ASSET PURCHASE AGREEMENT
This
Asset Purchase Agreement (this “Agreement”)
is
entered into on June 30, 2008, by and between New Motion, Inc., a Delaware
corporation (“New
Motion”),
Xxxxxxxx.xxx, LLC, a Minnesota limited liability company (“Xxxxxxxx.xxx”),
and,
solely with respect to Sections 7(a), 7(c), 7(d), 8, 9(g) and 9(i), W3i
Holdings, LLC, a Minnesota limited liability company, the only member of
Xxxxxxxx.xxx (“W3i”). New Motion and Xxxxxxxx.xxx are referred to collectively
herein as the “Parties.”
This
Agreement contemplates a transaction in which New Motion will purchase
substantially all of the assets except cash (and assume certain of the
liabilities) of Xxxxxxxx.xxx in return for cash and a convertible note.
Now,
therefore, in consideration of the premises and the mutual promises herein
made,
and in consideration of the representations, warranties, and covenants herein
contained, the Parties agree as follows.
SECTION
1. BASIC
TRANSACTION.
(a) Purchase
and Sale of Assets.
On and
subject to the terms and conditions of this Agreement, New Motion agrees to
purchase from Xxxxxxxx.xxx, and Xxxxxxxx.xxx agrees to sell, transfer, convey,
and deliver to New Motion, all of the Acquired Assets at the Closing, including
all Accounts Receivable as of June 1, 2008, for the consideration specified
below in this Section 1.
(b) Assumption
of Liabilities.
On and
subject to the terms and conditions of this Agreement, New Motion agrees to
assume and become responsible for all Assumed Liabilities at the Closing,
including all Accounts Payable as of June 1, 2008. New Motion will not assume
or
have any responsibility, however, with respect to any other Liability of
Xxxxxxxx.xxx not included within the definition of Assumed
Liabilities.
(c) Purchase
Price.
New
Motion agrees to pay to Xxxxxxxx.xxx at the Closing Eight Million Dollars
($8,000,000) (the “Purchase
Price”).
At
the Closing, New Motion will deliver (i) a signed promissory note (the
“New
Motion Note”)
in the
form of Exhibit
2(c)
attached
hereto in the aggregate principal amount of $1,750,000.00 and (ii) cash for
the
balance of the Purchase Price payable by wire transfer. For the avoidance of
doubt, the parties intend the New Motion note be treated as a deferred payment
under Code Section 453.
(d) Accounts
Receivable/Accounts Payable True-up.
(i) Included
within the Acquired Assets are all Accounts Receivable and included within
the
Assumed Liabilities are all Accounts Payable. The Parties have agreed that
Purchase Price is based on an estimated Net Working Capital amount of $1,500,000
calculated as of June 1, 2008. To the extent estimated Net Working Capital,
as
of June 1, 2008, as set forth on Schedule 1(d), is in excess of $1,500,000,
New
Motion shall pay at the Closing such excess to Xxxxxxxx.xxx and to the extent
estimated Net Working Capital, as calculated below, is less than $1,500,000,
Xxxxxxxx.xxx shall pay at the Closing such shortfall to New Motion.
(ii) On
September 30, 2008, or if later, when New Motion collects all disclosed Accounts
Receivable, New Motion shall deliver to Xxxxxxxx.xxx a statement which sets
forth a calculation of actual Net Working Capital, as of June 1, 2008, which
reflects any True-up Payments (as defined below).
(iii) To
the
extent actual Net Working Capital is in excess of the estimated Net Working
Capital set forth on Schedule 1(d), New Motion shall pay such excess to
Xxxxxxxx.xxx and to the extent actual Net Working Capital, is less than the
estimated Net Working Capital, Xxxxxxxx.xxx shall pay such shortfall to New
Motion. In addition, Xxxxxxxx.xxx shall remit to New Motion any amounts it
collects with respect to the acquired Accounts Receivable (or other Acquired
Assets) and New Motion shall reimburse Xxxxxxxx.xxx for any amounts Xxxxxxxx.xxx
pays with respect to the assumed Accounts Payable (or other Assumed
Liabilities). The payments required by this Section 1(d)(iii) are hereinafter
referred to as the “True-up
Payments”
which
may be offset against each other.
(iv) New
Motion shall provide Xxxxxxxx.xxx with copies of or access to all work papers
and supporting documentation relating to the preparation of the calculation
of
actual Net Working Capital and the True-up Payments as may be reasonably
requested by Xxxxxxxx.xxx, including reasonable access to all of New Motion’s
accounting records and personnel, including without limitation, all accounts
receivable, cash receipts, collection records, cash disbursements and accounts
payable records for the purpose of determining the accuracy of New Motion’s
calculation of Net Working Capital.
(v) On
or
prior to the thirtieth (30th) day following New Motion’s delivery to
Xxxxxxxx.xxx of the calculation of actual Net Working Capital and the True-up
Payments, Xxxxxxxx.xxx may deliver to New Motion a written notice stating
Xxxxxxxx.xxx’s objections (an “Objection Notice”) to the calculation of actual
Net Working Capital and the True-up Payments, which shall specify in reasonable
detail the dollar amount of any objection and the basis therefore and
Xxxxxxxx.xxx’s calculation and determination of actual Working Capital and the
True up Payments. If Xxxxxxxx.xxx does not give New Motion an Objection Notice
within such 30-day period, then the calculation of actual Net Working Capital
provided by New Motion and the True-up Payments will be conclusive and binding
upon the Parties.
(vi) In
the
event that New Motion and Xxxxxxxx.xxx fail to agree on the actual Net Working
Capital and True-up Payments within thirty (30) days after New Motion receives
the Objection Notice (the “Agreement
Period”),
(i)
New Motion and Ringtone will retain a mutually agreeable firm of certified
public accountants (the “Independent
Auditors”)
to
make the final determination of the actual Net Working Capital in accordance
with the terms of this Agreement within the 30-day period immediately following
the Agreement Period, and (ii) New Motion and Xxxxxxxx.xxx each shall provide
the Independent Auditors with their respective determinations of the actual
Net
Working Capital. The Independent Auditors shall consider only those items and
amounts in New Motion’s and Xxxxxxxx.xxx’s respective determinations of the
actual Net Working Capital as of the Closing Date that are identified as being
items and amounts to which New Motion and Xxxxxxxx.xxx have been unable to
agree. The Independent Auditors’ determination of the actual Net Working Capital
and the True-up Payments shall be based solely on written materials submitted
by
New Motion and Xxxxxxxx.xxx. The determination of the Independent Auditors
shall
be conclusive and binding upon the Parties for all purposes hereunder. The
fees,
costs and expenses of the Independent Auditors shall be allocated to New Motion
and/or Xxxxxxxx.xxx based upon the percentage which the portion of the contested
amount not awarded to each Party bears to the amount actually contested by
such
Party, as determined by the Independent Auditors. By way of illustration, if
New
Motion claims before the Independent Auditors that the determination of actual
Net Working Capital is $1,000,000, and Xxxxxxxx.xxx claim before the Independent
Auditors that the determination of actual Net Working Capital is $1,500,000,
and
if the Independent Auditors ultimately resolve the dispute by awarding New
Motion $300,000 of the $500,000 difference, then the costs and expenses of
the
Independent Auditors will be allocated 60% (i.e., 300,000 ÷ 500,000) to
Xxxxxxxx.xxx and 40% (i.e., 200,000 ÷ 500,000) to New Motion.
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(vii) Adjustment
Payment.
Any
True-up Payments required to be made under this Section 1(d) shall be made
by
wire transfer or delivery of other immediately available funds to an account
designated in writing by the receiving party within ten (10) days after the
determination of the actual Net Working Capital and the True-Up
Payments.
(e) Closing.
The
closing of the transactions contemplated by this Agreement (the “Closing”)
shall
take place at the offices of Xxxxxx, Xxxxxxxx & Markiles, LLP, in Xxxxxxx
Oaks, California commencing at 12:00 p.m. local time on June 30, 2008 or such
other date as the Parties may mutually determine (the “Closing
Date”).
