ASSET PURCHASE AGREEMENT among: iSports Inc.,
Exhibit
2.2
among:
iSports
Inc.,
a
California corporation; and
NTN Buzztime,
Inc.,
a
Delaware corporation.
___________________________
Dated as
of April 24, 2009
____________________________
This
Asset Purchase Agreement, dated April __, 2009 (this "Agreement"), is entered into
by and among: iSports Inc., a California corporation ("Seller"); and NTN Buzztime,
Inc., a Delaware corporation ("Buyer"). Unless
otherwise defined herein, capitalized terms shall have the meanings ascribed to
them in Exhibit A.
RECITALS
A. Seller is engaged in
the business of developing, offering and marketing mobile social gaming,
offering sports scores, gamecasting, news and interactive games (the "Business").
B. Seller desires to
sell, and Buyer desires to buy, certain of Seller's assets on the terms and
subject to the conditions set forth in this Agreement.
In
consideration of the premises and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE
I
PURCHASE AND SALE OF
ASSETS
1.1 Purchase of
Assets. Upon the terms and subject to the conditions contained
in this Agreement, at the Closing, Seller shall sell, assign, transfer and
convey to Buyer, and Buyer shall purchase, acquire and accept from Seller, as
more specifically set forth on Schedule 1.1, all of
Seller's assets of every kind and description (other than the Excluded Assets)
that are used or useful in the Business wherever located and whether or not such
assets and properties are reflected on the books and records of Seller or the
Business (the "Purchased
Assets"), free and clear of all Liens, other than Permitted
Liens. The Purchased Assets include:
(a) all of
Seller's rights under all licenses, permits, authorizations, orders,
registrations, certificates, approvals, consents and franchises, or any pending
applications for any of the foregoing;
(b) all
rights and interests in the Seller IP Rights;
(c) any
Contract set forth on Schedule 2.11
(i) to which Seller is a party or which is attributable to or related to
the Business, including all of Seller's rights under said Contracts,
(ii) pursuant to which any of the Purchased Assets are bound or subject, or
(iii) involving the Purchased Assets or any insurance policies
pursuant to which Seller is a beneficiary or any of the Purchased Assets are
insured (together, the "Purchased
Contracts");
(d) all of
Seller's claims, customer deposits, prepayments, prepaid expenses, refunds,
causes of action, rights of recovery, rights of setoff and rights of recoupment
existing as of the Closing Date and whether or not recorded in the books and
records of Seller;
(e) all
(i) of Seller's advertiser and customer and supplier lists and all other
sales, marketing and supplier information, (ii) of Seller's know-how,
technology, drawings, engineering specifications, bills of materials,
(iii) of Seller's software, database and related programs used or useful in
the conduct of the Business, and (iv) other intangible assets of
Seller;
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(f) all books
and records which relate to the operations and finance of Seller, including
books, records, ledgers, files, documents, correspondence, computer discs,
computer files, diagrams, construction data, blueprints, instruction manuals,
maintenance manuals, reports and similar documents used or useful in connection
with the Business;
(g) Seller's
corporate name and any trade names (current and any former, if applicable) and
any and all goodwill associated therewith;
(h) all of
the rights and interests of the Business in, to and under any third party
manufacturers' warranties;
(i) all other
assets of Seller of every kind and description, tangible or intangible, to the
extent used or useful in the conduct of the Business not provided for
above.
1.2 Excluded
Assets. Notwithstanding the foregoing, Seller is not selling,
assigning, transferring or conveying to Buyer hereunder and Buyer is not
purchasing hereunder the assets of Seller set forth on Schedule 1.2
(collectively, the "Excluded
Assets")
1.3 Assumed
Liabilities. In connection with the purchase and sale of the
Purchased Assets, Buyer shall only assume the following obligations and
liabilities of Seller (the "Assumed
Liabilities"):
(a) all
Liabilities of Seller arising on and after the Closing Date under the executory
portion of the Purchased Contracts; provided, however, that the
Assumed Liabilities shall not include any Liabilities arising out of any breach
by Seller on or prior to the Closing of any provision of any such Purchased
Contract, including Liabilities arising out of Seller's failure to perform under
any such Purchased Contract in accordance with its terms prior to the Closing;
and
(b) the
accounts payable of Seller listed on Schedule
1.3(b).
Notwithstanding
anything to the contrary herein, the Assumed Liabilities do not and shall not
include the Excluded Liabilities.
1.4 Excluded
Liabilities. Notwithstanding anything in this Agreement to the
contrary, or any disclosure contained herein or made pursuant hereto, or
anything otherwise known to Buyer, Buyer does not assume and will not become
responsible for any Liability of Seller except the Assumed
Liabilities. Without limiting the generality of the foregoing, the
following are included among the Liabilities of Seller which Buyer does not
expressly or impliedly assume (collectively, the "Excluded
Liabilities"):
(a) all
Liabilities of Seller that exist or may arise under that certain License
Agreement dated July 7, 2008 between Seller and STATS LLC, and all amendments
thereto (the "STATS
Agreement");
(b) all
Indebtedness of Seller except as set forth on Schedule 1.4(b);
(c) all
Liabilities of Seller with respect to any expenses relating to the transactions
contemplated by this Agreement;
(d) all
Liabilities of Seller under any Environmental Law existing on the Closing Date,
including all Liabilities which are attributable to non-compliance with federal,
state, and local statutes or regulations governing water discharges, air
emissions, and to the disposal, release, generation, treatment, transport,
recycling or storage of any Hazardous Materials at or from any property or
facility owned, leased, used or occupied at any time by Seller or any
predecessor, including any predecessor in ownership, or arising out of or
attributable to arrangements for any of the foregoing by Seller or any
predecessor, including any predecessor in ownership, and any environmental
condition or violation of Environmental Law with respect to any Real Property
leased by Seller which existed on or prior to the Closing Date;
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(e) all
Liabilities of Seller with respect to all Taxes for all periods prior to the
Closing Date;
(f) all
Liabilities of Seller with respect to any pending, threatened or unasserted
Action including Liabilities relating to the Excluded Assets or to the leased
Real Property and Liabilities relating to any Tax owed, alleged to be owed, or
that may become owed to any Governmental Entity with respect to matters which
occurred prior to the Closing Date;
(g) all
product liability or product warranty obligations of Seller;
(h) any
Liability of Seller incurred in connection with the execution, delivery or
performance of this Agreement;
(i) all
Liabilities of Seller which are attributable to non-compliance with applicable
Laws;
(j) all
Liabilities associated with, relating to or arising from the employment
relationships of Seller, including the termination of employees of Seller;
and
(k) all
Liabilities associated with any Employee Benefit Plan, including any Liabilities
associated with, relating to or arising from the failure to provide coverage
and/or benefits under any Employee Benefit Plan.
1.5 Purchase
Price.
(a) The
aggregate consideration payable for the Purchased Assets consists of (i) Five
Hundred Thousand (500,000) unregistered shares of Buyer's common stock, $0.005
par value per share (the "Closing Shares"), (ii) the
$0.30 Warrant, (iii) the $0.50 Warrant and (iv) the assumption by Buyer of the
Assumed Liabilities (collectively, the "Closing Purchase Price"). At
the Closing:
(A) Buyer
shall issue a certificate in the name of Seller representing the Closing Shares,
which shall be placed and held in the Holdback Account. The Closing
Shares shall remain in the Holdback Account for the Holdback Period to secure
the performance of the obligations of Seller under
ARTICLE VI. During the Holdback Period or until the Closing
Shares have been distributed from the Holdback Account, all dividends paid and
distributions made with respect to the Closing Shares shall be the property of
Seller, and Seller shall have the sole power to exercise all voting rights
pertaining to the Closing Shares. As soon as reasonably practicable
(but in any event within 10 Business Days) following the expiration of the
Holdback Period, Buyer shall cause to be released to the Seller all of the
remaining Closing Shares, if any, in excess of (i) any Closing Shares retained
by Buyer pursuant to Section 6.9, and (ii) the Closing Shares calculated
pursuant to the following sentence to satisfy all unresolved, unsatisfied or
disputed claims for Damages specified in any Indemnification Demand delivered to
Seller before the expiration of the Holdback Period. If any claims
for indemnification are unresolved, unsatisfied or disputed as of the expiration
of the Holdback Period, then Buyer shall retain possession and custody of that
portion of the Closing Shares that equals the total maximum amount of Damages
then being claimed by Buyer in all such unresolved, unsatisfied or disputed
claims, and as soon as reasonably practicable (but in any event within ten (10)
Business Days) following resolution of all such claims, Buyer shall release to
Seller the remaining Closing Shares, if any, not required to satisfy such
claims. Any dispute concerning the valuation of the indemnity claim
for purposes of retention of the Closing Shares or the number of Closing Shares
to be retained shall be resolved in accordance with Section 6.4(c).
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(B) Buyer
shall deliver to Seller each of the $0.30 Warrant and $0.50
Warrant.
(b) Following
placement of the Closing Shares in the Holdback Account and delivery by Buyer of
the $0.30 Warrant and the $0.50 Warrant as set forth above, Seller shall in all
events be solely responsible for any and all further distribution of proceeds to
its creditors and shareholders, as appropriate, and Buyer shall in no way be
liable or responsible for distribution of any portion of the Closing Purchase
Price directly to any of Seller's creditors or shareholders.
1.6 Earnout.
(a) Earnout
Consideration. In addition to the Closing Purchase Price, if
the earnout performance milestones (each an "Earnout Milestone" and
collectively the "Earnout
Milestones") set forth below in Section 1.6(b) are satisfied, Seller
shall receive, subject to the terms and conditions of this Agreement, additional
consideration (the "Earnout
Consideration") as set forth below in Section
1.6(b). Notwithstanding anything to the contrary in this Agreement,
Buyer shall have a right to offset against the Earnout Consideration in order to
secure Seller's indemnification obligations under ARTICLE VI.
(b) Earnout
Milestones.
(A) If the
Earnout Milestones described below are satisfied, then Seller will receive
additional consideration at such times and on the terms set forth
below.
(B) Subject
to the terms and conditions in this Section 1.6, payments related to the
successful satisfaction of an Earnout Milestone (each, an "Earnout Payment") will be paid
by Buyer to Seller in immediately available cash funds by wire transfer to an
account designated by Seller within 30 Business Days after it has been
determined that the applicable Earnout Milestone has been successfully
satisfied. Following delivery by Buyer to Seller of an Earnout
Payment, Seller shall in all events be solely responsible for any and all
further distribution of such Earnout Payment to its creditors and its
shareholders, as appropriate, and Buyer shall in no way be liable or responsible
for distribution, or lack thereof, of any portion of any Earnout Payment
directly to any of Seller's creditors or its shareholders. The
Earnout Milestones shall be as follows:
(i) Year
1. With respect to Year 1, Buyer shall pay Seller 35% of the
amount by which Buyer's Net Media Revenues for Year 1 exceeds $1,500,000 if and
only if all of the following Business Conditions are satisfied:
(1) Buyer
achieves an average of at least 250,000 Active Mobile Users per month during the
months of October, November and December of Year 1.
(2) Buyer
achieves an average of at least 100,000 users per month playing Challenges via
Mobile Devices during the months of October, November and December of Year
1.
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(ii) Year
2. With respect to Year 2, Buyer shall pay Seller 35% of the
amount by which Buyer's Net Media Revenues for Year 2 exceeds $5,000,000 if and
only if all of the following Business Conditions are satisfied:
(1) Average
monthly Unique Viewers on Buyer's consumer websites for Year 2 are at least
150,000 per month.
(2) Average
monthly Page Views from Mobile Devices for Year 2 are at least 50,000,000 per
month.
(3) Total
Unique Viewers accessing Buyer's products from mobile devices average at least
1,500,000 per month during the months of July, August, September, October,
November and December of Year 2.
(4) Buyer's
Premium Mobile and Web Revenues for Year 2 equal or exceed
$500,000.
(iii) Year
3. With respect to Year 3, Buyer shall pay Seller 35% of the
amount by which Buyer's Net Media Revenues for Year 3 exceeds $10,000,000 if and
only if all of the following Business Conditions are satisfied:
(1) Average
monthly Unique Viewers on Buyer's consumer websites for Year 3 are at least
250,000 per month.
(2) Average
monthly Page Views from Mobile Devices for Year 3 are at least 100,000,000 per
month.
(3) Total
Unique Users accessing Buyer's products from mobile devices average at least
2,500,000 per month during all of Year 3.
(4) Buyer's
Premium Mobile and Web Revenues for Year 3 equal or exceed
$1,000,000.
(c) Milestone
Notice. As soon as reasonably practicable (but in no event
later than 30 days after Buyer can determine whether a particular Earnout
Milestone has been satisfied), Buyer will give notice (in each case, a "Milestone Notice") to Seller
informing Seller as to whether or not the applicable Earnout Milestone was
satisfied. The "Milestone Notice Date," in any
case, will mean the date on which the Milestone Notice was delivered by Buyer to
Seller. If a dispute arises between Buyer and Seller as to whether an
Earnout Milestone has been satisfied, such dispute will be resolved pursuant to
Section 1.6(f).
(d) Exclusion of Later Acquired
Businesses or Assets. For purposes of determining whether or
not any of the Business Conditions set forth in Section 1.6(b) above have been
achieved during any given period, the portion of revenue, users, viewers, page
views and/or other business metrics relating to such Business Condition that are
attributable to businesses and assets that Buyer acquires after the Closing
shall be excluded, the value of which shall be based on reasonable methods of
measurement and valuation and mutually determined by Buyer and Seller in good
faith.
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(e) Employment
Condition. Notwithstanding anything else in this Section 1.6,
the Earnout Payments described above relating to Year 1, Year 2 and Year 3 shall
be conditioned on the continued full time employment by Buyer of each of ▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ from the Closing Date through the end of Year
1, Year 2 or Year 3, as applicable, except in the case of the death or
termination without Cause by Buyer of such individual; provided, however, that
if, after 18 months following the Closing Date and during Year 2 and/or Year 3,
as applicable, (i) one of either ▇▇. ▇▇▇▇▇▇▇▇ or ▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ceases to be a
full time employee of Buyer for any reason other than such individual's death or
termination without Cause by Buyer, then the amount of any Earnout Payment that
would otherwise be payable with respect to such year and any future year shall
be reduced by 50%, and (ii) both of Messrs. ▇▇▇▇▇▇▇▇ and Ramachandran cease to
be full time employees of Buyer for any reason other than their death or
termination without Cause by Buyer, then no Earnout Payment shall be due or
payable with respect to such year or any future year.
(f) Milestone Dispute
Resolution. If Seller disagrees as to whether or not an
Earnout Milestone set forth in Section 1.6(b) has been satisfied, Seller shall
give written notice (a "Dispute
Notice") to Buyer with a reasonable description of the basis for such
disagreement within 15 days following the applicable Milestone Notice
Date. For a period of 15 days following Buyer's receipt of the
Dispute Notice, Buyer and Seller shall negotiate in good faith to attempt to
agree whether or not the Earnout Milestone that is the subject of the Dispute
Notice has been satisfied. If Buyer and Seller cannot resolve the
dispute within that 15 day period, then the parties shall submit the dispute to
a mutually acceptable independent registered public accounting firm or other
relevant subject matter expert for final determination, provided that such
accounting firm or other relevant subject matter expert shall not have performed
services for Buyer or Seller in the past year (the "Determining
Experts"). The determination of the Determining Experts shall
be final, binding and conclusive on the parties hereto. The
Determining Experts shall consider only the items in dispute and shall be
instructed to act within 30 days (or such longer period as the parties may
agree) to resolve the dispute. The fees and expenses of the
Determining Accountants shall be paid by the non-prevailing party in the
dispute.
