Amendment to Registration of Securities of a Small-Business Issuer — Form 10-SB
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10SB12G/A Amendment to Registration of Securities of a 41 230K
Small-Business Issuer
2: EX-2.2 Agreement and Plan of Reorganization 44 161K
3: EX-2.3 Agreement and Plan of Reorganization 43 155K
4: EX-10.2 Common Stock Purchase Agreement 9 44K
5: EX-10.3 1998 Stock Option Plan 14 57K
EXHIBIT 2.3
AGREEMENT AND PLAN OF REORGANIZATION
among GOODNOISE CORPORATION,
GN ACQUISITION CORPORATION,
CREATIVE FULFILLMENT, INC. and
the SHAREHOLDERS of CREATIVE FULFILLMENT, INC.
October 8, 1998
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is entered into
this 8th day of October 1998, by and among GoodNoise Corporation, a Florida
corporation ("GoodNoise"), GN Acquisition Corporation, a Delaware corporation
and wholly-owned subsidiary of GoodNoise ("Sub"), Creative Fulfillment, Inc., a
California corporation ("Emusic") and certain shareholders of Emusic (the
"Shareholders").
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, Sub shall be merged with and into Emusic, with Emusic the
surviving corporation (the "Merger"), pursuant to Agreement of Merger
substantially in the form attached hereto as Exhibit A (the "Agreement of
---------
Merger") and the applicable provisions of the laws of the State of California
and Delaware. Upon the Merger, the Shareholders shall be entitled to receive
shares of GoodNoise common stock, par value $0.01 per share, at the exchange
ratio set forth herein.
B. For federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended.
AGREEMENT
NOW, THEREFORE, in reliance on the foregoing recitals and in and for the
consideration and mutual covenants set forth herein, the parties agree as
follows:
1. DEFINITIONS.
1.1 "Affiliate" shall have the meaning set forth in the rules and
regulations promulgated by the Commission pursuant to the Securities Act.
1.2 "Average Closing Stock Price" shall mean the closing or last trade
price for GoodNoise Common Stock for the seven consecutive trading days
immediately preceding, but not including, the date immediately prior to the date
of the Closing.
1.3 "California Law" shall mean the California General Corporation
Law, as amended.
1.4 "Closing" and "Closing Date" shall have the meanings set forth in
Section 2.4.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.6 "Commission" shall mean the Securities and Exchange Commission.
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1.7 "Confidential Information" shall mean that information of a party
("Disclosing Party") which is disclosed to another party ("Receiving Party")
pursuant to this Agreement. Confidential Information shall include, but not be
limited to, trade secrets, know-how, inventions, techniques, processes,
algorithms, software programs, schematics, designs, contracts, customer lists,
financial information, sales and marketing plans and business information.
Confidential Information shall not include any information which a recipient can
document: (a) was in the public domain at or subsequent to the time such
information was communicated to such recipient by the other party through no
fault of such recipient, (b) was rightfully in such recipient's possession free
of any obligation of confidence at or subsequent to the time such information
was communicated to such recipient by the other party, (c) was developed by
employees or agents of such recipient independently of and without reference to
any information communicated to such recipient by the other party, or (d) was
communicated by the other party to an unaffiliated third party free of any
obligation of confidence.
1.8 "Contaminant" shall mean, without limitation, any pollutants,
residues, infectious materials, flammable, dangerous, toxic or hazardous
substances, hazardous materials or waste of any description whatsoever, except
for non-hazardous waste of the kind generated in the normal course of
operations, including any of the foregoing as defined in or regulated under any
Environmental Law, including but not limited to polychlorinated biphenyls,
asbestos or asbestos containing materials, petroleum and petroleum containing
materials.
1.9 "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
1.10 "Dissenting Shares" shall mean any Emusic Shares held by persons
who have not voted such shares for approval of the Merger and with respect to
which such persons have become entitled to exercise dissenter's rights in
accordance with the California General Corporation Law.
1.11 "Effective Time" shall mean the time the Merger becomes effective
as defined in Section 2.5.
1.12 "Emusic Shares" shall mean the shares of Emusic common stock, no
par value, issued and outstanding at the Effective Time.
1.13 "Entity" shall mean corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
1.14 "Environmental Activity" shall mean, without limitation, any
activity, event or circumstance in respect of a Contaminant, including, without
limitation, its storage, use, holding, collection, purchase, accumulation,
assessment, generation, manufacture, construction, processing, treatment,
recycling, stabilization, disposition, handling or transportation or its
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affirmative or accidental release into the natural environment including
movement through or in the air, soil, subsoil, surface water or groundwater or
any other activity, event or circumstance which is subject to any of the
Environmental Laws including but not limited to noise, vibration, odor or
similar nuisance.
1.15 "Exchange Ratio" shall mean that for each outstanding share of
Emusic common stock, such share will be converted into the right to receive that
number of shares of GoodNoise Common Stock and that amount of cash as is
determined in accordance with Section 2.2 hereof.
1.16 "Environmental Laws" shall mean laws relating to the environment
or any Environmental Activity.
1.17 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
1.18 "GoodNoise Shares" shall mean the aggregate number of shares of
GoodNoise common stock, par value $0.01 per share, issued in accordance with
Section 2.2.
1.19 "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body, or Entity and any court or
other tribunal).
1.20 "Indemnification Period" shall mean the period commencing on the
Closing Date and ending at the close of business on the first anniversary of the
Closing Date.
1.21 "Legal Proceeding" shall mean any action, suit, litigation,
arbitration proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or otherwise
involving any court or other Governmental Body or any arbitrator or arbitration
panel.
1.22 "Material" when capitalized and used in reference to the
business, products or financial situation of Emusic shall be construed, except
as specifically provided, to qualify the matter referred to herein to matters
with a value in excess of $17,500. For example, a "Material adverse effect"
would be an adverse effect resulting in costs or expenses in excess of $17,500.
When the word "material" is not capitalized it shall mean material with respect
to the matter referenced. For example, a reference to a material breach of a
particular agreement would mean a breach that is material with respect to the
particular contract (and not necessarily with respect to the overall business of
Emusic or GoodNoise).
1.23 "Merger" shall mean the merger of Sub with and into Emusic, on
the terms and conditions described herein.
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1.24 "Music Rights" shall mean any music recording masters, musical
arrangements, copyrights, lyrics, song titles, artwork, graphics, song rights or
other forms of music-related intellectual property rights or licenses thereto
whether on an exclusive or nonexclusive basis.
1.25 "Person" shall mean any individual, Entity or Governmental Body.
1.26 "Proprietary Asset" shall mean: (a) any patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; and (b) any right to use or exploit any of
the foregoing including rights granted by third parties under license
agreements.
1.27 "Representatives" shall mean officers, directors, employees,
agents, attorneys, accountants and advisors.
1.28 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
1.29 "Shareholder Representative" shall mean Mark Chasan.
1.30 "Tax" or "Taxes" shall mean all U.S. federal, territorial, state,
municipal, local or other taxes, including without limitation income capital,
sales and use taxes, value added and goods and services taxes, excise taxes,
transfer and stamp taxes, custom duties and franchise taxes, real and personal
property taxes and payroll taxes (including tax withholdings, employer health
taxes, workers' compensation assessments and ERISA plans and unemployment
insurance premiums, contributions and remittances and the U.S. equivalents
thereof), and penalties, interest and surcharges in respect of any of the
foregoing and all words derived from or including the word "Tax," such as
"Taxing" and "Taxation" shall bear a corresponding meaning.
1.31 "Transaction Documents" shall mean all documents or agreements
required to be delivered by any party hereunder including the Agreement of
Merger.
1.32 "Valuation Stock Price" shall mean $ 7.61 per share.
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2. PLAN OF REORGANIZATION.
2.1 THE MERGER. Subject to the terms and conditions of this Agreement,
Sub shall be merged with and into Emusic in accordance with the applicable
provisions of the laws of the States of California and Delaware and with the
terms and conditions of this Agreement so that:
(a) At the Effective Time, Sub shall be merged with and into
Emusic. As a result of the Merger, the separate corporate existence of Sub shall
cease and Emusic shall continue as the surviving corporation (sometimes referred
to herein as the "Surviving Corporation") and shall succeed to and assume all of
the rights and obligations of Sub in accordance with the laws of the States of
California and Delaware.
(b) The Articles of Incorporation and the Bylaws of Emusic in
effect immediately prior to the Effective Time shall be the articles of
incorporation and bylaws, respectively, of the Surviving Corporation after the
Effective Time unless and until further amended as provided by law.
(c) The directors and officers of Sub immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation
after the Effective Time. Such directors and officers shall hold their position
until the election and qualification of their respective successors or until
their tenure is otherwise terminated in accordance with the Bylaws of Surviving
Corporation.
2.2 CANCELLATION OF SHARES AND DELIVERY OF CONSIDERATION.
(a) At the Effective Time, each share of Emusic capital stock, if
any, that is owned directly or indirectly by Emusic shall be canceled and no
cash or other consideration shall be delivered in exchange therefor.
(b) At the Effective Time, each Emusic Share (other than shares
owned directly or indirectly by Emusic) shall, by virtue of the Merger, and
without further action on the part of any holder thereof, be converted and
exchanged for the right to receive
(i) that number of GoodNoise Shares as is equal to the
quotient of (i) (A) Four Million Two Hundred and Twenty-Five Thousand Dollars
($4,225,000) divided by (B) the number of Emusic Shares outstanding at the
Effective Time (on a fully diluted basis giving effect to any options, warrants
or other rights to acquire Emusic Shares issued and outstanding at the Effective
Date) divided by (ii) the Valuation Period Stock Price (the "Exchange Ratio");
provided, however, that in the event the Average Closing Stock Price is less
than $5.00, then the Exchange Ratio shall be recalculated to be the quotient of
(i) (A) Four Million Two Hundred and Twenty-Five Thousand Dollars ($4,225,000)
divided by (B) the number of Emusic Shares outstanding at the Effective Time (on
a fully diluted basis giving effect to any options, warrants or other rights to
acquire Emusic Shares issued and outstanding at the Effective Date) divided by
(ii) the Average Closing Stock Price; provided further, that in no
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event shall the number of GoodNoise Shares issuable be less than 528,125 or more
than 845,000; plus
(ii) an amount of cash (the "Cash Merger Consideration") per
Emusic Share equal to $300,000 divided by the number of Emusic Shares
outstanding at the Effective Time (on a fully diluted basis giving effect to any
options, warrants or other rights to acquire Emusic Shares issued and
outstanding at the Effective Date) (the "Cash Ratio").
(c) At the Effective Time, each share of capital stock of Sub
outstanding immediately prior to the Merger shall, by virtue of the Merger, and
without further action on the part of any holder thereof, continue to be issued
and shall be converted into one share of Emusic common stock outstanding after
the Merger.
(d) The Exchange Ratio and the Cash Ratio shall be adjusted to
reflect the effect of any stock split, reverse split, stock dividend (including
any dividend or distribution of securities convertible into GoodNoise Common
Stock or Emusic common stock), reorganization, recapitalization or other like
change with respect to GoodNoise Common Stock or Emusic common stock occurring
after the date hereof and prior to the Effective Time.
(e) No fraction of a share of GoodNoise Common Stock shall be
issued, but in lieu thereof each holder of Emusic Shares who would otherwise be
entitled to a fraction of a share of GoodNoise Common Stock (after aggregating
all fractional shares of GoodNoise Common Stock to be received by such holder)
shall receive from GoodNoise an amount of cash (rounded to the nearest whole
cent) equal to the product of (i) such fraction, multiplied by (ii) the average
last sale price of a share of GoodNoise Common Stock for the five most recent
days that GoodNoise Common Stock has traded ending on the trading day
immediately prior to the Effective Time.
