Asset Purchase Agreement - New Frontier Media Inc., Colorado Satellite Broadcasting Inc. and 1248663 Ontario Inc.
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made to be effective
September 5, 1997 (the "Effective Date"), among NEW FRONTIER MEDIA, INC., a
Colorado corporation, COLORADO SATELLITE BROADCASTING, INC. ("Buyer"), a wholly
owned subsidiary of New Frontier Media, Inc., and 1248663 ONTARIO INC., an
Ontario corporation ( "Seller"). New Frontier Media, Inc. and Buyer are
collectively referred to in this Agreement as "Buyers."
This Agreement sets forth the terms and conditions upon which Buyers agree
to purchase from Seller, and Seller agrees to sell to Buyers, certain properties
and assets of Seller ("Subject Assets").
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties agree as
follows:
DEFINITIONS
"Newco" means 1248663 Ontario Inc., an Ontario corporation.
"Adult Movies Business" means any and all of Buyer's present or contemplated
satellite broadcast services on television or any other medium, including cable
television and the Internet, which broadcasts, replays, and/or otherwise
exploits feature length adult programming and all related promotional content
and other programming of a non-rated or X-rated nature and whose main theme
embodies nudity and/or sexually explicit material between consenting adults and
such other related business assets as are necessary for the operation thereof.
"adverse or adversely", when used alone or in conjunction with other terms
(including without limitation "affect," "change" and "effect"), means any event
discovered by either party after the date hereof which is reasonably likely in
the respective business judgment of either Buyers or Seller, as the case may be,
to be expected to (a) adversely affect the validity or enforceability of this
Agreement, or (b) adversely affect the business, operation, management or
properties of Seller taken as a whole or Buyers, or (c) impair Seller or Buyers,
or (d) adversely affect the respective aggregate rights and remedies of either
party under this Agreement.
"Agreement" means this Agreement as originally in effect, including unless the
context otherwise specifically requires, all schedules and all exhibits hereto,
and as any of the same may from time to time be supplemented, amended, modified
or restated in the manner herein or therein provided.
"Applicable Law" shall mean any Law of any Authority, whether domestic or
foreign, including without limitation all federal and state securities and
environmental laws, to which a person or entity is subject or by which it or any
of its business or operations is subject or any of its property or assets is
bound.
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"Authority" means any governmental or quasi-governmental authority, whether
administrative, executive, judicial, legislative or other, or any combination
thereof, including without limitation, any federal, provincial, state,
territorial, county, municipal or other government or governmental or quasi-
governmental agency, arbitrator, authority, board, body, branch, bureau, central
bank or comparable agency, or Entity, commission, corporation, court,
department, instrumentality, master, mediator, panel, referee, system, or other
political unit or subdivision or other Entity of any of the foregoing whether
domestic or foreign.
"Buyers' Disclosure Schedule" means the schedule attached as SCHEDULE 8.2(a).
"Closing" means the closing of the transactions contemplated herein and "Closing
Date" means the date on which the closing takes place.
"Collateral Agreements" means agreements and other documents executed or
required to be executed pursuant to the terms of this Agreement.
"Entity" means any corporation, firm, unincorporated organization, association,
partnership, limited liability company, trust (inter vivos or testamentary),
estate of a deceased, individual, business trust, joint stock company, joint
venture or other organization, entity or business, whether acting in an
individual, fiduciary or other capacity, or any Authority.
"Governmental Authorizations" means all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all applicable
Authorities.
"material, materially or materiality", unless specifically stated otherwise,
shall be determined without regard to the fact that various provisions of this
Agreement set forth specific dollar amounts.
"New Frontier" means New Frontier Media, Inc.
"Private Authorizations" means all approvals, concessions, consents, franchises,
licenses, permits, and other authorizations of all persons (other that
Authorities) including without limitation those with respect to copyrights,
computer software programs, patents, service marks, trademarks, trade names,
technology and know-how.
"Subject Assets" means:
(a) that equipment (including without limitation essential spares and
replacement parts) and software technology, furniture, machinery,
appliances, and other tangible personal property and technology used
in and historically allocated to the operation of a satellite operation
uplink facility as specifically set forth in SCHEDULE 1(a), "the Uplink
Facilities Equipment List", and which shall be in operating order;
(b) all hardware, equipment, software license assignments, furniture,
machinery, appliances and other tangible personal property as set forth
in SCHEDULE 1(b), "The
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Call Center Equipment List"; and
(c) any tort or insurance proceeds arising out of any damages or
destruction of any of the Subject Assets herein between the date of
this Agreement and the Closing Date to the extent required to repair
or replace any subject asset being acquired hereunder.
"Transactions" means the transactions contemplated by this Agreement and all
Collateral Agreements.
ARTICLE 1. TRANSFER OF ASSETS
Subject to the terms and conditions set forth in this Agreement, Seller agrees
to sell, convey, transfer, assign and deliver to Buyer, and Buyers agrees to
purchase from Seller at the Closing described in ARTICLE 3, all of the Subject
Assets, whether tangible, intangible, real, personal or mixed, and wherever
located, including those assets set forth in the lists of SCHEDULES 1(a) and (b)
and as further described in this ARTICLE 1.
1.1 UPLINK FACILITY. Pursuant to SCHEDULE 1.1, the Uplink Management Services
Agreement, Newco agrees to operate, maintain, manage, and sustain an uplink and
playback facility (at 2500 Don Reid Drive, Ottawa, Ontario) capable of providing
continual uninterrupted services on behalf of Buyer for its Adult Movies
Business. The term of the Uplink Management Services Agreement shall be three
(3) years with the right at Buyers' option to successive one year renewals on
terms to be negotiated. Newco may at its option acquire a building suitable for
relocating the current satellite broadcast uplink facility in order to fulfill
its obligations under the Uplink Management Services Agreement. In the event of
such move, Newco shall be responsible for all uplink moving/installations costs,
to the New Uplink Facility. Buyers shall be responsible for the reasonable
costs associated with the necessary tenant finish at the New Uplink Facility.
Newco shall ensure that Buyers have the right to use and operate the existing
Uplink Facility under the terms of the Uplink Management Services Agreement
until the New Uplink Facility is ready for use.
1.2 CALL CENTER FACILITY. Pursuant to SCHEDULE 1.2, the Call Center Interim
Services Agreement, Newco agrees to receive and process subscriber calls on
behalf of Buyers from a call center to be located at 1825 Woodward Drive,
Ottawa, Ontario using the call center assets included in the Subject Assets for
a period of up to nine (9) months from the Closing, at a flat, prepaid monthly
rental of US$275,000.00 and on other terms to be negotiated in a Call Center
Lease Agreement. Prior to the end of the nine (9) month period, Buyers shall
have the right to unilaterally terminate such agreement upon sixty (60) days
prior written notice. Pursuant to the Call Center Interim Services Agreement,
Newco agrees to deposit all amounts collected thereto into a merchant account
and a checking account to be established in the name of Buyer.
1.3 INVESTMENT CANADA ACT. The parties agree that the Transactions do not
require notice, review, approval or allowance under the INVESTMENT CANADA ACT
and it is not a condition
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precedent to the Closing of the Transactions that any notice be given or
approval, allowance or consent be obtained in respect thereof.