(g) Management of the
Business. The parties hereto acknowledge and agree that, from
and after the Closing, Buyer shall have the complete right, power and authority
to operate and control its business and operations, including the Business, in
any manner as it shall determine in its sole and absolute
discretion.
1.7 Sales, Use and Transfer
Taxes. Seller shall be responsible for paying, shall promptly
discharge when due, and shall reimburse, indemnify and hold harmless Buyer from,
any sales or use, transfer, value added, real property gains, excise, stamp,
stamp duty, stamp duty reserve tax, or other Taxes imposed by reason of the
transfer of the Purchased Assets provided hereunder, and any deficiency,
interest or penalty asserted with respect thereto; provided, however, that Buyer
and Seller shall cooperate to reduce or eliminate, to the extent practicable,
any such taxes that may be imposed on the transfer of the Purchased Assets
(including, without limitation, by causing the transfer of any suitable
intangible assets from Seller to Buyer to be made by means of remote
telecommunications rather than by delivery of any item of tangible personal
property). For California sales and use tax purposes this Agreement
shall constitute a "technology transfer agreement" within the meaning of Cal.
Code Regs. section 1507. Seller shall bear sole responsibility for
any Tax in the nature of an income, franchise or occupation tax imposed on
Seller as a result of the transfer of the Purchased Assets to Buyer as provided
herein
1.8 Allocation. The
Closing Purchase Price and any other consideration for the Purchased Assets, as
determined for U.S. federal income tax purposes pursuant to Treasury Regulation
Section 1.1060-1(c) (the "Tax
Purchase Price"), shall be allocated for such purposes as mutually agreed
by the parties hereto within 30 days following the Closing Date, in accordance
with the provisions of Treasury Regulations Section 1.1060-1(c) and the
Treasury Regulations referred to therein. Buyer and Seller shall
execute and file all U.S. federal and applicable state income Tax Returns in a
manner consistent with any allocations agreed or determined pursuant hereto and
shall not take any position in any other Tax Return, before any Governmental
Entity, or in any tax proceeding that is inconsistent with any such allocation,
except pursuant to a final "determination" (as defined in Code Section 1313(a)
or corresponding provision of state, local or foreign law). Buyer
and Seller shall timely file any IRS Forms 8594, and any other
U.S. federal and applicable state income Tax Returns prepared in a manner
consistent with the allocations agreed or determined pursuant hereto and shall
file any other Tax Return with any state, local or foreign Governmental Entity
in a manner that is not inconsistent therewith. Any redetermination
of the Tax Purchase Price within the meaning of Treasury Regulations
Section 1.338-7 shall be made as required thereby and shall be taken into
account by Buyer and Seller in carrying out the provisions hereof and the
preparation and filing of Tax Returns referred to above to the extent
applicable.
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1.9 Closing. Subject to the
satisfaction or waiver of the conditions set forth in this Agreement, the
closing of the transactions contemplated by this Agreement, including the
purchase and sale of the Purchased Assets (the "Closing"), shall take place at
the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP located at ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on: (a) April __, 2009,
or (b) such date, time and place as the parties may agree (the "Closing
Date"). Notwithstanding the foregoing, the parties agree that
the Closing shall be deemed effective as of 12:01 a.m. on the Closing
Date.
ARTICLE
II
REPRESENTATIONS AND
WARRANTIES OF SELLER
As of the
Closing Date, Seller represents and warrants to Buyer as follows
2.1 Organization. Seller
is a corporation, duly incorporated, validly existing and in good standing under
the laws of the State of California. Seller has all requisite power
and authority to own and lease its assets and to operate the Business as the
same are now being owned, leased and operated. Seller is duly
qualified or licensed to do business as a foreign corporation or foreign entity
in, and is in good corporate standing in, each jurisdiction in which the nature
of the Business or its ownership of its properties requires it to be so
qualified or licensed. Schedule 2.1 sets
forth a true and complete list of (a) all jurisdictions in which Seller is
qualified or licensed to do business as a foreign corporation or foreign entity,
and (b) all powers of attorney granted by Seller to any third party that
are currently in effect. All necessary corporate action on the part
of Seller with respect to the consummation of the transactions contemplated
hereby has been taken. Seller has provided Buyer with a true,
complete and correct copy of its articles of incorporation and bylaws, each as
currently in effect and reflecting any and all amendments thereto (the "Organizational
Documents"). Each of the Organizational Documents is in full
force and effect, and Seller is not in violation of any provision
thereof.
2.2 Authorization. The
execution, delivery and performance by Seller of this Agreement, the other
agreements contemplated hereby (each, a "Transaction Document") and
each of the transactions contemplated hereby or thereby have been duly and
validly authorized by Seller, and no other act or proceeding on the part of
Seller, its board of directors or its shareholders is necessary to authorize the
execution, delivery or performance by Seller of this Agreement or any
Transaction Document or the consummation of any of the transactions contemplated
hereby or thereby. This Agreement has been duly executed and
delivered by Seller and this Agreement constitutes, and the Transaction
Documents upon execution and delivery by Seller, will each constitute, a valid
and binding obligation of Seller, enforceable against Seller in accordance with
their respective terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect, relating to or limiting creditors' rights generally and
(ii) general principles of equity (whether considered in an action in equity or
at law). The board of directors of Seller has duly and unanimously
approved this Agreement and the transactions contemplated hereby, and has
recommended adoption thereof by Seller's shareholders.
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2.3 No
Conflict. The execution, delivery and performance by Seller of
this Agreement and the Transaction Documents and the consummation of each of the
transactions contemplated hereby or thereby will not (i) violate or conflict
with the Organizational Documents, (ii) violate, conflict with, result in any
material breach of, constitute a default under, result in the termination of,
result in the acceleration of any obligations under, result in a material change
in terms of, create in any party the right to accelerate, terminate, modify or
cancel, or require any consent or notice under, or create an event that, with
the giving of notice or the lapse of time, or both, would be a default under or
material breach of, any (A) Contract to which Seller is a party or by which it
is bound or affected or to which any of its assets is bound or affected; or (B)
judgment, order, writ, injunction, decree or demand of any Governmental Entity
which materially affects the ability of Seller to perform its obligations under
this Agreement; (iii) result in the creation or imposition of any Lien upon any
assets or any of the equity of Seller, or which affects the ability to conduct
the Business as conducted prior to the date of this Agreement or perform its
obligations under this Agreement; (iv) except as set forth on Schedule 2.3, require
any declaration, filing or registration with, or authorization, consent or
approval of, exemption or other action by or notice to, any Governmental Entity
or other Person under the provisions of any Law or any Contract to which Seller
is subject, or by which Seller is bound or affected or by which Seller or any of
its assets are bound or affected.
2.4 Capitalization. The
authorized capital stock of Seller consists of 5,000,000 shares of common stock,
and 1,000,000 shares of preferred stock. A total of 1,666,666 shares
of Seller's common stock, and 680,000 shares of Seller's preferred stock, are
issued and outstanding as of date of this Agreement. Schedule 2.4
accurately sets forth the authorized and outstanding equity securities of Seller
and the number of shares of each class or series of Seller capital stock held by
each shareholder of Seller, including, with respect to the outstanding shares of
preferred stock, the number of shares of common stock issuable upon conversion
thereof. Schedule 2.4 also
accurately sets forth an accurate and complete schedule by holder of all
outstanding options and warrants and the number of shares of each class or
series of Seller capital stock issuable upon exercise of such options and
warrants. All of the issued and outstanding shares of capital stock
of Seller have been duly authorized, are validly issued in accordance with
applicable laws, fully paid and nonassessable, are not subject to and were not
issued in violation of any preemptive rights, are free and clear of all Liens,
and are owned of record and beneficially by the shareholders as set forth on
Schedule
2.4.
2.5 Legal
Proceedings. Except as set forth on Schedule 2.5, there
are no, and since January 1, 2006, there have been no (a) outstanding
judgments, orders, decrees, awards, stipulations or injunctions of any kind
against Seller that otherwise affect the Purchased Assets or the Business or
(b) Actions pending or, to Seller's Knowledge, threatened against Seller
that otherwise affect the Purchased Assets or the
Business. There is no action, claim suit or proceeding pending or, to
Seller's Knowledge, threatened, by or against Seller that challenges, or may
have the effect of preventing, delaying, making illegal or otherwise interfering
with the execution and delivery by Seller of this Agreement or any of the
Transaction Documents or the performance of Seller hereunder or
thereunder.
2.6 Intellectual Property and
Proprietary Rights.
(a) Schedule 2.6(a) sets
forth a true, correct and complete list of all Intellectual Property, and any
Contracts relating to the Intellectual Property (other than trade secrets,
know-how and goodwill attendant to the Intellectual Property and other
intellectual property rights not reducible to schedule form) owned, licensed to
or used by Seller with respect to the conduct of the Business as presently
conducted or presently proposed to be conducted. Schedule 2.6(a)
separately identifies the Intellectual Property owned by Seller and the
Intellectual Property licensed to or used by Seller.
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(b) Except as
set forth on Schedule
2.6(b), Seller has not interfered with, infringed upon or misappropriated
any Intellectual Property rights of any Person, and Seller (and management level
employees with direct responsibility for Intellectual Property matters) has
never received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that Seller must license or refrain from using any Intellectual Property rights
of any Person). To Seller's Knowledge, no Person has interfered with,
infringed upon or misappropriated any Intellectual Property rights of
Seller.
(c) Except as
set forth on Schedule
2.6(c), (i) Seller owns all right, title and interest in, or has a valid
and binding license to use, the Intellectual Property, and, to the extent
required in connection with the way in which Seller has conducted, conducts, or
presently proposes to conduct the Business, to make, have made, use, sell,
import and export, distribute, publicly perform, publicly display, reproduce and
prepare derivative works of the Intellectual Property; (ii) the rights of Seller
to the Intellectual Property are free and clear of all Liens; (iii) all
registrations with and applications to Governmental Entities in respect of the
Intellectual Property are valid and in full force and effect and Seller has
taken all action required to maintain their validity and effectiveness; (iv)
there are no restrictions on the direct or indirect (A) transfer of any license,
or any interest therein, held by Seller in respect of the Intellectual Property
or (B) changes of control of Seller; (v) Seller has delivered to Buyer prior to
the execution of this Agreement documentation with respect to any invention,
process, design, computer program or other know-how or trade secret included in
the Intellectual Property, which documentation is accurate in all material
respects and reasonably sufficient in detail and content to identify and explain
such invention, process, design, computer program or other know-how or trade
secret and to facilitate its use without reliance on the special knowledge or
memory of any Person; (vi) Seller has taken reasonable measures to protect the
secrecy, confidentiality and value of its trade secrets; and (vii) Seller is
not, nor has it received any notice that it is, in default (or with the giving
of notice or lapse of time or both, would be in default) under any license with
respect to the Intellectual Property.
(d) Except as
identified on Schedule
2.6(d), no approval or consent of or payment of any consideration to any
Person is required so that the interest of Buyer in the Intellectual Property
shall continue to be in full force and effect following the transactions
contemplated by this Agreement, and Seller is not subject to any restriction,
agreement, instrument, order, judgment or decree which would be violated or
breached by the consummation of the transactions contemplated by this
Agreement.
(e) Except
for the fees identified in Schedule 2.6(e) for
the agreements identified therein, no licensing fees, royalties or payments are
due or payable by Seller in connection with the Intellectual Property, other
than maintenance fees. Schedule 2.6(e) lists
all actions that must be taken by Seller within one year from the date hereof,
including the payment of any registration, maintenance, renewal fee, annuity fee
and Tax or the filing of any document, application or certificate for the
purposes of maintaining, perfecting or preserving or renewing any Intellectual
Property.
(f) Schedule 2.6(f)
separately lists and identifies all (i) computer programs, (ii) computer
databases (including, but not limited to, databases used in conjunction with
such computer programs) and (iii), specifications, manuals and materials
associated therewith, owned, licensed or used by Seller, excluding generally
available off-the-shelf microcomputer and work station software (collectively,
the "Software
Rights"). Except as set forth in Schedule 2.6(f), all
right, title and interest in and to the Software is owned by Seller free and
clear of all Liens, is fully transferable to Buyer, and no party other than
Seller has any interest in the Software. Each of the representations
in Sections 2.6(b) through 2.6(e), inclusive, is applicable to the Software
Rights.
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(g) The
Software performs in accordance with the documentation and other written
materials related to the Software and is free from substantial defects in
programming and operations, is in machine readable form, contains all current
revisions of such Software, and includes all computer programs, materials,
tapes, know-how, object and source codes, other written materials, know-how and
processes related to the Software. Seller has delivered to Buyer
complete and correct copies of the Software in its current form and all user and
technical documentation related thereto.
(h) All
copies of the Software embodied in physical form are being delivered to Buyer at
or prior to the Closing.
(i) Seller
has kept secret and has not disclosed the source code for the Software to any
Person other than certain employees of Seller who are subject to the terms of a
binding confidentiality agreement with respect thereto. Seller has
taken all appropriate measures to protect the confidentiality and proprietary
nature of the Software, including the use of confidentiality agreements with all
of its employees and consultants having access to the
Software source and object code.
(j) No
employee of Seller is in default under, and the consummation of the transactions
contemplated by this Agreement will not result in a default of, any term of any
employment Contract relating to the Software or any noncompetition arrangement,
or any other Contract or any restrictive covenant relating to the Software or
its development or exploitation. Seller does not have any obligation
to compensate any Person for the development, use, sale or exploitation of the
Software nor has Seller granted to any other Person or entity any license,
option or other rights to develop, use, sell or exploit in any manner the
Software whether requiring the payment of royalties or not.
(k) Except as
set forth on Schedule 2.6(k), all Intellectual Property owned by Seller and for
which confidentiality is appropriate has been maintained in confidence in
accordance with protection procedures believed by Seller to be adequate for
protection customarily used in the industry to protect rights of like
importance. All former and current managers, employees, agents,
consultants and independent contractors who have authored, co-authored or
otherwise contributed to or participated in the conception and development of
Intellectual Property which is used in and material to the Business ("IP Participant"), have
executed and delivered to Seller a proprietary information agreement, pursuant
to which, inter alia,
such IP Participant has assigned any and all of his, her or its rights in such
Intellectual Property to Seller and has agreed to keep such Intellectual
Property confidential and not to use such Intellectual Property for any purpose
unrelated to his, her or its work for Seller. Except as set forth on Schedule
2.6(k), no former or current IP Participant has filed, asserted in writing or,
to Seller's Knowledge (or management employees of Seller with direct
responsibility for Intellectual Property matters), threatened any claim against
Seller in connection with his, her or its involvement in Intellectual Property
which is used in and material to the Business. To Seller's Knowledge
(or management employees of Seller with direct responsibility for Intellectual
Property matters), except as set forth on Schedule 2.6(k), no IP Participant has
any patents issued or applications pending for any device, process, design or
invention of any kind now used or needed by Seller which patents or applications
have not been assigned to Seller.
(l) No former
or current shareholder, director or officer, employee or independent contractor
of Seller has any right to receive royalty payments or license fees from
Seller.
(m) With
respect to privacy and security agreements and contractual commitments (the
"Commitments"), (i)
Seller is in full compliance with all applicable Commitments; (ii) the
transactions contemplated by this Agreement and the Transaction Documents will
not violate any Commitments; (iii) Seller has not received inquiries from the
Federal Trade Commission or any other Governmental Entity regarding Commitments;
(iv) Seller has not received any written (including email) complaints from any
web site user regarding Commitments, or compliance with Commitments; (v) the
Commitments have not been rejected by any applicable certification organization
which has reviewed such Commitment or to which any such Commitment has been
submitted and (vi) Seller has not experienced the cancellation, termination or
revocation of any privacy or security certification issued by any
Commitments.