(f) Any Dissenting Shares shall not be converted into GoodNoise
Common Stock but shall instead be converted into the right to Dissenting Shares
pursuant to the California Law. Emusic agrees that, except with the prior
written consent of GoodNoise, or as required under the California Law, it will
not voluntarily make any payment with respect to, or settle or offer to settle,
any such purchase demand. Each holder of Dissenting Shares (a "Dissenting
Shareholder") who, pursuant to the provisions of the California Law, becomes
entitled to payment for Emusic Shares shall receive payment therefor (but only
after the value therefor shall have been agreed upon or finally determined
pursuant to such provisions). If, after the Effective Time, any Dissenting
Shares shall lose their status as Dissenting Shares, GoodNoise shall issue and
deliver, upon surrender by such shareholder of certificate or certificates
representing Emusic Shares, the number of shares of GoodNoise Common Stock to
which such shareholder would otherwise be entitled under this Section 2.2 less
the number of shares of GoodNoise Common Stock allocable to such shareholder
that have been deposited in the Indemnity Escrow.
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2.3 EXCHANGE PROCEDURES.
(a) Subject to paragraph (e) hereof, following the Closing Date,
GoodNoise shall mail to each holder of record of certificate(s) or other
documents which represent Emusic Shares (the "Certificates"), to be exchanged
pursuant to Section 2.2 hereof (i) a letter of transmittal (which shall specify
that, with respect to the Certificates, delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to GoodNoise and shall be in such form and have such other
provisions as GoodNoise shall reasonably require) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for GoodNoise Shares
and the Cash Merger Consideration. Upon surrender of a Certificate for
cancellation to GoodNoise, together with such letter of transmittal, duly
executed, the holder of such Certificates shall be entitled to receive in
exchange therefor his pro rata allocation of the GoodNoise Shares and the Cash
Merger Consideration as to which such holder is entitled pursuant to Section 2.2
hereof. Certificates so surrendered pursuant to this Section 2.3 shall forthwith
be canceled (if not otherwise canceled or terminated in accordance with their
terms). In the event of a transfer of ownership of Emusic Shares which is not
registered on the transfer records of Emusic, the appropriate number of
GoodNoise Shares and the Cash Merger Consideration may be delivered to a
transferee if the Certificate representing such transferred security is
presented to GoodNoise and accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this Section 2.3, each
Certificate shall be deemed at any time after the Effective Time to represent
solely the right to receive upon such surrender that number of GoodNoise Shares
and the Cash Merger Consideration (without interest and subject to applicable
withholding, escheat and other laws) to which such holder is entitled.
(b) Notwithstanding anything to the contrary in this Section 2.3,
none of GoodNoise, the Surviving Corporation or any party hereto shall be liable
to a holder of Emusic Shares for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(c) The GoodNoise Shares and the Cash Merger Consideration paid
in accordance with the terms hereof shall be deemed to be in full satisfaction
of all rights pertaining to such Emusic Shares, and there shall be no further
registration of transfers on the records of the Surviving Corporation of Emusic
Shares. If, after the Effective Time, Certificates are presented to the
surviving Corporation for any reason, they shall be canceled and exchanged as
provided in Section 2.2.
(d) In the event any Certificates evidencing Emusic Shares shall
have been lost, stolen or destroyed, GoodNoise shall issue in exchange for such
lost, stolen or destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, such holders pro rata allocation of GoodNoise Shares
and the Cash Merger Consideration as may be required pursuant to Section 2.2;
provided, however, that GoodNoise may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity
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against any claim that may be made against GoodNoise with respect to the
Certificates alleged to have been lost, stolen or destroyed.
(e) Notwithstanding anything to the contrary set forth herein,
the GoodNoise Shares shall be deposited into escrow pursuant to the terms of the
conditions subsequent described in Section 12 are satisfied. In the event
GoodNoise satisfies those conditions subsequent, eighty percent (80%) of the
GoodNoise Shares shall be removed from escrow and distributed to the
Shareholders in accordance with the terms set forth in Section 2.2. Should
GoodNoise fail to satisfy any or all of the conditions subsequent and the
Shareholders elect to cancel the transactions contemplated herein, all of the
GoodNoise Shares shall be removed from escrow and delivered to GoodNoise in
accordance with the terms of the Indemnity Escrow Agreement.
2.4 THE CLOSING. Subject to termination of this Agreement as provided
in Section 13 below, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Gray Cary Ware &
Freidenrich LLP at 10:00 a.m. local time on the date three (3) days following
the satisfaction of all conditions to closing set forth herein, or such other
place, time and date as GoodNoise and Emusic may mutually select (the "Closing
Date").
2.5 EFFECTIVE TIME. Simultaneously with the Closing, the Agreement of
Merger shall be filed in the offices of the Secretaries of State of the States
of California and Delaware. The Merger shall become effective immediately upon
the filing of the Agreement of Merger with such office (the "Effective Time").
2.6 CASH MERGER CONSIDERATION. The Cash Merger Consideration shall be
paid within five days of the earlier of (i) the closing by GoodNoise of
additional financing in an amount of $5,000,000 or more or (ii) six months from
the date of this Agreement; provided however, that if the $5,000,000 in
additional financing is received prior to the Closing, the Cash Merger
Consideration shall be paid within five days of the Effective Time. If GoodNoise
has not made such payment when due, the Emusic Shareholders shall have a right
to cancel the transactions contemplated herein in their entirety pursuant to
Section 12 hereof, or to convert the amount payable in cash to GoodNoise Shares
based upon eighty percent (80%) of the average last trade price for GoodNoise
Shares for the seven days prior to the Effective Date. Any election to cancel
the transactions must be made as to all Emusic Shareholders based upon the
approval of the holders of a majority of the Emusic Shares. The obligation to
pay the Cash Merger Consideration shall be evidenced by a promissory note (the
"Note") and security agreement (the "Security Agreement") in the form attached
as Exhibit B hereto.
3. REPRESENTATIONS AND WARRANTIES OF EMUSIC. Except as otherwise set
forth in the "Emusic Disclosure Schedule," referencing the appropriate section
and paragraph numbers, to be provided to GoodNoise concurrent with the execution
of this Agreement (and which shall apply regardless of whether the particular
subsection of this Section 3 refers to such schedule), Emusic and the
Shareholders represent and warrant to GoodNoise as set forth below. No fact or
circumstance disclosed to GoodNoise by Emusic shall constitute an exception to
these
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representations and warranties unless such fact or circumstance is set forth in
the Emusic Disclosure Schedule.
3.1 ORGANIZATION. Emusic is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has corporate power and authority to carry on its business as
it is now being conducted and as it is proposed to be conducted. Emusic is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or properties makes such
qualification or licensing necessary. The Emusic Disclosure Schedule contains a
true and complete listing of the locations of all sales offices, manufacturing
facilities, and any other offices or facilities of Emusic and a true and
complete list of all jurisdictions in which Emusic maintains any employees. The
Emusic Disclosure Schedule contains a true and complete list of all
jurisdictions in which Emusic is duly qualified to transact business as a
foreign corporation. True and complete copies of Emusic's charter documents as
in effect on the date hereof and as to be in effect immediately prior to the
Closing, have been provided to GoodNoise or its Representatives.
3.2 CAPITALIZATION.
(a) The authorized capital stock of Emusic as of the date of this
Agreement consists of 25,000,000 shares of Emusic common stock; and, as of the
date of this Agreement, 16,909,165 shares of Emusic common stock are issued and
outstanding and held of record by Emusic Shareholders as set forth and
identified in Section 3.2(a) of the Emusic Disclosure Schedule.
(b) Except as set forth in Section 3.2(b) of the Emusic
Disclosure Schedule, there are no outstanding options, warrants, rights,
commitments, conversion rights, rights of exchange, plans or other agreements of
any character providing for the purchase, issuance or sale of any shares of the
capital stock of Emusic other than as contemplated by this Agreement. There are
no voting trust, buy-sell or other similar agreements in place among the Emusic
Shareholders and Emusic.
(c) All of the outstanding securities of Emusic have been duly
authorized and are validly issued, fully paid and nonassessable. All securities
of Emusic were issued in compliance with applicable securities laws. None of
Emusic's outstanding securities were issued in consideration in whole or in part
for any contribution, transfer, assignment or any proprietary rights.
3.3 POWER, AUTHORITY AND VALIDITY. Emusic has the corporate power and
authority to enter into this Agreement and the other Transaction Documents to
which it is a party and to carry out its obligations hereunder and thereunder.
The execution and delivery of this Agreement and the Transaction Documents to
which it is a party and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by the board of directors of Emusic, and
no other corporate proceedings are necessary to authorize this Agreement or the
other Transaction Documents. Emusic is not subject to or obligated under any
charter, bylaw or contract provision or any license, franchise or permit, or
subject to any order or decree, which would be breached or violated by or in
conflict with its executing and carrying out
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this Agreement and the transactions contemplated hereunder and under the
Transaction Documents. This Agreement is, and each of the other Transaction
Documents to which Emusic will be a party, when executed and delivered by Emusic
shall be, the valid and binding obligation of Emusic enforceable in accordance
with their respective terms, subject to (i) laws of general application relating
to bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.4 FINANCIAL STATEMENTS.
(a) Schedule 3.4(a) of the Emusic Disclosure Schedule sets forth
the balance sheet and statements of income for Emusic and its predecessors for
the fiscal years ended October 31, 1996 and 1997 and for the ten month period
ended August 30, 1998 (the "Emusic Financial Statements").
(b) The Emusic Financial Statements are complete and in
accordance with the books and records of Emusic and present fairly in all
respects the financial position of Emusic as of their historical dates. Except
and to the extent reflected or reserved against in the Emusic balance sheet as
of June 30, 1998 (the "Emusic Balance Sheet"), Emusic does not have, as of the
date of such balance sheet, any liabilities or obligations (absolute or
contingent) of a nature required or customarily reflected in a balance sheet (or
the notes thereto). The aggregate reserves, if any, reflected on the Emusic
Financial Statements are adequate in light of the contingencies with respect to
which they are made.
(c) Emusic does not have any debt, liability, or obligation of
any nature, whether accrued, absolute or contingent that is not reflected or
reserved against in the Emusic Financial Statements. All debts, liabilities, and
obligations incurred after the date of the Emusic Financial Statements, whether
absolute or contingent, were incurred in the ordinary course of business and are
usual and normal in amount both individually and in the aggregate.
3.5 TAX MATTERS.
(a) Emusic has fully and timely, properly and accurately filed
all Tax returns and reports required to be filed by it (the "Emusic Returns"),
including all federal, foreign, state and local returns and reports for all
years and periods for which any such returns or reports were due. The Emusic
Returns and all other Tax returns and reports filed by Emusic were prepared in
the manner required by applicable law. Except for any Tax due upon the filing
of the Emusic Returns for current periods, all income, sales, use, occupation,
property or other Taxes or assessments due from Emusic have been paid, and
there are no pending assessments, asserted deficiencies or claims for
additional Taxes that have not been paid. The reserves for Taxes, if any,
reflected on the Emusic Financial Statements are adequate and there are no Tax
liens on any property or assets of Emusic. There have been no audits or
examinations of any Tax returns or reports by any applicable governmental
agency. No state of facts exists or has existed which would constitute grounds
for the assessment of any penalty or of any further Tax liability beyond that
shown on the respective Tax reports or returns. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable
to any federal, state or local income Tax return or report for any period.
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(b) All Taxes which Emusic has been required to collect or
withhold have been duly withheld or collected and, to the extent required, have
been paid to the proper taxing authority.
(c) Emusic is not a party to any tax-sharing agreement or similar
arrangement with any other party.
(d) At no time has Emusic been included in the federal
consolidated income Tax return of any affiliated group of corporations.
(e) No payment which Emusic is obliged to pay to any director,
officer, employee or independent contractor pursuant to the terms of an
employment agreement, severance agreement or otherwise will constitute an excess
parachute payment as defined in Section 280G of the Code.