Notwithstanding anything to the contrary in this Agreement, no
representation, warranty or covenant given by any party under or pursuant to
this Agreement is intended or shall be deemed to include a representation,
warranty or covenant related to the INVESTMENT CANADA ACT.
ARTICLE 2. PURCHASE PRICE
2.1 PAYMENT OF PURCHASE PRICE. In consideration for the transfer and assignment
of the Subject Assets and in consideration of the representations, warranties
and covenants of Seller set forth herein, Buyers on the conditions set forth
herein:
(a) shall pay, subject to ARTICLE 5, an earnest money deposit in the
amount of US$10,000.00;
(b) shall deliver to Seller at the Closing (as hereinafter defined)
US$660,172.00 plus taxes as provided in ARTICLE 6, payable in cash as
more fully described in SECTION 3.2;
(c) shall deliver at the Closing a promissory note in the amount of
US$185.711.00 executed by Buyer and payable to Seller in the form
substantially similar to that set forth in SCHEDULE 2.1(c). Buyer's
performance under the promissory note shall be guaranteed by New
Frontier. Additionally, in order to secure Buyer's obligations
pursuant to the promissory note, at the Closing (i) Buyer shall execute
and deliver to Seller a security agreement in the form attached as
Exhibit A to SCHEDULE 2.1(c) pursuant to which Buyer shall grant to
Seller a security interest/lien in all of its furniture, fixtures,
equipment and inventory, ranking first in priority over all other
security interests/lienholders, except the interests of Buyers' chief
financial institutions which shall have a first priority up to an
amount of US $2,000,000.00 and the interests another secured creditor
approved by Seller which shall have a second priority up to an amount
of US$725,510; and
(d) shall assume and discharge, and shall indemnify Seller against,
liabilities and obligations of Seller under the leases, contracts or
other agreements, if any, specified on SCHEDULE 4 but only to the
extent that such liabilities or obligations accrue on or after the
Closing Date.
2.2 ALLOCATION OF THE PURCHASE PRICE. The parties agree that the Purchase Price
(defined as the sum of the amounts specified in SECTIONS 2.1 (b) and (c) above
shall be allocated as set forth in SCHEDULE 2.2 and that such allocation will be
used by the parties in reporting the transaction contemplated by this Agreement
for tax purposes.
2.3 ELECTIONS. Seller and Buyers will on or before the Closing Date jointly
execute an election, in prescribed form and containing the prescribed
information, to have subsection 167(1.1) of the
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EXCISE TAX ACT (Canada) apply to the sale and purchase of the Subject Assets
hereunder so that no tax is payable in respect of such sale and purchase
under Part IX of the EXCISE TAX ACT (Canada). The Buyers will file such
election with the Minister of National Revenue within the time prescribed by
the Excise Tax Act (Canada).
ARTICLE 3. THE CLOSING
The closing of the purchase and sale of the Subject Assets by Seller to Buyers
(the "Closing") shall take place at 2500 Don Reid Drive, Ottawa, Ontario, sixty-
four (64) days after the date of this Agreement or at such other place and/or
time as the parties may agree in writing (the "Closing Date"). In the event
that the conditions specified in this Agreement have not be fulfilled by such
date, either Seller or Buyers may extend the Closing Date for a period or
periods not exceeding an aggregate of thirty (30) days by written notice to the
other parties.
3.1. SELLER'S OBLIGATIONS AT CLOSING.
(a) At the Closing Seller shall deliver or cause to be delivered to Buyer:
(i) assignment and assumption agreements for personal property
leases, all contracts and agreements of Seller to be assumed in
connection herewith, in form and substance reasonably
satisfactory to Buyers' counsel, and accompanied by all consents
required by this Agreement and the personal property leases,
contracts and agreements being assigned;
(ii) instruments of assignment and transfer (including a bill of
sale) of all the Subject Assets in form and substance reasonably
satisfactory to Buyers' counsel; and
(iii) such other documents as shall be reasonably requested by
Buyers or Buyers' counsel (for example, a BULK SALES ACT
affidavit).
(b) Simultaneously, with the consummation of the transfer, Seller, through
its officers, agents and employees, shall put Buyer into full
possession and enjoyment of all the Subject Assets to be sold,
conveyed, transferred, assigned and delivered by this Agreement.
(c) Seller, at any time before or after the Closing Date shall execute,
acknowledge, and deliver any further deeds, assignments, conveyances
and other assurances, documents and instruments of transfer, reasonably
requested by Buyers and shall take any other action consistent with the
terms of this Agreement that may be reasonably requested by Buyers for
the purpose of assigning, transferring, granting, conveying and
confirming to Buyers, or reducing to possession, any or all property
and assets to be conveyed or transferred by this Agreement. If
requested by Buyers, Seller further agrees to prosecute or otherwise
enforce in
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their own names for the benefit of Buyers any claims, rights, or
benefits that are transferred to Buyers by this Agreement and that
require prosecution or enforcement in any of Seller's names.
Any prosecution or enforcement of claims, rights, or benefits under
this Section shall be solely at Buyer's expense, unless the
prosecution or enforcement is made necessary by a breach of this
Agreement by Seller.
3.2. BUYER'S OBLIGATIONS AT CLOSING. At the Closing Buyers shall deliver to
Seller against delivery of the items specified in SECTION 2.1, a certified bank
or cashier's check, or a wire transfer of immediately available funds, in the
amount of US$660,172.00 plus taxes pursuant to ARTICLE 6 payable to Seller and
the promissory note payable to Seller in the amount of US$185,711.00. Seller
shall notify Buyers within five (5) days of the Closing Date whether the amount
payable at Closing shall be delivered by certified bank or cashier's check, or
by wire transfer. At closing, Buyers shall deliver to Seller such documents
that shall be reasonably requested by Seller or Seller's counsel.
ARTICLE 4. ASSUMPTION OF LIABILITIES
Buyers are not assuming any debt, liability or obligation of Seller, whether
known or unknown, fixed or contingent, except as herein specifically otherwise
provided. Seller agrees to indemnify and hold Buyers harmless against all
debts, claims, liabilities and obligations of Seller not expressly assumed by
Buyers hereunder, and to pay any and all attorneys' fees and legal costs
incurred by Buyers, its successors and assigns in connection therewith. Buyers
shall have the benefit of and shall perform and assume all leases, contracts and
agreements, if any, specifically listed on SCHEDULE 4, in accordance with the
terms and conditions thereof, except to the extent modifications are
specifically set forth in SCHEDULE 4 and except to the extent set forth in the
assignments or assignment and assumption agreements for such leases, contract
and agreements.
ARTICLE 5. RETURN OF DEPOSIT
Upon execution of this Agreement, Buyers shall pay to Seller an earnest money
deposit of US$2,500. Upon parties' final acceptance of the form and content of
the schedules to this Agreement, Buyers shall pay to Seller a further earnest
money deposit of US$7,500. Such deposits shall be returned to Buyers if the
Transactions are not closed due to: (a) the failure of any conditions set forth
in ARTICLE 11 to be met at or before the Closing as a result of any act or
omission by Seller; or (b) the occurrence of any default by Seller described in
SECTION 17.3. If the Transactions are not closed for any other reason, the
deposit shall be retained by Seller. Upon Closing, the deposit shall be applied
towards the payment due to Seller under SECTION 2.1(b).