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(n) Except as
set forth on Schedule 2.6(n), Seller has in its possession or control: (i)
correct and complete, fully-executed copies of all of the Contracts (as amended
to date) that are required to be identified on any of the schedules required by
this Section 2.6; and (ii) correct and complete copies of all documents
(including without limitation patents, registration certificates, renewal
certificates, applications, prosecution histories, and all documents submitted
to or received from the relevant patent, copyright, trademark, domain name or
other authorities in the United States and foreign jurisdictions, as the case
may be) relating to each item of the Intellectual Property identified on Schedule
2.6(a). Seller has delivered to Buyer correct and complete,
fully-executed copies of all of the documents described in this Section
2.6(n).
2.7 Employees and Independent
Contractors.
(a) Schedule 2.7(a)
contains a true and complete list, as of March 31, 2009, of all employees
currently employed or who have at any time been employed by Seller or in the
Business (the "Business
Employees"), including each such employee's (i) name,
(ii) title, (iii) principal location of employment, (iv) with
respect to all currently employed Business Employees, their current salary and
other compensation arrangement (i.e. commission rate) and whether the employee
is actively working or on a leave of absence, and (v) with respect to all
previously employed Business Employees, a description of their duties and
services to Seller.
(b) (i) all
Business Employees have executed Seller's form proprietary information and
inventions agreement, a copy of which has been provided to Buyer; (ii) to
Seller's Knowledge, no Business Employee is a party to or is bound by any
employment contract, patent disclosure agreement, non-competition agreement or
other restrictive covenant or other Contract with any third party that could be
reasonably expected to affect (A) the performance by such Business Employee
of any of his or her duties or responsibilities as an employee of the Business,
or (B) the Business; and (iii) to Seller's Knowledge, no Business
Employee is in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any other restrictive
covenant or other Contract with any third party relating to the right of any
such Business Employee to be employed by Seller, or after the closing, by
Buyer.
(c) Except as
set forth on Schedule
2.7(c), Seller has paid or otherwise satisfied all obligations due to the
Transferred Employees in respect of their employment with Seller, including if
applicable, any wages, salaries, bonuses (including any bonuses that arise out
of the completion of the transactions contemplated hereby), accrued vacation
pay, and severance pay, and all payroll taxes payable with respect to such
employees, which will be discharged by Seller in accordance with their
terms. Buyer shall have no obligations or liabilities to any
Transferred Employee whatsoever, including but not limited to any wages,
salaries, bonuses (including any bonuses that arise out of the completion of the
transactions contemplated hereby or any Earnout Consideration, if any), accrued
vacation pay and severance pay, if any, owing to a Transferred Employee as a
result of such employee's employment with Seller.
(d) Schedule 2.7(d)
contains a true and complete list, as of February 28, 2009, of all consultants
and other independent contractors who are providing or who have at any time
provided services to the Business (the "Independent Contractors"),
including (i) their name, (ii) type of services provided, (iii) the
dates during which they provided services, and (iv) principal location
where services are provided.
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(e) Seller
has complied in all respects with all legal requirements relating to employment
practices, terms and conditions of employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining
requirements, the payment of social security and similar Taxes and occupational
safety and health. Seller is not liable for the payment of any Taxes,
fines, penalties, or other amounts, however designated, for failure to comply
with any of the foregoing legal requirements.
(f) Except as
set forth in Schedule
2.7(f), there has not been and there are no pending or, to Seller's
Knowledge, threatened controversies, grievances, administrative charges,
lawsuits or claims by any Business Employee with respect to his or her
employment, termination of employment or compensation and
benefits. Seller has not (i) been a party to, or bound by, any
collective bargaining agreement with any labor organization; or (ii) experienced
any strike, work stoppage, lock-up, slow-down or other material labor dispute or
any attempt by organized labor or employees to cause Seller to comply with or
conform to demands of organized labor relating to its employees or recognize any
union or collective bargaining units. No labor strike or stoppage is
pending or, to Seller's Knowledge, threatened against Seller. Seller
is in material compliance with all laws relating to the employment of labor,
including all such laws relating to wages, hours, the WARN Act, collective
bargaining, discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding or social security
Taxes and any similar Tax. There has been no "mass layoff" or "plant
closing" as defined by the WARN Act with respect to Seller. There are
no pending or, to Seller's Knowledge, threatened governmental audits or
investigative proceedings with respect to Seller's employees, including but not
limited to audits or investigations by the Department of Labor, the Occupational
Safety and Health Administration, the Equal Employment Opportunity Commission or
any state counterpart. To Seller's Knowledge, all of the Transferred
Employees are legally eligible to work in the United States and Seller and
Transferred Employees have properly completed Form I-9s with respect to each
Transferred Employee.
2.8 Employee Benefit
Plans.
(a) Except
for the arrangements set forth on Schedule 2.8(a),
Seller does not maintain or contribute to, and has not in the current or
preceding six calendar years maintained or contributed to, any pension,
profit-sharing, deferred compensation, bonus, stock option, share appreciation
right, severance, group or individual health, dental, medical, life insurance,
survivor benefit, or similar plan, policy or arrangement, whether formal or
informal, for the benefit of any director, officer, consultant or employee,
whether active or terminated, of Seller. Each of the arrangements set
forth on Schedule
2.8(a) is hereinafter referred to as an "Employee Benefit
Plan".
(b) Seller
has heretofore provided to Buyer true, correct and complete copies of each
Employee Benefit Plan, and with respect to each such plan (i) any
associated trust, custodial, insurance or service agreements, (ii) any Form
5500 annual report, actuarial report, or disclosure materials (including
specifically any summary plan descriptions) submitted to any Governmental Entity
or distributed to participants or beneficiaries thereunder in the current or any
of the three preceding calendar years and (iii) the most recently received
IRS determination or opinion letters and any governmental advisory opinions or
rulings.
(c) Each
Employee Benefit Plan is and has heretofore been maintained and operated in all
material respects in compliance with the terms of such plan and with the
requirements prescribed (whether as a matter of substantive law or as necessary
to secure favorable tax treatment) by any and all applicable statutes,
governmental or court orders, or governmental rules or regulations in effect
from time to time, including but not limited to ERISA and the
Code. Each Employee Benefit Plan that is intended to be qualified
under Code Section 401(a) has obtained a favorable determination letter
issued by the IRS as to its tax-qualified status and nothing has occurred since
the issuance of such favorable determination letter, whether by action or
failure to act, which would cause the loss of such qualification.
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(d) There is
no pending or, to Seller's Knowledge, threatened Action, other than routine
claims for benefits, concerning any Employee Benefit Plan or any fiduciary or
service provider thereof and, to Seller's Knowledge, there is no basis for any
such Action.
(e) Neither
Seller nor any ERISA Affiliate has ever maintained, sponsored or been required
to contribute to any (i) "defined benefit plan" (as defined in Section 3(35) of
ERISA), (ii) "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) that is subject to Title IV of ERISA or Code Section 412, or (iii)
"multiemployer plan" (as defined in Section 3(37) of ERISA).
(f) No
Employee Benefit Plan nor any party in interest with respect thereof, has
engaged in a "prohibited transaction" which could subject Seller or any ERISA
Affiliate directly or indirectly to liability under Section 409 or 502(i)
of ERISA or Code Section 4975.
(g) Seller
and any ERISA Affiliate have at all times complied with the applicable
continuation coverage requirements for their group health plans under Code
Section 4980B(f) and Part 6 of Title I of ERISA ("COBRA"). Except for
the continuation coverage requirements of COBRA, Seller has no obligations or
potential liability for continuation of medical, dental, life or disability
coverage to employees, former employees or their respective dependents following
termination of employment or retirement.
2.9 Financial
Statements. Schedule 2.9 sets
forth true and complete copies of the following (collectively, the "Financial Statements")
(a) unaudited consolidated balance sheets of Seller as of December 31,
2008, and the related unaudited statement of operations for the twelve-month
period ended December 31, 2008, and (b) the unaudited consolidated
balance sheet of Seller as of March 31, 2009 ("Acquisition Balance Sheet"),
and the related unaudited statement of operations for the three-month period
then ended, in each case prepared in a manner consistent with Seller's
historical basis and accounting methods. Each of the Financial
Statements (including in all cases the notes thereto, if any) is accurate and
complete in all respects and presents fairly the consolidated financial
condition, results of operations and cash flows of Seller throughout the periods
covered thereby, and such Financial Statements have been prepared in accordance
with accounting methods consistently applied throughout the periods
indicated. Seller maintains books, records and accounts which, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of Seller. Seller maintains systems of internal
accounting controls reasonably sufficient to provide reasonable assurances that:
(i) Seller's transactions are executed in accordance with management's general
or specific authorization; (ii) Seller's transactions are recorded as necessary
to permit the preparation of financial statements and to maintain accountability
for its assets; (iii) access to Seller's assets is permitted only in accordance
with management's general or specific authorization; and (iv) the recorded
accountability for Seller's assets is compared with the actual levels at
reasonable intervals and appropriate action is taken with respect to any
differences. Seller has provided Buyer copies of each management
letter or other letter delivered to Seller by its outside accountants in
connection with the Financial Statements or relating to any review by Seller's
outside accountants of the internal controls of Seller.
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2.10 Changes. Except
as described in Schedule 2.10, since
December 31, 2008, Seller has conducted the Business only in the ordinary
course and in a manner consistent with past practice and, since such date there
has not been a Material Adverse Effect. Specifically, except as
described in Schedule
2.10, since December 31, 2008, Seller has
not: (a) incurred any material Liabilities (including
liabilities as guarantor or otherwise with respect to the obligations of others)
of the Business, other than in the ordinary course of business;
(b) subjected to or permitted an Lien upon or otherwise encumbered any of
the Purchased Assets; (c) sold, transferred, licensed or leased any of the
Purchased Assets except in the ordinary course of business; (d) suffered
any physical damage, destruction or loss (whether or not covered by insurance)
to the Purchased Assets causing, or which could cause, a Material Adverse
Effect; (e) amended or terminated any Material Contract;
(f) experienced any change in the assets, liabilities, sales, income or
business of Seller or in its relationships with suppliers, customers or lessors,
other than changes which were both in the ordinary course of business and have
not, either in any case or in the aggregate, had, or which could have, a
Material Adverse Effect; (g) acquired or disposed of any asset or property
other than in the ordinary course of business; (h) made any declaration,
setting aside or payment of any distributions in respect of Seller's securities;
(i) made any increase in the compensation, pension or other benefits
payable or to become payable by Seller to any of its officers, directors,
shareholders, or employees, or any bonus payments or arrangements made to or
with any of them (other than pursuant to the terms of any existing written
agreement or plan of which Buyer has been supplied complete and correct copies);
(j) forgiven or cancelled any debt or claim or waived any right of material
value other than compromises of accounts receivable in the ordinary course of
business; (k) entered into any transaction other than in the ordinary
course of business; (l) discharged or satisfied any Lien or made any
payment of any Liability other than (i) current liabilities included in the
Acquisition Balance Sheet and (ii) current liabilities incurred since the
date of the Acquisition Balance Sheet in the ordinary course of business; or
(m) entered into any Contract obligated itself to do any of the
foregoing.
2.11 Material
Contracts.
(a) Schedule 2.11 lists
all of the following to which Seller is a party or by which Seller is bound and
which are currently in effect (including the subsection(s) below to which each
such item is responsive) (each a "Material
Contract"):
(A) Contracts
which involve commitments to make capital expenditures or which provide for the
purchase of goods or services by Seller from any Person under which the
undelivered balance of such goods or services has a purchase price in excess of
$5,000;
(B) Contracts
which provide for the sale of goods or services by Seller and under which the
undelivered balance of such goods or services has a sale price in excess of
$5,000;
(C) Contracts
relating to the borrowing of money by Seller, to the granting by Seller of a
Lien on any of its assets, or any guaranty by Seller of any Indebtedness or
otherwise;
(D) extensions
of credit by Seller except for trade accounts receivable in the ordinary course
of business consistent with past practice;
(E) warranties,
guaranties, or other similar undertakings by Seller;
(F) joint
venture, partnership or similar Contracts involving a sharing of profits,
losses, costs or Liabilities by Seller with any other Person;
(G) Contracts
continuing over a period of more than six months from the date thereof, not
terminable by Seller without penalty upon 30 days' or less notice;
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(H) Contracts
relating to the marketing, sale, advertising or promotion of its products or
services;
(I) non
competition agreements with any Business Employee or Independent Contractor and
employment agreements and consulting agreements with any Business Employee or
Independent Contractor;
(J) Contracts
that restrict or purport to restrict in any respect (including as to manner or
place) the ability of Seller to engage in any line of business or compete with
any Person;
(K) Contracts
that restrict or purport to restrict in any respect the right of Seller to sell
to or purchase from any other Person;
(L) Contracts
pursuant to which Seller is a lessor or a lessee of any property, personal or
real, or holds or operates any tangible personal property owned by another
Person, except for any leases of personal property under which the aggregate
annual rent or lease payments do not exceed $5,000;
(M) Contracts
with respect to Intellectual Property, including Contracts with any Business
Employee or Independent Contractor regarding the appropriation or the
non-disclosure of any Intellectual Property;
(N) Employee
Benefit Plans or Contracts providing for the payment of any cash or other
compensation or benefits upon the consummation of the transactions contemplated
hereby or Contracts relating to loans to any officers, directors or
Affiliates;
(O) collective
bargaining agreements and other Contracts to or with any labor union, employees'
association or other employee representative of a group of
employees;
(P) sales
representative or other Contracts obligating Seller to pay commissions to any
Person;
(Q) Contracts
that grant a currently effective power of attorney to any Person;
(R) Contracts
that contain any provision requiring Seller to indemnify any other party
thereto;
(S) stock
option agreements, warrants and convertible or exchangeable securities for the
purchase or issuance of capital stock of Seller; and
(T) Contracts
restricting the transfer of capital stock of Seller, obligating Seller to issue
or repurchase shares of its capital stock, or relating to the voting of stock or
the election of directors of Seller.
(b) Except as
disclosed on Schedule
2.11(b): (i) no Material Contract has been breached in any
respect or canceled by the other party that has not been duly cured or
reinstated; (ii) Seller is not in receipt of any claim of default under any
Material Contract or other item; and (iii) no event has occurred which with the
passage of time or the giving of notice or both would result in a breach or
default under any such Material Contract. Each Material Contract is
valid, binding and enforceable against Seller, and, to Seller's Knowledge,
against any other Person that is a party thereto. The consummation of
the transactions contemplated by this Agreement will not (and will not give any
Person a right to) terminate or modify any rights of, or accelerate or augment
any obligation of, Seller under any Material Contract.
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(c) Seller
has delivered to Buyer copies of all Material Contracts, together with all
amendments, waivers or other changes thereto.
2.12 Compliance with
Laws. Seller is not in violation of or in default in any
material respect under any foreign or domestic (federal, state or local) law,
statute, treaty, rule, regulation, ordinance, franchise, permit, concession,
license, order, decree, consent decree or similar instrument or determination or
award applicable to it by which any of the Purchased Assets or the Business is
bound or affected (including any labor, environmental, occupational health,
zoning or other law, regulation or ordinance). Except as set forth on
Schedule 2.12,
Seller has not committed, been charged with, or, to Seller's Knowledge, been
under investigation with respect to, nor does there exist, any material
violation of any provision of any federal, state or local law or administrative
regulation in respect of Seller or the Purchased Assets or the
Business.