(f) Emusic will not be required to include any adjustment in
taxable income for any Tax period (or portion thereof) ending after the Closing
Date pursuant to Section 481(c) of the Code or any provision of the Tax laws of
any jurisdiction requiring Tax adjustments as a result of a change in method of
accounting implemented by Emusic prior to the Closing Date for any Tax period
(or portion thereof) ending on or before the Closing Date or pursuant to the
provisions of any agreement entered into by Emusic prior to the Closing Date
with any taxing authority with regard to the Tax liability of Emusic for any Tax
period (or portion thereof) ending on or before the Closing Date.
(g) Emusic is not currently under any contractual obligation to
pay to any Governmental Body any Tax obligations of, or with respect to any
transaction relating to, any other person or to indemnify any other person with
respect to any Tax.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.6 of the Emusic Disclosure Schedule, from June 30, 1998, Emusic has
not:
(a) suffered any Material adverse change in its financial
condition or in the operations of its business, nor any Material Adverse Change
in its balance sheet, including but not limited to cash distributions or
decreases in the net assets of Emusic;
(b) suffered any physical damage, destruction or loss, whether or
not covered by insurance, in an aggregate amount in excess of Ten Thousand
Dollars ($10,000);
(c) granted or agreed to make any increase in the compensation
payable or to become payable by Emusic to its officers or employees, except
those occurring in the ordinary course of business;
(d) declared, set aside or paid any dividend or made any other
distribution on or in respect of the shares of the capital stock of Emusic or
declared any direct or indirect redemption, retirement, purchase or other
acquisition by Emusic of such shares;
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(e) issued any shares of capital stock of Emusic or any warrants,
rights, options or entered into any commitment relating to the shares of Emusic;
(f) made any change in the accounting methods or practices it
followed, whether for general financial or Tax purposes, or any change in
depreciation or amortization policies or rates adopted therein;
(g) sold, leased, abandoned or otherwise disposed of any real
property or any machinery, equipment or other operating property other than in
the ordinary course of business;
(h) sold, assigned, transferred, licensed or otherwise disposed
of any patent, trademark, trade name, brand name, copyright (or pending
application for any patent, trademark or copyright), invention, work of
authorship, process, know-how, formula or trade secret or interest thereunder or
other intangible asset except for equipment sales in the ordinary course of
their business;
(i) suffered any dispute involving any employee that could have a
Material adverse effect on Emusic;
(j) engaged in any activity or entered into any commitment or
transaction (including without limitation any borrowing or capital expenditure),
in either case, other than in the ordinary course of business;
(k) incurred any liabilities, absolute or contingent except for
(i) liabilities identified as such in the "liabilities" column of the Emusic
Financial Statements; (ii) accounts payable or accrued salaries that have been
incurred by Emusic since June 30, 1998, in the ordinary course of business and
consistent with Emusic's past practices; and (iii) liabilities in Section 3.6(k)
of the Emusic Disclosure Schedule;
(l) permitted or allowed any of its property or assets to be
subjected to any mortgage, deed of trust, pledge, lien, security interest or
other encumbrance of any kind, other than any purchase money security interests
incurred in the ordinary course of business;
(m) made any capital expenditure or commitment for additions to
property, plant or equipment, in the aggregate, in excess of Five Thousand
Dollars ($5,000);
(n) paid, loaned or advanced any amount to, or sold, transferred
or leased any properties or assets to, or entered into any agreement or
arrangement with any of its Affiliates, officers, directors or shareholders or
any Affiliate or associate of any of the foregoing;
(o) made any amendment to or terminated any agreement which, if
not so amended or terminated, would be required to be disclosed in the Emusic
Disclosure Schedule;
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(p) agreed to take any action described in this Section 3.6 or
outside of its ordinary course of business or which would constitute a breach of
any of the representations contained in this Agreement.
3.7 TITLE AND RELATED MATTERS. Emusic has good and marketable title to
all the properties, interests in properties and assets, real and personal,
reflected in the Emusic Financial Statements or acquired after the date of the
Emusic Financial Statements (except properties, interests in properties and
assets sold or otherwise disposed of since the date of the Emusic Financial
Statements in the ordinary course of business), free and clear of all mortgages,
liens, pledges, charges or encumbrances of any kind or character, except the
lien of current Taxes not yet due and payable and except for liens which in the
aggregate do not secure more than Ten Thousand Dollars ($10,000) in liabilities.
Except as noted in Section 3.7 of the Emusic Disclosure Schedule, the equipment
of Emusic used in the operation of its business is in good operating condition
and repair, normal wear and tear excepted. All real or personal property leases
to which Emusic is a party are valid, binding, enforceable and effective in
accordance with their respective terms, subject to (i) laws of general
application relating to bankruptcy, insolvency, and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies. There is not under any of such leases any existing default
by Emusic or, any other event of default or event which, with notice or lapse of
time or both, would constitute a default by any other party to such leases.
Section 3.7 of the Emusic Disclosure Schedule contains a description of all real
and personal property leased or owned by Emusic, describing its interest in said
property and with respect to real property a description of each parcel and a
summary description of the buildings, structures and improvements thereon. True
and correct copies of Emusic's leases have been provided to GoodNoise or its
Representatives.
3.8 MUSIC RIGHTS
(a) Section 3.8(a)(i) of the Emusic Disclosure Schedule sets
forth a true and complete list of all Music Rights owned by Emusic. Section
3.8(a)(ii) of the Emusic Disclosure Schedule sets forth a true and complete list
of all Music Rights licensed by or to Emusic. Except as provided in Section
3.8(a)(iii) of the Emusic Disclosure Schedule, Emusic has written contracts
(each of which are listed in the Emusic Disclosure Schedule) for all Music
Rights owned, licensed, used, marketed, and sold by it, and those licensed to
it, Emusic has not received any notice from any party to such a contract
challenging the enforceability of such a contract, and all such contracts are
enforceable in accordance with their terms. Except as provided in Section
3.8(a)(iv) of the Emusic Disclosure Schedule, the Merger will not constitute or
be deemed to constitute an assignment of any such Music Rights or otherwise
require the consent of any third party. Except as provided in Section 3.8(a)(v)
of the Emusic Disclosure Schedule, all Music Rights owned or licensed by Emusic
were recorded and otherwise prepared in all respects in accordance with the
rules and regulations of any unions, guilds and similar associations having
jurisdiction. Except as provided in Section 3.8(a)(vii) of the Emusic Disclosure
Schedule, each person or entity who has rendered any service or provided any
materials in connection with, or has contributed in any way, to the making of
the Music Rights has the right to grant such rights, render such services or
furnish such materials. Except as
13
disclosed in the Emusic Disclosure Schedule, all fees and other payments
applicable to or resulting from the creation, recording, manufacture,
duplication, and distribution of the Music Rights, including, but not limited
to, payments to performers, producers, engineers and others, have been fully and
completely paid by Emusic.
(b) Except as set forth in Section 3.8 of the Emusic Disclosure
Schedule, there are no amounts owed or that will become owing to any holder of
rights for royalties arising as a result of the Music Rights, nor has the Emusic
paid an advance in respect of such royalties, except to the extent that such
advance has been depleted or to the extent that the balance of any such advance
is set forth in Section 3.8 of the Emusic Disclosure Schedule.
(c) Except as described in Section 3.8(c) of the Emusic
Disclosure Schedule, Emusic does not know of or have any reason to believe that
any customers of the Emusic, or any holder of Music Rights, (i) has any
complaint or objection with respect to the service or any business practices of
the Emusic or the transactions contemplated hereby which could reasonably be
expected to have a Material Adverse Effect, or (ii) will cease to do business,
or significantly reduce the business conducted, with Emusic as a result of the
Merger which could reasonably be expected to have a Material Adverse Effect.
3.9 PROPRIETARY RIGHTS AND WARRANTY CLAIMS.
(a) Section 3.9(a)(i) of the Disclosure Schedule sets forth,
with respect to each Proprietary Asset owned or used by Emusic (each a "Emusic
Proprietary Asset" and collectively, the "Emusic Proprietary Assets") registered
with any Governmental Body or for which an application has been filed with any
Governmental Body, (i) a brief description of such Emusic Proprietary Asset, and
(ii) the names of the jurisdictions covered by the applicable registration or
application. Section 3.9(a)(ii) of the Emusic Disclosure Schedule identifies and
provides a brief description of all other Emusic Proprietary Assets. Section
3.9(a)(iii) of the Emusic Disclosure Schedule identifies and provides a brief
description of each Proprietary Asset licensed to Emusic by any Person (except
for any Proprietary Asset that is licensed to Emusic under any third party
software license generally available to the public at a cost of less than One
Thousand Dollars ($1,000)), and identifies the license agreement under which
such Proprietary Asset is being licensed to Emusic. Except as set forth in
Section 3.9(a)(iv) of the Emusic Disclosure Schedule, Emusic has good, valid and
marketable title to all Emusic Proprietary Assets identified in Sections
3.9(a)(i) and 3.9(a)(ii) of the Emusic Disclosure Schedule, free and clear of
all liens and other encumbrances and of all third party licensed technology, and
has a valid right to use all Proprietary Assets identified in Section
3.9(a)(iii) of the Emusic Disclosure Schedule. Except as set forth in Section
3.9(a)(v) of the Emusic Disclosure Schedule, Emusic is not obligated to make any
payment to any Person for the use of any Proprietary Asset. Except as set forth
in Section 3.9(a)(vi) of the Emusic Disclosure Schedule, Emusic has not
developed jointly with any other Person any Proprietary Asset with respect to
which such other Person has any rights.
(b) Except as set forth in Section 3.9(b) of the Emusic
Disclosure Schedule, Emusic has taken reasonable and customary measures and
precautions necessary to
14
protect and maintain the confidentiality and secrecy of all Emusic Proprietary
Assets (except Emusic Proprietary Assets whose value would be unimpaired by
public disclosure) and otherwise to maintain and protect the value of all Emusic
Proprietary Assets. Except as set forth in the Emusic Disclosure Schedule,
Emusic has not disclosed or delivered to any Person, or permitted the disclosure
or delivery to any Person of any of the Emusic Proprietary Assets used in or
necessary for the conduct of business by Emusic as currently conducted by
Emusic.
(c) Except as provided in Section 3.9(c) of the Emusic
Disclosure Schedule, Emusic is not infringing, misappropriating or making any
unlawful use of, and Emusic has not at any time infringed, misappropriated or
made any unlawful use of, or received any notice or other communication (in
writing or otherwise) of any actual, alleged, possible or potential
infringement, misappropriation or unlawful use of, any Proprietary Asset owned
or used by any other person ("Third Party Proprietary Asset"). No other person
is infringing, misappropriating or making any unlawful use of, and no Third
Party Proprietary Asset owned or used by any other person infringes or conflicts
with, any Emusic Proprietary Asset.
(d) Except as set forth in Section 3.9(d) of the Emusic
Disclosure Schedule: (i) each Emusic Proprietary Asset conforms with any
specification, documentation, performance standard, representation or statement
made or provided with respect thereto by or on behalf of Emusic; and (ii) there
has not been any claim made against Emusic by any customer or other person
alleging that any Emusic Proprietary Asset (including each version thereof that
has ever been licensed or otherwise made available by Emusic to any person) does
not conform with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of Emusic, and
there is no basis for any such claim.
(e) Emusic's Proprietary Assets constitute all the
proprietary assets necessary to enable Emusic to conduct its business in the
manner in which such business has been and is being conducted. Except as set
forth in Section 3.9(e) of the Emusic Disclosure Schedule, (i) Emusic has not
exclusively licensed any of the Emusic Proprietary Assets to any person and (ii)
Emusic has not entered into any covenant not to compete or contract limiting its
ability to exploit fully any of the Emusic Proprietary Assets or to transact
business in any market or geographical area or with any person.
3.10 EMPLOYEE BENEFIT PLANS. Emusic does not maintain, or is
obligated to contribute to, any defined benefit pension plan or any employee
benefit plan that is subject to either Title IV of the Employee Retirement
Income Security Act of 1974 ("ERISA") or the minimum funding standards of ERISA
or the Code. Each bonus, incentive, deferred compensation, pension, profit-
sharing, retirement, vacation, severance pay, stock purchase, stock option,
group insurance and other employee benefit or fringe benefit plans, whether
formal or informal (whether written or not), maintained by Emusic conforms to
all applicable requirements, if any, of ERISA. Section 3.10 of the Emusic
Disclosure Schedule lists and describes all such plans.