(f) Deliveries
at Closing.
At the
Closing, (i) Xxxxxxxx.xxx will deliver to New Motion the various certificates,
instruments, and documents referred to in Section 5(a) below; (ii) New Motion
will deliver to Xxxxxxxx.xxx the various certificates, instruments, and
documents referred to in Section 5(b) below; (iii) Xxxxxxxx.xxx will execute,
acknowledge (if appropriate), and deliver to New Motion (A) assignments
(including Intellectual Property transfer documents) in the forms attached
hereto, and (B) such other instruments of sale, transfer, conveyance, and
assignment as New Motion and its counsel may reasonably request; (iv) New Motion
will execute, acknowledge (if appropriate), and deliver to Xxxxxxxx.xxx (A)
assumptions in the form attached hereto and (B) such other instruments of sale,
transfer, conveyance, and assumption as Xxxxxxxx.xxx and its counsel may
reasonably request; and (v) New Motion will deliver to Xxxxxxxx.xxx the
consideration specified in Section 1(c) above.
(g) Allocation.
Within
60 days after the Closing Date, New Motion shall prepare an allocation of the
Purchase Price (and all other capitalized costs) among the Acquired Assets
in
accordance with Code Section 1060 and the Treasury regulations thereunder (and
any similar provision of state, local or foreign law, as appropriate). New
Motion shall deliver such allocation to Xxxxxxxx.xxx, and Xxxxxxxx.xxx shall
have the opportunity to review and comment on the proposed allocation. If
Xxxxxxxx.xxx concurs with the proposed allocation, in writing, it shall be
the
final allocation. If Xxxxxxxx.xxx differs with the proposed allocation, the
parties shall negotiate in good faith to arrive at a mutually agreeable
allocation. If the parties agree on a final allocation, then they shall document
their agreement in writing and New Motion, Xxxxxxxx.xxx, and their respective
Affiliates shall file Tax Returns (including, but not limited to Internal
Revenue Service Form 8594) consistent with the agreed upon allocation.
Xxxxxxxx.xxx shall timely and properly prepare, execute, file and deliver all
such documents, forms and other information as New Motion may reasonably request
to prepare such allocation. Neither New Motion nor Xxxxxxxx.xxx shall take
any
position (whether in audits, tax returns or otherwise) that is inconsistent
with
such allocation unless required to do so by applicable law. Notwithstanding
the
foregoing, New Motion shall have the sole and absolute discretion to determine
the allocation of Purchase Price (and all other capitalized costs) among the
Acquired Assets for purposes of, and that will be used in, its filings with
the
Securities and Exchange Commission.
SECTION
2. XXXXXXXX.XXX’S
WARRANTIES.
Xxxxxxxx.xxx represents and warrants to New Motion that the statements contained
in this Section 2 are correct and complete as of the date of this Agreement
and
will be correct and complete as of the Closing Date (as though made then and
as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 2) unless another date is specified, except as set
forth
in the disclosure schedule accompanying this Agreement (the “Disclosure
Schedule”).
The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Section 2.
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(a) Organization
of Xxxxxxxx.xxx.
Xxxxxxxx.xxx is a limited liability company duly formed, validly existing,
and
in good standing under the laws of the state of Minnesota.
(b) Authorization
of Transaction.
Xxxxxxxx.xxx has full power and authority (including full limited liability
company power and authority) to execute and deliver this Agreement and to
perform its obligations hereunder. Without limiting the generality of the
foregoing, the Board of Governors of Xxxxxxxx.xxx has duly authorized the
execution, delivery, and performance of this Agreement by Xxxxxxxx.xxx. This
Agreement constitutes the valid and legally binding obligation of Xxxxxxxx.xxx,
enforceable in accordance with its terms and conditions.
(c) Non-contravention.
Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in Section 2 above), will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
Xxxxxxxx.xxx is subject or any provision of the certificate of formation or
operating agreement of Xxxxxxxx.xxx or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice or consent under any agreement, contract, lease, license, instrument,
or
other arrangement to which Xxxxxxxx.xxx is a party or by which it is bound
or to
which any of its assets is subject (or result in the imposition of any Lien
upon
any of its assets). Xxxxxxxx.xxx does not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and assumptions
referred to in Section 1 above).
(d) Brokers’
Fees.
Xxxxxxxx.xxx has no Liability to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this Agreement
for which New Motion could become liable or obligated.
(e) Title
to Assets.
Xxxxxxxx.xxx has good and transferable title to all of the Acquired Assets,
free
and clear of any Liens or restriction on transfer.
(f) No
Subsidiaries.
Xxxxxxxx.xxx does not have any Subsidiaries.
(g) Financial
Statements.
The
Disclosure Schedule includes the following financial statements (collectively
the “Financial
Statements”)
for
Xxxxxxxx.xxx: (i) unaudited balance sheets and statements of income, changes
in
members’ equity, and cash flow as of and for the fiscal years ended December 31,
2006, and December 31, 2007 (the “Most
Recent Fiscal Year End;
and
(ii) unaudited statements of income, balance sheets, changes in members’ equity,
and cash flow (the “Most
Recent Financial Statements”)
as of
and for the five months ended May 31, 2008 (the “Most
Recent Fiscal Month End”).
The
Financial Statements have been prepared in accordance with GAAP throughout
the
periods covered thereby and present fairly in all material respects the
financial condition of Xxxxxxxx.xxx as of such dates and the results of
operations of Xxxxxxxx.xxx for such periods, provided,
however,
that
the Most Recent Financial Statements are subject to normal year-end adjustments
and New Motion understands Xxxxxxxx.xxx is a related entity and certain costs
have been allocated from Affiliates.
(h) Events
Subsequent to Most Recent Fiscal Month End.
Since
the Most Recent Fiscal Month End, there has not been any Material Adverse
Change. Without limiting the generality of the foregoing, since that
date:
(i) Xxxxxxxx.xxx
has not sold, leased, transferred, or assigned any of its assets, tangible
or
intangible, other than in the Ordinary Course of Business;
4
(ii) Xxxxxxxx.xxx
has not entered into any agreement, contract, lease, or license (or series
of
related agreements, contracts, leases, and licenses) either involving more
than
$10,000.00 or outside the Ordinary Course of Business;
(iii) No
party
(including Xxxxxxxx.xxx) has accelerated, terminated, modified, cancelled any
agreement, contract, lease or license (or series of related agreements,
contract, leases, and licenses) involving more than $10,000 to which
Xxxxxxxx.xxx is a party or by which it is bound outside the Ordinary Course
of
Business.
(iv) Xxxxxxxx.xxx
has not imposed or permitted to exist any Lien, except Permitted Liens, upon
any
of its assets, tangible or intangible;
(v) Xxxxxxxx.xxx
has not made any capital investment in, any loan to, or any acquisition of
the
securities or assets of, any other Person, other than an Affiliate, (or series
of related capital investments, loans, and acquisitions) either involving more
than $10,000.00 or outside the Ordinary Course of Business. This excludes any
Affiliate transactions;
(vi) Xxxxxxxx.xxx
has not issued any note, bond, or other debt security or created, incurred,
assumed, or guaranteed any indebtedness for borrowed money or capitalized lease
obligation either involving more than $10,000.00 singly or $100,000.00 in the
aggregate that has not been waived;
(vii) Xxxxxxxx.xxx
has not delayed or postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business;
(viii) Xxxxxxxx.xxx
has not cancelled, compromised, waived, or released any right or claim (or
series of related rights and claims) either involving more than $10,000.00
or
outside the Ordinary Course of Business;
(ix) Xxxxxxxx.xxx
has not transferred, assigned, or granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(x) Xxxxxxxx.xxx
has not experienced any damage, destruction, or loss (whether or not covered
by
insurance) to any of the Acquired Assets;
(xi) Xxxxxxxx.xxx
has not paid any amount to any third party with respect to any Liability
(including any costs and expenses Xxxxxxxx.xxx has incurred or may incur in
connection with this Agreement and the transactions contemplated hereby) that
would not constitute an Assumed Liability if in existence as of the Closing;
(xii) Xxxxxxxx.xxx
has not discharged a material Liability or Lien outside the Ordinary Course
of
Business;
(xiii) Xxxxxxxx.xxx
has not made any loans or advances of money, except for Affiliate transactions;
and
(xiv) Xxxxxxxx.xxx
has not committed to any of the foregoing.