ARTICLE 6. TAXES
Buyers shall pay all sales, use and transfer taxes arising out of the transfer
of the Subject Assets,
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including any foreign transfer taxes and shall pay its portion, prorated as
of the Closing Date, of state, provincial, and local real and personal
property taxes of the business being sold hereunder. Buyers shall not be
responsible for any business, occupation, withholding or similar tax, or for
any income, sales, use, value-added or similar taxes related to any period,
or transaction occurring during any period, before the Closing Date.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyers that the following facts and
circumstances are and will be at all times up to the Closing Date, except as
contemplated hereby, true and correct, and hereby acknowledge that such facts
and circumstances constitute the basis upon which Buyers are induced to enter
into and perform this Agreement. Each warranty set forth in this ARTICLE 7
shall survive eighteen (18) months past the Closing Date and any investigation
made by or on behalf of Buyers. Buyers shall conduct their own due diligence
investigation and that investigation shall include an investigation into whether
Seller are or have operated in accordance with the warranties and
representations of Seller. If prior to the closing date, Buyers believe they
have discovered any breach of the representations and warranties of Seller, they
shall forthwith advise Seller in writing of such breach. If Seller does not or
cannot cure such breach prior to the Closing Date, Buyers may elect to close (in
which case the breach shall be deemed non-material) or not close provided such
breach is material. If Buyers fail to give such notice then the breach will be
deemed non-material.
7.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Newco is a corporation
organized, validly existing, and in good standing under the laws of Ontario.
Seller has all necessary corporate powers to own its properties and to carry on
its business as now owned and operated by it, and is duly qualified to transact
any business and is in good standing in all jurisdictions in which the nature of
its business or its properties makes such qualification necessary.
7.2 ABSENCE OF SPECIFIED CHANGES. Since March 31, 1997, there has not been any:
(a) material and adverse destruction, damage to, or loss of any of the
Subject Assets (whether or not covered by insurance);
(b) labor trouble or other event or condition of any character materially
and adversely effecting the financial condition, business, assets or
prospects of Seller;
(c) revaluation by Seller of any of the Subject Assets in a manner that
would be materially adverse to Buyers;
(d) execution, creation, amendment, nonrenewal or termination of any
material contract, agreement or license to which Seller is a party,
except in the ordinary course of business or except as can be
terminated prior to the Closing Date without materially adversely
effecting the Subject Assets;
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(e) creation or assumption by Seller of any mortgage, pledge, security
interest or lien or other encumbrance on any of the Subject Assets,
except as set forth in SCHEDULE 7.2(e);
(f) other event or condition of any character of which Seller has
knowledge that has or might reasonably have a material adverse effect
on the Subject Assets, except as set forth in SCHEDULE 7.2(f); or
(g) agreement by Seller to do any of the things described in the preceding
clauses (a) through (f).
7.3 SUBJECT ASSETS SUFFICIENT FOR OPERATIONS. The Subject Assets constitute all
assets (other than premises) necessary for the continued uninterrupted operation
by Seller of a call center and uplink facility for the Buyers' Adult Movies
Business. Except as stated in SCHEDULE 4, none of the Subject Assets are held
under any lease, security agreement, conditional sales, contract, or other title
of retention or security agreement, or are in the possession of anyone other
than Seller.
7.4 TRADE NAMES, TRADEMARKS AND COPYRIGHTS. Seller does not own any trademark,
service mark, trade name, trade secret, or brand name. To the actual knowledge
of Seller, no person has made any outstanding claims against Seller in respect
of any trademark, trademark registration or application, service mark, trade
name, copyright, copyright registration or application or brand name, the use of
which is necessary or contemplated in connection with the performance of any
contract to which Seller is a party.
7.5 TITLE TO ASSETS. To the best of Seller's knowledge, Seller shall at Closing
have good and marketable title to all the Subject Assets free and clear of
mortgages, liens, pledges, charges, encumbrances, equities, claims, easements,
rights of way, covenants, conditions, or restrictions, except for (i) the lien
of current taxes not yet due and payable; and (ii) possible minor matters that,
in the aggregate, are not substantial in amount and do not materially detract
from or interfere with the present or intended use of any of these assets. The
parties acknowledge that Seller will not own all of the Subject Assets on the
date this Agreement is executed, but will be acquiring Subject Assets prior to
Closing and no representation, warranty, condition or covenant contained herein
is intended to state otherwise. All the Subject Assets are in good operating
condition and repair, ordinary wear and tear excepted.
7.6 INSURANCE POLICIES. SCHEDULE 7.6 to this Agreement is a description of all
insurance policies held by Seller concerning the Subject Assets. All these
policies are in the respective principal amounts set forth in SCHEDULE 7.6.
Seller has maintained and now maintain (a) insurance on all the Subject Assets
of a type customarily insured, covering property damage by fire or other
casualty, and (b) adequate insurance protection against all liabilities, claims,
and risks against which it is customary to insure. Such insurance coverage will
be cancelled as of Closing.
7.7 OTHER CONTRACTS. Copies of all contracts which will be assigned to or
assumed by Buyers under this Agreement are attached as part of SCHEDULE 4.
Except as set forth in SCHEDULE 4 and to the best of Seller's knowledge, the
Subject Assets will not at Closing or thereafter (as a result
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of actions or conduct of Seller) be bound or potentially bound by, any
distributor's or manufacturer's representative or agency agreement, any
output or requirements agreement, any agreement not entered into in the
ordinary course of business, any indenture, mortgage, deed of trust, lease or
any other agreement that is unusual in nature, duration or amount (including,
without limitation, any agreement requiring the performance by Seller of any
obligation for a period of time extending beyond one year from Closing Date
or calling for consideration of more than US$ 10,000.00 or requiring
purchases at prices in excess of, or sales at prices lower than, prevailing
market prices). To the best of Seller's knowledge, there is no default or
event that with notice or lapse of time, or both, would constitute a default
by any party to any of the agreements listed in SCHEDULE 4 and such contracts
remain in full force and effect. Seller has not received notice that any
party to any of the agreements listed in SCHEDULE 4 intends to cancel or
terminate any of these agreements or to exercise or not exercise any options
under any of these agreements. Seller is not a party to, nor is Seller or
the Subject Assets bound by, any agreement that is materially adverse to the
business, assets, property, operating results, prospects or financial
condition of Seller.
7.8 COMPLIANCE WITH LAWS. Seller has received no notice of any violation of any
statutes, laws or regulations (including, without limitation any applicable
obscenity, environmental, health, building, zoning, or other law, ordinance or
regulations) from any Authority the violation of which may materially adversely
affect its ability to fulfill its obligations under this Agreement. Seller is
not in violation of or default under any provisions of their Articles of
Incorporation or Bylaws, both as amended. The execution, delivery and
performance of the Agreement and the consummation of the Transactions will not
result in any such violation or default, or be in conflict with or constitute,
with or without the passage of time or the giving of notice or both, a default
under Seller's Articles of Incorporation or Bylaws, both as amended.