3.11 BANK ACCOUNTS AND RECEIVABLES. Section 3.11 of the Emusic
Disclosure Schedule sets forth the names and locations of all banks, trusts,
companies, savings and loan
15
associations, and other financial institutions at which Emusic maintains
accounts of any nature and the names of all persons authorized to draw thereon
or make withdrawals therefrom. Section 3.11 of the Emusic Disclosure Schedule
sets forth an accurate and complete breakdown and aging of all accounts
receivable, notes receivable, and other receivables of Emusic as of the date of
the Balance Sheet. Except as set forth on the Emusic Disclosure Schedule all
existing accounts receivable of Emusic (including those accounts receivable
reflected on the Emusic Financial Statements that have not yet been collected
and those accounts receivable that have arisen since June 30, 1998 and have not
yet been collected) (i) represent valid obligations of customers of Emusic
arising from bona fide transactions entered into in the ordinary course of
business, (ii) are current and will be collected in full when due, without any
counterclaim or setoff.
3.12 CONTRACTS.
(a) Section 3.12(a) the Emusic Disclosure Schedule
identifies each document or instrument to which Emusic is a party and that
relates to the acquisition, transfer, use, development, sharing or licensing of
any technology or Emusic Proprietary Asset.
(b) Except as set forth in Section 3.12(b) the Emusic
Disclosure Schedule,
(i) Emusic has no agreements, contracts or commitments
that call for fixed and/or contingent payments or expenditures by or to Emusic
of more than Five Thousand Dollars ($5,000) over the life of any such agreement,
contract or commitment.
(ii) Emusic has no purchase agreement, contract or
commitment that calls for fixed and/or contingent payments by Emusic that are in
excess of the normal, ordinary and usual requirements of Emusic's business.
(iii) There is no outstanding sales contract,
commitment or proposal (including, without limitation, development projects) of
Emusic that Emusic currently expects (or reasonably should expect) to result in
any loss to Emusic upon completion or performance thereof.
(iv) Emusic has no outstanding agreements, contracts or
commitments with officers, employees, agents, consultants, advisors, salesmen,
sales representatives, distributors or dealers that are not cancelable by it on
notice of not longer than thirty (30) days and without liability, penalty or
premium.
(v) Emusic has no outstanding agreements, contracts or
commitments with sales representatives, OEM's, distributors or dealers.
(vi) Emusic is not restricted by agreement from
competing with any person or from carrying on its business anywhere in the
world.
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(vii) Emusic has not guaranteed any obligations of
other persons, including each other, or made any agreements to acquire or
guarantee any obligations of other persons, including each other.
(viii) Emusic does not have any outstanding loan or
advance to any person; nor is it party to any line of credit, standby financing,
revolving credit or other similar financing arrangement of any sort which would
permit the borrowing by Emusic of any sum not reflected in the Emusic Financial
Statements.
(ix) All contracts, agreements and instruments listed in
the Emusic Disclosure Schedule pursuant to Section 3.11 (a) and (b) (the "Emusic
Material Contracts") are valid, binding, in full force and effect, and
enforceable by Emusic in accordance with their respective terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies. No party to any Emusic Material Contract intends
to cancel, withdraw, modify or amend such contract.
(c) Emusic has delivered to GoodNoise accurate and complete
copies of all written Emusic Material Contracts, including all amendments
thereto and any correspondence regarding any dispute with respect thereto.
Emusic has not entered into any Material oral contracts.
(d) Except as set forth in Section 3.12(d) of the Emusic
Disclosure Schedule:
(i) Emusic has not violated or breached, or committed
any default under, any Emusic Material Contract, and no other person has
violated or breached, or committed any default under, any Emusic Material
Contract;
(ii) No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or could
reasonably be expected to, (A) result in a violation or breach of any of the
provisions of any Emusic Material Contract, (B) give any person the right to
declare default or exercise any remedy under any Emusic Material Contract, (C)
give any person the right to accelerate the maturity or performance of any
Emusic Material Contract; or (D) give any person the right to cancel, terminate
or modify any Emusic Material Contract;
(iii) There are no unresolved claims between Emusic and
any of its principal licensors, vendors, suppliers, distributors,
representatives or customers and none of such persons has advised Emusic of its
intention to cease doing business with Emusic, or with GoodNoise following the
Closing Date, whether as a result of the transactions contemplated hereunder.
3.13 COMPLIANCE WITH LAW. Except as provided in Section 3.13
of the Emusic Disclosure Schedule, Emusic is in compliance in all material
respects with all applicable laws and regulations. All licenses, franchises,
permits and other governmental authorizations held by
17
Emusic and which are required for its business are valid and sufficient in all
respects for the businesses presently carried on by Emusic and as set forth in
the Emusic Disclosure Schedule.
3.14 LABOR DIFFICULTIES; NO DISCRIMINATION.
(a) Emusic is not engaged in any unfair labor practice
or in violation of any applicable laws respecting employment and employment
practices, health and safety, human rights, terms and conditions of employment,
and wages and hours.
(b) There is no unfair labor practice complaint against
Emusic actually pending or threatened before a labor relations board.
(c) There is and has not been any claim made against
Emusic based on actual or alleged wrongful termination or on actual or alleged
race, age, sex, disability or other harassment or discrimination, or similar
tortious conduct, nor is there any basis for any such claim.
(d) Emusic is not aware of any Emusic employee who
intends to terminate his or her employment with Emusic as a result of the Merger
or otherwise.
3.15 INSIDER TRANSACTIONS. No Affiliate of Emusic has any
interest in (i) any equipment or other property, real or personal, tangible or
intangible, including, without limitation, any Emusic Proprietary Asset, used in
connection with or pertaining to the businesses of Emusic, or (ii) any creditor,
supplier, customer, manufacturer, agent, representative, or distributor of
products of Emusic; provided, however, that no such Affiliate or other person
shall be deemed to have such an interest solely by virtue of the ownership of
less than one percent (1%) of the outstanding stock or debt securities of any
publicly-held company whose stock or debt securities are traded on a recognized
U.S. stock exchange or quoted on the National Association of Securities Dealers
Automated Quotation System.
3.16 EMPLOYEES, INDEPENDENT CONTRACTORS AND CONSULTANTS.
Section 3.16 of the Emusic Disclosure Schedule lists and describes all currently
effective written and oral consulting, independent contractor and/or employment
agreements and other agreements concluded with individual employees, independent
contractors or consultants to which Emusic is a party. True and correct copies
of all such written agreements have been provided to GoodNoise or its
Representatives. All salaries and wages paid by Emusic are in compliance in all
respects with applicable federal, state and local laws. Section 3.16 of the
Emusic Disclosure Schedule lists the names of all persons currently employed by
Emusic as well as the salaries and other compensation arrangements (bonus,
deferred compensation, etc.) and the accrued vacation time for each such person.
3.17 INSURANCE. Section 3.17 of the Emusic Disclosure
Schedule contains a list of the policies of fire, liability and other forms of
insurance held by Emusic. Emusic has done nothing, either by way of action or
inaction, that might invalidate such insurance policies in whole or in part.
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3.18 LITIGATION. Except as set forth in Section 3.18 of the
Emusic Disclosure Schedule, there is no suit, action or proceeding which has
been served upon or threatened against Emusic (nor is there any reasonable basis
therefor), in each case other than immaterial matters, or which questions or
challenges the validity of this Agreement or the Transaction Documents. Except
as set forth in Section 3.18 of the Emusic Disclosure Schedule, there is no
judgment, decree, injunction, or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against Emusic.
3.19 SUBSIDIARIES. Emusic has no subsidiaries. Except as set
forth in Section 3.19 of the Emusic Disclosure Schedule, Emusic does not own or
control (directly or indirectly) any capital stock, bonds or other securities
of, and does not have any proprietary interest in, any other corporation,
general or limited partnership, joint venture, firm, association or business
organization, entity or enterprise, and Emusic does not control (directly or
indirectly) the management or policies of any other corporation, partnership,
firm, association or business organization, entity or enterprise.
3.20 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS. Emusic has
obtained all permits, licenses and other authorizations which are required under
federal, state and local laws applicable to Emusic relating to pollution or
protection of the environment, including laws or provisions relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials, substances, or wastes into air,
surface water, groundwater, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic materials,
substances, or wastes. Except as set forth in Section 3.20 of the Emusic
Disclosure Schedule, Emusic is in compliance with all terms and conditions of
the required permits, licenses and authorizations. Except as set forth in
Section 3.20 of the Emusic Disclosure Schedule, Emusic is not aware of, nor has
Emusic received written notice of, any conditions, circumstances, activities,
practices, incidents, or actions which may form the basis of any claim, action,
suit, proceeding, hearing, or investigation of, by, against or relating to
Emusic, based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant, or hazardous or toxic substance, material or waste.
Except as disclosed in Section 3.20 of the Emusic Disclosure Schedule,
(a) No Environmental Activity has occurred in the
business of Emusic or on or in relation to any premises currently or formerly
used by Emusic which may cause Emusic to incur expenses or costs for the
elimination, neutralization or amelioration of the results of the Environmental
Activity or become liable for compensation to any third party.
(b) Emusic has held its assets, occupied its respective
premises, operated its respective businesses and conducted all other activities
in compliance with all Environmental Laws. Emusic has not received any notice of
non-compliance with Environmental Laws from any person or governmental authority
and Emusic does not know of any facts which could give rise to any such notice.
19
(c) There are no underground storage tanks or surface
impoundments at, on, or under premises formerly or currently used by Emusic.
(d) Emusic has maintained all environmental and
operating documents and records substantially in the manner and for the time
periods required by any Environmental Laws. Section 3.20 of the Emusic
Disclosure Schedule lists each environmental permit and each Environmental Audit
conducted with respect to Emusic or its premises while occupied by either of
them. An "Environmental Audit" shall mean any evaluation, inspection,
assessment, study or test performed at the request of or on behalf of a
governmental authority, including but not limited to, a public liaison
committee, as well as a self-evaluation, whether or not required by
Environmental Law.
3.21 CORPORATE DOCUMENTS. Emusic has furnished to GoodNoise
for its examination all documents requested by GoodNoise, including, but not
limited to: (i) copies of its charter documents; (ii) its minute book containing
all records required to be set forth of all proceedings, consents, actions, and
meetings of the shareholders, the board of directors and any committees thereof;
(iii) all permits, orders, and consents issued by any regulatory agency with
respect to Emusic, or any securities of Emusic, and all applications for such
permits, orders, and consents; and (iv) the stock transfer books of Emusic
setting forth all transfers of any capital stock. The corporate minute books,
stock certificate books, stock registers and other corporate records of Emusic
are complete and, and the signatures appearing on all documents contained
therein are the true signatures of the persons purporting to have signed the
same. All actions reflected in such books and records were duly and validly
taken in compliance with the laws of the applicable jurisdiction.
3.22 ACCURACY OF INFORMATION IN INFORMATION OR PROXY
STATEMENT. The information furnished by Emusic to the Emusic Shareholders in
connection with the solicitation of shareholder consent or proxies for the
approval and adoption of this Agreement and the approval and adoption of the
Merger shall not, on the date the Information or Proxy Statement is first mailed
to the Emusic shareholders, on any date subsequent thereto and prior to the
Effective Time or at the Effective Time, contain any untrue statement of a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
false or misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
consent or proxies which has become false or misleading.
3.23 NO BROKERS. Neither Emusic nor any shareholder, officer
or director of Emusic is obligated for the payment of fees or expenses of any
broker or finder in connection with the origin, negotiation or execution of this
Agreement or in connection with any transaction contemplated hereby.