(i) Undisclosed
Liabilities.
Xxxxxxxx.xxx does not have any material Liability, except for (i) Liabilities
set forth on the face of the Most Recent Balance Sheet and (ii) Liabilities
that
have arisen after the Most Recent Fiscal Month End in the Ordinary Course of
Business (none of that results from, arises out of, relates to, is in the nature
of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law).
5
(j) Legal
Compliance. To
the
Knowledge of the governors, managers and officers Xxxxxxxx.xxx has complied
with
all applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder and including the
Foreign Corrupt Practices Act, 15 U.S.C. 78dd-1 et seq.) of federal, state,
local, and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against it alleging any failure to so
comply.
(k) Tax
Matters.
(i) Xxxxxxxx.xxx
has timely filed all Tax Returns that it was required to file. To the Knowledge
of the governors, managers and officers of Xxxxxxxx.xxx all such Tax Returns
were substantially correct, complete and in compliance with all applicable
laws
and regulations. To the Knowledge of the governors, managers and officers of
Xxxxxxxx.xxx all Taxes owed by Xxxxxxxx.xxx have been paid. No claim has ever
been made by an authority in any jurisdiction where Xxxxxxxx.xxx does not file
Tax Returns that Xxxxxxxx.xxx is or may be subject to taxation by that
jurisdiction. There are no Liens on any of the assets of Xxxxxxxx.xxx that
arose
in connection with any failure (or alleged failure) to pay any
Taxes.
(ii) To
the
Knowledge of the governors, managers and officers Xxxxxxxx.xxx has withheld
and
paid all Taxes required to have been withheld and paid in connection with any
amounts paid or owing to any employee, independent contractor, creditor, member,
or other third party, and all Forms W-2 and 1099 required with respect thereto
have been properly completed and timely filed.
(iii) There
is
no dispute or claim concerning any Tax Liability of Xxxxxxxx.xxx either (A)
claimed or raised by any authority in writing or (B) as to which any of
Xxxxxxxx.xxx governors, managers, or officers (and employees responsible for
Tax
matters) has Knowledge based upon personal contact with any agent of such
authority. Xxxxxxxx.xxx has not waived any statute of limitations in respect
of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(iv) None
of
the Assumed Liabilities is an obligation to make a payment that is not
deductible under Code Section 280G. Xxxxxxxx.xxx is not a party to any Tax
allocation or sharing agreement.
(l) Real
Property.
(i) Xxxxxxxx.xxx
does not own or lease any real property.
(m) Intellectual
Property.
(i) Xxxxxxxx.xxx
owns or possesses or has the right to use pursuant to a valid and enforceable
written license, sublicense, agreement, or permission all Intellectual Property
necessary for the substantive operation of the business of Xxxxxxxx.xxx as
presently conducted. To the Knowledge of the governors, managers, and officers
of Xxxxxxxx.xxx, all material Intellectual Property owned or used by
Xxxxxxxx.xxx immediately prior to the Closing will be owned or available for
use
by New Motion on identical terms and conditions immediately subsequent to the
Closing hereunder. Xxxxxxxx.xxx has taken all necessary and desirable action
to
maintain and protect each item of Intellectual Property that it owns or uses
and
will continue to maintain and protect all of the Intellectual Property that
it
owns or uses prior to Closing so as not to materially adversely affect the
validity or enforceability thereof.
6
(ii) To
the
Knowledge of the governors, managers, and officers of Xxxxxxxx.xxx, Xxxxxxxx.xxx
has not interfered with, infringed upon, misappropriated, or otherwise come
into
conflict with any Intellectual Property rights or privacy rights of third
parties, there are no facts that indicate a likelihood of any of the foregoing,
and no governor, manager or officer of Xxxxxxxx.xxx has ever received any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that
Xxxxxxxx.xxx must license or refrain from using any Intellectual Property rights
of any third party). To the Knowledge of any governor, manager or officer of
Xxxxxxxx.xxx, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of Xxxxxxxx.xxx.
(iii) Xxxxxxxx.xxx
does not own any patent and has no patent applications pending. The Disclosure
Schedule identifies each registration that has been issued to Xxxxxxxx.xxx
with
respect to any of its Intellectual Property, identifies each pending application
for registration that Xxxxxxxx.xxx has made with respect to any of its
Intellectual Property, and identifies each license, sublicense, agreement,
or
other permission that Xxxxxxxx.xxx has granted to any third party with respect
to any of its Intellectual Property (together with any exceptions). Xxxxxxxx.xxx
has delivered to New Motion correct and complete copies of all such
registrations, applications, licenses, sublicenses, agreements, and permissions
(as amended to date) and has made available to New Motion correct and complete
copies of all other written documentation evidencing ownership and prosecution
(if applicable) of each such item. The Disclosure Schedule also identifies
each
unregistered trademark, service xxxx, trade name, corporate name or Internet
domain name, computer software item (other than commercially available
off-the-shelf software purchased or licensed for less than a total cost of
$1,000 in the aggregate) and each material unregistered copyright used by
Xxxxxxxx.xxx in connection with its business. With respect to each item of
Intellectual Property identified in the Disclosure Schedule pursuant to this
Section:
(A) Xxxxxxxx.xxx
owns and possesses all right, title, and interest in and to the item, free
and
clear of any Lien, license, or other restriction or limitation regarding use
or
disclosure;
(B) the
item
is not subject to any outstanding injunction, judgment, order, decree, ruling,
or charge;
(C) no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or
demand is pending or, to the Knowledge of any of the governors, managers and
officers of Xxxxxxxx.xxx, is threatened that challenges the legality, validity,
enforceability, use, or ownership of the item, and there are no grounds for
the
same;
(D) Xxxxxxxx.xxx
has never agreed to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to the item;
and
(E) no
loss
or expiration of the item is threatened, pending, or reasonably foreseeable,
except for patents expiring at the end of their statutory terms (and not as
a
result of any act or omission by Xxxxxxxx.xxx, including without limitation,
a
failure by Xxxxxxxx.xxx to pay any required maintenance fees).
7
(iv) The
Disclosure Schedule identifies each item of Intellectual Property that any
third
party owns and that Xxxxxxxx.xxx uses pursuant to license, sublicense,
agreement, or permission. With respect to each item of Intellectual Property
required to be identified in the Disclosure Schedule pursuant to this
Section:
(A) the
license, sublicense, agreement, or permission covering the item is legal, valid,
binding, enforceable, and in full force and effect;
(B) to
the
Knowledge of the governors, managers, and officers of Xxxxxxxx.xxx, the license,
sublicense, agreement, or permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following
consummation of the transactions contemplated hereby. Except as set forth on
the
Disclosure Schedules, no consent of any third party is required in connection
with the transfer, assignment and conveyance of such license, sublicense,
agreement or permission as a result of the transactions contemplated by this
Agreement;
(C) to
the
Knowledge of the governors, managers, and officers of Xxxxxxxx.xxx, no party
to
the license, sublicense, agreement, or permission is in breach or default,
and
no event has occurred that with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(D) to
the
Knowledge of the governors, managers, and officers of Xxxxxxxx.xxx, no party
to
the license, sublicense, agreement, or permission has repudiated any provision
thereof;
(E) with
respect to each sublicense, the representations and warranties set forth in
subsections (A) through (D) above are true and correct with respect to the
underlying license;
(F) the
underlying item of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(G) no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or
demand is pending or, to the Knowledge of any governor, manager or officer
of
Xxxxxxxx.xxx, is threatened that challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property, and there are
no
grounds for the same; and
(H) Xxxxxxxx.xxx
has not granted any sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(n) Tangible
Assets.