7.9 LITIGATION. There is no suit, action, arbitration or legal, administrative
or other proceeding, or governmental investigation ("Actions") pending or, to
the best knowledge of Seller, threatened, against or affecting Seller, or any of
its business, assets or financial condition, or against any officer, director or
employee of Seller in connection with such officer's, director's or employee's
relationship with or actions taken on behalf of Seller. Seller is not a party
to or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality, and there are no
actions or claims by Seller currently pending or, to which Seller intends to
initiate. To the best knowledge of Seller, there has not occurred any event nor
does there exist any condition on the basis of which any litigation, proceeding
or investigation is likely to be instituted by or against Seller. Seller is not
in default with respect to any order, writ, injunction or decree of any federal,
state, local or foreign court, department, agency or instrumentality.
7.10 AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION. Neither the entry into this
Agreement nor the consummation of the transactions contemplated hereby will
result in or constitute any of the following events where the occurrence of such
event would render Seller materially unable to comply with this Agreement: (a) a
default or an event that, with notice or lapse of time or both, would be a
default, breach or violation of any lease, license, promissory note, conditional
sales contract, commitment, indenture, mortgage, deed of trust or other
agreement, instrument or
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arrangement; (b) an event that would permit any party to terminate any
agreement or to accelerate the maturity of any indebtedness or other
obligation; (c) the creation or imposition of any lien, charge or encumbrance
on any of the Subject Assets; or (d) the violation of any law, regulation,
ordinance, judgment, order or decree.
7.11 AUTHORITY AND CONSENTS. Except as set forth in SCHEDULE 7.11, Seller has
the right, power, legal capacity and authority to enter into, and perform their
obligations under this Agreement, and no approvals or consents of any persons
other than the shareholders of Seller are necessary in connection with it. The
execution and delivery of this Agreement and the consummation of this
transaction by Seller has been, or prior to the Closing will have been, duly
authorized by all necessary corporate action of Seller (including any necessary
action by Seller's security holders). This Agreement constitutes a legal, valid
and binding obligation of Seller enforceable in accordance with its terms except
as limited by bankruptcy and insolvency laws and by other laws affecting the
rights of creditors generally.
7.12 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as set forth in
SCHEDULE 7.12 or as contemplated by a Collateral Agreement, neither Seller nor
any officer or director or shareholder of Seller, nor any spouse or child of any
of them has any direct or indirect interest in any competitor, supplier or
customer of Seller or in any person with whom Seller are doing business.
7.13 INFORMATION FURNISHED TO BUYER FOR BULK TRANSFER NOTICE. For the purposes
of furnishing notices under the BULK SALES ACT (Ontario), SCHEDULE 7.13 is a
true, complete and correct list of all names and business addresses used by
Newco.
7.14 DOCUMENTS DELIVERED. Each copy or original of any agreement, contract or
other instrument which is identified in any exhibit or schedule delivered by
Seller or its counsel to Buyers (or their counsel or representatives), whether
before or after the execution hereof, is in fact what it is purported to be by
Seller and has not been amended, canceled or otherwise modified.
7.15 FULL DISCLOSURE. None of the representations and warranties made by Seller
or made in any letter, certificate or memorandum furnished or to be furnished by
Seller or on its behalf, contains or will contain any untrue statement of a
material fact, or omits any material fact the omission of which would make the
statements made misleading and materially adverse to Buyers.
7.16 SUBJECT ASSETS ARE SUFFICIENT TO OPERATE BUSINESS.
(a) The Buyers are acquiring the ownership, possession or use under this
Agreement of all or substantially all of the property and assets that
can reasonably be regarded as necessary for Buyer to be capable of
operating an uplink facility and call center facility as contemplated
herein (excluding premises for such facilities) as a business within
the meaning of section 167 of the EXCISE TAX ACT (Canada).
(b) Newco will be at Closing registered under Part IX of the EXCISE TAX
ACT (Canada).
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7.17 SOLVENCY. As of the execution and delivery of this Agreement, and, after
giving effect to the consummation of the Transactions, Seller will be solvent.
7.18 TAX MATTERS. Seller shall continue to be responsible for and will
discharge all obligations and liabilities in respect to taxes pertaining to the
Subject Assets which arise or accrue for all periods ending on or before the
Closing Date (but excluding the taxes referred to in ARTICLE 6). Seller will
indemnify and hold harmless Buyers against any and all claims and demands
incurred by Buyers that directly or indirectly arise out of such obligations or
liabilities. Without limiting the foregoing, Seller will be responsible for all
federal, state, provincial, local, foreign and other net income, gross income,
gross receipts, alternative or add on minimum, profits, sales, use, occupation,
value-added, ad valorem, transfer, franchise, license, lease, service use,
withholding, payroll, employment, excise, severance, premium, property, windfall
profits, customs, duties, or other taxes, fees assessments, or charges of any
kind whatsoever, together with any interest, penalties or additions to tax
imposed with respect thereto, or any obligations to any agreements or
arrangements with respect to and taxes described above.
7.19 EMPLOYMENT MATTERS. Buyer shall be under no obligation to offer employment
to any of Seller's employees ("affected employees"), except as otherwise stated
in this Agreement. Buyer may, however, choose to retain the services of or to
offer employment to one or more of the affected employees, should it wish to do
so, subject to SECTION 13.4.
Seller will continue to be responsible for and will discharge all obligations
and liabilities in respect of the affected employees which arise or accrue prior
to, on or after the Closing Date. Seller will indemnify and save harmless
Buyers against any and all claims and demands incurred by Buyers that directly
or indirectly pertain to or arise out of such obligations or liabilities.
Without limiting the forgoing, Seller will be responsible for and will bear and
discharge any and all obligations and liabilities for wages, severance pay,
termination pay, notice of termination of employment or pay in lieu of such
notice, damages for wrongful discharge or other employee benefits or claims,
including vacation pay, which may arise in connection with the employment or
dismissal of any of the affected employees, including any interest, award,
judgment or penalty relating thereto and any costs or expenses incurred by
Buyers in defending against any claim or demand relating to such obligation or
liabilities.
ARTICLE 8. BUYERS' REPRESENTATIONS AND WARRANTIES
Buyers represents, warrants, and covenants to, and agrees with Seller as
follows:
8.1 ORGANIZATION AND BUSINESS: POWER AND AUTHORITY: EFFECT OF TRANSACTION.
(a) Each Buyer (i) is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation;
(ii) has all requisite power and authority to own or hold under lease
its properties and to conduct its business as now conducted and as
presently proposed to be conducted, and has in full force and effect
all Governmental Authorizations and Private Authorizations
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and has made all governmental filings, to the extent required for such
ownership and lease of its property and conduct of its business and is
in good standing in such jurisdictions in which the failure to be in
good standing would have a material adverse effect upon its property
or the nature of its business or operations.