3.24 ACCURACY OF DOCUMENTS AND INFORMATION. The copies of all
instruments, agreements, other documents and written information set forth as,
or referenced in, the schedules or exhibits to this Agreement or specifically
required to be furnished pursuant to this Agreement to GoodNoise by Emusic are
complete and correct. No representations or
20
warranties made by Emusic in this Agreement, nor any document, written
information, statement, financial statement, certificate, schedule or exhibit
furnished directly to GoodNoise pursuant to this Agreement contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements or facts contained herein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF GOODNOISE AND SUB. Except as otherwise
set forth in the "GoodNoise Disclosure Schedule," referencing the appropriate
section and paragraph numbers, to be provided to Emusic concurrent with the
execution of this Agreement, GoodNoise represents and warrants to Emusic as set
forth below. No fact or circumstance disclosed to Emusic by GoodNoise shall
constitute an exception to these representations and warranties unless such fact
or circumstance is set forth in the GoodNoise Disclosure Schedule.
4.1 ORGANIZATION. GoodNoise and Sub are corporations duly
organized, validly existing and in good standing under the laws of their
jurisdictions and have corporate power and authority to carry on their
businesses as they are now being conducted and as they are proposed to be
conducted. Each of GoodNoise and Sub is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or properties makes such qualification or licensing necessary.
4.2 POWER, AUTHORITY AND VALIDITY. GoodNoise and Sub have the
corporate power and authority to enter into this Agreement and other Transaction
Documents to which they are a party and to carry out their obligations hereunder
and thereunder. The execution and delivery of this Agreement and the Transaction
Documents to which they are a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the board of
directors of GoodNoise and Sub, and no other corporate proceedings are necessary
to authorize this Agreement or the other Transaction Documents. GoodNoise and
Sub are not subject to or obligated under any charter, bylaw or contract
provision or any license, franchise or permit or subject to any order or decree,
which would be breached or violated in a material manner by or in material
conflict with its executing and carrying out this Agreement and the transactions
contemplated hereunder and under the Transaction Documents. This Agreement is,
and each of the other Transaction Documents to which GoodNoise and Sub are a
party, when executed and delivered by GoodNoise and Sub shall be, the valid and
binding obligations of GoodNoise and Sub, enforceable in accordance with their
respective terms, subject to (i) laws of general application relating to
bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
4.3 CAPITALIZATION.
(a) The authorized capital stock of GoodNoise as of the
date of this Agreement consists of: (i) Two Hundred Million (200,000,000) shares
of GoodNoise Common Stock, of which 14,985,800 shares are issued and outstanding
and (ii) Five Hundred Thousand (500,000) shares of preferred stock, none of
which are issued or outstanding. GoodNoise has reserved 3,000,000 shares of
GoodNoise Common Stock for issuance to employees, directors and consultants,
upon exercise of stock options. Except as set forth in the GoodNoise Disclosure
Schedule, there are no outstanding options, warrants, rights, commitments,
conversion rights,
21
rights of exchange, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of the capital stock of GoodNoise from
GoodNoise other than as contemplated by this Agreement.
(b) All of the outstanding securities of GoodNoise have
been duly authorized and are validly issued, fully paid and nonassessable. All
securities of GoodNoise were issued in compliance with all applicable federal
and state securities laws. Except as otherwise set forth in the GoodNoise
Disclosure Schedule or in the GoodNoise Commission Documents (as defined in
Section 4.4 below), GoodNoise does not have any other shares of its capital
stock issued or outstanding and does not have any other outstanding
subscriptions, options, warrants, rights or other agreements or commitments
obligating GoodNoise to issue shares of its capital stock or other securities.
GoodNoise is not a party to or aware of any shareholders agreements among the
shareholders of GoodNoise.
(c) The GoodNoise Shares have been duly authorized and,
when issued and delivered in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable and will be issued in compliance with all
applicable federal and state securities laws. There are no preemptive rights of
any stockholder of GoodNoise to acquire the GoodNoise Shares.
4.4 LITIGATION. There is no suit, action or proceeding which
has been served upon or, to the knowledge of GoodNoise, threatened against
GoodNoise, in each case other than immaterial matters, or which questions or
challenges the validity of this Agreement or the Transaction Documents. There is
no judgment, decree, injunction, or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against GoodNoise.
4.5 COMPLIANCE WITH LAW. GoodNoise is in compliance in all
material respects with all applicable laws and regulations. All licenses,
franchises, permits and other governmental authorizations held by GoodNoise and
which are required for its business are valid and sufficient in all respects for
the businesses presently carried on by GoodNoise.
4.6 TAX MATTERS. GoodNoise has fully and timely, properly and
accurately filed all Tax returns and reports required to be filed by it (the
"GoodNoise Returns"), including all federal, foreign, state and local returns
and reports for all years and periods for which any such returns or reports were
due. The GoodNoise Returns and all other Tax returns and reports filed by
GoodNoise were prepared in the manner required by applicable law. Except for any
Tax due upon the filing of the GoodNoise Returns for current periods, all
income, sales, use, occupation, property or other Taxes or assessments due from
GoodNoise have been paid, and there are no pending assessments, asserted
deficiencies or claims for additional Taxes that have not been paid. The
reserves for Taxes, if any, reflected on the GoodNoise Financial Statements are
adequate and there are no Tax liens on any property or assets of GoodNoise.
There have been no audits or examinations of any Tax returns or reports by any
applicable governmental agency. No state of facts exists or has existed which
would constitute grounds for the assessment of any penalty or of any further Tax
liability beyond that shown on the respective Tax reports or
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returns. There are no outstanding agreements or waivers extending the statutory
period of limitation applicable to any federal, state or local income Tax return
or report for any period.
4.7 COMMISSION DOCUMENTS; FINANCIAL STATEMENTS. GoodNoise has
made available to Emusic a true and complete copy of its Registration Statement
or Form 10-SB as filed with the Commission by GoodNoise; and, prior to the
Effective Time, GoodNoise will have made available to Emusic any additional
documents filed with the Commission by GoodNoise prior to the Effective Time
(collectively, the "GoodNoise Commission Documents"). To date, GoodNoise has not
been subject to the reporting obligations under either Section 13(a) or 15(d) of
the Exchange Act. As of their respective filing dates, the GoodNoise Commission
Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, and none of the GoodNoise Commission
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed GoodNoise
Commission Document prior to the date hereof. The financial statements of
GoodNoise, including the notes thereto, included in the GoodNoise Commission
Documents (the "GoodNoise Financial Statements") were complete and correct in
all material respects as of their respective dates, complied as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the Commission with respect thereto as of their
respective dates, and have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Qs Q, as permitted by Form 10-Q of the Commission). The
GoodNoise Financial statements fairly present the consolidated financial
condition and operating results of GoodNoise and its subsidiaries at the dates
and during the periods indicated therein (subject, in the case of unaudited
statements, to normal, recurring year-end adjustments).
4.8 ABSENCE OF CHANGES. There has been no change in GoodNoise
GoodNoise's accounting policies except as described in the notes to the
GoodNoise Financial Statements. Since June 30, 1998, except for losses in the
ordinary course of business or as otherwise disclosed in the GoodNoise
Commission Documents, there has been no material adverse change and no material
adverse development in the business, properties, operations, financial
condition, or results of operations of GoodNoise.
4.9 PRIVATE OFFERING. Subject to the accuracy of the
Shareholders' representations and warranties set forth in Section 5 hereof, the
offer, sale and issuance of the GoodNoise Shares as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act.
GoodNoise agrees that neither GoodNoise nor anyone acting on its behalf will
offer any GoodNoise common stock or any similar securities for issuance or sale,
or solicit any offer to acquire any of the same from anyone so as to render the
issuance and sale of the GoodNoise Shares subject to the registration
requirements of the Securities Act. The Company has not offered or sold the
GoodNoise Shares by any form of general solicitation or general advertising, as
such terms are used in Rule 502(c) under the Securities Act.
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4.10 ACCURACY OF DOCUMENTS AND INFORMATION. The copies of al
instruments, agreements, other documents and written information set forth as,
or referenced in the schedules or exhibits to this Agreement or specifically
required to be furnish pursuant to this Agreement to Emusic by GoodNoise or Sub
are complete and correct. No representations or warranties made by GoodNoise or
Sub in this Agreement, nor any document, written information, statement,
financial statement, certificate, schedule or exhibit furnished directly to
Emusic pursuant to this Agreement, taken as a whole, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements or facts contained herein not misleading.
4.11 NO BROKERS. GoodNoise is not obligated to pay fees or
expenses to any broker or finder in connection with the origin, negotiation or
execution of this Agreement or in connection with any transaction contemplated
hereby.
5. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.
Each Shareholder as to itself, himself or herself represents
and warrants to GoodNoise as follows:
5.1 No person or entity not a signatory of this Agreement has
a beneficial interest in or a right to acquire or vote the Emusic Shares held of
record by such Shareholder or any portion thereof (except, with respect to
shareholders which are partnerships, partners of such shareholders). The Emusic
Shares are and will be, at all times until the Closing, free and clear of any
liens, claims, options, charges or other encumbrances. Such Shareholder's
principal place of residence or place of business is set forth on the signature
page hereto.
5.2 Such Shareholder will not transfer (except as may be
specifically required by court order or by operation of law), sell, exchange,
pledge or otherwise dispose of or encumber the Emusic Shares or any New
Securities (as defined below), or make any offer or agreement relating thereto,
at any time prior to the Closing.
5.3 Such Shareholder agrees that any shares in the capital
stock of Emusic that Shareholder purchases or with respect to which such
Shareholder otherwise acquired beneficial ownership after the date of this
Agreement and prior to the Closing (the "New Securities") shall be subject to
the terms and conditions of this Agreement to the same extent as if they
constituted Emusic Shares.
5.4 Such Shareholder represents to GoodNoise, that the
GoodNoise Shares which he will receive will be acquired with his own property or
funds or property for investment for an indefinite period for his own account,
not as a nominee or agent, and not with a view to the sale or distribution of
any part thereof, and that he has no present intention of selling, granting
participation in, or otherwise distributing the same.
5.5 Such Shareholder understands that the GoodNoise Shares
will not be registered under the Securities Act of 1933 (the "Securities Act")
on the ground that the sale provided for in this Agreement is exempt pursuant to
section 4(2) of the Securities Act, and that GoodNoise's reliance on such
exemption is predicated on his representations set forth herein.
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5.6 Until such time as the GoodNoise Shares shall become
registered for resale under the Securities Act or no longer subject to
restriction pursuant to Rule 144(k), such Shareholder agrees that in no event
will he make a disposition of any of the GoodNoise Shares unless and until (a)
he shall have notified GoodNoise of the proposed disposition and shall have
furnished GoodNoise with a statement of the circumstances surrounding the
proposed disposition and (b) he shall have furnished GoodNoise with an opinion
of counsel satisfactory to GoodNoise to the effect that (i) such disposition
will not require registration of such Stock under the Securities Act or (ii)
that appropriate action necessary for compliance with the Securities Act has
been taken or (c) GoodNoise shall have waived, expressly and in writing, its
rights under clauses (a) and (b) of this Section.
5.7 In connection with the investment representations made
herein, Shareholder represents that he is able to fend for himself in the
transactions contemplated by this Agreement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of his investment, has the ability to bear the economic risks of his
investment.
5.8 Such Shareholder understands that the acquisition of the
GoodNoise Shares involves a highly speculative and risky investment and that
GoodNoise may not be able to continue as a going concern unless it is able to
raise substantial funds from outside investors and that there is no assurance
that GoodNoise will be able to do so.
6. COVENANTS OF EMUSIC AND THE SHAREHOLDERS
6.1 ADVICE OF CHANGES. Emusic will promptly advise GoodNoise in
writing (i) of any event occurring subsequent to the date of this Agreement
which would render any representation or warranty of Emusic contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect and (ii) of any material adverse
change in Emusic's business, taken as a whole.