Xxxxxxxx.xxx leases all equipment, and other tangible assets necessary for
the
conduct of its business as presently conducted.
(o) Contracts.
(i) Schedule
2(o)(i) hereto lists each Acquired Contract.
(ii) In
addition, the Disclosure Schedule lists the following contracts and other
agreements to which Xxxxxxxx.xxx is a party:
8
(A) any
agreement (or group of related agreements) for the lease of personal property
to
or from any Person providing for lease payments in excess of $10,000 per
annum;
(B) any
agreement (or group of related agreements) for the purchase or sale of personal
property, or for the furnishing or receipt of services, the performance of
which
will extend over a period of more than 1 year, result in a material loss to
Xxxxxxxx.xxx, or involve consideration in excess of $10,000;
(C) any
agreement concerning a partnership or joint venture;
(D) any
agreement (or group of related agreements) under which it has created, incurred,
assumed, or guaranteed any indebtedness for borrowed money, or any capitalized
lease obligation, in excess of $10,000 or under which it has imposed a Lien
on
any of its assets, tangible or intangible;
(E) any
agreement concerning confidentiality or non-competition;
(F) any
agreement involving any of Xxxxxxxx.xxx Members and their Affiliates (other
than
Xxxxxxxx.xxx);
(G) any
agreement under which the consequences of a default or termination could have
a
Material Adverse Effect; or
(H) any
other
agreement (or group of related agreements) the performance of which involves
consideration in excess of $10,000.
(iii) Xxxxxxxx.xxx
has delivered to New Motion a correct and complete copy of each Acquired
Contract (as amended to date) listed on Schedule 2(o)(i) hereto. With respect
to
each Acquired Contract, to the Knowledge of the governors, managers, and
officers of Xxxxxxxx.xxx: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect in accordance with its terms; and
(B)
the agreement will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in Section 1 above). In addition, Xxxxxxxx.xxx represents that
to
the Knowledge of the governors, managers, and officers of Xxxxxxxx.xxx, no
party
is in breach or default, and no event has occurred that with notice or lapse
of
time would constitute a breach or default, or permit termination, modification,
or acceleration, under the agreement and no party has repudiated any provision
of the agreement. The foregoing notwithstanding, the consent of one or more
third parties may be required in connection with the transfer, assignment and
conveyance of the Acquired Contracts to New Motion.
(p) Notes
and Accounts Receivable.
All
notes and accounts receivable of Xxxxxxxx.xxx included within the Acquired
Assets are reflected properly on its books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible, and can
be
collected in accordance with their terms at their recorded amounts, subject
only
to the reserve for bad debts set forth on the face of the Most Recent Balance
Sheet as adjusted for the passage of time through the Closing Date in accordance
with the past custom and practice of Xxxxxxxx.xxx. The Bank Account is the
only
bank account used by Xxxxxxxx.xxx in connection with the collection of moneys
from customers.
9
(q) Powers
of Attorney.
There
are no outstanding powers of attorney executed on behalf of
Xxxxxxxx.xxx.
(r) Litigation.
The
Disclosure Schedule sets forth each instance in which Xxxxxxxx.xxx (i) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or, to the Knowledge of any governor, manager or
officer of Xxxxxxxx.xxx, is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in the Disclosure Schedule could result
in any Material Adverse Change.
(s) Suppliers.
Since
the date of the Most Recent Balance Sheet, no Xxxxxxxx.xxx supplier has
indicated that it shall stop, or materially decrease the rate of, its buying
of
services from Xxxxxxxx.xxx.
(t) Disclosure.
To the
Knowledge of any governor, manager or officer of Xxxxxxxx.xxx, the
representations and warranties contained in this Section 2 do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this Section 2
not
misleading.
(u) Investment.
Xxxxxxxx.xxx understands and agrees that (i) the New Motion Note has not been,
and will not be, registered under the Securities Act, or under any state
securities laws, and is being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering, (ii) it
is
acquiring the New Motion Note solely for its own account for investment
purposes, and not with a view to the distribution thereof (except to
Xxxxxxxx.xxx Members), (iii) it is a sophisticated investor with knowledge
and
experience in business and financial matters, (iv) it has received certain
information concerning New Motion and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and the risks
inherent in holding the New Motion Note, (v) it is able to bear the economic
risk and lack of liquidity inherent in holding the New Motion Note, and (vi)
it
is an Accredited Investor.
(v) Investigations.
To the
Knowledge of any governor, manager or officer of Xxxxxxxx.xxx, there
is
no investigation, regulatory action or lawsuit pending or, to the knowledge
of
the governors, officers and management of Xxxxxxxx.xxx, threatened against
Xxxxxxxx.xxx and Xxxxxxxx.xxx is not subject to any outstanding order, writ,
judgment, injunction or decree of any Governmental Authority that, in either
case, would be reasonably likely,
individually or in the aggregate,
to (a)
prevent or materially delay
the
consummation of the transaction
contemplated hereunder or (b) otherwise prevent or materially delay performance
by Xxxxxxxx.xxx of any of its obligations under this Agreement.
(w) Insurance.
The
Disclosure Schedule sets forth the following information with respect to
Xxxxxxxx.xxx’s E&O insurance policy: the name, and telephone number of the
agent; the name of the insurer and each covered insured; the policy number
and
period of coverage; the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and a description of any other loss-sharing arrangements.
With
respect to such insurance policy: (A) the policy is legal, valid, binding,
enforceable, and in full force and effect; (B) the policy will continue to
be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above);
(C)
neither Xxxxxxxx.xxx nor any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred that, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. After the Closing Date, for a period of three (3) years,
Xxxxxxxx.xxx shall maintain in full force and effect its current levels of
E&O insurance as in existence on the Closing Date.
10
SECTION
3. NEW
MOTION’ REPRESENTATIONS AND WARRANTIES.
New
Motion represents and warrants to Xxxxxxxx.xxx that the statements contained
in
this Section 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and
as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3).
(a) Organization
of New Motion.
New
Motion is a corporation duly organized, validly existing and in good standing
under the laws of the state of Delaware.
(b) Authorization
of Transaction. New
Motion has full power and authority (including full corporate power and
authority) to execute and deliver this Agreement together with the New Motion
Note and to perform its obligations hereunder. Without limiting the generality
of the foregoing, the Board of Directors of New Motion has duly authorized
the
execution, delivery, and performance of this Agreement by New Motion. This
Agreement and the New Motion Note constitute valid and legally binding
obligations of New Motion, enforceable against New Motion in accordance with
their terms and conditions. The execution, delivery and performance of this
Agreement and the New Motion Note and all other agreements contemplated hereby
have been duly authorized by New Motion.
(c) Non-contravention.
Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in Section 1 above), will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which New Motion
is subject or any provision of its charter, bylaws, or other governing documents
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice or consent under any agreement,
contract, lease, license, instrument, or other arrangement to which New Motion
is a party or by which it is bound or to which any of its assets are subject
(or
result in the imposition of any Lien upon any of its assets). New Motion does
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency
in
order for the Parties to consummate the transactions contemplated by this
Agreement (including the assignments and assumptions referred to in Section
1
above).
(d) Brokers’
Fees.
New
Motion has no Liability to pay any fees or commissions to any broker, finder,
or
agent with respect to the transactions contemplated by this Agreement for which
Xxxxxxxx.xxx could become liable or obligated.
(e) The
Note.
The New
Motion Note has been duly authorized, and upon issuance in accordance with
the
terms of this agreement, will be validly issued, binding, and will be issued
in
compliance with all applicable federal and state securities laws as presently
in
effect, and will not be subject to any preemptive rights, rights of first
refusal or restrictions on transfer other than under this Agreement and under
applicable federal and state securities laws. The shares of New Motion common
stock issuable upon conversion of the New Motion Note have been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
New
Motion Note, will be duly and validly issued, fully paid and nonassessable,
will
be issued in compliance with all applicable federal and state securities laws
as
presently in effect, and will not be subject to any preemptive rights, rights
of
first refusal or restrictions on transfer other than under this Agreement and
under applicable federal and state securities laws.