2.13 Permits, Licenses,
Etc. Schedule 2.13
contains a complete listing of all Government Licenses used by Seller in the
conduct of the Business. Seller owns or possesses all right, title
and interest in and to all of the Government Licenses that are necessary to own
and operate the Business, including those Government Licenses necessary for the
employment of Seller's employees. Seller is in compliance with the
terms and conditions of such Government Licenses and has not received any notice
that it is in violation of any of the terms or conditions of any such Government
Licenses. All of the Government Licenses are currently effective and
valid, and will remain so upon consummation of the transactions contemplated by
this Agreement. To Seller's Knowledge, no event has occurred or
circumstances exist which would currently or upon notice or lapse of time
constitute a default under any of the Government Licenses. To
Seller's Knowledge, there is no threatened suspension, cancellation or
invalidation of any Government License.
2.14 Taxes.
(a) All Tax
Returns required to be filed by or on behalf of Seller, on or before the date
hereof were true, correct and complete as of the date filed, or if amended on or
before the date hereof, were true, correct and complete after giving effect to
such amendment. All such Tax Returns that were required to be filed
were duly and timely filed (taking into account any extension of time to file
granted or obtained) and all Taxes (including, Taxes withheld from employees'
salaries and all other withholding Taxes and obligations and deposits required
to be made by or with respect to Seller) due have been timely paid, or to the
extent not due and payable as of the date hereof, adequate provision for the
payment thereof has been made on the Acquisition Balance Sheet.
(b) No Tax
Return of Seller has been examined by or settled with any tax authority during
the last seven years. During the last seven years, no deficiency,
delinquency or default for any Taxes relating to Seller or its receipts, income,
sales, transactions or other business activities has been claimed, proposed or
assessed against Seller, nor has Seller received notice of any such deficiency,
delinquency or default; and there is no audit, examination, investigation,
claim, assessment, action, suit, or proceeding, pending or proposed by any tax
authority, with respect to any Tax or with respect to any Tax Return of
Seller.
(c) There are
no Liens on the Purchased Assets relating to or attributable to Taxes, other
than for Taxes not yet due and payable. No Governmental Entity has
asserted any claim relating to or attributable to Taxes, which, if adversely
determined, would result in any Lien on the Purchased Assets.
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(d) No
extension or waiver of any statute of limitations has been requested of or
granted by Seller with respect to any Tax for any period. No
extension or waiver of time within which to file any Tax Return has been
requested by or granted to Seller with respect to any Tax Return that has not
been filed. No power of attorney with respect to Taxes has been
executed by Seller or filed with any tax authority with respect to Seller during
the last three years.
(e) No claim
has ever been made by an authority in a jurisdiction where Seller does not file
Tax Returns that Seller is or may be subject to taxation by that
jurisdiction.
(f) Seller is
not a party to, bound by, or obligated under any tax sharing or allocation
agreements, tax indemnification agreement or similar Contract whether written or
unwritten.
(g) Except as
set forth in the Acquisition Balance Sheet, Seller has not, in the past 10 years
acquired assets from another corporation in a transaction in which Seller's
U.S. federal income tax basis for the acquired assets was determined, in
whole or in part, by reference to the tax basis of the acquired assets (or any
other property) in the hands of the transferor.
(h) There is
no tax ruling, request for ruling or settlement, compromise, closing or Tax
collection agreement in effect or pending which does or could reasonably be
expected to affect the liability of Seller for Taxes for any period after the
Closing Date.
(i) Seller is
not required to document a transfer pricing methodology in compliance with Code
Section 482 and any related provisions, the Treasury Regulations
thereunder, and any comparable provisions of state, local or foreign Tax
law. Seller has not agreed to, and is not required to include in
income, any adjustment pursuant to Code Section 482 (or similar provision
of other law or regulations), nor has any Tax authority proposed, or is any Tax
authority considering, such adjustment.
(j) Seller
has never been a member of any affiliated group filing a consolidated federal
Tax Return, or incurred any liability for the Taxes of any Person under Treasury
Regulation Section 1.1502–6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by Contract, or
otherwise.
(k) Seller is
not and has never been required to make a basis reduction pursuant to Treasury
Regulation Sections 1.1502-20(b) or
Section 1.337(d)-2(b).
(l) At no
time during the five-year period ending on the date hereof was Seller a
"distributing corporation" or "controlled corporation" within the meaning of
Code Section 355(a)(1)(A) in any distribution intended to qualify under
Code Section 355.
(m) Seller
has no interest in and is not subject to any joint venture, partnership, or
other Contract which is treated as a partnership for U.S. federal Tax
purposes.
(n) Seller is
not successor to any other Person by way of merger, reorganization or similar
transaction.
(o) Seller
has not made any payments, is not obligated to make any payment(s), and is not a
party to any agreement that could obligate Seller to make any
payment(s) that would not be deductible under either Code
Sections 280G or 162(m).
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(p) No
property owned by Seller is treated as "tax-exempt use property" within the
meaning of Code Section 168(h).
(q) Seller
has disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662.
(r) Seller
has not been a party to a transaction that constitutes a "reportable
transaction" within the meaning of Treasury Regulation
Section 1.6011-4(b) (or a similar provision of state
law).
(s) Seller
does not have and has never had any obligation to register a tax shelter under
Code Section 6111 or to file any disclosure or maintain any list pursuant
to Code Section 6112 and regulations promulgated thereunder.
(t) Seller
has previously provided Buyer with the following information with respect to
Seller as of the most recent practicable date: each state, county, local
municipal, domestic or foreign jurisdiction in which Seller (i) files, or
is or has been required to file, a Tax Return relating to Taxes of any kind,
(ii) is required to register for Tax purposes, (iii) is or has been
liable for any Taxes on a "nexus" basis at any time, (iv) is qualified to
do business, (v) owns or regularly uses property, (vi) has any
employee or in which any employee of Seller is regularly present, or
(vii) has any agent, representative or distributor.
2.15 Brokers. Except
as set forth on Schedule 2.15, there
are no claims or rights to brokerage commissions, finders fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any Contract made or alleged to have been made by or on behalf of
Seller or any of its Affiliates, officers, employees or
directors. All fees and expenses related to the items set forth on
Schedule 2.15
will be paid by Seller at or prior to the Closing, and neither Buyer nor any of
its Affiliates shall have any liability of any kind with respect
thereto.
2.16 Purchased
Assets.
(a) The
Purchased Assets represent all of the assets currently used in the conduct of
the Business in the ordinary course.
(b) The
Purchased Assets and the assets presently owned, leased, or licensed by Seller
are reasonably sufficient in all material respects for the conduct of the
Business as presently conducted and as the Business is intended to be conducted
for the next 12 months. Except as set forth on Schedule 2.16(b),
Seller does not own any material assets which are used in or have been used in
the Business that are not included in the Purchased Assets.
(c) Seller
has good title to, a valid leasehold interest in, or valid rights to use, all
the Purchased Assets free and clear of all Liens other than Permitted
Liens.
(d) The
Purchased Assets taken as a whole are sufficient in all material respects for
the purposes for which they are used by Seller in the ordinary course of the
Business.
(e) Seller
has the full right to contribute, convey, transfer, assign and deliver the
Purchased Assets without the need to obtain the consent or approval of or pay
any consideration to any Person.
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(f) At and as
of the Closing, Seller will convey the Purchased Assets to Buyer in the manner
set forth on Schedule
1.1, by bills of sale, certificates of title and other instruments of
assignment and transfer effective in each case to vest in Buyer, and Buyer will
have, good and valid record and marketable title to all of the Purchased Assets,
free and clear of all Liens other than Permitted Liens.
2.17 Suppliers. Schedule 2.17 hereto
sets forth the top 10 suppliers of Seller, based upon dollar volume as of
the date hereof, listed in order of the dollar amount of purchases, for each of
the 2007 and 2008 fiscal years and for the first two months of the 2009 fiscal
year. To Seller's Knowledge, the relationships of Seller with such
suppliers are good commercial working relationships. Except as set
forth on Schedule
2.17, no supplier of material importance to the Business or Seller has
cancelled or otherwise terminated, or, to Seller's Knowledge, threatened to
cancel or otherwise to terminate, its relationship with Seller or has during the
last 12 months decreased materially, or, to Seller's Knowledge, threatened to
decrease or limit materially, its services or materials for use in the
Business. To Seller's Knowledge, no such supplier intends to cancel
or otherwise substantially modify its relationship with Seller or to decrease
materially or limit its services, supplies or materials to Seller.
2.18 Title to
Properties.
(a) Owned Real
Property. Seller does not now own nor in the past owned any
real property.
(b) Leased Real
Property. Schedule 2.18(b) sets
forth the address of each parcel of real property leased by Seller or used by
Seller in connection with the Business (the "Real Property") and a list of
all leases of Seller (including all amendments, extensions, renewals, guaranties
and other Contracts with respect thereto) for each parcel of Real Property
(collectively, the "Leases"). With
respect to each of the Leases: (i) such Lease is legal, valid, binding and
enforceable against Seller and the applicable lessor and is in full force and
effect and has not been modified and Seller holds good, valid and marketable
leasehold title to each parcel of Real Property that is the subject of such
Lease free and clear of all Liens, except for Liens that have been placed by the
applicable lessor on any parcel of Real Property and for which Seller has
subordination and non disturbance or similar agreements relating thereto; (ii)
neither Seller nor, to Seller's Knowledge, any other party to the Lease is in
breach or default under such Lease, and no event has occurred or circumstance
exists which, with the delivery of notice, passage of time or both, would
constitute such a breach or default or permit the termination or modification of
such Lease or the acceleration of rent under such Lease; (iii) no security
deposit or portion thereof deposited with respect to such Lease has been applied
in respect of a breach of or default under such Lease that has not been
redeposited in full; (iv) Seller does not owe and will not owe in the future any
brokerage commissions or finder's fees with respect to such Lease; (v) all rents
and additional rents due as of the Closing Date have been paid; (vi) Seller has
been (and continues to be) in peaceable possession since the commencement of the
term of the Lease; (vii) no waiver, indulgence, or postponement of Seller's
obligations under the Lease has been granted by the lessor, and no waiver,
indulgence or postponement of the lessor's obligations under the Lease has been
granted by Seller; (viii) Seller has provided to Buyer a true, correct and
complete copy of such Lease; and (ix) Seller has not assigned, subleased or
otherwise granted to any Person the right to use or occupy the Real Property
that is the subject of such Lease or any portion thereof.
(c) Seller
has obtained all consents and other permissions related to the transactions
contemplated herein and required under any agreements related to all or any
portion of the Real Property. Such transactions will not result in a
breach of or default under any Lease or other such agreement with respect to all
or any portion of the Real Property, or otherwise cause any Lease or other such
agreement to cease to be legal, valid, binding, enforceable and in full force
and effect on identical terms following the Closing.
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(d) The Real
Property comprises all of the real property used or intended to be used in the
Business. Seller is not a party to any agreement or option to
purchase any real property or interest therein.
(e) There are
no pending or, to Seller's Knowledge, contemplated or threatened, condemnation
or eminent domain proceedings against all or any portion of the Real
Property. There are no (i) public improvements which have been
commenced or completed and for which an assessment may be levied against all or
any portion of the Real Property, or (ii) planned public or other improvements
which may result in any assessment against all or any portion of the Real
Property.
(f) Seller
has neither received any notice nor has any Knowledge of any violation of any
zoning, entitlement, building or other land use regulations or of any covenants,
conditions, restrictions, or easements related to all or any portion of the Real
Property. The Real Property is properly and fully zoned for the
operation and use thereof consistent with past practice at the applicable Real
Property and for the operation of the Business.
(g) All
water, storm and sanitary sewage facilities, telephone, gas, electricity, fire
protection and, without limitation, other required utilities have been installed
and are operational and sufficient to permit the operation of the Business after
the Closing Date in the ordinary course consistent with past practice at the
applicable Real Property.
(h) The Real
Property, and each part and portion thereof and improvements thereto, is in good
condition and repair and free from material defects.
(i) Seller
has not received any notice nor has any Knowledge that:
(A) any
government agency or any employee or official thereof considers that the
operation of any of the Real Property consistent with past practice at the
applicable Real Property has failed or will fail to comply with any
laws;
(B) any
investigation has been commenced or is contemplated respecting any such possible
or actual failure of compliance; or
(C) there are
any unsatisfied requests for repairs, restorations or alterations with regard to
any of the Real Property or improvements thereto from any Person, including any
tenant, lender, insurance carrier or Governmental Entity.
(j) There are
no moratoria, initiatives, referenda or similar governmental or
quasi-governmental enactments or policies existing, pending, or to Seller's
Knowledge, threatened or contemplated, which would prohibit, hinder or render
more expensive the operation of the Business at any of the Real Property
consistent with past practices at the applicable Real Property.
(k) There are
no Actions pending, or to Seller's Knowledge, threatened, before or by any
judicial, administrative or union body, any arbiter or any governmental
authority, against or affecting the Real Property (or any portion
thereof).
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(l) Schedule 2.18(l)
lists all leases and other Contracts under which Seller is lessee or lessor of
any asset (other than Real Property), or holds, manages or operates any asset
(other than Real Property) owned by any other Person, or under which any asset
(other than Real Property) owned by Seller is held, operated or managed by a
third party. Seller is the holder of all the leasehold estates
purported to be granted to such entity by the leases set forth on Schedule 2.18(l) and
is the owner of all equipment, machinery and other assets purported to be owned
by Seller thereon, free and clear of all Liens other than Permitted
Liens. Each such lease and other Contract is in full force and effect
and constitutes a legal, valid and binding obligation of, and is legally
enforceable against, Seller and, to Seller's Knowledge, each of the respective
parties thereto (except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights generally and by the
application of general principles of equity) and grants the leasehold estate it
purports to grant free and clear of all Liens other than Permitted
Liens. All necessary governmental approvals required to be obtained
by Seller with respect thereto have been obtained, all necessary filings or
registrations therefor have been made, and to Seller's Knowledge, there have
been no threatened cancellations thereof and are no outstanding disputes
thereunder. Seller has performed all obligations thereunder required
to be performed to date. Seller is not in default in any material
respect under any of the foregoing and to Seller's Knowledge, no other party is
in default in any material respect under any of the foregoing, and there has not
occurred any event which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) could, constitute a default on the
part of Seller, or to Seller's Knowledge, a party thereto other than
Seller.
2.19 Environmental
Matters. Except as set forth in Schedule 2.19, to Seller's
Knowledge:
(a) Seller is
in compliance in all material respects with all applicable Environmental
Laws;
(b) Seller
has obtained and is in material compliance with all permits, licenses and other
authorizations required under applicable Environmental Laws for the Business
and/or the operations of Seller as it is currently operated;
(c) there has
not been a Release at, on, under or from any Real Property during Seller's
period of ownership, lease term or operation on any Real Property, or, to
Seller's Knowledge, prior to Seller's period of ownership, lease term or
operation on any Real Property;
(d) Seller
has not received any notice regarding any violation of, or any Liability
(including any investigatory, corrective or remedial obligation) under, any
Environmental Laws with respect to the past or current operations, properties,
products or facilities of Seller;
(e) Seller's
products comply with all applicable Environmental Laws.
2.20 Product and Warranty
Liability. Schedule 2.20
contains a true, correct and complete description of the product and service
warranties provided by Seller. There have not been any material
deviations from such warranties, and neither Seller nor any of its salespeople,
employees, distributors or agents is authorized to undertake obligations to any
customer or to other third parties in excess of such
warranties. Seller has not made any oral warranty with respect to any
of its products or services. Seller has provided Buyer with a true,
correct and complete schedule of all product warranty claims against Seller
since January 1, 2006. There are no claims pending against Seller
alleging defects in or other claims relating to the performance or
non-performance of the products of Seller, and to Seller's Knowledge, no facts
or circumstances exist that could give rise to such a claim. Except
as set forth on Schedule 2.20, all
third party manufacturers' warranties relevant to the conduct of the Business
are assignable, without requiring the consent of or the payment of any
consideration to any Person.