6.2 CONDUCT OF BUSINESS. Until the Closing, Emusic will continue
to conduct its business and maintain its business relationships in the ordinary
and usual course and will not, except as set forth in Section 6.2 of the Emusic
Disclosure Schedule or without the prior written consent of GoodNoise:
(a) borrow any money which borrowings exceed in the aggregate
Five Thousand Dollars ($5,000) per month;
(b) incur any liability other than in the ordinary and usual
course of business or in connection with the performance or consummation of this
Agreement;
(c) encumber or permit to be encumbered any of its assets
except in the ordinary course of its business;
(d) dispose of any of its assets, except inventory in the
regular and ordinary course of business;
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(e) except as provided in Section 6.2(h) hereof, enter into
any lease or contract for the purchase or sale of any property, real or personal
except for inventory and licenses purchased in the ordinary course of business
or other leases or contracts for less than $5,000;
(f) fail to maintain its equipment and other assets in good
working condition and repair according to the standards it has maintained up to
the date of this Agreement, subject only to ordinary wear and tear;
(g) pay or authorize any bonus, increased salary, or special
remuneration to any officer or employee, including any amounts for accrued but
unpaid salary or bonuses;
(h) enter into any agreement for the acquisition or license
of any Music Rights with advances or minimum future commitments in excess of
$30,000;
(i) adopt or change any accounting methods;
(j) declare, set aside or pay any cash or stock dividend or
other distribution in respect of capital, or redeem or otherwise acquire any of
its capital stock;
(k) amend or terminate any contract, agreement or license to
which it is a party except non-Material agreements in the ordinary course of
business or other agreements with an annual value of less than $17,500;
(l) enter into any Material contract outside of the ordinary
course of business or which grants an exclusive license of a substantial part of
its assets, catalogue or right for a period over ninety (90) days. Good Noise
shall be given a reasonable prior notice of any such agreement and a right of
consultation, provided that after forty-five days from the date of this
Agreement, Emusic may enter into Material contracts without consent provided
that such contracts are in the ordinary course of business consistent with
Emusic's past practices;;
(m) loan any amount to any person or entity, or guaranty or
act as a surety for any obligation;
(n) waive or release any right or claim;
(o) issue or sell any shares of its capital stock of any
class or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities, or other
commitments to issue shares of capital stock or amend the terms of any agreement
regarding the foregoing;
(p) split or combine the outstanding shares of its capital
stock of any class or enter into any recapitalization affecting the number of
outstanding shares of its capital stock of any class or affecting any other of
its securities;
(q) merge, consolidate or reorganize with any entity;
26
(r) grant any exclusive license to all or a significant
portion of its assets, including, but not limited to, any exclusive license of a
significant portion of the company's catalog of Music Rights for a period of
over ninety (90) days;
(s) amend its Articles of Incorporation or Bylaws;
(t) make or change any election, change any annual accounting
period, file any tax return or amended tax return, enter into any closing
agreement, settle any tax claim or assessment relating to Emusic, surrender any
right to claim refund of taxes, consent to any extension or waiver of the
limitation period applicable to any tax claim or assessment relating to Emusic,
or take any other action or omit to take any action, if any such election,
adoption, change, amendment, agreement, settlement, surrender, consent or other
action or omission would have the effect of increasing the tax liability of
Emusic or GoodNoise; or
(u) agree to do any of the things described in the preceding
clauses of this Section 6.2.
Notwithstanding the above, Emusic or Radiant Records may enter into new
agreements with recording artists that provide for recording funds of no more
than $15,000 per agreement and at an aggregate cost not in excess of $30,000,
exclusive of renewal options. Before entering into any such agreements, Emusic
shall provide GoodNoise with copies of any such agreements for prior review and
comment.
6.3 RISK OF LOSS. Until the Closing and subject to the
confidentiality and nonuse provisions hereof, all risk of loss, damage or
destruction to Emusic's assets shall be borne by Emusic, and the Merger terms
described in Section 2 shall, in case of any such loss, damage or destruction,
be revised as the parties may agree, or this Agreement shall be terminated in
accordance with Section 13.
6.4 ACCESS TO INFORMATION. Until the Closing and subject to the
confidentiality and nonuse provisions hereof, Emusic shall allow GoodNoise and
its Representatives free access upon reasonable notice and during normal working
hours to its files, books, records, and offices, including, without limitation,
any and all information relating to taxes, commitments, contracts, leases,
licenses, and personal property and financial condition. Until the Closing,
Emusic shall cause its accountants to cooperate with GoodNoise and its
Representatives in making available all financial information requested,
including without limitation the right to examine all working papers pertaining
to all financial statements prepared or audited by such accountants.
6.5 REGULATORY APPROVALS. Prior to the Closing, Emusic shall
execute and file, or join in the execution and filing, of any application or
other document which may be necessary in order to obtain the authorization,
approval or consent of any Governmental Body, federal, state or local, which may
be reasonably required, or which GoodNoise may reasonably request, in connection
with the consummation of the transactions contemplated by this Agreement Emusic
shall use its best efforts to obtain all such authorizations, approvals and
consents.
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6.6 SATISFACTION OF CONDITIONS PRECEDENT. Emusic will use its
best efforts to satisfy or cause to be satisfied all the conditions precedent
which are set forth in Section 11, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties which may be
necessary or reasonably required on its part in order to effect the transactions
contemplated hereby.
6.7 EQUITY COMPENSATION ARRANGEMENTS. Prior to the Closing, any
obligation of Emusic to issue stock, warrants or options which have been offered
or promised to the employees of Emusic shall have been fulfilled or been
terminated to the satisfaction of GoodNoise.
6.8 SHAREHOLDER CONSENT. Prior to the Closing, whether by special
meeting or written consent of its shareholders, Emusic will submit this
Agreement, the Agreement of Merger and related matters to its shareholders for
consideration and approval, and the Board of Directors of Emusic will recommend
such approval to the Emusic Shareholders. Each of the Shareholders agrees to
vote all shares of Emusic capital stock in respect of which each such
shareholder is entitled to vote at any meeting, in favor of the Merger, the
approval of the transactions contemplated by this Agreement.
7. COVENANTS OF GOODNOISE AND SUB.
7.1 ADVICE OF CHANGES. GoodNoise and Sub will promptly advise
Emusic in writing of (i) any event occurring subsequent to the date of this
Agreement which would render any representation or warranty of GoodNoise or Sub
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect and (ii) any material
adverse change in GoodNoise's business, taken as a whole.
7.2 REGULATORY APPROVALS. Prior to the Closing, GoodNoise and Sub
shall execute and file, or join in the execution and filing, of any application
or other document which may be necessary in order to obtain the authorization,
approval or consent of any Governmental Body, federal, state or local, which may
be reasonably required, or which Emusic may reasonably request, in connection
with the consummation of the transactions contemplated by this Agreement. Such
persons and entities shall use their best efforts to obtain all such
authorizations, approvals and consents.
7.3 SATISFACTION OF CONDITIONS PRECEDENT. GoodNoise will use its
best efforts to satisfy or cause to be satisfied all the conditions precedent
which are set forth in Section 10, and GoodNoise will use its best efforts to
cause the transactions contemplated by this Agreement to be consummated, and,
without limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties which may be necessary or reasonably required on its
part in order to effect the transactions contemplated hereby. Notwithstanding
the foregoing, the condition precedent payment obligations of GoodNoise
hereunder, including the $25,000 signing bonus and $3,125 per week consulting
fees are due when payable in accordance with the terms hereof and are firm
commitments not subject to a best efforts condition.
28
7.4 REGISTRATION RIGHTS. GoodNoise agrees that if prior to the
time the GoodNoise Shares may be freely sold pursuant to Rule 144, GoodNoise
registers for the account of any other person, or grants to any other party
rights to register, GoodNoise Shares under the Securities Act, GoodNoise shall
provide to the Shareholders the right to participate in such registration or
become parties to the registration rights agreement, as the case may be, on the
same or substantially the same terms and conditions as pertain to such other
party; provided however, that the foregoing shall not apply to the extent that
registration rights are granted in connection with an equity offering of or by
GoodNoise unless such rights are also granted to other existing shareholders of
GoodNoise or to other parties receiving shares in connection with any other
transaction, including a purchase or sale of assets or stock, between GoodNoise
and any other person. Notwithstanding the foregoing, GoodNoise shall not permit
either Gene Hoffman or Robert Kohn (the "GoodNoise Founders") to sell any shares
of GoodNoise stock owned by them into the public market unless or until the
GoodNoise Shares have been registered for resale under the Securities Act or are
otherwise eligible for resale pursuant to Rule 144.
7.5 NASDAQ LISTING. Following the closing, GoodNoise shall use its
best efforts to obtain a Nasdaq listing for its Common Stock within one year of
the Effective Date.
7.6 CONSULTING FEE. Following the execution of this Agreement and
until the Closing or termination of this Agreement, GoodNoise shall pay to
Emusic a consulting fee of $3,125 per week payable on Monday of each week;
provided however, that GoodNoise shall not be obligated to pay such fee if
Emusic is in breach of this Agreement or otherwise if the delay in the closing
is due to actions or inaction of Emusic.
8. MUTUAL COVENANTS.
8.1 CONFIDENTIALITY. Each party acknowledges that in the course
of the performance of this Agreement, it may obtain the Confidential Information
of the other party. The Receiving Party shall, at all times, both during the
term of this Agreement and thereafter, keep in confidence and trust all of the
Disclosing Party's Confidential Information received by it. The Receiving Party
shall not use the Confidential Information of the Disclosing Party other than as
expressly permitted under the terms of this Agreement or by a separate written
agreement. The Receiving Party shall take all reasonable steps to prevent
unauthorized disclosure or use of the Disclosing Party's Confidential
Information and to prevent it from falling into the public domain or into the
possession of unauthorized persons. The Receiving Party shall not disclose
Confidential Information of the Disclosing Party to any person or entity other
than its officers, employees, consultants and permitted sublicensees who need
access to such Confidential Information in order to effect the intent of this
Agreement and who have entered into confidentiality agreements with such
person's employer which protects the Confidential Information of the Disclosing
Party. The Receiving Party shall promptly give notice to the Disclosing Party of
any unauthorized use or disclosure of Disclosing Party's Confidential
Information. The Receiving Party agrees to assist the Disclosing Party to remedy
such unauthorized use or disclosure of its Confidential Information, which
remedies shall include injunctive relief without the necessity of posting a bond
or proving damages. These obligations shall not apply to the extent that
Confidential Information includes information which:
29
(a) is already known to the Receiving Party at the time of
disclosure, which knowledge the Receiving Party shall have the burden of
proving;
(b) is, or, through no act or failure to act of the Receiving
Party, becomes publicly known;
(c) is received by the Receiving Party from a third party
without restriction on disclosure;
(d) is independently developed by the Receiving Party without
reference to the Confidential Information of the Disclosing Party, which
independent development the Receiving Party will have the burden of proving;
(e) is approved for release by written authorization of the
Disclosing Party; or
(f) is required to be disclosed by a government agency to
further the objectives of this Agreement or by a proper order of a court of
competent jurisdiction; provided, however that the Receiving Party will use its
best efforts to minimize such disclosure and will consult with and assist the
Disclosing Party in obtaining a protective order prior to such disclosure.
GoodNoise and Sub, on the one hand, and Emusic and the Shareholders, on the
other, individually and collectively, agree that neither they nor their
Representatives will disclose the existence of this Agreement or the
transactions contemplated herein without the prior written consent of the other
party. Notwithstanding the foregoing, GoodNoise may make any disclosure deemed
by it based upon the advice of counsel to be necessary or appropriate pursuant
to the requirements of applicable securities laws.
8.2 EXCLUSIVITY. Until the earlier of the Closing Date or the
termination of this Agreement, Emusic agrees that it will not (and that it will
use best efforts to assure that its employees, agents and affiliates do not on
its behalf) discuss or enter into any agreement concerning the sale or
acquisition of Emusic, a controlling interest in its stock (including by means
of any public offering thereof, but excluding issuance of stock and options to
employees in the ordinary course of business consistent with past practices) or
a substantial part of its assets with any party other than GoodNoise, and that
any such discussions presently in progress will be terminated or suspended
during that period. Emusic represents and warrants that it has the legal right
to terminate or suspend any such pending negotiations and agrees to indemnify
GoodNoise, its representatives and agents from and against any claims by any
party to such negotiations based upon or arising out of the discussion or any
consummation of the Merger.