(b) Each Buyer has all requisite power and authority and has in full force
and effect all Governmental Authorizations and Private Authorizations
in order to enable it to execute and deliver, and to perform its
obligations under, this Agreement and each Collateral Agreement
executed or required to be executed pursuant hereto or thereto or to
consummate the Transactions and the Collateral Agreements; and the
execution, delivery and performance of this Agreement and each
Collateral Agreement has been duly authorized by all requisite
corporate or other action. No further action or approval on the part
of Buyers' stockholders is required in connection with the execution,
delivery and performance of this Agreement or each Collateral Agreement
or the consummation of the Transactions. This Agreement has been duly
executed and delivered by each Buyer and constitutes, and each
Collateral Agreement executed or required to be executed pursuant
hereto or thereto or to consummate the Transactions when executed and
delivered by Buyers will constitute, legal, valid and binding
obligations of Buyers enforceable in accordance with their respective
terms.
(c) Neither the execution and delivery of this Agreement or any Collateral
Agreement, nor the consummation of the Transactions, nor compliance
with the terms, conditions and provisions hereof or thereof by Buyers
will conflict with, or result in a material breach or violation of, or
constitute a material default under, any Applicable Law on the part of
Buyers or will conflict with, or result in a material breach or
violation of, or constitute a material default under, or permit the
acceleration of any obligation or liability in, or but for any
requirement of giving notice or passage of time or both would
constitute such a conflict with, material breach or violation of, or
material default under, or permit any such acceleration in, any
contractual obligation of Buyers.
8.2 FINANCIAL AND OTHER INFORMATION
(a) Buyers have heretofore furnished to Seller copies of the consolidated
financial statements of New Frontier and all of its subsidiaries
("Buyers' Financial Statements"). Buyers' Financial Statements,
including in each case the notes thereto, have been prepared in
accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, except as otherwise noted therein or as set
forth in SCHEDULE 8.2(a) (Buyers' Disclosure Schedule), and are true,
accurate and complete, do not contain any untrue statement of material
fact or omit to state a material fact required by GAAP to be stated
therein or necessary in order to make the statements contained therein
not misleading, and fairly present the financial condition and the
results of operations of Buyers, on the bases therein stated, as of the
respective dates thereof, and for the respective periods covered
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thereby subject, in the case of unaudited financial statements, to
normal year-end audit adjustments and accruals.
(b) Neither Buyers' Disclosure Schedule, Buyers' Financial Statements,
this Agreement, any Collateral Agreement, or any data, information or
statement furnished or to be furnished by or on behalf of Buyers
pursuant to this Agreement or any Collateral Agreement or required to
consummate the Transactions, contains or will contain any untrue
statement of material fact or omits or will omit to state a material
fact required to be stated herein or therein or necessary in order to
make statements contained herein or therein not misleading and all
Collateral Agreements, data, information or statements are and will be
true, accurate and complete.
8.3 CHANGES IN CONDITION. Since the date of the most recent financial
statements forming part of Buyers' Financial Statements, there has been no
material adverse change in Buyers taken as a whole or individually. Except
matters of general applicability to Buyers' industries, there is no event known
to Buyers which materially adversely affects Buyers taken as a whole or
individually, or the ability of Buyers to perform any of the obligations set
forth in this Agreement or any Collateral Agreement or to consummate the
Transactions.
8.4 COMPLIANCE WITH PRIVATE AUTHORIZATIONS. Each Buyer has obtained all Private
Authorizations which are necessary for the ownership by such Buyer of its
properties and the conduct of its business as now conducted or as presently
proposed to be conducted or which, if not obtained and maintained, could, singly
or in the aggregate, materially adversely affect such Buyer. Neither Buyer is
in breach or violation of, or is in default in the performance, observance or
fulfillment of, any Private Authorization, and no event exists or has occurred,
which constitutes, or but for any requirement of giving of notice or passage of
time or both would constitute, such a breach, violation or default, under any
contractual obligation of such Buyer or Private Authorization, except for such
defaults, breaches or violations, as do not and will not have in the aggregate
any material adverse affect on such Buyer or the ability of such Buyer to
perform any of its obligations set fourth in this Agreement or any Collateral
Agreement or to consummate the Transactions. No Private Authorization is the
subject of any pending or, to Buyers' knowledge, information or belief,
threatened attack, revocation or termination.
8.5 COMPLIANCE WITH GOVERNMENTAL AUTHORIZATIONS AND APPLICABLE LAW.
(a) Each Buyer has obtained all other Governmental Authorizations which
are necessary for the ownership or uses of its properties and the
conduct of its business as now conducted or as presently proposed to
be conducted and which, if not obtained and maintained, would singly
or in the aggregate, have any material adverse affect on such Buyer
and its subsidiaries taken as a whole. No other Governmental
Authorization is subject of any pending or, to Buyers' knowledge,
information and belief, threatened challenge or proceeding to revoke
or terminate any such Governmental Authorization. Buyers' have no
reason to believe that any other Governmental Authorization would not
be renewed in the name of Buyer by
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the granting Authority in the ordinary course.
(b) Neither Buyer nor any officer or director (in connection with the
business, operations and properties of such Buyer) is in or is charged
with or, to Buyer's knowledge, information and belief, at any time
since its organization has been in or has been charged with, or is
threatened or under investigation with respect to, breach or violation
of, or default in the performance, observance or fulfillment of, any
Governmental Authorization or any Applicable Law, and no event exists
or has occurred, which constitutes, or but for any requirement of
giving notice or passage of time or both would constitute, such a
breach, violation or default, under:
(i) any Governmental Authorization or any Applicable Law, except for
such breaches, violations or defaults as do not and will not have
in the aggregate any material adverse affect on Buyers taken as a
whole or the ability of Buyers to perform any of the obligations
set forth in this Agreement or any Collateral Agreement or to
consummate the Transactions, or
(ii) any requirement of any insurance carrier, applicable to its
business, operations or properties.
8.6 GST REGISTRATION. Buyer will be registered under Part IX of the EXCISE TAX
ACT (Canada) at Closing.
8.7 DISCLOSURE. None of the representations and warranties made by Buyers or
made in any letter, certificate or memorandum furnished or to be furnished by
Buyers or on their behalf, contains or will contain any untrue statement of a
material fact, or omits any material fact the omission of which would make the
statements made misleading and materially adverse to Seller.
8.8 CONTINUING REPRESENTATION AND WARRANTY. Except for those representations
and warranties which speak as of a specific date, all of the representations and
warranties of Buyers set forth in this Article shall be true and correct on the
Closing Date with the same force and effect as though made on and as of that
date and those, if any which speck as of a specific date shall be true and
correct on the Closing Date.
8.9 SOLVENCY. As of the execution and delivery of this Agreement, and, after
giving effect to the consummation of the transactions contemplated herein,
Buyers taken as a whole and individually will be solvent.
8.10 INTERPRETATION. For the purposes of this ARTICLE 8, New Frontier and
Colorado Satellite Broadcasting, Inc. are each considered to be a "Buyer".