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2.21 Insurance. Schedule 2.21 sets
forth a list of each insurance policy to which Seller is a party or a named
insured. All of such insurance policies are legal, valid, binding and
enforceable and in full force and effect and will remain so immediately after
the Closing and Seller is not in breach or default with respect to its
obligations under such insurance policies (including with respect to payment of
premiums). Seller has not received any notice or other indication
from any insurer or agent of any intent to cancel or not renew any insurance
policy. Schedule 2.21 sets
forth a list of all claims filed by Seller with its insurers over the past three
years. Seller has timely filed claims with its insurers with respect
to all matters and occurrences for which Seller believes it has
coverage. Seller has not been refused any insurance with respect to
its assets or operations, and Seller's coverage has not been limited by any
insurance carrier with which it has carried insurance.
2.22 No Undisclosed
Liabilities. Seller has no Liabilities except for Liabilities
set forth in the Acquisition Balance Sheet and Liabilities that are not material
that have arisen after the date of the Acquisition Balance Sheet in the ordinary
course of business consistent with past practice
2.23 Affiliate
Transactions. Except as set forth on Schedule 2.23, no
shareholder, officer, director, or Affiliate of Seller (a) is a party to any
Contract with Seller or has any interest in, or has any claim or right against,
any property or asset of Seller or any tangible or intangible property which
Seller is using or the use of which is necessary for the Business as currently
conducted or currently proposed to be conducted, (b) owns or has owned (of
record or as a beneficial owner) an equity interest or any other financial or
profit interest in a Person that has (i) had business dealings or a material
financial interest in any transaction with Seller or (ii) engaged in a business
competing with Seller with respect to any line of the products or services of
such entity in any market; or (c) has any cause of action or other claim
whatsoever against, or owes any amount to, Seller, except for claims in the
ordinary course of business, such as for accrued vacation pay, accrued benefits
under Employee Benefit Plans and similar matters and agreements.
2.24 Indebtedness. Except
for Indebtedness described on Schedule 2.24 hereto, Seller
has no Indebtedness outstanding at the date hereof. Except as
disclosed on Schedule
2.24 hereto, Seller is not in default with respect to any outstanding
Indebtedness or any instrument relating thereto and no such Indebtedness or any
instrument or agreement relating thereto purports to limit the issuance of any
securities by Seller or the operation of the Business. Seller has
furnished to Buyer complete and correct copies of all Contracts (including all
amendments, supplements, waivers and consents) relating to (a) any
Indebtedness of Seller, (b) any conditional sale or other title retention
agreement with respect to any assets used in the Business, (c) any purchase
money mortgage or other agreement securing all or part of the purchase price of
property used in the Business, and (d) any capital leases of any assets
used in the Business or in respect of which Seller is liable as
lessee.
2.25 STATS
Agreement. All Liabilities under, or relating to, the STATS
Agreement have been fully discharged by Seller. Seller has paid and
satisfied in full all amounts due or payable under the STATS
Agreement. The STATS Agreement has been terminated prior to the
Closing and STATS LLC has no claims whatsoever under or relating to the
termination of the STATS Agreement against Seller or Buyer.
2.26 Subsidiaries. Seller
neither has any Subsidiaries nor owns or holds of record and/or beneficially any
shares of any class in the capital of any corporation. Seller owns no
legal and/or beneficial interests in any limited liability companies,
partnerships, business trusts or joint ventures or in any other unincorporated
trade or business enterprises.
2.27 Absence of Certain Business
Practices.
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(a) Neither
Seller nor any predecessor of Seller, nor any of their respective directors,
officers, employees, agents or, to Seller's Knowledge, any other Person
affiliated with or acting for or on the behalf of Seller or of any predecessor
of Seller, has, (i) directly or indirectly, used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds, violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence
payment, kickback or other similar unlawful payment or (ii) agreed to give any
gift or similar benefit to any customer, supplier, governmental employee or
other Person which could subject the Business or Buyer to any damage or penalty
in any civil, criminal or governmental litigation or proceeding.
(b) Seller
has in the conduct of the Business and the ownership and operation of its assets
complied in all material respects with all statutory and regulatory requirements
relating to export controls and trade sanctions under all applicable legal
requirements of each jurisdiction in which Seller conducts the Business or holds
any assets, including, without limitation, the International Traffic in Arms
Regulations, the Export Administration Regulations, and anti-boycott provisions,
regulations administered by the Office of Foreign Assets Control.
(c) Seller
does not maintain or conduct, and has not maintained or conducted, any business,
investment, operation or other activity in the conduct of the Business and the
ownership, operation or use of Seller's assets in or with: (i) any country or
Person targeted by any of the economic sanctions of the United States of America
administered by the United States Treasury Department's Office of Foreign Assets
Control; (ii) any Person appearing on the list of Specially Designated Nationals
and Blocked Persons issued by the United States Treasury Department's Office of
Foreign Assets Control; or (iii) any country or Person designated by the United
States Secretary of the Treasury pursuant to the USA PATRIOT Act as being of
"primary money laundering concern."
2.28 Disclosure. No
representation or warranty by Seller in this Agreement or in any exhibit,
schedule, written statement, certificate or other document delivered
or to be delivered to Buyer pursuant hereto or in connection with the
consummation of the transactions contemplated hereby contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading or necessary in order to provide Buyer with
proper and complete information as to Seller and the identity, value and
usability of the Purchased Assets. There is no fact relating to the
Business, the Purchased Assets or Seller which may materially adversely affect
the same and which has not been disclosed to Buyer in writing.
2.29 Investment
Representations.
(a) No Representations.
Seller confirms that neither Buyer nor any of its authorized agents has made any
representation or warranty to Seller about Buyer or the Securities other than
those set forth in this Agreement, and that Seller has not relied upon any other
representation or warranty, express or implied, in connection with the
transactions contemplated by this Agreement.
(b) Investment
Representations. Seller represents, warrants and covenants to Buyer that
Seller is acquiring the Securities for its own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities Act.
Seller is either (i) an "accredited investor(s)" as such term is defined in Rule
501(a) under the Securities Act, or (ii) has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of acquiring the Securities.
(c) Investment Risks.
Seller acknowledges and is aware that: (i) there are substantial restrictions on
the transferability of the Securities, (ii) the Securities will not be, and
Seller does not have the right to require that the Securities be, registered
under the Securities Act; (iii) the certificates representing the Securities
shall bear a legend similar to the legend set out below and (iv) such legend
shall not be removed from any such certificates unless either (A) such
Securities are sold under an effective registration statement under the
Securities Act, or (B) Seller delivers to Buyer a written opinion of counsel, in
form and substance reasonably satisfactory to Buyer, that no such registration
is required and that the transfer will not otherwise violate the Securities Act,
the Securities Exchange Act of 1934, or applicable state securities
laws.
-24-
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") UNDER
▇▇▇▇▇▇▇ ▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), IN RELIANCE UPON ONE OR MORE EXEMPTIONS FROM REGISTRATION OR
QUALIFICATION AFFORDED BY THE SECURITIES ACT AND/OR RULES PROMULGATED BY THE
COMMISSION PURSUANT THERETO. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
ALSO NOT BEEN REGISTERED OR QUALIFIED (AS THE CASE MAY BE) UNDER THE SECURITIES
LAWS OF ANY ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ (THE "BLUE SKY LAWS"), IN
RELIANCE UPON ONE OR MORE EXEMPTIONS FROM REGISTRATION OR QUALIFICATION (AS THE
CASE MAY BE) AFFORDED UNDER SUCH SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR THE HOLDER'S OWN ACCOUNT FOR INVESTMENT PURPOSES ONLY AND NOT WITH
A VIEW FOR RESALE OR DISTRIBUTION.
(d) Opportunity to Ask
Questions. During the course of the transaction contemplated by this
Agreement, and before acquiring the Securities, Seller has had the opportunity
(i) to be provided with financial and other written information about Buyer
included in all documents Buyer has publicly filed with the Securities and
Exchange Commission, and (ii) to ask questions and receive answers concerning
the business of Buyer and its finances. Seller has, to the extent it has availed
itself of this opportunity, received satisfactory information and
answers.
(e) Sophistication.
Seller represents that by reason of its business or financial experience or the
business or financial experience of Seller's professional advisors who are
unaffiliated with and who are not compensated by Buyer or any Affiliate or
selling agent of Buyer, directly or indirectly, Seller has the capacity to
protect its own interests in connection with the transactions contemplated by
this Agreement.
(f) Reliance by
Buyer. Seller understands that the foregoing representations
and warranties are to be relied upon by Buyer as a basis for exemption of the
sale of the Securities under the Securities Act and under the securities laws of
all applicable states and for other purposes.
ARTICLE
III
REPRESENTATIONS AND
WARRANTIES OF BUYER
As of the
Closing Date, Buyer represents and warrants to Seller as follows:
3.1 Organization and
Qualification. Buyer is an entity duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to perform its obligations under
this Agreement.
3.2 Authorization. The
execution, delivery and performance by Buyer of this Agreement and each other
Transaction Document to which it is a party and each of the transactions
contemplated hereby or thereby have been duly and validly authorized by Buyer,
and no other corporate act or proceeding on the part of Buyer, its board of
directors or its shareholders is necessary to authorize the execution, delivery
or performance by Buyer of this Agreement or any Transaction Document to which
it is a party or the consummation of any of the transactions contemplated hereby
or thereby. This Agreement has been duly executed and delivered by
Buyer and this Agreement constitutes, and the Transaction Documents upon
execution and delivery by Buyer, will each constitute, a valid and binding
obligation of Buyer, enforceable against Buyer in accordance with their
respective terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect, relating to or limiting creditors' rights generally and
(ii) general principles of equity (whether considered in an action in equity or
at law).
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3.3 No
Conflict. The execution, delivery and performance by Buyer of
this Agreement and the Transaction Documents to which it is a party and the
consummation of each of the transactions contemplated hereby or thereby will not
(i) violate or conflict with the certificate of incorporation, bylaws or other
organizational documents of Buyer, (ii) violate, conflict with, result in any
material breach of, constitute a default under, result in the termination of,
result in the acceleration of any obligations under, result in a material change
in terms of, create in any party the right to accelerate, terminate, modify or
cancel, or require any consent or notice under, or create an event that, with
the giving of notice or the lapse of time, or both, would be a default under or
material breach of, any (A) Contract to which Buyer is a party or by which it is
bound or affected or to which any of its assets is bound or affected; or (B)
judgment, order, writ, injunction, decree or demand of any Governmental Entity
which materially affects the ability of Buyer to perform its obligations under
this Agreement; (iii) result in the creation or imposition of any Lien upon any
assets or any of the equity of Buyer, or which affects the ability to conduct
its business as conducted prior to the date of this Agreement or perform its
obligations under this Agreement; (iv) require any declaration, filing or
registration with, or authorization, consent or approval of, exemption or other
action by or notice to, any Governmental Entity or other Person under the
provisions of any law, statute, rule, regulation, judgment, order or decree or
any Contract to which Buyer is subject, or by which Buyer is bound or affected
or by which Buyer or any of its assets are bound or affected.
3.4 Legal
Proceedings. There is no action, claim suit or proceeding
pending or, to the Knowledge of Buyer, threatened, by or against or Buyer that
challenges, or may have the effect of preventing, delaying, making illegal or
otherwise interfering with the execution and delivery by Buyer of this Agreement
or any of the Transaction Documents to which it is a party or the performance of
Buyer hereunder or thereunder.
3.5 Brokers. There
are no claims or rights to brokerage commissions, finders fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any Contract made or alleged to have been made by or on behalf of Buyer
or any of its Affiliates, officers, employees or directors.
ARTICLE
IV
COVENANTS
4.1 Employee
Matters.
(a) No Rights Conferred Upon
Employees. The parties hereby acknowledge that, other than the
Transferred Employees, Buyer is under no obligation to employ any current or
future employee of Seller. Except as specifically set forth in the
Offer Letters, Buyer shall be under no obligation to (i) continue the
employment of any Transferred Employee after the Closing Date, and nothing in
this Agreement shall confer any rights or remedies under this Agreement on any
such Transferred Employee or (ii) continue any Transferred Employee's coverage under any
Employee Benefit Plan.
-26-
(b) COBRA Continuation
Coverage. On and after the Closing Date, Seller shall be
responsible for (i) complying with all notice requirements of COBRA, and (ii)
providing COBRA continuation coverage to all "M&A qualified beneficiaries,"
as that term is defined by Treasury Regulations §54.4980B-9, Q&A-4, with
respect to the transactions contemplated by this Agreement for at least the
maximum period that continuation coverage may be available to the M&A
qualified beneficiaries (including any second qualifying events experienced by
the M&A qualified beneficiaries) under COBRA.
4.2 Filing of Tax Returns;
Allocation of Straddle Period Taxes; Cooperation.
(a) Subject
to Sections 4.2(b) and 4.2(c), Seller shall be responsible for the preparation
and filing of all Tax Returns of Seller (including Tax Returns required to be
filed after the Closing Date) to the extent such Tax Returns include or relate
to Seller's operation of the Business or Seller's use or ownership of the
Purchased Assets on or prior to the Closing Date. Seller's Tax
Returns, to the extent they relate to the Business or the Purchased Assets,
shall, in all material respects, be true, complete and correct and prepared in
accordance with applicable law. Seller will be responsible for and
make all payments of Taxes shown to be due on such Tax Returns.
(b) Buyer
will be responsible for the preparation and filing of all Tax Returns it is
required to file with respect to (i) Buyer's ownership or use of the
Purchased Assets or (ii) the operation of the Business attributable to
taxable periods (or portions thereof) commencing after the Closing
Date. Buyer's Tax Returns, to the extent they relate to the Purchased
Assets or the Business, shall be true, complete and correct and prepared in
accordance with applicable law in all material respects. Buyer will
make all payments of Taxes shown to be due on such Tax Returns.
(c) Buyer
will be responsible for the preparation and filing of all Tax Returns (other
than income Tax Returns), if any, required to filed with respect to the Business
or the Purchased Assets for which Taxes are reported on a Tax Return covering a
period commencing before and ending after the Closing Date (a "Straddle
Period"). Unless otherwise required by applicable law, each
such Tax Return shall be prepared in a manner consistent with past accounting
methods and practices of Seller. Seller shall promptly pay to Buyer
the portion of any Tax liability attributable to the portion of the Straddle
Period ending on the Closing Date, as determined in accordance with Section
4.2(d).
(d) For
purposes of apportioning liability for Taxes in connection with any Straddle
Period (i) in the case of Taxes based upon or related to receipts or
employee payroll amounts, the amount of any such Taxes allocable to the portion
of the taxable period ending on the Closing Date shall be determined based on an
interim closing of the books as of the close of business on the Closing Date;
and (ii) in the case of Taxes other than Taxes described in
clause (i), the amount of such Taxes allocable to the portion of the
taxable period ending on the Closing Date shall be the product of (A) the
amount of such Taxes for the entire period and (B) a fraction the numerator
of which is the number of calendar days in the period ending with the Closing
Date and the denominator of which is the number of calendar days in the entire
Straddle Period.
(e) To the
extent relevant to the Business or the Purchased Assets, each party shall
(i) provide the other with such assistance as may reasonably be required in
connection with the preparation of any Tax Return and the conduct of any audit
or other examination by any taxing authority or in connection with judicial or
administrative proceedings relating to any liability for Taxes and
(ii) retain and provide the other with all records or other information
that may be relevant to the preparation of any Tax Return, or the conduct of any
audit or examination, or other proceeding relating to Taxes.
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4.3 Cooperation With
Intellectual Property Assignments. Seller agrees to execute
and deliver at the request of Buyer, all documents, instruments and assignments
reasonably requested by Buyer, and to perform any other reasonable acts Buyer
may require in order to vest all of right, title, and interest in and
to the Seller IP Rights in Buyer or to provide evidence to support any of the
foregoing in the event such evidence is reasonably deemed necessary by Buyer to
the extent such evidence is in the possession or control of Seller.