11
(f) Exchange
Act Filings.
New
Motion has filed, or furnished, as applicable, all reports and other documents
as required by the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) with the Securities and Exchange Commission since February 12, 2007 (the
“New Motion SEC Documents”). As of their respective dates of filing with the SEC
(or, if amended or superseded by a filing prior to the date hereof, as of the
date of such filing), the New Motion SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC thereunder applicable to such New Motion SEC Documents, and none
of
the New Motion SEC Documents when filed contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under
which they were made, not misleading. The financial statements of New Motion
included in the New Motion SEC Documents complied as to form, as of their
respective dates of filing with the SEC, in all material respects with all
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto and, (except, in the case of unaudited
statements, as permitted by Form 10-QSB of the SEC), have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be disclosed therein) and fairly present in all material respects
the consolidated financial position of New Motion and its consolidated
subsidiaries and the consolidated results of operations, changes in
stockholders’ equity and cash flows of such companies as of the dates and for
the periods shown. There are no outstanding comments from the Staff of the
SEC
with respect to any of the New Motion’s SEC Documents.
(g) Investigations.
To the
Knowledge of any director or officer of New Motion,
there
is no investigation, regulatory action or lawsuit pending or, to the knowledge
of the directors, officers and management of New Motion, threatened against
New
Motion and New Motion is not subject to any outstanding order, writ, judgment,
injunction or decree of any Governmental Authority that, in either case, would
be reasonably likely,
individually or in the aggregate,
to (a)
prevent or materially delay
the
consummation of the transaction
contemplated hereunder or (b) otherwise prevent or materially delay performance
by New Motion of any of its obligations under this Agreement.
(h) Legal
Compliance. To
the
Knowledge of any director or officer of New Motion, New Motion has complied
with
all applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder and including the
Foreign Corrupt Practices Act, 15 U.S.C. 78dd-1 et seq.) of federal, state,
local, and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against it alleging any failure to so
comply.
(i) Inspection;
No other Representations and Warranties.
New
Motion understands and agrees that it is purchasing the Acquired Assets in
the
condition on the Closing Date based upon New Motion’s own inspection,
examination, and determination of all matters related thereto, and without
reliance upon or inducement attributable to any express or implied
representations or warranties of any nature, whether in writing, orally or
otherwise, made by or on behalf of or imputed to Xxxxxxxx.xxx, its governors,
managers, officers, employees, agents, financial and legal advisors, or other
representatives, except for the representations and warranties made by
Xxxxxxxx.xxx which are expressly set forth in Section 2 of this Agreement.
Neither Xxxxxxxx.xxx, its governors, managers, officers, employees, agents,
financial and legal advisors, or other representatives or Affiliates will have
or be subject to any liability of indemnification obligation to New Motion,
or
any other person resulting from the distribution to New Motion, or New Motion’s
use of, any information, documents, projections, forecasts, or other material
made available to New Motion by any such person or any presentations in
expectation of the transaction contemplated by this Agreement made by any such
person to New Motion, unless such information, document or other material is
expressly included in a representation or warranty made by the Company in
Section 2 of this Agreement.
12
SECTION
4. PRE-CLOSING
COVENANTS.
The
Parties agree as follows with respect to the period between the execution of
this Agreement and the Closing:
(a) General.
Each of
the Parties will use commercially reasonable efforts to take all actions and
to
do all things necessary, proper, or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the Closing
conditions set forth in Section 5 below).
(b) Notices
and Consents.
Xxxxxxxx.xxx will give any notices to third parties, and Xxxxxxxx.xxx will
use
its commercially reasonable best efforts to obtain any third-party consents,
referred to in Section 2(c) above. Each of the Parties will give any notices
to,
make any filings with, and use commercially reasonable efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Section 2(c) and Section 3(c)
above.
(c) Operation
of Business.
Xxxxxxxx.xxx will not take any action, or enter into any transaction outside
the
Ordinary Course of Business. Without limiting the generality of the foregoing,
Xxxxxxxx.xxx will not (i) declare, set aside, or pay any dividend or make any
distribution with respect to the Xxxxxxxx.xxx Membership Interests or redeem,
purchase, or otherwise acquire any of the Xxxxxxxx.xxx Membership Interests,
except in the Ordinary Course of Business, or (ii) otherwise engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 2(h) above.
(d) Preservation
of Business.
Xxxxxxxx.xxx will keep its business and properties substantially intact,
including its present operations and relationships with lessors, licensors,
suppliers, and customers, and will not decrease the coverage provided by its
E&O insurance policy.
(e) Full
Access.
Prior
to the Closing, Xxxxxxxx.xxx will permit representatives of New Motion
(including legal counsel and accountants) to have access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of Xxxxxxxx.xxx, to all premises, properties, personnel, books,
records (including tax records), contracts, and documents of or pertaining
to
Xxxxxxxx.xxx.
(f) Notice
of Developments.
Each
Party will give prompt written notice to the other Party of any material adverse
development causing a breach of any of its own representations and warranties
in
Section 2 and Section 3 above.
SECTION
5. CONDITIONS
TO OBLIGATION TO CLOSE.
(a) Conditions
to New Motion’ Obligation.
New
Motion’ obligation to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the
representations and warranties set forth in Section 2 above shall be true and
correct in all material respects at and as of the Closing Date, except to the
extent that such representations and warranties are qualified by the term
“material,” or contain terms such as “Material Adverse Effect” or “Material
Adverse Change,” in which case such representations and warranties (as so
written, including the term “material” or “Material”) shall be true and correct
in all respects at and as of the Closing Date;
13
(ii) Xxxxxxxx.xxx
shall have performed and complied with all of its covenants hereunder in all
material respects through the Closing, except to the extent that such covenants
are qualified by the term “material,” or contain terms such as “Material Adverse
Effect” or “Material Adverse Change,” in which case Xxxxxxxx.xxx shall have
performed and complied with all of such covenants (as so written, including
the
term “material” or “Material”) in all respects through the Closing;
(iii) Xxxxxxxx.xxx
shall have used its commercially reasonable best efforts to procure all of
the
third-party consents specified in Section 4(b) above;
(iv) no
action, suit, or proceeding shall be pending or threatened before any court
or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation of
any
of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) adversely affect the right of New Motion to own the
Acquired Assets and to operate the former business of Xxxxxxxx.xxx (and no
such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(v) Xxxxxxxx.xxx
shall have delivered to New Motion a certificate to the effect that each of
the
conditions specified above in Section 5(a)(i)-(iv) is satisfied in all
respects;
(vi) Xxxxxxxx.xxx
and New Motion shall have received all other authorizations, consents, and
approvals of governments and governmental agencies referred to in Section 2(c)
and Section 3(c) above;
(vii) Xxxxxxxx.xxx
shall have delivered to New Motion a certificate of the secretary of
Xxxxxxxx.xxx, dated the Closing Date, in form and substance reasonably
satisfactory to New Motion, as to: (i) the resolutions of the Board of Governors
authorizing the execution, delivery, and performance of this Agreement and
the
transactions contemplated hereby; and (ii) incumbency and signatures of the
officers of Xxxxxxxx.xxx executing this Agreement or any other agreement
contemplated by this Agreement;
(viii) Xxxxxxxx.xxx
shall have executed, acknowledged (if appropriate), and delivered to New Motion
(A) assignments (including Intellectual Property transfer documents) in the
forms attached hereto, and (B) such other instruments of sale, transfer,
conveyance, and assignment as New Motion and its counsel may reasonably request,
including those specified in Section 1(f);
(ix) all
actions to be taken by Xxxxxxxx.xxx in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
will
be reasonably satisfactory in form and substance to New Motion.
New
Motion may waive any condition specified in this Section 5(a) if it executes
a
writing so stating at or prior to the Closing.