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ARTICLE 9. SELLER'S OBLIGATIONS BEFORE CLOSING
Seller covenants that, except as otherwise agreed in writing by Buyer, from the
date of this Agreement until the Closing:
9.1 BUYERS' ACCESS TO PREMISES AND INFORMATION. Buyers and its counsel,
accountants and other representatives shall be entitled to have full access
during normal business hours to all Seller's properties, books, accounts,
records, contracts and documents of or relating to the Subject Assets. Seller
shall furnish or cause to be furnished to Buyers and its representatives all
data and information concerning the Subject Assets that may reasonably be
requested.
9.2 MAINTENANCE OF INSURANCE. Seller shall continue to carry its existing
insurance, subject to variations in amounts required by the ordinary operations
of their businesses. At the request of Buyers and at Buyers' sole expense, the
amount of insurance against fire and other casualties which, at the date of this
Agreement, Seller carries on any of the Subject Assets shall be increased by
such amount or amounts as Buyers shall specify.
9.3 NEW TRANSACTIONS. Seller shall not do or agree to enter into any contract,
commitment or transaction which would materially adversely effect the ability of
Seller to perform any obligation set forth in this Agreement of any Collateral
Agreement.
9.4 EXISTING AGREEMENTS. Except in ordinary course of business, Seller shall
not modify, amend, cancel or terminate any of its existing contracts or
agreements, or agree to do any of those acts without the consent of Buyers, if
doing so would materially adversely affect Seller's ability to fulfill its
obligations under this Agreement.
9.5 CONSENT OF OTHERS. As soon as reasonably practical after the execution and
delivery of this Agreement, and in any event on or before the Closing Date,
Seller shall obtain the written consent of the persons described in SCHEDULE
7.11 in form and substance satisfactory to Buyers and will furnish to Buyers
executed copies of those consents.
9.6 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Seller shall use its
reasonable commercial efforts to assure that all representations and warranties
of Seller set forth in this Agreement and in any written statements delivered to
Buyers by Seller under this Agreement will also be true and correct as of the
Closing Date as if made on that date and that all conditions precedent to
Closing shall have been met. Seller shall promptly disclose to Buyers any
information contained in the Schedules to this Agreement which, because of an
event occurring after the date hereof, is incomplete or is no longer correct as
of all times after the date hereof until the Closing Date; provided, however,
that none of such disclosures shall be deemed to modify, amend or supplement the
representations and warranties of Seller or the schedules hereto for the
purposes of ARTICLE 11, unless Buyer shall have consented thereto in writing.
9.7 STATUTORY FILINGS. Seller shall cooperate fully with Buyers in preparing
and filing all information and documents required under any statutes or
governmental rules or regulations pertaining to the Transactions, including but
not limited to, any licenses required by Industry
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Canada and the rules promulgated thereunder.
ARTICLE 10. BUYERS' OBLIGATIONS BEFORE CLOSING
10.1 GENERAL OBLIGATIONS AND CONFIDENTIALITY. Prior to the Closing Date (or, in
the event the Closing does not occur, for a period of two years following the
date of this Agreement) Buyers shall use its best efforts to preserve the
confidentiality of any commercial information which is confidential and which
Seller identifies in writing as confidential which is disclosed to Buyers or to
its representatives by Seller; provided that Buyers at all times shall not be
materially restricted in its investigation of the assets or matters relating
thereto. The above provisions of this Section shall not apply to any
information which (i) is already known to Buyers at the time of disclosure by
Seller, (ii) is published or through no fault of Buyers becomes published or
(iii) is lawfully disclosed to Buyer by a third party. Whether or not the
Closing shall take place, Seller waive any cause of action, right or claim
arising out of the access of Buyers or their representatives to any trade
secrets or other confidential business information of Seller from the date of
this Agreement until the Closing Date, except for the intentional competitive
misuse by Buyers or its representatives of such trade secrets or other
confidential business information (identified as confidential as required by
this Article) if the Closing does not take place.
10.2 SELLER'S ACCESS TO PREMISES AND INFORMATION. Seller and its counsel,
accountants and other representatives shall be entitled to have full access
during normal business hours to all Buyers' properties, books, accounts,
records, contracts and documents. The Buyers shall furnish or cause to be
furnished to Seller and its representatives all data and information concerning
Buyers that may reasonably be requested.
ARTICLE 11. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
The obligation of Buyers to purchase the Subject Assets under this Agreement are
subject to the satisfaction, at or before the Closing, of all the conditions set
out below in this Article. Buyers may waive any or all of these conditions;
provided, however, that no such waiver of a condition shall constitute a waiver
by Buyers of any of its other rights or remedies, at law or in equity, if Seller
shall be in default of any of their representations, warranties or covenants
under this Agreement.
11.1 ACCURACY'S OF SELLER'S REPRESENTATIONS AND WARRANTIES. All representations
and warranties by Seller contained in this Agreement or in any Collateral
Agreement or in any written statement delivered by Seller thereunder shall be
true on and as of the Closing as though such representations and warranties were
made on and as of that date. Buyers shall have received a certificate, dated
the Closing Date, signed by Seller's President certifying, in such detail as
Buyers and their counsel may reasonably request, that the representations and
warranties set out herein are true and correct as of the Closing Date.
11.2 SELLER'S PERFORMANCE. Seller shall have performed, satisfied, and complied
with all
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covenants, agreements, and conditions required by this Agreement to be
performed or complied with by Seller on or before the Closing Date.
11.3 CERTIFICATION BY SELLER. Buyers shall have received a certificate, dated
the Closing Date, signed by Seller' Presidents certifying, in such detail as
Buyer and its counsel may reasonably request, that the representations and
warranties set out herein are true and correct as of the Closing Date.
11.4 OPINION OF SELLER'S COUNSEL. Buyers shall have received from counsel for
Seller, opinions dated the Closing Date, in form and substance reasonably
satisfactory to Buyers and their counsel, stating that:
(a) Seller is a corporation duly organized, validly existing and in good
standing under the applicable laws of the jurisdiction of its
incorporation and has all necessary corporate power to own its
properties as now owned and operate its businesses as now operated;
(b) all corporate proceedings required by law or by the provisions of
this Agreement to be taken by Seller on or before the Closing Date in
connection with the execution and delivery of this Agreement and the
consummation of the Transactions have been duly and validly taken;
(c) this Agreement has been duly and validly authorized and, when executed
and delivered by Seller will be valid and binding on Seller and
enforceable in accordance with its terms, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights
of creditors generally; and
(d) neither the execution nor delivery of this Agreement nor the
consummation of the Transactions will constitute a default, or an event
that would with notice or lapse of time or both constitute a default
under, or violation or breach of Seller's articles of incorporation or
bylaws.
In rendering their opinions, counsel for Seller may rely on certificates of
governmental authorities, certificates of Seller's officers, directors or
shareholders, and on opinions of associate counsel.
11.5 ABSENCE OF LITIGATION. No action, suit or proceeding before any court or
any governmental body or authority, pertaining to the Transactions or their
consummation shall have been instituted or threatened on or before the Closing
Date.
11.6 CORPORATE APPROVAL. The execution and delivery of this Agreement by
Seller, and the performance of their covenants and obligations under it, shall
have been duly authorized by all necessary corporate action, and Buyer shall
have received copies of all resolutions pertaining to that authorization,
certified by the secretary of Seller.