4.4 Confidentiality. Seller
acknowledges and agrees to continue to abide by the terms and conditions of the
Confidentiality Agreement. Notwithstanding the foregoing or anything
to the contrary in the Confidentiality Agreement, Seller agrees not to divulge
or disclose or use for its benefit or purposes at any time after the Closing any
information with respect to the Purchased Assets, Buyer or the Business, unless
such information has already become public (without violation of this
Agreement). The information intended to be protected hereby shall
include financial information, customers, sales representatives, and anything
else having an economic or pecuniary benefit to Buyer or Seller.
4.5 Use of
Name. Buyer is purchasing all of Seller's rights to the
business names of Seller, and therefore Seller shall not be entitled to use the
name "iSports", variations thereof, or any confusingly similar name as corporate
or business names or titles anywhere in the world from and after the
Closing. Seller shall, promptly following with the Closing, undertake
and promptly pursue all necessary action to change its business and corporate
names to new names bearing no resemblance or confusing similarity to any of
its pre-Closing names, so as to permit the use of such pre-Closing names by
Buyer and its Affiliates. Buyer agrees to pay the filing fees with
the State of California associated with this name change.
4.6 Payment of the Closing
Purchase Price and Earnout Consideration. Seller shall be
solely responsible for further distributing the Closing Purchase Price and the
Earnout Consideration, if any, when and if received by Seller from Buyer, to
those Persons entitled to any portion of the Closing Purchase Price and the
Earnout Consideration.
4.7 Transfer
Restrictions. Seller acknowledges and agrees that the Securities may only
be disposed of in compliance with state and federal securities
laws. Without in any way limiting the representations set forth in
Section 2.29, Seller further agrees not to Transfer all or any portion of the
Securities, unless and until:
(a) there is
then in effect a registration statement under the Securities Act covering such
proposed Transfer and such Transfer is made in accordance with such registration
statement; or
(b) Seller
shall have notified Buyer of the proposed Transfer and shall have furnished
Buyer with a statement of the circumstances surrounding the proposed Transfer,
and, at the expense of Seller or the transferee, with an opinion of counsel,
reasonably satisfactory to Buyer, that such Transfer will not require
registration of such securities under the Securities Act and that such Transfer
is in compliance with applicable state securities laws.
Notwithstanding
the provisions of Sections 4.7(a) and 4.7(b), no such registration statement or
opinion of counsel shall be required for any Transfer of any Securities in
compliance with Rule 144 promulgated under the Securities Act, except in unusual
circumstances.
4.8 Piggyback Registration
Rights.
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(a) If at any
time or from time to time Buyer shall determine to register any of its
securities, either for its own account or the account of a security holder or
holders, other than (1) a registration relating solely to employee benefit plans
on Form S-8 (or any successor form) or (2) a registration relating on Form S-4
(or any successor form), Buyer will:
(A) promptly
give to Seller written notice thereof, and
(B) include
in such registration (and any related qualification under blue sky laws or other
compliance), and in any underwriting involved therein, all the Closing Shares
and the shares of Buyer's common stock issuable upon exercise of the $0.30
Warrant and the $0.50 Warrant (collectively, the "Registrable Shares") specified in a
written request or requests, made within 10 days after delivery of such written
notice from Buyer.
(b) If the
registration for which Buyer gives notice is for a registered public offering
involving an underwriting, Buyer shall so advise Seller as a part of the written
notice described above. Seller shall (together with Buyer) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by Buyer.
(A) If the
managing underwriter determines in good faith that marketing factors (including
pricing) require a limitation of the number of shares to be underwritten, the
underwriter may exclude some or all of the Registrable Shares from such
registration and underwriting. Buyer shall so advise Seller, and the
number of Registrable Shares to be included in such registration shall be
allocated as follows: first, for the account of Buyer, all shares of Common
Stock proposed to be sold by Buyer; second, for the account of Seller, the
number of Registrable Shares requested to be included in the registration up to
the amount of the limitation imposed by the managing underwriter; and third, for
the account of any other investor that has been granted registration rights with
respect to the Common Stock on the terms and conditions of any agreement
pertaining to such registration rights.
(B) If Seller
disapproves of the terms of any such underwriting, Seller may elect to withdraw
by written notice to Buyer and the managing underwriter. Any Registrable Shares
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
(C) Buyer
shall have the right to terminate or withdraw any registration initiated by it
prior to the effectiveness of such registration, whether or not Seller has
elected to include any or all of the Registrable Shares in such
registration.
(c) All
expenses incurred in connection with any registration, qualification, or
compliance pursuant to this Section 4.8 shall be borne by Buyer. All
selling expenses relating to the Registrable Shares shall be borne by
Seller.
(d) The
registration rights set forth in this Section 4.8 shall expire at such time as
the Registrable Shares may be immediately sold to the public without
registration or restriction (including without limitation as to volume) under
the Securities Act, including pursuant to Rule 144.
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ARTICLE
V
CLOSING CONDITIONS AND
DELIVERABLES
5.1 Conditions Precedent to
Buyer's Obligations. The obligation of Buyer to consummate the
Closing shall be subject to the satisfaction at or prior to the Closing of each
of the following conditions (to the extent noncompliance is not waived in
writing by Buyer):
(a) Buyer
shall have received a ▇▇▇▇ of sale (the "▇▇▇▇ of Sale") and an
assignment, assumption, and general conveyance (the "Assignment and Assumption
Agreement"), duly executed by Seller in favor of Buyer for transfer of
the Purchased Assets in substantially the forms attached hereto as Exhibits B and C,
dated as of the Closing Date;
(b) Buyer
shall have received an assignment from Seller of all right, title and interest
of Seller in all the Seller IP Rights (the "Seller IP Assignment"), duly
executed by Seller in favor of Buyer as described in Schedule 1.1, in
substantially the form attached hereto as Exhibit D, dated
as of the Closing Date;
(c) Buyer
shall have received the employment offer letters, in form and substance
acceptable to Buyer (collectively, the "Offer Letters"), between Buyer
and each of ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, respectively (collectively,
the "Transferred
Employees"), duly executed by each of the Transferred Employees, dated as
of the Closing Date.
(d) Buyer
shall have received the non-competition agreements in the form attached hereto
as Exhibit E
(the "Non-Competition
Agreements"), between Buyer and each of the Transferred Employees duly
executed by each of the Transferred Employees, dated as of the Closing
Date.
(e) Seller
shall prepare and deliver to Buyer a certificate (the "Certificate of Indebtedness")
certifying as to the amount of Indebtedness of Seller outstanding on the Closing
Date, and specifying the amount owed to each creditor listed thereon.
(f) Buyer
shall have received the Payoff Letters, providing for terminations of any and
all Liens in, and releases of any and all Liens and Indebtedness on, the
Purchased Assets, including, but not limited to, UCC termination statements from
the secured creditors of Seller;
(g) Buyer
shall have received certificates of corporate good standing as of the most
recent practicable date from Secretary of State where Seller is incorporated or
qualified to do business;
(h) All
filings, authorizations and approvals and consents necessary to consummate the
transactions contemplated by this Agreement shall have been made with or
obtained from all applicable Governmental Entities and other Persons, as the
case may be;
(i) Buyer
shall have received: (i) evidence of the change in Seller's corporate name to
one not using the word "iSports" or any derivation or variation thereof, and
(ii) all required consents from Seller related to Buyer's use of Seller's
name on the Closing Date and thereafter, in the state of its incorporation and
all other states wherein it is qualified to do business as a foreign corporation
or has business nexus;
(j) Buyer
shall have received evidence to Buyer's satisfaction that all third party
inventor assignments with respect to the Seller IP Rights have been properly
executed in favor of Seller;
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(k) Buyer
shall have received a certificate duly executed by a duly authorized officer of
Seller, in form and substance reasonably satisfactory to Buyer, certifying that
Seller has secured all necessary corporate and other approvals authorizing the
execution, delivery and performance by Seller of this Agreement and the
transactions contemplated hereby;
(l) Buyer
shall have received approval from NYSE Amex for the additional listing of shares
of Common Stock with respect to the Closing Shares and the shares of Common
Stock issuable upon exercise of the $0.30 Warrant and the $0.50
Warrant;
(m) Seller
shall have terminated the STATS Agreement to the satisfaction of Buyer in its
sole discretion;
(n) Seller
shall have received approval of this Agreement and the transactions contemplated
hereby from holders of at least 90% of the outstanding shares of Seller's common
stock and preferred stock, voting separately; and
(o) Seller
shall have amended its Articles of Incorporation in form and substance
acceptable to Buyer.
Any
agreement or document to be delivered to Buyer pursuant to this Section 5.1, the
form of which is not attached to this Agreement as an exhibit, shall be in form
and substance reasonably satisfactory to Buyer.
5.2 Conditions Precedent to
Seller's Obligations. The obligation of Seller to consummate
the Closing shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions (to the extent noncompliance is not waived in
writing by Seller):
(a) Seller
shall have received the Assignment and Assumption Agreements duly executed by
Buyer, dated as of the Closing Date;
(b) Seller
shall have received the Seller IP Assignment duly executed by Buyer, dated as of
the Closing Date;
(c) Seller
shall have received a certificate duly executed by a duly authorized officer of
Buyer, in form and substance reasonably satisfactory to Seller, certifying that
Buyer has secured all necessary corporate and other approvals authorizing the
execution, delivery and performance by Buyer of this Agreement and the
transactions contemplated hereby; and
(d) Buyer
shall have delivered to Seller each of the $0.30 Warrant and $0.50 Warrant in
accordance with Section 5.2(d) and shall have delivered the Closing Shares into
the Holdback Account.
Any
agreement or document to be delivered to Seller pursuant to this Section 5.2,
the form of which is not attached to this Agreement as an exhibit, shall be in
form and substance reasonably satisfactory to Seller.
ARTICLE
VI
INDEMNIFICATION
6.1 Survival of Representations
and Warranties and Covenants.
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(a) The
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement and the closing and the consummation of
the transactions contemplated hereby (and any examination or investigation by or
on behalf of any party hereto) for a period of 24 months from the Closing Date
(the "Cut-Off
Date"). Notwithstanding the foregoing, (i) any obligation
in respect of a claim for indemnity as a result of a breach of any
representation or warranty of any party that is asserted in writing with
reasonable specificity as to the nature and, if then reasonably determinable,
amount of the claim prior to the Cut-Off Date, the IP Claim Date or the
applicable Statute of Limitations Date, in each case as applicable, shall
survive past such date until finally resolved or settled, (ii) any
obligation in respect of a claim by a party for indemnity as a result of a
breach of a representation or warranty arising or resulting from a breach of
Section 2.6 (the "IP
Claim") shall survive for a period of 36 months from the Closing Date
(the "IP Claim Date");
(iii) any obligation in respect of a claim by a party for indemnity as a
result of a breach of a representation or warranty arising or resulting from a
breach of Sections 2.8, 2.14 or 2.18(c) shall survive until the expiration of
the applicable statute of limitations (collectively, the "Statute of Limitation Claims"
and each such date, the applicable "Statute of Limitations Date");
and (iv) any obligation in respect of a claim by a party for indemnity as a
result of a breach of Sections 2.16 ("Purchased Assets"), 2.25 ("License
Agreement"), or 2.27 ("Absence of Certain Business Practices"), a breach of a
covenant contained in ARTICLE IV, except as otherwise provided in Section 4.5, a
claim arising or resulting from fraud or willful misrepresentation on the part
of the other party, or a claim with respect to the Excluded Assets or Excluded
Liabilities shall survive indefinitely (collectively, the "Indefinite
Claims").
(b) No Action
may be commenced with respect to any representation or warranty, or covenant
hereunder, or in any writing delivered pursuant hereto, unless written notice,
setting forth in reasonable detail the claimed breach thereof, shall be
delivered pursuant to Section 7.6 to the party or parties against whom liability
for the claimed breach is charged on or before the termination of the survival
period specified in Section 6.1(a) for such representation, warranty, covenant
or agreement; provided, that the
foregoing shall not apply to an Action related to any Indefinite
Claim.
6.2 Indemnification by
Seller. Subject to the provisions of this ARTICLE VI,
Seller covenants and agrees to defend, indemnify and hold harmless Buyer and
each of its directors, officers, Affiliates, successors, assigns and agents from
and against and with respect to any Damages directly or indirectly, relating to,
resulting from or arising out of (i) any inaccuracy in or breach of any
representation or warranty in ARTICLE II, (ii) the failure of Seller to
perform or observe any covenant, agreement or provision to be performed or
observed pursuant to this Agreement, (iii) the operation of the Business before
the Closing Date or any claims, actions or litigation concerning the same, or
(iv) any Excluded Assets or Excluded Liabilities.
6.3 Indemnification by
Buyer. Buyer covenants and agrees to defend, indemnify and
hold harmless Seller and its directors, officers, affiliates, successors,
assigns and agents, as applicable, from and against any and all Damages arising
out of or resulting from (i) any inaccuracy in or breach of any
representation or warranty in ARTICLE III, (ii) the failure of Buyer to
perform or observe any covenant, agreement or provision to be performed or
observed pursuant to this Agreement, or (iii) the operation of the Business
after the Closing Date for periods after the Closing Date or any claims, actions
or litigation concerning the same.
6.4 Direct
Claims.
(a) In order
to seek indemnification under this ARTICLE VI (other than with respect to Third
Party Claims), a party entitled to indemnification under Section 6.2 or Section
6.3 (an "Indemnified
Party") shall deliver a written demand (an "Indemnification Demand") to
Seller (in the case of Indemnification Demands from Buyer) or Buyer (in the case
of Indemnification Demands from Seller) which contains (i) a description of and
if reasonably determinable at the time such demand is delivered, the amount (the
"Asserted Damages
Amount") of any Damages incurred or reasonably expected to be incurred by
the Indemnified Party, (ii) a statement that the Indemnified Party may be
entitled to indemnification under this ARTICLE VI for such Damages and a
reasonable explanation of the basis therefor, and (iii) a demand for
indemnification hereunder and payment of all such Damages.
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(b) Within 30
days after delivery of an Indemnification Demand to Seller or Buyer (as the case
may be), such party shall deliver to the other of such parties a written
response (the "Response") in which the party
providing the Response shall either: (i) agree that the Indemnified Party is
entitled to receive all of the Asserted Damages Amount, if any (in which case,
if the Indemnified Party is (A) Buyer, then Buyer shall be entitled to retain as
an offset, without any further action by Seller, a portion (up to all) of the
Closing Shares or the Earnout Consideration equal to such Asserted Damages
Amount in satisfaction thereof, and such offset shall be deemed to occur
automatically such as to reduce the Closing Shares otherwise deliverable to
Seller upon the expiration of the Holdback Period (and any extended period
required to resolve any timely made claims for indemnification) or the Earnout
Consideration, if any, and Seller shall, in accordance with a payment method
reasonably acceptable to Buyer, pay to Buyer cash equal to any remainder of such
Asserted Damages Amount not offset from the Closing Shares or the Earnout
Consideration, if any, or (B) Seller, then Buyer shall, in accordance with a
payment method reasonably acceptable to Seller, pay to Seller cash equal to the
amount of such Asserted Damages (in either case, subject to the limitations of
Section 6.6)); (ii) agree that the Indemnified Party is entitled to receive
part, but not all, of the Damages related to such Indemnification Demand (such
portion, the "Agreed
Portion") (in which case, if the Indemnified Party is (A) Buyer, then
Buyer shall be entitled to retain as an offset, without any further action by
Seller, a portion (up to all) of the Closing Shares or the Earnout Consideration
equal to such Asserted Damages Amount in satisfaction thereof, and such offset
shall be deemed to occur automatically such as to reduce the Closing Shares
otherwise deliverable to Seller upon the expiration of the Holdback Period (and
any extended period required to resolve any timely made claims for
indemnification) or the Earnout Consideration, if any, and Seller shall, in
accordance with a payment method reasonably acceptable to Buyer, pay to Buyer
cash equal to any remainder of such Agreed Portion not offset from the Closing
Shares or the Earnout Consideration, if any, or (B) Seller, then Buyer shall, in
accordance with a payment method reasonably acceptable to Seller, pay to Seller
cash equal to the amount of such Agreed Portion (in either case, subject to the
limitations of Section 6.6)); or (iii) dispute that the Indemnified Party is
entitled to receive any of the Asserted Damages Amount.
