "THIRD PARTY CLAIM") against the Indemnified
Party that the Indemnifying Party acknowledges in writing is a claim or
demand for which it is obligated to indemnify or hold harmless the
Indemnified Party under Section 12.02 or 12.03, the Indemnifying Party
shall have the right to employ counsel reasonably acceptable to the
Indemnified Party to defend any such Third Party Claim asserted against the
Indemnified Party for so long as the Indemnifying Party shall continue in
good faith to diligently defend against such Third Party Claim. The
Indemnified Party shall have the right to participate in the defense of any
such Third Party Claim at its own expense. The Indemnifying Party shall
notify the Indemnified Party in writing, as promptly as possible (but in
any case five (5) Business Days before the due date for the answer or
response to a claim) after the date of the notice of claim given by the
Indemnified Party to the Indemnifying Party under Section 12.04(a), of its
election to defend in good faith any such Third Party Claim. So long as the
Indemnifying Party is defending in good faith any such Third Party Claim,
the Indemnified Party shall not settle or compromise such Third Party Claim
without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld, and the Indemnified Party shall make available to
the Indemnifying Party or its agents, at the expense of the Indemnifying
Party, all records and other material in the Indemnified Party's possession
reasonably required by the Indemnifying Party for its use in contesting any
such Third Party Claim but only to the extent of such use. In the event the
Indemnified Party is, directly or indirectly, conducting the defense
against any such Third Party Claim, the Indemnifying Party shall cooperate
with the Indemnified Party in such defense and make available to the
Indemnified Party, at the Indemnifying Party's expense, all records and
other materials in the Indemnifying Party's possession or under the
Indemnifying Party's control reasonably required by the Indemnified Party
for its use in contesting any such Third Party Claim. Whether or not the
Indemnifying Party elects to defend any such Third Party Claim, the
Indemnified Party shall have no obligations to do so. In the event the
Indemnifying Party elects not to defend such Third Party Claim or if the
Indemnifying Party elects to defend such Third Party Claim but fails to
diligently defend such Third Party Claim in good faith, the Indemnified
Party shall have the right to settle or compromise such Third Party Claim
without the consent of the Indemnifying Party. No Third Party Claim may be
settled by the Indemnifying Party without the prior written consent of the
Indemnified Party except for any Third Party Claim the settlement
59
of which fully and finally releases the Indemnified Party, has no adverse
impact on the business(es) of the Indemnified Party or any of its
Affiliates and is fully accomplished with the payment of money.
SECTION 12.05. DISTRIBUTIONS FROM ESCROW FUND. In the event that (a) Seller
shall not have objected to the amount claimed by Buyer for indemnification with
respect to any Loss in accordance with the procedures set forth in the Escrow
Agreement or (b) Seller shall have delivered notice of its disagreement as to
the amount of any indemnification requested by Buyer and either (i) Seller and
Buyer shall have, subsequent to the giving of such notice, mutually agreed that
Seller is obligated to indemnify Buyer for a specified amount and shall have so
jointly notified the Escrow Agent or (ii) a final nonappealable judgment shall
have been rendered by the court having jurisdiction over the matters relating to
such claim by Buyer for indemnification from Seller and the Escrow Agent shall
have received, in the case of clause (i) above, written instructions from Seller
and Buyer or, in the case of clause (ii) above, a copy of the final
nonappealable judgment of the court, the Escrow Agent shall deliver to Buyer
from the Escrow Fund any amount determined to be owed to Buyer under this
Article XII in accordance with the Escrow Agreement.
ARTICLE XIII
GENERAL PROVISIONS
SECTION 13.01. EXPENSES. Except as may be otherwise specified herein or
therein, all costs and expenses, including fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement,
the Ancillary Agreements and the transactions contemplated hereby and thereby
shall be paid by the party incurring such costs and expenses, whether or not the
Closing shall have occurred.
SECTION 13.02. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly delivered and received (a) on the date of personal delivery, (b) on the
date of transmission, if sent by facsimile, (c) one Business Day after having
been dispatched via a nationally recognized overnight courier service, or (d)
three Business Days after being sent by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 13.02), in each case if received
prior to 5 p.m. NYC time on such date and if thereafter, on the following
Business Day:
(a) if to Seller:
CTN Media Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Lord, Bissell & Brook
The Proscenium
Suite 1900
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
U-C Holdings, L.L.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Avy ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Buyer or Parent:
MTV Networks on Campus Inc.
c/o Viacom International Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Shearman & Sterling
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 13.03. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 13.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced because of any Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party hereto. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the greatest extent possible.
SECTION 13.05. ENTIRE AGREEMENT. This Agreement, the Confidentiality
Agreement, the Ancillary Agreements and any agreements or other documents
entered into contemporaneously with this Agreement constitute the entire
agreement of the parties hereto with respect to the subject matter hereof
61
and thereof and supersede all prior agreements and undertakings, both written
and oral, among the parties hereto with respect to the subject matter hereof and
thereof, except as otherwise expressly provided herein.
SECTION 13.06. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns; PROVIDED that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of any other party hereto; PROVIDED FURTHER that Parent and Buyer may,
without such consent, assign any or all of their respective rights and
obligations under this Agreement and/or the Ancillary Agreements to any of its
Affiliates; PROVIDED FURTHER that Parent or Buyer, as the case may be, may,
without such consent, assign any or all of its rights and obligations contained
in Section 2.11 of this Agreement to ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners II, L.P. pursuant
to the Deposit Letter Agreement, and any such assignment shall release Parent
and Buyer, as the case may be, of all of its respective obligations under
Section 2.11 of this Agreement.
SECTION 13.07. NO RECOURSE. Notwithstanding any of the terms or provisions
of this Agreement, the parties hereto agree that none of them nor any Person
acting on any such party's behalf may assert any claims or cause of action
against any employee, officer or director of any other party or stockholder of
such other party in connection with or arising out of this Agreement or the
transactions contemplated hereby.
SECTION 13.08. NO THIRD-PARTY BENEFICIARIES. Except as expressly provided
in Articles IX and XII, this Agreement is for the sole benefit of the parties
hereto and their permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person or entity any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 13.09. AMENDMENTS AND WAIVERS.
(a) This Agreement may not be amended or modified except by an
instrument in writing signed by the parties hereto.
(b) At any time prior to the Closing, any party may (i) extend the
time for the performance of any of the obligations or other acts of any
other party hereto, (ii) waive any inaccuracies in the representations and
warranties of any other party hereto contained herein or in any document
delivered pursuant hereto or (iii) waive compliance by any other party
hereto with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party to be bound thereby.
(c) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
62
SECTION 13.10. GOVERNING LAW; JURISDICTION. This Agreement shall be
governed by, and construed in accordance with, the Laws of the State of
New
York. All actions and proceedings arising out of or relating to this Agreement
shall be heard and determined in a New York state or federal court sitting in
the City of New York, and the parties hereto hereby irrevocably submit to the
exclusive jurisdiction of such courts in any such action or proceeding and
irrevocably waive the defense of an inconvenient forum to the maintenance of any
such action or proceeding. Each party agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court.
SECTION 13.11. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 13.12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
facsimile shall be as effective as delivery of a manually executed counterpart
of this Agreement.
SECTION 13.13. NO PRESUMPTION. This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.
63
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.
VIACOM INTERNATIONAL INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and
Deputy General Counsel and
Assistant Secretary
MTV NETWORKS ON CAMPUS INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and
Assistant Secretary
CTN MEDIA GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: CFO
64