8.3 FURTHER ASSURANCES. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
30
8.4 TAX-FREE ORGANIZATION. Each party shall each use its best
efforts to cause the Merger to be treated as a reorganization within the meaning
of Section 368(a) of the Code.
9. THE CLOSING.
9.1 MERGER. On the date of the Closing, but not prior to the
Closing, the Agreement of Merger shall be simultaneously filed with the office
of the Secretary of State of the States of California and Delaware and the
merger of Sub with and into Emusic shall be consummated.
9.2 ADDITIONAL DOCUMENTS.
(a) At any time and from time to time at or after the Closing,
the parties shall at the request of the other party execute and deliver or cause
to be executed and delivered all such assignments, consents and other documents
and take or cause to be taken all such other actions as either party may
reasonably deem necessary or desirable, in order to more fully and effectively
carry out the intents and purposes of this Agreement.
(b) Emusic shall execute and deliver to GoodNoise a statement
meeting the requirements of Treasury Regulation Section 1.897-2(h)(2) stating
that interests in Emusic are not United States real property interests.
10. CONDITIONS PRECEDENT TO EMUSIC'S OBLIGATIONS.
Emusic's obligations hereunder are subject to the fulfillment or
satisfaction on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Emusic, but only in a writing signed by
Emusic):
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of GoodNoise and Sub set forth in Section 4 shall
be true on and as of the Closing with the same force and effect as if they had
been made at the Closing and the conditions to Emusic's obligations set forth
under Sections 10.1, 10.2, 10.3 and 10.4 shall have been satisfied. Emusic shall
receive a certificate to such effect from an executive officer of GoodNoise.
10.2 COVENANTS. GoodNoise and Sub shall have performed and complied
with all of their covenants contained in this Agreement to be performed on or
before the Closing, and GoodNoise shall deliver to Emusic a certificate executed
by an executive officer of GoodNoise at Closing stating that such condition has
been satisfied.
10.3 NO LITIGATION. No litigation or proceeding shall be threatened
or pending against GoodNoise or Sub with the purpose or with the probable effect
of enjoining or preventing the consummation of any of the transactions
contemplated by this Agreement or which would have a material adverse effect on
the business, liabilities, operations of GoodNoise following the Closing, taken
as a whole, and Emusic shall receive a certificate to such effect signed by an
executive officer of GoodNoise.
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10.4 AUTHORIZATIONS. Emusic shall have received from GoodNoise and
Sub written evidence that the execution, delivery and performance of GoodNoise
and Sub's obligations under this Agreement and the Agreement of Merger have been
duly and validly approved and authorized by the Board of Directors of GoodNoise
and Sub, respectively, and the shareholder of Sub.
10.5 GOVERNMENT CONSENTS. There shall have been obtained at or prior
to the date of Closing such permits or authorizations, and there shall have been
taken such other action, as may be required by any regulatory authority having
jurisdiction over the parties and the subject matter and the actions herein
proposed to be taken, including, but not limited to, compliance with applicable
state and federal securities laws.
10.6 EMPLOYMENT OFFERS AND OTHER AGREEMENTS. Mark Chasan shall have
entered into a non-compete agreement with GoodNoise in substantially the same
form as attached hereto as Exhibit C, and an employment agreement in
---------
substantially the form as attached hereto as Exhibit D.
---------
10.7 FINANCING. GoodNoise shall have raised not less than
$3,000,000 through the issuance of additional equity securities within ninety
(90) days from the date of this Agreement.
10.8 PAYMENTS. GoodNoise shall have made all payments due to Emusic
or Chasan pursuant to the terms of this Agreement or the Chasan Employment
Agreement prior to the Closing.
11. CONDITIONS TO GOODNOISE AND SUB'S OBLIGATIONS.
GoodNoise's and Sub's obligations hereunder are subject to the
fulfillment or satisfaction on and as of the Closing, of each of the following
conditions (any one or more of which may be waived by GoodNoise, but only in a
writing signed by GoodNoise):
11.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Emusic contained in Section 3 and the Shareholders in Section
5 shall be true on and as of the Closing with the same force and effect as if
they had been made at the Closing and the conditions to GoodNoise's and Sub's
obligations set forth under Sections 11.1, 11.2, 11.3 and 11.4 shall have been
satisfied. GoodNoise shall receive a certificate to such effect from an
executive officer of Emusic.
11.2 COVENANTS. Emusic and the Shareholders shall have performed and
complied with all of their covenants set forth in this Agreement on or before
the Closing.
11.3 NO LITIGATION. On and as of the Closing, no litigation or
proceeding shall be threatened or pending against Emusic for the purpose or with
the probable effect of enjoining or preventing the consummation of any of the
transactions contemplated by this Agreement, or which would have a material
adverse effect on the business, liabilities, income, property, operations or
prospects of Emusic subsequent to the Closing.
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11.4 AUTHORIZATIONS. GoodNoise shall have received from Emusic
written evidence that (i) the execution, delivery and performance of this
Agreement and the Agreement of Merger have been duly and validly approved and
authorized by its Board of Directors and (ii) the Emusic Shareholders holding
not less than 85% of the Emusic Shares shall have approved this Agreement, the
Merger and the transactions contemplated hereby and thereby.
11.5 NO ADVERSE DEVELOPMENT. There shall be no order, decree, or
ruling by any court or Governmental Body or threat thereof or any other fact or
circumstance, which might prohibit or render illegal or have a Material adverse
effect on the business, prospects, liabilities, income, property, assets or
operations of Emusic subsequent to the Closing. Emusic shall not have sustained
a loss, whether or not insured, by reason of physical damage caused by fire,
flood or earthquake, accident or other calamity which materially affects the
Emusic Balance Sheet or its ability to carry on its business as proposed to be
conducted, and which, in the judgment of GoodNoise, renders it inadvisable to
proceed with the Closing. There shall have been no other event which, in the
reasonable judgment of GoodNoise, has a material and adverse effect on Emusic's
assets, business, liabilities, income, property, assets, prospects or operations
subsequent to the Closing.
11.6 REQUIRED CONSENTS. GoodNoise shall have received all written
consents, assignments, waivers, authorizations or other certificates reasonably
deemed necessary by GoodNoise's legal counsel to provide for the continuation in
full force and effect of any and all contracts and leases of Emusic.
11.7 GOVERNMENT CONSENTS. There shall have been obtained at or prior
to the Closing Date such permits or authorizations and there shall have been
taken such other action, as may be required by any regulatory authority having
jurisdiction over the parties and the subject matter and the actions herein
proposed to be taken, including, but not limited to, compliance with applicable
state and federal securities laws.
11.8 EMPLOYMENT OFFERS AND OTHER AGREEMENTS. Mark Chasan shall have
entered into non-compete and employment agreements with GoodNoise in
substantially the same form as attached hereto as Exhibits C and D.
-----------------
11.9 FINANCING. GoodNoise shall have raised not less than $3,000,000
through the issuance of additional equity securities within ninety (90) days of
the date upon which the last party hereto executed this Agreement.
11.10 NORDIC ACQUISITION. GoodNoise shall have closed (or shall
close simultaneously with this Agreement) the acquisition of Nordic
Entertainment Worldwide, Inc.
12. CONDITION SUBSEQUENT. As a condition to the continued ownership of
Emusic by Good Noise, Good Noise shall have closed an aggregate of $5,000,000 or
more in financing (including the $3,000,000 which is a condition to the Closing
of this Agreement) within six months from the date of this Agreement and shall
have paid the Cash Merger Consideration in the sum of $300,000 on the earlier of
closing said $5,000,000 in financing or six months from the date hereof. Until
such time as (i) GoodNoise has raised not less than $5,000,000 of additional
33
financing (including the $3,000,000 which is a condition to the Closing of this
Agreement) and (ii) GoodNoise has paid the Cash Merger Consideration, the
GoodNoise Shares and Emusic Share shall remain in escrow pursuant to the terms
of the Indemnity Escrow Agreement. In the event that GoodNoise has not satisfied
the conditions of the preceding sentence (the "Conditions Subsequent") on or
before the date six months following the date of this Agreement, the Emusic
Shareholders, exercising the right by majority in interest, may elect to rescind
the Merger and have returned to them all of the Emusic Shares and related assets
of Emusic or exercise their rights under the Security Agreement. Such election
to rescind shall be effective fifteen (15) days following written notice thereof
from the Representative to GoodNoise, provided that GoodNoise shall have not
satisfied the Conditions Subsequent prior to that time.
12.1 BANKRUPTCY. During the period following the Closing and before
the Conditions Subsequent are satisfied, GoodNoise agrees that it shall remain
solvent and refrain from filing (voluntarily or involuntarily) for bankruptcy
protection and shall make no assignment for the benefit of creditors. If
GoodNoise files for bankruptcy protection, the Merger shall be deemed rescinded
on the date immediately prior to the date of the bankruptcy filing.
12.2 NON-MERGER CONSIDERATION. It is expressly understood that if
the Merger fails to close or is rescinded in accordance with the provisions of
this Section, neither Emusic nor any Emusic Shareholder shall have any
obligation to return any payment or other non-GoodNoise Share consideration or
other payments received by such shareholder pursuant to the terms hereof and
prior to the date of such rescinding.
13. TERMINATION OF AGREEMENT.
13.1 MUTUAL AGREEMENT. This Agreement may be terminated at any time
prior to the Closing by the mutual written consent of each of the parties
hereto.
13.2 FAILURE TO FULFILL CONDITIONS. Either GoodNoise or Emusic may
terminate this Agreement if the Merger has not been consummated within ninety
(90) days of the date of this Agreement (provided that the right to terminate
this Agreement under this Section shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date). Any
termination of this Agreement under this Section shall be effective by the
delivery of notice of the terminating party to the other parties hereto.
13.3 NO LIABILITY. Any termination of this Agreement pursuant to this
Section shall be without further obligation or liability upon any party in favor
of any other party hereto.
13.4 EFFECT OF TERMINATION. The termination of the Agreement pursuant
to this Section shall terminate all sections hereof other than Section 8.1.
14. INDEMNIFICATION.
14.1 SURVIVAL OF REPRESENTATIONS.
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(a) The representations and warranties made by Emusic and the
Shareholders under Sections 3 and 5 hereof and the representations and
warranties set forth in any certificate delivered by Emusic in connection with
this Agreement shall survive the Closing and shall remain in full force and
effect and shall survive until the end of the Indemnification Period and shall
survive thereafter only with respect to any claims made prior to the end of the
Indemnification Period.
(b) The representations, warranties, covenants and obligations
of Emusic, and the rights and remedies that may be exercised by the Indemnitees
(as defined herein), shall not be limited or otherwise affected by or as a
result of any information furnished to, or any investigation made by or
knowledge of, any of the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other
item of information set forth in the Emusic Disclosure Schedule shall be deemed
to be a representation and warranty made by Emusic in this Agreement.
14.2 INDEMNIFICATION BY EMUSIC SHAREHOLDERS.
(a) From and after the Closing Date, the Emusic Shareholders
shall be jointly and severally liable for and shall hold harmless and indemnify
GoodNoise and the Surviving Corporation (each an "Indemnitee") from and against,
and shall compensate and reimburse each of the Indemnitees for, any Damages
which are directly or indirectly suffered or incurred by any of the Indemnitees
or to which any of the Indemnitees may otherwise become subject (regardless of
whether or not such Damages relate to any third-party claim) and which arise
from or as a result of, or are directly or indirectly connected with: (i) any
inaccuracy in or breach of any representation or warranty set forth in Section 3
or 5 hereunder or in any certificate delivered by Emusic in connection with this
Agreement; (ii) any breach of any covenant or obligation of Emusic or the
Shareholders hereunder or pursuant to any agreement delivered in connection
herewith; or (iii) any Legal Proceeding relating to any inaccuracy, breach or
expense of the type referred to in clause "(i)" or "(ii)" above (including any
Legal Proceeding commenced by any Indemnitee for the purpose of enforcing any of
its rights under this Section if such Indemnitee is the prevailing party in any
such Legal Proceeding). The aggregate liability arising by reason of this
Section shall not exceed the value of the GoodNoise Shares held in escrow
pursuant to the terms of the Indemnity Escrow Agreement, even if the Damages
exceed the value of such shares.