(c) In the
event that the party providing a Response shall (i) dispute that the Indemnified
Party is entitled to receive any of the Damages related to such Indemnification
Demand, or (ii) agree that the Indemnified Party is entitled to only the Agreed
Portion of the Damages related to such Indemnification Demand, Buyer and Seller
shall attempt in good faith to agree upon the rights of the respective parties
with respect to each of the indemnification claims that comprise the Damages
related to such Indemnification Demand (or the portion of the Damages related to
such Indemnification Demand not comprising the Agreed Portion). If
Buyer and Seller should so agree, then the amount of Damages upon which they
agree (as applicable) shall be offset as provided in Section
6.4(b). If no such agreement can be reached after good faith
negotiation within 15 days after delivery of a Response, then, at the request of
either party, the parties will submit the dispute to a mutually acceptable
arbitrator in San Diego County, California designated by the American
Arbitration Association, under its rules for Commercial Arbitration, for binding
and final resolution. The fees and expenses of the arbitration shall
be paid jointly, one-half by Buyer, on the one hand, and one-half by Seller, on
the other hand.
6.5 Third Party
Claims.
(a) If an
Indemnified Party receives notice of the assertion by any Person (other than a
party hereto) of any claim or of the commencement by any such Person of any
Action (a "Third Party
Claim") with respect to which an Indemnifying Party is or may be
obligated to provide indemnification, the Indemnified Party shall promptly
notify the Indemnifying Party in writing of the Third Party Claim (the "Third Party Claim Notice"); provided, however, that the
failure to provide such notice shall not relieve or otherwise affect the
obligation of the Indemnifying Party to provide indemnification hereunder,
except to the extent that such failure or delay materially prejudices the
defense thereof.
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(b) The
Indemnifying Party shall be entitled to participate in the defense of a Third
Party Claim after receipt of a Third Party Claim Notice. Within 30
days after receipt of a Third Party Claim Notice, the Indemnifying Party may
assume the defense of the Third Party Claim subject of such Third Party Claim
Notice, in which case the Indemnifying Party shall have the authority to
negotiate, compromise and settle such Third Party Claim, if and only if all of
the following conditions are satisfied:
(i) the
Indemnifying Party shall have confirmed in writing that it is obligated
hereunder to indemnify the Indemnified Party with respect to such Third Party
Claim;
(ii) the
Indemnified Party shall not have given the Indemnifying Party written notice
that it has determined, in the exercise of its reasonable discretion and in good
faith, that matters of corporate or management policy or a conflict of interest
make separate representation by the Indemnified Party's own counsel advisable;
and
(iii) such
Third Party Claim involves only money damages and does not seek an injunction or
other equitable relief.
The
Indemnified Party shall retain the right to employ its own counsel and to
participate in the defense of any Third Party Claim, the defense of which has
been assumed by the Indemnifying Party pursuant hereto, but the Indemnified
Party shall bear and shall be solely responsible for its own costs and expenses
in connection with such participation unless: (A) the employment of
such counsel has been specifically authorized by the Indemnifying Party in
writing, (B) the Indemnifying Party has failed to assume the defense and employ
counsel in accordance with Section 6.5(b), or (C) the named parties to such
Third Party Claim (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party and the Indemnified Party
reasonably believes that there may be one or more material legal defenses
available to the Indemnified Party that are different from or additional to
those available to the Indemnifying Party (other than differing interests
associated with an Indemnifying Party's obligation to indemnify), in which cases
the fees and expenses of the Indemnified Party's counsel shall be paid by the
Indemnifying Party on a current basis.
(c) Subject
to the foregoing provisions of this Section 6.5, for a period of 20 days after
delivery of a Third Party Claim Notice, the Indemnifying Party shall have the
right to object in a written statement (an "Objection") to the claim made
in the Third Party Claim Notice, and such statement shall have been delivered to
the Indemnified Party prior to the expiration of such 20-day
period. If an Objection has been made, the Indemnifying Party shall
attempt to resolve the dispute with the Indemnified Party in accordance with
this Section 6.5(c). Once an Objection has been made, the
Indemnifying Party and Indemnified Party shall attempt in good faith to agree
upon the rights of the respective parties with respect to the claim or claims
relating to the Third Party Claim Notice. Any such agreement shall be
set forth in a written memorandum signed by both parties. If the
parties cannot come to such agreement within 15 days after receipt by the
Indemnified Party of the Objection, then, at the request of either party, the
parties will submit the dispute to a mutually acceptable arbitrator in San Diego
County, California designated by the American Arbitration Association, under its
rules for Commercial Arbitration, for binding and final resolution. The fees and expenses of
the arbitration shall be paid jointly, one-half by Buyer, on the one hand, and
one-half by Seller, on the other hand.
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6.6 Limitations on
Indemnity. Buyer and Seller are not entitled to indemnity
under this ARTICLE VI except to the extent that the aggregate amount of
indemnifiable Damages incurred by the respective party, in the aggregate,
exceeds Ten Thousand Dollars ($10,000) (the "Threshold Amount"), in which
case the party seeking indemnification may bring a claim for the entire amount
of such Damages from dollar one. The parties agree that they will not
submit any claim for indemnification pursuant to this ARTICLE VI unless and to
the extent that the aggregate amount of all Damages for which indemnity is
claimed exceeds the Threshold Amount; provided, however, that the
Threshold Amount shall not apply in respect of an IP Claim, Statute of
Limitation Claims or Indefinite Claims.
6.7 Relationship Between Assumed
Liabilities and Indemnification. Subject to the provisions of
this ARTICLE VI, Buyer shall be entitled to indemnification pursuant to this
ARTICLE VI for Damages in respect of the breach by Seller of the representations
and warranties contained in ARTICLE II even if such Damages would otherwise be
assumed by Buyer under Section 1.3.
6.8 Exclusive
Remedy. This ARTICLE VI sets forth the sole and exclusive remedies
of Buyer and Seller, and their respective successors and assigns for
any Action any of them may assert or attempt to assert against the other to the
extent the Action in any way relates to this Agreement or its negotiation,
execution, delivery or performance, any alleged breach of or default under this
Agreement, or the transactions contemplated hereby, regardless of whether such
Action is based in tort (for example, intentional or negligent
misrepresentation) or contract, or arises at law or in equity; provided, however, the
foregoing limitation shall not apply to a claim arising or resulting from fraud
or willful misrepresentation on the part of the other party.
6.9 Right of Offset.
Notwithstanding anything to the contrary herein, Buyer may offset any amount to
which it may be entitled under this ARTICLE VI against the Closing Shares and
any other amount otherwise payable to Seller under this Agreement or under any
document delivered in connection herewith, including with respect to any Earnout
Payment. For purposes of exercising Buyer's offset rights against the
Closing Shares, the value per share of the Closing Shares shall be deemed to be
the closing price per share of the Buyer's common stock as reported on NYSE Amex
on the date of delivery of the Indemnification Demand or the Third Party Claim
Notice, as applicable. The exercise of such right of offset by Buyer
in good faith, whether or not ultimately determined to be justified, will not
constitute a breach of this Agreement. Neither the exercise of, nor
the failure to exercise, such right of offset shall constitute an election of
remedies or limit Buyer in any manner in the enforcement of any other remedies
that may be available to it, in law or in equity. Buyer may exercise
its offset rights by notice to Seller at any time setting forth the amount of
offset and the basis for such offset.
ARTICLE
VII
MISCELLANEOUS
7.1 Rules of
Construction. This Agreement has been negotiated by the
parties and is to be interpreted according to its fair meaning as if the parties
had prepared it together and not strictly for or against any
party. All references in this Agreement to articles, sections,
schedules and exhibits are to articles, sections, schedules and exhibits of or
to this Agreement unless expressly otherwise indicated. At each place
in this Agreement where the context so requires, the masculine, feminine or
neuter gender includes others. "Including" or "include" means
"including without limitation" and "include without limitation," respectively,
"Or" is used in the inclusive sense of "and/or." Currency amounts
referenced herein, unless otherwise specified, are in
U.S. Dollars.
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7.2 Further
Actions. From time to time, as and when requested by any party
hereto, each other party shall execute and deliver, or cause to be executed and
delivered, such documents and instruments and shall take, or cause to be taken,
such further or other actions as the requesting party may reasonably deem
necessary or desirable to carry out the intent and purposes of this Agreement,
to transfer, assign and deliver the Purchased Assets to Buyer and its respective
successors and assigns effective as of the Closing Date (or to evidence the
foregoing) and to consummate and give effect to the other transactions,
covenants and agreements contemplated hereby.
7.3 Expenses. Except
as expressly set forth herein, the parties shall bear their own legal fees and
other costs and expenses with respect to the negotiation, execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereunder.
7.4 Entire
Agreement. This Agreement, which includes the all schedules
and exhibits hereto and the other documents, agreements and instruments executed
and delivered pursuant to this Agreement, contains the entire agreement between
the parties hereto with respect to the transactions contemplated by this
Agreement and supersedes all prior arrangements, understandings, proposals,
prospectuses, projections and related materials with respect thereto, other than
the Confidentiality Agreement, which shall survive in accordance with its
terms.
7.5 Descriptive
Headings. The descriptive headings of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
7.6 Notices. All
notices or other communications which are required or permitted hereunder shall
be in writing and shall be sufficiently given if (a) delivered personally
or (b) sent by registered or certified mail, postage prepaid, or
(c) sent by overnight courier with a nationally recognized courier, or
(d) sent via facsimile confirmed in writing in any of the foregoing
manners, as follows:
|
If
to Seller:
|
iSports
Inc.
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Email:
▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇▇▇▇▇▇▇.▇▇▇
|
|
|
With
a copy to:
|
Kendall,
Koenig, and ▇▇▇▇▇▇▇, LLP
▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ ▇▇▇▇▇▇▇
Email:
▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
|
|
|
If
to Buyer:
|
NTN
Buzztime, Inc.
▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇
▇▇▇▇▇▇
Fax: ▇▇▇.▇▇▇.▇▇▇▇
|
|
|
With
a copy to:
|
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇
▇▇▇▇▇▇▇▇▇
Fax: ▇▇▇.▇▇▇.▇▇▇▇
|
-36-
If sent
by mail, notice shall be considered delivered five Business Days after the date
of mailing, and if sent by any other means set forth above, notice shall be
considered delivered upon receipt thereof. Any party may by notice to
the other parties change the address or facsimile number to which notice or
other communications to it are to be delivered or mailed.
7.7 Publicity. Buyer
shall have sole control over any press release, public announcement, statement
or acknowledgment (collectively, "Public Statements") with
respect to this Agreement and the consummation of the transactions contemplated
herein; provided, however, that Messrs. Ramachandran and ▇▇▇▇▇▇▇▇ shall have a
right to review any Public Statements which shall include their
name,
7.8 Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to the choice
of law principles thereof.
7.9 Assignment. This
Agreement shall inure to the benefit of and shall be binding upon the parties
hereto and their respective successors and permitted assigns. This
Agreement shall not be assignable (whether voluntarily or involuntarily,
directly or indirectly or by operation of law) by Seller without the written
consent of Buyer and any such purported assignment by Seller without such
consent shall be void.
7.10 Waivers and
Amendments. Any amendment or supplementation of this Agreement
shall be effective only if in writing signed by each of the parties
hereto. Any waiver of any term or condition of this Agreement shall
be effective only if in writing signed by the party giving the
waiver. A waiver of any breach or failure to enforce any of the terms
or conditions of this Agreement shall not in any way affect, limit or waive a
party's rights hereunder at any time to enforce strict compliance thereafter
with every term or condition of this Agreement, except to the extent such future
rights are specifically included within the scope of such written
waiver.
7.11 Third Party
Rights. This Agreement shall not create benefits on behalf of
any other Person (including any Business Employee, broker or finder),
and this Agreement shall be effective only as between the parties hereto,
their successors and permitted assigns.
7.12 Severability. If
any term or provision of this Agreement or the application thereof to any
circumstance shall, in any jurisdiction, be invalid or unenforceable, such term
or provision shall be ineffective as to such jurisdiction to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
such term or provision in any other jurisdiction, the remaining terms and
provisions of this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or
enforceable.
7.13 Counterparts. This
Agreement may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement. Facsimile
and PDF signatures shall be treated as if they were originals.
[SIGNATURE
PAGE FOLLOWS]
-37-
IN
WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto
have caused this Agreement to be duly executed and delivered as a sealed
instrument as of the date and year first above written.
|
BUYER
NTN
Buzztime, Inc.,
a
Delaware corporation.
By:
______________________________
Name:
____________________________
Title:
_____________________________
|
SELLER
iSports
Inc.,
a
California corporation
By:
______________________________
Name:
____________________________
Title:
_____________________________
|
[Signature Page to Asset Purchase
Agreement]
-38-
LIST OF
EXHIBITS
| Exhibit A | Definitions |
| Exhibit B | ▇▇▇▇ of Sale [Not Attached] |
| Exhibit C | Assignment and Assumption Agreement [Not Attached] |
| Exhibit D | Seller IP Assignment [Not Attached] |
| Exhibit E | Form of Non-Competition Agreement [Not Attached] |
| Exhibit F | $0.30 Warrant [Not Attached] |
| Exhibit G | $0.50 Warrant [Not Attached] |
EXHIBIT A
DEFINITIONS
The terms
defined in this Exhibit A,
whenever used in this Agreement (including in any schedule to this Agreement),
shall have the respective meanings indicated below for all purposes of this
Agreement, unless otherwise indicated in this Agreement (or the applicable
schedule):
"$0.30 Warrant": means a
warrant to purchase 1,000,000 unregistered shares of Common Stock, with an
exercise price of $0.30 per share, substantially in the form attached hereto as
Exhibit
F.
"$0.50 Warrant": means a
warrant to purchase 500,000 unregistered shares of Common Stock, with an
exercise price of $0.50 per share, substantially in the form attached hereto as
Exhibit
G.
"Action": means any claim,
action, suit, arbitration, hearing, inquiry, proceeding, complaint, charge or
investigation of any kind, whether civil, criminal or administrative, at law or
in equity and any appeal from any of the foregoing.
"Active Mobile User": means a
unique user who accesses Buyer's products from a mobile device during the period
in question.
"Affiliate": with
respect to any Person, means any Person directly or indirectly through one or
more intermediaries, that controls, is controlled by, or is under common control
with such other Person.
"Assumed
Liabilities": as defined in Section 1.3.
"Business": as
defined in the Recitals.
"Business Day" means Monday
through Friday, excluding any day of the year on which banks are required or
authorized to close in the State of California.
"Business
Conditions": means those conditions set forth in Sections
1.6(b)(B)(i)(1) and (2), 1.6(b)(B)(ii(1) – (4), and 1.6(b)(B)(iii)(1) –
(4).
"Business
Employees": as defined in Section 2.7(a).