(b) Conditions
to Xxxxxxxx.xxx’s Obligation.
Xxxxxxxx.xxx’s obligation to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions:
14
(i) the
representations and warranties set forth in Section 3 above shall be true and
correct in all material respects at and as of the Closing Date, except to the
extent that such representations and warranties are qualified by the term
“material,” or contain terms such as “Material Adverse Effect” or “Material
Adverse Change,” in which case such representations and warranties (as so
written, including the term “material” or “Material”) shall be true and correct
in all respects at and as of the Closing Date;
(ii) New
Motion shall have performed and complied with all of its covenants hereunder
in
all material respects through the Closing, except to the extent that such
covenants are qualified by the term “material,” or contain terms such as
“Material Adverse Effect” or “Material Adverse Change,” in which case New Motion
shall have performed and complied with all of such covenants (as so written,
including the term “material” or “Material”) in all respects through the
Closing;
(iii) no
action, suit, or proceeding shall be pending or threatened before any court
or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation of
any
of the transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(iv) New
Motion shall have delivered to Xxxxxxxx.xxx a certificate to the effect that
each of the conditions specified above in Section 5(b)(i)-(iii) is satisfied
in
all respects;
(v) Xxxxxxxx.xxx
and New Motion shall have received all authorizations, consents, and approvals
of governments and governmental agencies referred to in Section 2(c) and Section
3(c) above;
(vi) New
Motion shall have refunded to Xxxxxxxx.xxx all unused prepaid funds of
Xxxxxxxx.xxx held by New Motion as of the date of this Agreement;
(vii) New
Motion shall have delivered to Xxxxxxxx.xxx a certificate of the secretary
of
New Motion, dated the Closing Date, in form and substance reasonably
satisfactory to Xxxxxxxx.xxx, as to: (i) the resolutions of the Board of
Directors authorizing the execution, delivery, and performance of this Agreement
and the transactions contemplated hereby; and (ii) incumbency and signatures
of
the officers of New Motion executing this Agreement or any other agreement
contemplated by this Agreement;
(viii) New
Motion shall have executed, acknowledged (if appropriate), and delivered to
Xxxxxxxx.xxx (A) assumptions in the form attached hereto and (B) such other
instruments of assumption as Xxxxxxxx.xxx and its counsel may reasonably request
including those specified in Section 1(f);
(ix) New
Motion shall have delivered to Xxxxxxxx.xxx the consideration specified in
Section 1(c) above; and
(x) all
actions to be taken by New Motion in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
will
be reasonably satisfactory in form and substance to Xxxxxxxx.xxx.
15
Xxxxxxxx.xxx
may waive any condition specified in this Section 5(b) if it executes a writing
so stating at or prior to the Closing.
SECTION
6. TERMINATION.
(a) Termination
of Agreement.
The
Parties may terminate this Agreement as provided below:
(i) New
Motion and Xxxxxxxx.xxx may terminate this Agreement by mutual written consent
at any time prior to the Closing;
(ii) New
Motion may terminate this Agreement by giving written notice to Xxxxxxxx.xxx
at
any time prior to the Closing (A) in the event Xxxxxxxx.xxx has materially
breached any representation, warranty, or covenant contained in this Agreement,
New Motion has notified Xxxxxxxx.xxx as applicable, of the breach, and the
breach has continued without cure for a period of 15 days after the notice
of
breach or (B) if the Closing shall not have occurred on or before July 15,
2008,
by reason of the failure of any condition precedent under Section 5(a) hereof
(unless the failure results primarily from New Motion itself breaching any
representation, warranty, or covenant contained in this Agreement);
and
(iii) Xxxxxxxx.xxx
may terminate this Agreement by giving written notice to New Motion at any
time
prior to the Closing (A) in the event New Motion has materially breached any
representation, warranty, or covenant contained in this Agreement, Xxxxxxxx.xxx
has notified New Motion of the breach, and the breach has continued without
cure
for a period of 15 days after the notice of breach or (B) if the Closing shall
not have occurred on or before July 15, 2008, by reason of the failure of any
condition precedent under Section 5(b) hereof (unless the failure results
primarily from Xxxxxxxx.xxx itself breaching any representation, warranty,
or
covenant contained in this Agreement).
(b) Effect
of Termination.
If any
Party terminates this Agreement pursuant to Section 6(a) above, all rights
and
obligations of the Parties hereunder shall terminate without any Liability
of
any Party to any other Party for such termination (except for any Liability
that
accrues from a breach of this Agreement). Furthermore, New Motion hereby
acknowledges and agrees that prior to the Closing and delivery of the New Motion
Note and payment of the cash consideration specified in Section 1(c) to be
paid
at Closing, New Motion shall have no right to take any action in respect of,
and
Xxxxxxxx.xxx shall have no liability in respect of, any breach by Xxxxxxxx.xxx
of any representations or warranties contained herein or any failure to comply
with any of the covenants, conditions or agreements contained herein, except
to
terminate this Agreement pursuant to this Section 6, in which event,
Xxxxxxxx.xxx shall have no obligation or liability to New Motion
whatsoever.
SECTION
7. POST-CLOSING
COVENANTS.
The
Parties agree as follows with respect to the period following the
Closing:
(a) General.
In case
at any time after the Closing any further actions are necessary or desirable
to
carry out the purposes of this Agreement, each of the Parties will take such
further actions (including the execution and delivery of such further
instruments and documents) as any other Party may reasonably request, all at
the
sole cost and expense of the requesting Party (unless the requesting Party
is
entitled to indemnification therefor under Section 8 below). Without limiting
the generality of the foregoing, if reasonably requested by New Motion,
Xxxxxxxx.xxx and W3i will provide reasonable assistance to New Motion in
preparing New Motion’s audited financial statements relating to the business
represented by the Acquired Assets and Assumed Liabilities, including
providing New Motion and its auditors access to and copies of
such accounting books and records of Xxxxxxxx.xxx and W3i at reasonable
times at such places as not to interrupt the business of
Xxxxxxxx.xxx.
16
(b) Litigation
Support.
In the
event and for so long as any Party actively is contesting or defending against
any action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the date hereof substantively related to this
Agreement and involving a Party, the other Party will cooperate with it and
its
counsel in the contest or defense, make available its personnel, and provide
such testimony and access to its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of
the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8 below).
(c) Covenant
Not to Compete.
For a
period of 3 years from and after the Closing Date, Xxxxxxxx.xxx and W3i will
not
engage directly or indirectly in the sale of ringtones on a subscription basis.
If the final judgment of a court of competent jurisdiction declares that any
term or provision of this Section 7(c) is invalid or unenforceable, the Parties
agree that the court making the determination of invalidity or unenforceability
shall have the power to reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or
unenforceable term or provision, and this Agreement shall be enforceable as
so
modified after the expiration of the time within which the judgment may be
appealed.
(d) Name
Change.
After
the Closing Date: (a) Xxxxxxxx.xxx shall promptly change its name from
“Xxxxxxxx.xxx, LLC.” to a name not including the words “Xxxxxxxx.xxx” or any
part or colorable imitation thereof (the “Prohibited
Names”);
and
(b) Xxxxxxxx.xxx and W3i shall not at any time after the Closing Date
change their name to, or establish any business entity that has a name
including, the Prohibited Names.
(e) New
Motion Note.
The New
Motion Note will be imprinted with a legend substantially in the following
form:
The
payment of principal and interest on this Note is subject to certain recoupment
provisions set forth in an Asset Purchase Agreement dated June 30, 2008 (the
"Purchase
Agreement")
between the issuer of this Note and the holder to whom this Note originally
was
issued. This Note was originally issued on June 30, 2008, and has not been
registered under the Securities Act of 1933, as amended, or any state securities
act, and may not be sold or transferred in the absence of such registration
or
qualification or an exemption therefrom under the securities act or any such
state securities laws that may be applicable. The sale or transfer of this
Note
is subject to certain restrictions set forth in the Purchase Agreement. The
issuer of this Note will furnish a copy of these provisions to the holder hereof
without charge upon written request.