11.7 CONSENTS. All necessary agreements and consents of any parties (other than
Buyers, their
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shareholders or directors, and Authorities in the United States of America)
to the consummation of the Transaction, or otherwise pertaining to the
matters covered by this Agreement, shall have been obtained.
11.8 APPROVAL OF DOCUMENTATION. The form and substance of all certificates,
instruments, opinions and other documents delivered to Buyers under this
Agreement shall be satisfactory in all reasonable respects to Buyers and their
counsel.
11.9 BULK SALES ACT. The Buyers will have been furnished with evidence
satisfactory that the sale and purchase of the Subject Assets is in compliance
with the provisions of the Bulk Sales Act (Ontario).
11.10 CONDITION OF ASSETS. The Subject Assets shall not have been materially or
adversely affected in any way as a result of any fire, accident, storm or other
casualty or labor or civil disturbance or act of God or the public enemy.
11.11 NON-COMPETITION AGREEMENT. The shareholders of Seller shall each have
duly executed and delivered to Buyers a Non-competition Agreement substantially
in the form of SCHEDULE 11.11.
11.12 RETAIL SALES TAX CERTIFICATE. Buyers shall have received, from Newco, a
retail sales tax certificate issued under the RETAIL SALES TAX ACT (Ontario).
11.13 AGREEMENT ON SCHEDULES. At the date of execution of this Agreement by the
parties, the form and content of the schedules to this Agreement had not be
settled by the parties and it is a condition precedent to Buyers' performance
under this Agreement that such schedules be settled prior to Closing.
ARTICLE 12. CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
The obligations of Seller to sell and transfer the Subject Assets under this
Agreement are subject to the satisfaction, at or before the Closing, of all the
following conditions:
12.1 ACCURACY OF BUYERS' REPRESENTATIONS AND WARRANTIES. All representations
and warranties by Buyers contained in this Agreement or in any Collateral
Agreement or in any written statement delivered by Buyers thereunder shall be
true on and as of the Closing as though such representations and warranties were
made on and as of that date. Seller shall have received a certificate, dated
the Closing Date, signed by Buyers' Presidents certifying, in such detail as
Seller and its counsel may reasonably request, that the representations and
warranties set out herein are true and correct as of the Closing Date.
12.2 BUYERS' PERFORMANCE. Buyers shall have performed and complied with all
covenants and agreements, and satisfied all conditions that it is required by
this Agreement to perform, comply with, or satisfy, before or at the Closing.
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12.3 OPINION OF BUYERS' COUNSEL. Buyers shall have furnished Seller with an
opinion from counsel for Buyers, dated the Closing Date, satisfactory to Seller
and its counsel, stating that:
(a) Buyers are corporations duly organized, validly existing and in good
standing under the laws of the State of Colorado and have all requisite
corporate power to perform their obligations under this Agreement;
(b) all corporate proceedings required by law or by the provisions of this
Agreement to be taken by Buyers on or before the Closing Date in
connection with the execution and delivery of this Agreement and the
consummation of the Transactions shall have been duly and validly
taken;
(c) this Agreement has been duly and validly authorized and, when executed
and delivered by Buyers will be valid and binding on Buyers and
enforceable in accordance with its terms, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights
of creditors generally;
(d) neither the execution nor delivery of this Agreement nor the
consummation of the Transactions will constitute a default, or an event
that would with notice or lapse of time or both constitute a default
under, or violation or breach of Buyers' articles of incorporation
or bylaws; and
(e) to the best of such counsel's knowledge, there is no legal action
pending or threatened against either of Buyers which could have a
material adverse affect on Buyers.
In rendering its opinion, counsel for Buyers may rely on certificates of
governmental authorities and on opinions of associate counsel.
12.4 BUYERS' CORPORATE APPROVAL. Buyers shall have received corporate
authorization and approval for the execution and delivery of this Agreement and
all corporate action necessary or proper to fulfill the obligations of Buyers to
be performed under this Agreement on or before the Closing Date.
12.5 AGREEMENT ON SCHEDULES. At the date of execution of this Agreement by the
parties, the form and content of the schedules to this Agreement had not be
settled by the parties and it is a condition precedent to Seller's performance
under this Agreement that such schedules be settled prior to Closing and shall
be initialled by the signing officers of the parties.
12.6 CAPITALIZATION OF BUYERS. Prior to the Closing Date, the Buyers shall have
raised and received the proceeds from a share offering of not less than
US$7,000,000.
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ARTICLE 13. SELLER'S OBLIGATIONS AFTER THE CLOSING.
13.1 PRESERVATION OF GOODWILL. Following the Closing, Seller will restrict its
activities so that Buyers' reasonable expectations with respect to the goodwill,
business reputation, employee relations and prospects connected with the Subject
Assets will not be materially impaired. In furtherance but not in limitation of
this general obligation, Seller agrees that, for the period of two (2) years
following the Closing Date, or as long as Buyers or its assigns or successors in
interest carry on a like business in the counties or areas specified, whichever
is shorter:
(a) Seller and its shareholders will not engage in an Adult Movies
Business and will execute the non-competition agreement attached as
SCHEDULE 11.11. If, in any judicial proceeding, a court shall refuse
to enforce any of the separate covenants deemed included in this
Section, then this unenforceable covenant shall be deemed eliminated
from these provisions for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants to be
enforced.
(b) Seller and its shareholders will not disclose to any person or use for
their own benefit any price lists, pricing data, customer lists or
similar matters possessed by them relating to the Subject Assets or
the business transferred to Buyer unless they first clearly demonstrate
to Buyer that such matters are at the time of the proposed disclosure
or use of common knowledge within the trade.
13.2 SELLER'S INDEMNITIES. Seller shall indemnify, defend and hold harmless
Buyers against and in respect of any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorneys' fees, that Buyers shall
incur or suffer, which arise, result from or relate to any breach of, or failure
by Seller to perform any of its representations, warranties, covenants or
agreements in this Agreement or in any schedule, certificate, exhibit or other
instrument furnished or to be furnished by Seller under this Agreement.
Notwithstanding any other provision of this Agreement, Seller shall not be
liable to Buyer on any warranty, representation or covenant made by Seller in
this Agreement, or under any of its indemnities in this Agreement, regarding any
single claim, loss, expense, obligation or other liability that does not exceed
US$2,500.00; provided, however, that when the aggregate amount of all such
claims, losses, expenses, obligations and liabilities not exceeding US$2,500.00
each reaches US$25,000.00, Seller shall thereafter be liable in full for all
such breaches and indemnities and regarding all those claims, losses, expenses,
obligations, and liabilities.
13.3 ACCESS TO RECORDS. From and after the Closing, Seller shall allow Buyers,
and its counsel, accountants and other representatives, such access to records
which after the Closing are in the custody or control of Seller as Buyers
reasonably require in order to comply with its obligations under the law or
under contracts assumed by Buyers pursuant to this Agreement.
13.4 NONSOLICITATION OF EMPLOYEES. Except with the prior written consent of
Seller, Buyers shall not, prior to the first anniversary of the Closing, solicit
any employee of Seller or of any affiliate of Seller to leave such employment if
such employee was at any time between the date hereof and the Closing an
employee of any Seller.