(b) If the Surviving Corporation suffers, incurs or otherwise
becomes subject to any Damages as a result of or in connection with any
inaccuracy in or breach of any representation, warranty, covenant or obligation,
then (without limiting any of the rights of the Surviving Corporation as an
Indemnitee) GoodNoise shall also be deemed, by virtue of its ownership of the
stock of the Surviving Corporation, to have incurred Damages as a result of and
in connection with such inaccuracy or breach.
14.3 NO CONTRIBUTION. The Emusic Shareholders acknowledge and agree
that they shall not have and shall not exercise or assert (or attempt to
exercise or assert), any right of
35
contribution, right of indemnity or other right or remedy against the Surviving
Corporation which they have in their capacity as shareholders in connection with
any indemnification obligation or any other liability to which it may become
subject under or in connection with this Agreement or any certificate delivered
by Emusic in connection with this Agreement.
14.4 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against the
Surviving Corporation, against GoodNoise or against any other Person) with
respect to which the Emusic Shareholders may become obligated to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section, the
procedure set forth below shall be followed.
(a) NOTICE. GoodNoise shall give prompt written notice of the
commencement of any such Legal Proceeding against GoodNoise or the Surviving
Corporation for which indemnity may be sought; provided, however, that any
failure on the part of GoodNoise to so notify Emusic shall not limit any of the
obligations of Emusic under this Section unless the ability to defend such claim
is materially prejudiced by such failure or delay. The Indemnification Period
shall be tolled solely with respect to a particular claim for the period
beginning on the date the Emusic Shareholders receive written notice of that
claim until the final resolution of such claim so long as such claim is made
within the Indemnification Period.
(b) DEFENSE OF CLAIM. The Indemnitee shall have the right to be
represented by counsel of its choice and to defend or otherwise control the
handling of any claim, or Legal Proceeding for which indemnity is sought;
provided however that the choice of such counsel shall be subject to the
approval of the Shareholder Representative, which approval shall not be
unreasonably withheld. If the Indemnitee so proceeds with the defense of any
such claim or Legal Proceeding:
(i) all expenses relating to the defense of such claim or
Legal Proceeding (whether or not incurred by the Indemnitee) shall be borne and
paid exclusively by the Emusic Shareholders;
(ii) the Emusic Shareholders shall make available to the
Indemnitee any non-privileged documents and materials in the possession or
control of the Emusic Shareholders that may be necessary to the defense of such
claim or Legal Proceeding except for documents or materials which are sealed by
a court order or are subject to a nondisclosure agreement prohibiting disclosure
by the Emusic Shareholders;
(iii) the Indemnitee shall keep the Emusic Shareholders
informed of all material developments and events relating to such claim or Legal
Proceeding; and
(iv) the Emusic Shareholders shall have the right to
participate in the defense of such claim or legal proceeding through the
Shareholder Representative (including, if desired, obtaining counsel separate
and apart from GoodNoise); provided that any such participation shall be at
their sole cost and expense (including the costs of any such counsel); and
36
(v) the Indemnitee shall have the right to settle, adjust
or compromise such claim or Legal Proceeding with the written consent of the
Emusic Shareholders; provided, however, that the Emusic Shareholders shall not
unreasonably withhold such consent.
14.5 INDEMNITY ESCROW. As soon as practicable after the Effective
Time, GoodNoise shall deposit into an escrow account (the "Indemnity Escrow")
with a national bank or other financial institution reasonably acceptable to
Emusic, as escrow agent (the "Indemnity Escrow Agent"), twenty percent (20%) of
the GoodNoise Shares (the "Indemnity Escrow Holdback"). The Indemnity Escrow
Holdback shall be withheld on a pro rata basis from the Emusic Shareholders who
otherwise are entitled to such amounts at the Effective Time and shall be
governed by the terms set forth herein and in an escrow agreement (the
"Indemnity Escrow Agreement") in substantially the form attached hereto as
Exhibit E. The Indemnity Escrow (but only up to a maximum of the total
----------
aggregate value of the Indemnity Escrow Holdback) shall be available to
compensate the Indemnitees for any loss, to the extent of the amount of Damages
that such Indemnitee has incurred and which are subject to indemnification
hereunder.
So long as the GoodNoise shares remain subject to escrow, the Shareholders
shall have the right to vote said shares or give a proxy for the same.
Furthermore, any distribution of money or property (including additional shares
of GoodNoise equity) paid by GoodNoise on the Indemnity Escrow Holdback shall be
added to the Indemnity Escrow Holdback and become subject to the Indemnity
Escrow. Said additions shall thereafter be distributed to the Shareholders upon
expiration of the Indemnity Escrow.
14.6 SHAREHOLDER REPRESENTATIVE.
(a) By virtue of their approval of this Agreement, the Emusic
Shareholders will be deemed to have irrevocably constituted and appointed,
effective as of the Effective Time, Mark Chasan (the "Shareholder
Representative"), as their true and lawful agent and attorney-in-fact to enter
into any agreement in connection with the transactions contemplated by this
Agreement or the Indemnity Escrow Agreement, to exercise all or any of the
powers, authority and discretion conferred on him under any such agreement, to
waive any terms and conditions of any such agreement, to give and receive
notices and communications, to authorize delivery to GoodNoise of the Indemnity
Escrow Holdback or other property from the Indemnity Escrow in satisfaction of
claims by GoodNoise, to object to such deliveries, to agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and to
take all actions necessary or appropriate in the judgment of the Shareholder
Representative for the accomplishment of the foregoing. Such agency may be
changed by the holders of a majority in interest of the Indemnity Escrow from
time to time upon not less than ten (10) days' prior written notice to
GoodNoise. The Shareholder Representative shall receive no compensation for his
services. Notices or communications to or from the Shareholder Representative
shall constitute notice to or from each of the Emusic Shareholders. This power
of attorney is coupled with an interest and is irrevocable.
37
(b) The Shareholder Representative shall not be liable for any
act done or omitted hereunder as Shareholder Representative while acting in good
faith and not in a manner constituting gross negligence, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such
good faith. The Emusic Shareholders shall severally indemnify the Shareholder
Representative and hold him harmless against any loss, liability or expense
incurred without gross negligence or bad faith on the part of such Shareholder
Representative and arising out of or in connection with the acceptance or
administration of his duties hereunder.
15. MISCELLANEOUS.
15.1 GOVERNING LAWS. It is the intention of the parties hereto
that the internal laws of the State of California (irrespective of its choice of
law principles) shall govern the validity of this Agreement, the construction of
its terms, and the interpretation and enforcement of the rights and duties of
the parties hereto.
15.2 BINDING UPON SUCCESSORS AND ASSIGNS. Subject to, and
unless otherwise provided in, this Agreement, each and all of the covenants,
terms, provisions, and agreements contained herein shall be binding upon, and
inure to the benefit of, the permitted successors, executors, heirs,
representatives, administrators and assigns of the parties hereto.
15.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall be interpreted so as best to reasonably
effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision which will achieve, to the extent possible, the economic,
business and other purposes of the void or unenforceable provision.
15.4 ENTIRE AGREEMENT. This Agreement, the exhibits and
schedules hereto, the documents referenced herein, and the exhibits and
schedules thereto, constitute the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof and thereof and
supersede all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect hereto and thereto. The express terms hereof control and
supersede any course of performance or usage of the trade inconsistent with any
of the terms hereof.
15.5 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original as against any party
whose signature appears thereon and all of which together shall constitute one
and the same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as signatories.
15.6 EXPENSES. Except as provided to the contrary herein,
each party shall pay all of its own costs and expenses incurred with respect to
the negotiation, execution and delivery of this Agreement and the exhibits
hereto. In the event the Merger is consummated, all legal and
38
accounting fees incurred by Emusic and the Emusic Shareholders in connection
with the Merger shall be deemed to be expenses of the Emusic Shareholders, shall
be borne by the Emusic Shareholders and shall not become obligations of Emusic,
GoodNoise or the Surviving Corporation. The Emusic Shareholders shall make
arrangements satisfactory to GoodNoise at or prior to the Closing for the
satisfaction of such amounts.
15.7 OTHER REMEDIES. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party shall be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy shall not preclude the
exercise of any other.
15.8 AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to constitute
a waiver of any other default or any succeeding breach or default.
15.9 SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby notwithstanding any investigation of the parties hereto.
15.10 NO WAIVER. The failure of any party to enforce any of
the provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
15.11 ATTORNEYS' FEES. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party shall be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including without limitation, costs,
expenses and fees on any appeal). The prevailing party shall be the party
entitled to recover its costs of suit, regardless of whether such suit proceeds
to final judgment. A party not entitled to recover its costs shall not be
entitled to recover attorneys' fees. No sum for attorneys' fees shall be counted
in calculating the amount of a judgment for purposes of determining if a party
is entitled to recover costs or attorneys' fees.
15.12 NOTICES. Any notice provided for or permitted under this
Agreement will be treated as having been received (a) when delivered personally,
(b) when sent by confirmed telex or telecopy, (c) one (1) day following when
sent by commercial overnight courier with written verification of receipt, or
(d) three (3) days following when mailed postage prepaid by certified or
registered mail, return receipt requested, to the party to be notified, at the
address set forth below, or at such other place of which the other party has
been notified in accordance with the provisions of this Section:
Emusic: Creative Fulfillment, Inc.
1437 5th Street, Suite 305
39
Santa Monica, California 90401
With copy to: W. R. Johnson, Esq.
GOFF JOHNSON, LLP
12424 Wilshire Boulevard, Suite 1120
Los Angeles, California 90025
Facsimile: (310) 979-3110
GoodNoise or Sub: GoodNoise Corporation
719 Colorado Avenue
Palo Alto, California 94306
Attention: Gene Hoffman
With copy to: Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, CA 94301
Facsimile: (650) 327-3699
Attention: Peter M. Astiz, Esq.
15.13 TIME. Time is of the essence of this Agreement.
15.14 CONSTRUCTION OF AGREEMENT. This Agreement has been
negotiated by the respective parties hereto and their attorneys and the language
hereof shall not be construed for or against any party. The titles and headings
herein are for reference purposes only and shall not in any manner limit the
construction of this Agreement which shall be considered as a whole.
15.15 NO JOINT VENTURE. Nothing contained in this Agreement
shall be deemed or construed as creating a joint venture or partnership between
any of the parties hereto. No party is by virtue of this Agreement authorized as
an agent, employee or legal representative of any other party. No party shall
have the power to control the activities and operations of any other and their
status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party shall have any power or
authority to bind or commit any other. No party shall hold itself out as having
any authority or relationship in contravention of this Section 15.15.
15.16 PRONOUNS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine or neuter, singular or plural, as
the identity of the person, persons, entity or entities may require.
15.17 FURTHER ASSURANCES. Each party agrees to cooperate
fully with the other parties and to execute such further instruments, documents
and agreements and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
40
15.18 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions
of this Agreement are intended, nor shall be interpreted, to provide or create
any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, partner of any party hereto or any
other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof shall be personal solely between
the parties to this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
GOODNOISE CORPORATION CREATIVE FULFILLMENT, INC.
By: /s/ By /s/
--------------------------- ----------------------------
GN ACQUISITION CORPORATION SHAREHOLDERS:
By: /s/ By /s/
--------------------------- ----------------------------
Mark S. Chasan
[SIGNATURE PAGE FOR AGREEMENT AND PLAN OF REORGANIZATION]
Dates Referenced Herein and Documents Incorporated by Reference
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