Each
holder desiring to transfer the New Motion Note first must furnish New Motion
with (i) a written opinion reasonably satisfactory to New Motion in form and
substance from counsel reasonably satisfactory to New Motion by reason of
experience to the effect that the holder may transfer the New Motion Note as
desired without registration under the Securities Act and (ii) a written
undertaking executed by the desired transferee reasonably satisfactory to New
Motion in form and substance agreeing to be bound by the recoupment provisions
and the restrictions on transfer contained herein.
(f) After
the
Closing Date, for a period of three (3) years, Xxxxxxxx.xxx shall maintain
in
full force and effect its current levels of E&O insurance as in existence on
the Closing Date.
17
SECTION
8. INDEMNIFICATION.
(a) Survival
of Representations and Warranties.
Except
as set forth in the immediately following sentence, all of the representations
and warranties of New Motion and Xxxxxxxx.xxx contained in this Agreement shall
survive the Closing and continue in full force and effect for a period of 1
year
thereafter. The representations and warranties of Xxxxxxxx.xxx contained in
Sections 2(a), (b), (j), and (k) of this Agreement shall survive the Closing
and
continue in full force and effect until the expiration of any applicable
statutes of limitations (after giving effect to any extensions or waivers)
and
the Representations and Warranties of New Motion contained in Sections 3(a),
(e), and (h) of the Agreement shall survive the closing and continue in full
force and effect until the expiration of any applicable statutes of
limitation.
(b) Indemnification
Provisions for New Motion' Benefit.
Xxxxxxxx.xxx and W3i, jointly and severally, shall indemnify New Motion from
and
against the entirety of any Adverse Consequences New Motion may suffer
(including any Adverse Consequences New Motion may suffer after the end of
any
applicable survival period) resulting from, arising out of, relating to, in
the
nature of, or caused by: (i) any breach (or in the event any third party alleges
facts that, if true, would mean Xxxxxxxx.xxx has breached) of Xxxxxxxx.xxx’s
representations, warranties, and covenants contained herein; provided that
with
respect to breaches of representations and warranties, New Motion makes a
written claim for indemnification against Xxxxxxxx.xxx or W3i within the
applicable survival period; and (ii) the operation of Xxxxxxxx.xxx’s business or
the ownership, use or possession of the Acquired Assets prior to the Closing
Date, including, without limitation, any action or claim brought by any third
party or governmental entity against New Motion as a successor in interest
to
Xxxxxxxx.xxx that is based on facts that arose on or before the Closing Date
or
on acts or omissions occurring on or before the Closing Date (other than the
Assumed Liabilities). Xxxxxxxx.xxx and W3i shall not have any obligation to
indemnify New Motion from and against any Adverse Consequences resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or
alleged breach) of any representation or warranty of Xxxxxxxx.xxx until New
Motion has suffered Adverse Consequences by reason of all such breaches (or
alleged breaches) in excess of a $50,000 aggregate threshold (at which point
Xxxxxxxx.xxx and W3i will be obligated to indemnify New Motion from and against
all such Adverse Consequences in excess of $50,000). The aggregate
indemnification obligation under Section 8(b)(i) for any Adverse Consequences
resulting from, arising out of, relating to, in the nature of, or caused by
the
breach (or alleged breach) of any representation or warranty of Xxxxxxxx.xxx
shall not exceed the $1,200,000.
(c) Indemnification
Provisions for Xxxxxxxx.xxx’s Benefit.
New
Motion shall indemnify Xxxxxxxx.xxx from and against the entirety of any Adverse
Consequences Xxxxxxxx.xxx may suffer (including any Adverse Consequences
Xxxxxxxx.xxx may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused by:
(i)
any breach (or in the event any third party alleges facts that, if true, would
mean New Motion has breached) of New Motion’s representations, warranties, and
covenants contained herein; provided that with respect to breaches of
representations and warranties, Xxxxxxxx.xxx makes a written claim for
indemnification against New Motion within the applicable survival period; and
(ii) the operation of New Motion’s business or the ownership, use or possession
of the Acquired Assets after the Closing Date, including, without limitation,
any action or claim brought by any third party or governmental entity against
Xxxxxxxx.xxx as a predecessor in interest to New Motion that is based on facts
that arose after the Closing Date or on acts or omissions occurring after the
Closing Date (other than Liabilities which are excluded from the definition
of
Assumed Liabilities). New Motion shall not have any obligation to indemnify
Xxxxxxxx.xxx from and against any Adverse Consequences resulting from, arising
out of, relating to, in the nature of, or caused by the breach (or alleged
breach) of any representation or warranty of New Motion until Xxxxxxxx.xxx
has
suffered Adverse Consequences by reason of all such breaches (or alleged
breaches) in excess of a $50,000 aggregate threshold (at which point New Motion
will be obligated to indemnify Xxxxxxxx.xxx from and against all such Adverse
Consequences in excess of $50,000). The aggregate indemnification obligation
under Section 8(c)(i) for any Adverse Consequences resulting from, arising
out
of, relating to, in the nature of, or caused by the breach (or alleged breach)
of any representation or warranty of Xxxxxxxx.xxx shall not exceed the
$1,200,000.
18
(d) Matters
Involving Third Parties.
(i) If
any
third party notifies either Party (the “Indemnified
Party”)
with
respect to any matter (a “Third-Party
Claim”)
that
may give rise to a claim for indemnification against any other Party (the
“Indemnifying
Party”)
under
this Section 8, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided,
however,
that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party is thereby
prejudiced.
(ii) Any
Indemnifying Party will have the right to defend the Indemnified Party against
the Third-Party Claim with counsel of its choice reasonably satisfactory to
the
Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified
Party in writing within 30 days after the Indemnified Party has given notice
of
the Third-Party Claim that the Indemnifying Party will conduct the defense
of
the Third-Party Claim, (B) the Indemnifying Party provides the Indemnified
Party
with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the
Third-Party Claim and fulfill its indemnification obligations hereunder, (C)
the
Third-Party Claim involves only money damages and does not seek an injunction
or
other equitable relief, (D) settlement of, or an adverse judgment with respect
to, the Third-Party Claim is not, in the good faith judgment of the Indemnified
Party, reasonably likely to establish a precedential custom or practice
materially adverse to the continuing business interests or the reputation of
the
Indemnified Party, and (E) the Indemnifying Party conducts the defense of the
Third-Party Claim in good faith.
(iii) So
long
as the Indemnifying Party is conducting the defense of the Third-Party Claim
in
accordance with Section 8(d)(ii) above, (A) the Indemnified Party may retain
separate co-counsel at its sole cost and expense and participate in the defense
of the Third-Party Claim, (B) the Indemnified Party will not consent to the
entry of any judgment on or enter into any settlement with respect to the
Third-Party Claim without the prior written consent of the Indemnifying Party
(not to be unreasonably withheld), and (C) the Indemnifying Party will not
consent to the entry of any judgment on or enter into any settlement with
respect to the Third-Party Claim without the prior written consent of the
Indemnified Party (not to be unreasonably withheld), unless
there is a complete release of the Indemnified Party specifically included
in
any settlement agreement. The Indemnified Party shall provide the Indemnifying
Party and its counsel with access to its records and personnel relating to
any
such claim, assertion, event or proceeding during normal business hours and
shall otherwise cooperate with the Indemnifying Party in the defense or
settlement thereof.
In
the
event any of the conditions in Section 8(d)(ii) above is or becomes unsatisfied,
or if the Indemnifying Party fails to defend or if, after commencing or
undertaking any such defense, the Indemnifying Party fails to prosecute or
withdraws from such defense, (A) the Indemnified Party may defend against,
and
consent to the entry of any judgment on or enter into any settlement with
respect to, the Third-Party Claim in any manner it may reasonably deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (B) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third-Party Claim (including
reasonable attorneys' fees and expenses), and (C) the Indemnifying Parties
will
remain responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
the
Third-Party Claim to the fullest extent provided in this Section 8.