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13.5 RISK OF LOSS.
(a) Until the Closing Date the Subject Assets will remain at the risk
of Seller. Seller will maintain all risk insurance in respect of
loss or damage to or any other casualty in respect of the Subject
Assets which provides for loss settlement on a replacement cost
basis if the Subject Assets are repaired or replaced and on an
actual cash value basis if the Subject Assets are not repaired or
replaced. In the event of any loss, damage or claim, in respect of
any risk for which insurance is to be carried as aforesaid arising
before the Closing Date, Buyers, as an additional condition of
closing, will be entitled to be satisfied that the insurers have
accepted the claim of Seller for payment in accordance with the
terms of the policies. If any destruction or damage occurs to the
Subject Assets on or before the Closing Date or if any or all of
the Subject Assets are appropriated, expropriated or seized by
governmental or other lawful authority on or before the Closing
Date, Seller will forthwith give notice thereof to Buyers and
Buyers will have the option, exercisable by notice to Seller on or
before the Closing Date:
(i) to reduce the Purchase Price by an amount equal to the cost of
repair or, if destroyed or damaged beyond repair or if
appropriated, expropriated or seized, by an amount equal to the
replacement cost of the assets forming the part of the Subject
Assets so damaged or destroyed or appropriated, expropriated or
seized and to complete the purchase;
(ii) to complete the purchase without reduction of the Purchase Price,
in which event all proceeds of insurance or compensation for the
destruction or damage or appropriation, expropriation or seizure
will be payable to Buyers and all right and claim of Seller to
any such amounts not paid by the Closing Date will be assigned
to Buyers; or
(iii) to rescind this Agreement and not complete the purchase if,
in the opinion of Buyers, such destruction, damage,
appropriation, expropriation or seizure is material and in such
event Seller and Buyers will be released from all obligations
hereunder and the deposit referred to in SECTION 2.1(a) shall be
returned to Buyers.
(b) If Buyers elect to reduce the Purchase Price pursuant to SECTION
13.5(a)(i), Seller and Buyers will at the Closing Date determine the
amount of the reduction to the extent that it is then determinable and
will undertake to adjust such amount after the Closing Date, if
necessary.
ARTICLE 14. COSTS
14.1 FINDER'S OR BROKER'S FEES. Each party shall be responsible for its on
costs or for any
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commission or finder's fee incurred on behalf of that party in connection
with the Transactions.
14.2 EXPENSES. Each of the parties shall pay all costs and expenses, including,
but not limited to attorneys' fees, incurred or to be incurred by it in
negotiating and preparing this Agreement and in closing and carrying the
Transactions.
ARTICLE 15. FORM OF AGREEMENT
15.1 HEADINGS. The subject headings of the Articles and Sections of this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
15.2 ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Agreement constitutes the
entire agreement between the parties pertaining to the subject matter contained
in it and supersedes all prior and contemporaneous agreements, representations,
and understandings of the parties. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by all the parties.
No waiver of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not similar, nor shall
any waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
15.3 COUNTERPARTS. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
ARTICLE 16. PARTIES
16.1 PARTIES IN INTEREST. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and permitted assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action over against any party to this Agreement.
16.2 ASSIGNMENT. No party can assign this Agreement without the express written
consent of the other parties. This Agreement shall be binding on and shall
inure to the benefit of the parties to it and their respective heirs or legal
representatives, and their respective successors and permitted assigns.
ARTICLE 17. REMEDIES
17.1 RECOVERY OF LITIGATION COSTS. If any legal action or any arbitration or
other proceeding is
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brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to
which it or they may be entitled.
17.2 CONDITIONS PERMITTING TERMINATION. Subject to the provisions of ARTICLE 3
relating to the postponement of the Closing Date, either party may on the
Closing Date terminate this Agreement by written notice to the other, without
liability to the other, if any bona fide action or proceeding shall be pending
against either party on the Closing Date that could result in a materially
adverse judgment, decree or order that would prevent or make unlawful the
carrying out of this Agreement.
17.3 DEFAULTS PERMITTING TERMINATION. If a Buyer or Seller materially defaults
in the due and timely performance of any of its material warranties, covenants,
or agreements under this Agreement, the non-defaulting party or parties may on
the Closing Date give notice of termination of this Agreement, in the manner
provided in ARTICLE 19. The notice shall specify with particularity the default
or defaults on which the notice is based. The termination shall be on the first
to occur of the 10th day after such notice or the Closing Date, unless the
specified default or defaults have been cured by such time.
ARTICLE 18. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations, warranties, covenants and agreements of the parties
contained in this Agreement, or in any instrument, certificate, opinion or other
writing provided for in it, shall survive the Closing.
ARTICLE 19. NOTICES
All notices, requests, demands and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given on the date of
service if served personally on the party to whom notice is to be given, or on
the third day after mailing if mailed to the party to whom notice is to be
given, by first class mail registered or certified, postage prepaid, and
properly addressed as follows:
Seller: Douglas Duncan
2500 Don Reid Drive
Ontario, Canada
K1H 8P5
Stuart Duncan
2500 Don Reid Drive
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Ontario, Canada
K1H 8P5
Daniel Bender
27357 Valley Center Road
Valley Center, California
92082
with copy to: Jamie Wyllie, Esq.
Yegendorf, Brazeau, Seller, Prehogan & Wyllie
55 Metcalfe Street, Suite 750
Ontario, Canada
K1H 6L5
Buyers: New Frontier Media, Inc.
1050 Walnut Street, Suite 301
Boulder, CO 80302
Attn.: Mark H. Kreloff
with copy to: The Law Office of Mark L. Driver, P.C.
3300 East First Ave. Suite 600
Denver, CO 80206
Attn.: Mark L. Driver
Any party may change its address for purposes of this Article by giving the
other parties written notice of the new address in the manner set forth above.
ARTICLE 20. GOVERNING LAW
This Agreement shall be construed in accordance with, and governed by, the laws
of the State of Colorado.
ARTICLE 21. MISCELLANEOUS
21.1 ANNOUNCEMENTS. Seller will not make any announcements to the public
concerning this Agreement or the Transactions without the prior approval of
Buyers, which will not be unreasonably withheld. Notwithstanding any failure of
Buyers to approve it, Seller may make an announcement of substantially the same
information as therefore announced to the public by Buyers, or any announcement
required by applicable law, but Seller shall in either case notify Buyers of the
contents thereof reasonably promptly in advance of its issuance.
24
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21.2 REFERENCES. Unless otherwise specified, references to Sections or Articles
are to sections or articles in this Agreement.
IN WlTNESS WHEREOF, the parties to this Agreement have duly executed it as of
the day and year first above written.
BUYERS: New Frontier Media, Inc.
By: /s/ ILLEGIBLE SIGNATURE
----------------------------------
Its: President
---------------------------------
Colorado Satellite Broadcasting, Inc.
By: /s/ ILLEGIBLE SIGNATURE
----------------------------------
Its: President
---------------------------------
SELLER: 1248663 Ontario Inc.
By: /s/ ILLEGIBLE SIGNATURE
----------------------------------
Its authorized signing officer