"Cause": Cause for termination of
employment of the Transferred Employees shall be defined as when there is, as
reasonably determined by Buyer: (i) any act of personal dishonesty taken by
the Transferred Employee in connection with his responsibilities as an employee
of Buyer which is intended to result in substantial personal enrichment of the
Transferred Employee and is reasonably likely to result in material harm to
Buyer, (ii) the Transferred Employee's conviction of a felony which Buyer
reasonably believes has had or will have a material detrimental effect on
Buyer's reputation or business, (iii) a willful act by the Transferred
Employee which constitutes misconduct and is materially injurious to Buyer,
(iv) continued willful violations by the Transferred Employee of the
Transferred Employee's obligations to Buyer after there has been delivered to
the Transferred Employee a written demand for performance from Buyer which
describes the basis for Buyer's belief that the Transferred Employee has
willfully violated his obligations to Buyer.
"Challenges": means any individual or
group gaming experience on any of Buyer's products or services where users
compete against each other, in groups, or individually against Buyer's product
offering.
Exhibit
A-1
"Closing": as defined in
Section 1.9.
"Closing Date": as defined in
Section 1.9.
"Closing Purchase
Price": as defined in Section 1.5(a).
"Closing Shares" as defined in
Section 1.5(a).
"Code": Internal
Revenue Code of 1986, as amended.
"Commitments": as defined in
Section 2.6(m).
"Common Stock": means shares of
Buyer's common stock, $0.005 par value per share.
"Confidentiality Agreement":
means that certain Nondisclosure Agreement dated as of February 16, 2009 by and
between Seller and Buyer, as the same may be amended from time to
time.
"Contract": means any written
or oral contract, agreement, instrument, commitment, arrangement, understanding
or undertaking (including leases, franchises, bonds, guaranties, licenses,
mortgages, notes, guarantees, sublicenses, subcontracts and purchase
orders).
"Damages": means any and all
losses, liabilities, obligations, costs, expenses, orders, decrees, damages
(including incidental and consequential damages) or judgments of any kind or
nature whatsoever (including costs of investigation and defense reasonable
attorneys', accountants' and experts' fees, and disbursements of
counsel).
"Dispute Notice": as defined in
Section 1.6(f).
"Determining Experts": as
defined in Section 1.6(f).
"Earnout Consideration": as
defined in Section Section 1.6(a).
"Earnout Milestone": as defined
in Section 1.6(a).
"Earnout Payment": as defined
in Section 1.6(b)(B).
"Employee Benefit Plan": as defined in Section
2.8(a).
"Environmental Laws": means all
civil and criminal, foreign, international, provincial, federal, state and local
laws, rules, regulations, orders, ordinances, policies, guidance documents and
common law, which govern or relate to pollution, protection or restoration of
the environment, natural resources, safety and health, Releases or threatened
Releases of Hazardous Materials, solid or hazardous waste, or otherwise relating
to the manufacture, processing, distribution, use, recycling, treatment,
storage, Release, transport or handling of Hazardous Materials and all laws and
regulations with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Materials, together with any
governmental entity interpretations of each of the foregoing.
"ERISA": means Employee
Retirement Income Security Act of 1974, as amended.
"ERISA Affiliate": means any
entity, trade or business (whether or not incorporated) that is treated as a
single employer with Seller under Section 4001(b) of ERISA or Code Sections
414(b), (c), (m) or (o).
Exhibit
A-2
"Excluded
Assets": as defined in Section 1.2.
"Excluded
Liabilities": as defined in Section 1.4.
"GAAP": means generally
accepted accounting principles as in effect in the United States.
"Government Licenses" means all
permits, licenses, franchises, orders, registrations, certificates, variances,
approvals and other authorizations obtained from any Governmental Entity,
including those listed on Schedule
2.11.
"Governmental
Entity": means any foreign, federal, state, municipal or local
government, governmental, regulatory or administrative authority, agency,
instrumentality or commission or any United States court, tribunal, or judicial
or arbitral body of any nature; or any United States body exercising, or
entitled to exercise, any administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power of any nature.
"Hazardous Materials": means
(i) any chemical, compound, material, mixture or substance that is now or
hereafter defined or listed in, or otherwise classified pursuant to, any
Environmental Laws as a "hazardous substance", "hazardous material", "hazardous
waste", "extremely hazardous waste", "acutely hazardous waste", "radioactive
waste", "infectious waste", "biohazardous waste", "toxic substance",
"pollutant", "toxic pollutant", "contaminant" , "special waste", as well as any
formulation not mentioned herein intended to define, list, or classify
substances by reason of deleterious properties, including ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity "EP
toxicity," or "TCLP toxicity"; (ii) petroleum, natural gas, natural gas liquids,
liquefied natural gas, synthetic gas usable for fuel (or mixtures of natural gas
and such synthetic gas) and ash produced by a resource recovery facility
utilizing a municipal solid waste stream, and drilling fluids, produced waters
and other wastes associated with the exploration, development or production of
crude oil, natural gas, or geothermal resources; (iii) "hazardous substance" as
defined in Section 25281(f) of the California Health and Safety Code; (iv)
"waste" as defined in Section 13050(d) of the California Water Code (v) asbestos
in any form; (vi) urea formaldehyde foam insulation; (vii) transformers or other
equipment which contain dielectric fluid containing levels of polychlorinated
biphenyls (PCBs); (viii) radon; and (ix) any other chemical, material, or
substance that, because of its quantity, concentration, or physical or chemical
characteristics, exposure to which is limited or regulated for health and safety
reasons by any governmental authority, or which poses a present or potential
hazard to human health and safety or to the environment if released into the
workplace or the environment
"Holdback Account": means the
account consisting of the Closing Shares to be established by and administered
by Buyer to secure the indemnification obligations of Seller under ARTICLE
VI.
"Holdback Period": means the
period beginning with the Closing Date and ending on the one year anniversary of
the Closing Date.
"Indebtedness": means, as at
any date of determination thereof (without duplication): (i) all
obligations of Seller for borrowed money or funded indebtedness or issued in
substitution for or exchange for borrowed money or funded indebtedness
(including obligations in respect of principal, accrued interest, any applicable
prepayment charges or premiums and any unpaid fees, expenses or other monetary
obligations in respect thereof); (ii) any indebtedness evidenced by any
note, bond, debenture or other debt security; (iii) the lease obligations
required to be listed on Schedule 2.18(b) and
Schedule
2.18(l) or required to be capitalized in accordance with GAAP;
(iv) all obligations for reimbursement then required to be made of any
obligor on any banker's acceptance or similar transactions (including all
letters of credit and all obligations thereunder); (v) all obligations for
the deferred purchase price of property or conditional sale obligations of
Seller under any title retention agreement (but excluding trade accounts payable
and other accrued liabilities arising in the ordinary course of business);
(vi) any obligations with respect to the termination of any interest rate
hedging or swap agreements; (vii) all obligations of the type referred to
in clauses (i) through (vi) of any Person for the payment of which
Seller is responsible or liable, directly or indirectly, as guarantor, obligor,
surety or otherwise; (viii) obligations of the type referred to in clauses
(i) through (vii) of other Persons secured by any Lien on any property
or asset of Seller but only to the extent of the value of the property or asset
that is subject to such Lien; and (ix) any outstanding but not cleared
checks.
Exhibit
A-3
"Independent
Contractors": as defined in Section 2.7(d).
"Intellectual Property": means:
(i) inventions and discoveries (whether or not patentable and whether or not
reduced to practice), improvements thereto, and patents, patent applications,
invention disclosures, and other rights of invention, worldwide, including
without limitation any reissues, divisions, continuations and
continuations-in-part, provisionals, reexamined patents or other applications or
patents claiming the benefit of the filing date of any such application or
patent; (ii) trademarks, service marks, trade names, trade dress, logos, domain
names, product names and slogans, including any common law rights,
registrations, and applications for registration for any of the foregoing, and
the goodwill associated with all of the foregoing, worldwide; (iii)
copyrightable works, all rights in copyrights, including moral rights,
copyrights, website content, and other rights of authorship and exploitation,
and any applications, registrations and renewals in connection therewith,
worldwide; (iv) trade secrets and confidential business and technical
information, including, without limitation, web site user information, customer
and supplier lists and related information, pricing and cost information,
business and marketing plans, advertising statistics, any other financial,
marketing and business data, technical data, specifications, schematics and
know-how; (v) to the extent not covered by subsections (i) through (iv), above,
Software and web sites (including all related computer code and content); (vi)
rights to exclude others from appropriating any of such intellectual property,
including the rights to ▇▇▇ for and remedies against past, present and future
infringements of any or all of the foregoing and rights of priority and
protection of interests therein; and (vii) any other proprietary, intellectual
property and other rights relating to any or all of the foregoing anywhere in
the world.
"IP Participant": as defined in
Section 2.6(k).
"Knowledge of Buyer" and "Buyer's
Knowledge": any particular fact, circumstance, event or other
matter in question of which any of Buyer's officers and directors have
knowledge. An individual shall be deemed to have knowledge of a
particular fact, circumstance, event or other matter if (i) such fact,
circumstance, event or other matter is reflected in one or more documents,
written or electronic, that are or have been in such individual's possession or
that would likely be reviewed by an individual who has the duties and
responsibilities of such individual in the customary performance of such duties
and responsibilities or (ii) such knowledge would be obtained from
reasonable and customary inquiry of those Persons employed by Buyer charged with
administrative or operational responsibility for such matter.
"Knowledge of Seller" and
"Seller's
Knowledge": any particular fact, circumstance, event or other
matter in question of which either ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ or
any of Seller's other officers and directors have knowledge. An
individual shall be deemed to have knowledge of a particular fact, circumstance,
event or other matter if (i) such fact, circumstance, event or other matter
is reflected in one or more documents, written or electronic, that are or have
been in such individual's possession or that would likely be reviewed by an
individual who has the duties and responsibilities of such individual in the
customary performance of such duties and responsibilities or (ii) such
knowledge would be obtained from reasonable and customary inquiry of those
Persons employed by Seller charged with administrative or operational
responsibility for such matter.
Exhibit
A-4
"Law": means any United States
federal, state, municipal or local statute, law, ordinance, regulation, rule,
code, executive order, injunction, judgment, decree or other order of any
Governmental Entity.
"Liabilities": means any and
all debts, liabilities, commitments and obligations of any kind, whether fixed,
contingent or absolute, matured or unmatured, liquidated or unliquidated,
accrued or not accrued, asserted or not asserted, known or unknown, determined,
determinable or otherwise, whenever or however arising (including, whether
arising out of any contract or tort based on negligence or strict liability) and
whether or not the same would be required by GAAP to be reflected in financial
statements or disclosed in the notes thereto.
"Lien": means any
charge, claim, community property interest, condition, equitable interest, lien,
license, option, pledge, security interest, right of first refusal or
restriction of any kind, including any restriction on use, voting, transfer,
receipt of income or exercise of any other attribute of ownership.
"Material Adverse Effect":
means any material adverse effect on the Business, the Purchased Assets, the
Assumed Liabilities, operations, prospects, or results of operations of the
Business or condition (financial or otherwise) of the Business taken as a
whole.
"Material
Contract": as defined in Section 2.11(a).
"Milestone Notice": as defined
in Section 1.6(c).
"Milestone Notice Date": as
defined in Section 1.6(c).
"Mobile
Devices": means any device, such as a personal data assistant
(PDA), mobile phone, or portable gaming device, whose primary networking
capability is derived from WiFi (802.11x), RF (radio frequency), IR (infra-red),
or satellite technology. Mobile Devices are understood to exclude
personal computers.
"Net Media Revenues": means all
revenues derived from sources other than subscription revenues from Buyer's
retail customers. For purposes of calculating Net Media Revenues for
any given period, all revenue attributable to businesses and assets that Buyer
acquires after the Closing shall be excluded.
"Organizational Documents": as
defined in Section 2.1.
"Page View": means
any impression that has the technical capability of delivering an advertising
asset within it.
"Payoff
Letters": means the letters provided by the lenders or other
holders of Indebtedness to Seller in connection with the repayment of the
Indebtedness as contemplated hereby.
"Permitted
Liens": means Liens for Taxes not yet due and
payable.
"Person": means any individual,
sole proprietorship, partnership, joint venture, trust, unincorporated
association, corporation, limited liability company, entity or Governmental
Entity.
"Premium Mobile and Web
Revenues": means all revenues outside of
mobile advertising and sponsorship generated by Buyer, including one time
billing events, subscriptions, or season/league-long purchases, and third-party
content licensing and services relationships, but excluding in all cases
subscription revenue from Buyer's retail customers.
Exhibit
A-5
"Purchased Assets": as defined
in Section 1.1.
"Purchased Contracts": as
defined in Section 1.1(c).
"Release": means any spill,
emission, discharge, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching, release, presence or migration of Hazardous Materials on,
above, under, onto, in or into the environment or into or out of any
property.
"Securities": means the Closing
Shares, the $0.30 Warrant, the $0.50 Warrant and the shares of Buyer's common
stock issuable upon exercise of the $0.30 Warrant and the $0.50
Warrant.
"Securities Act": means the
Securities Act of 1933, as amended.
"Seller IP Rights": means all
of the rights and interests of Seller in Intellectual Property used in, or
useful in the conduct of, the Business wherever located, remedies against
infringement thereof and rights of protection of interests therein and all
related goodwill, including without limitation, Software and the other
Intellectual Property and related rights as set forth on Schedule
2.6.
"Software": means the computer
software included in the Software Rights.
"Software Rights": as defined
in Section 2.6(f).
"Straddle Period": as defined
in Section 4.2(c).
"Subsidiary": with respect to
any Person, means any corporation a majority (by number of votes) of the
outstanding shares of any class or classes of which shall at the time be owned
by such Person or by a Subsidiary of such Person, if the holders of the shares
of such class or classes (i) are ordinarily, in the absence of contingencies,
entitled to vote for the election of a majority of the directors (or Persons
performing similar functions) of the issuer thereof, even though the right so to
vote has been suspended by the happening of such a contingency, or (ii) are at
the time entitled, as such holders, to vote for the election of a majority of
the directors (or Persons performing similar functions) of the issuer thereof,
whether or not the right so to vote exists by reason of the happening of a
contingency.
"Tax" or, collectively, "Taxes": means (i) any and
all federal, state, local, or non-U.S. income, franchise, sales and use
taxes, real and personal property (tangible and intangible) taxes, gross
receipts taxes, documentary transfer taxes, excise taxes, employment taxes,
withholding taxes, unemployment insurance contributions, unclaimed property,
value added taxes and any other taxes or governmental charges of any kind,
however denominated, including any interest, penalties and additions to tax in
respect thereto, and (ii) any liability for the payment of any amounts of
the type described in clause (i) as a result of any express or implied
obligation to indemnify any other Person as a result of any obligations under
any agreements or arrangements with any other Person with respect to such
amounts, or as a successor or transferee, or pursuant to the provisions of
Treasury Regulation 1.1502-6 (and any comparable provision of state, foreign or
local law).
"Tax Purchase Price": as
defined in Section 1.8.
Exhibit
A-6
"Tax Return": means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
"Transaction
Document": as defined in Section 2.2.
"Transfer": means any sale,
assignment, transfer, conveyance, pledge, hypothecation or other disposition,
voluntarily or involuntarily, by operation of law, with or without
consideration, or otherwise (including by way of intestacy, will, gift,
bankruptcy, receivership, levy, execution, charging order or other similar sale
or seizure by legal process).
"Transferred
Employees": as defined in Section 5.1(c).
"Unique Viewer": means a
visitor to one of Buyer's consumer websites who is identified unique by one of
several different variables based on the technology used, including IP address
via reverse DNS lookup, user agent, and cookie and/or registration
identification.
"Year 1": means the
partial-year period commencing on the Closing Date and ending on December 31,
2009.
"Year 2": means the 12-month
period commencing on January 1, 2010 and ending on December 31,
2010.
"Year 3": means the 12-month
period commencing on January 1, 2011 and ending on December 31,
2011.
Exhibit
A-7