19
(e) Determination
of Adverse Consequences.
All
indemnification payments under this Section 8 shall be deemed adjustments to
the
Purchase Price for tax purposes and such agreed treatment shall govern for
purposes of this Agreement.
(f) Recoupment
Against New Motion Note.
Any
indemnification to which New Motion is entitled under this Agreement as a result
of any Adverse Consequences it may suffer shall first be made by recouping
the
Adverse Consequences it may suffer by notifying Xxxxxxxx.xxx that New Motion
is
reducing first, the accrued interest outstanding on the New Motion Note, and
second, if the indemnification to which New Motion is entitled exceeds such
accrued interest then outstanding, the principal amount outstanding under the
New Motion Note. Any reduction in the principal amount of the New Motion Note
shall affect the timing and amount of payments required under the New Motion
Note in the same manner as if New Motion had made a permitted prepayment
(without premium or penalty) thereunder.
(g) Exclusive
Remedy for Representations and Warranties.
The
foregoing indemnification provisions shall be the sole and exclusive remedy
of a
Party for all claims arising from this Agreement (other than a claim based
on
fraud, breach of the New Motion Note, or a breach or failure to perform any
covenant or obligation hereunder) against the other Party pursuant to Sections
8(b)(i) or 8(c)(i), as applicable. To the maximum extent permitted by law,
the
parties hereby waive all other rights and remedies with respect to any matter
in
any way relating to a breach of any representation or warranty of a party,
whether under any laws, at common law or otherwise. Except as provided in this
Section 8, no claim, action or remedy shall be brought or maintained by any
party against any other party, and no recourse shall be brought or granted
against any of them, by virtue of or based upon any alleged misstatement or
omission respecting an inaccuracy in or breach of any of the representations
or
warranties of any of the parties hereto set forth or contained in this
Agreement.
SECTION
9. MISCELLANEOUS.
(a) Press
Releases and Public Announcements.
Xxxxxxxx.xxx and New Motion shall use commercially reasonable best efforts
(i)
to develop a joint communications plan, (ii) to ensure that all press releases
and other public statements with respect to the transactions contemplated hereby
shall be consistent with such joint communications plan, and (iii) except in
respect of any announcement required by applicable law or by obligations
pursuant to any listing agreement with or rules of NASDAQ in which it is
impracticable to consult with each other as contemplated by this clause (iii),
to consult with each other before issuing any press release or, to the extent
practical, otherwise making any public statement with respect to this Agreement
or the transactions contemplated hereby. In addition to the foregoing, no Party
shall issue any press release or otherwise make any public statement or
disclosure concerning the other Party or the other Party’s business, financial
condition or results of operations without the prior review by such other
Party.
(b) No
Third-Party Beneficiaries.
This
Agreement shall not confer any rights or remedies upon any Person other than
the
Parties and their respective successors and permitted assigns.
20
(c) Entire
Agreement.
This
Agreement (including the documents referred to herein) constitutes the entire
agreement between the Parties and supersedes any prior understandings,
agreements, or representations by or between the Parties, written or oral,
to
the extent they relate in any way to the subject matter hereof. Each party
hereto agrees that, except for the representations and warranties contained
in
this Agreement neither New Motion nor Xxxxxxxx.xxx or any of its Subsidiaries
or
Affiliated entities makes any other representations or warranties, and each
hereby disclaims any other representations or warranties made by itself or
directors, governors, managers, officers, employees, agents, financial and
legal
advisors, or other representatives with respect to the execution and delivery
of
this Agreement, or the Asset Sale.
(d) Succession
and Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other Party.
(e) Counterparts.
This
Agreement may be executed in one or more counterparts (including by means of
facsimile), each of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
(f) Headings.
The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(g) Notices.
All
notices, requests, demands, claims, and other communications hereunder shall
be
in writing. Any notice, request, demand, claim, or other communication hereunder
shall be deemed duly given (i) when delivered personally to the recipient,
(ii)
1 business day after being sent to the recipient by reputable overnight courier
service (charges prepaid), (iii) 1 business day after being sent to the
recipient by facsimile transmission or electronic mail, providing that
confirmation of receipt has been obtained, or (iv) 4 business days after being
mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid, and addressed to the intended recipient as set
forth below:
|
If
to Xxxxxxxx.xxx:
|
Attn:
General Counsel
|
Xxxxxxxx.xxx,
LLC
0000
Xxxxxxx Xxxx Xxx. X.
Xxxxxxx,
XX 00000
Fax:
(000) 000-0000
Phone:
(000) 000-0000
|
If
to New Motion:
|
Attn:
Chief Financial Officer
|
00
Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxx,
XX 00000
Fax:
(949)
Phone:
(000) 000-0000
|
Copy
to:
|
Xxxxxx,
Xxxxxxxx & Markiles, LLP
|
00000
Xxxxxxx Xxxxxxxxx, 00xx
Xxxxx
Xxxxxxx
Xxxx, XX 00000
Attention:
Xxxxx Xxxxx
Fax:
(000) 000-0000
Phone:
(000) 000-0000
21
|
If
to W3i::
|
Attn:
General Counsel
|
Xxxxxxxx.xxx,
LLC
0000
Xxxxxxx Xxxx Xxx. X.
Xxxxxxx,
XX 00000
Fax:
(000) 000-0000
Phone:
(000) 000-0000
Any
Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice
in
the manner herein set forth.
(h) Governing
Law. This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of New
York
without
giving effect to any choice or conflict of law provision or rule (whether of
the
State of New
York
or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New
York.
(i) Amendments
and Waivers.
No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by New Motion, Xxxxxxxx.xxx, and W3i. No waiver
by any Party of any provision of this Agreement or any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver nor shall such waiver be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of warranty
or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such default, misrepresentation, or breach of warranty
or
covenant.
(j) Severability.
Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of
the remaining terms and provisions hereof or the validity or enforceability
of
the offending term or provision in any other situation or in any other
jurisdiction.
(k) Expenses.
Each
Party will bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. Without limiting the generality of the foregoing, all transfer,
documentary, sales, use, stamp, registration and other such Taxes, and all
conveyance fees, recording charges and other fees and charges (including any
penalties and interest) incurred in connection with the consummation of the
transactions contemplated by this Agreement shall be paid by Xxxxxxxx.xxx when
due, and Xxxxxxxx.xxx will, at its own expense, file all necessary Tax Returns
and other documentation with respect to all such Taxes, fees and charges, and,
if required by applicable law, the Parties will, and will cause their Affiliates
to, join in the execution of any such Tax Returns and other
documentation.
(l) Construction.
The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall
be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word “including” shall mean including
without limitation. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless
the
Disclosure Schedule identifies the exception with reasonable particularity
and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception
to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself).
22
(m) Incorporation
of Exhibits and Schedules.
The
Schedules identified in this Agreement are incorporated herein by reference
and
made a part hereof. Information
set forth in the Schedules is included solely for informational purposes and
may
not be required to be disclosed pursuant to this Agreement. The disclosure
of
any information shall not be deemed to constitute an acknowledgment that such
information is required to be disclosed in connection with the representations
and warranties made by Xxxxxxxx.xxx in this Agreement or that such information
is material, nor shall such information be deemed to establish a standard of
materiality, nor shall it be deemed an admission of any liability of, or
concession as to any defense available to, Xxxxxxxx.xxx or W3i, or their
governors, managers , officers, employees, agents, financial and legal advisors,
or other representatives. The section number headings in the Schedules
correspond to the section numbers in this Agreement and any information
disclosed in any section of the Schedules shall be deemed to be disclosed and
incorporated into any other section of the Schedules where such disclosure
would
be appropriate and reasonably apparent.
(n) Specific
Performance.
Solely
with respect to the Covenant Not to Compete contained in Section 7(c), each
Party acknowledges and agrees that New Motion would be damaged irreparably
in
the event any provision of Section 7(c) is not performed in accordance with
its
specific terms or otherwise is breached, so that New Motion shall be entitled
to
injunctive relief to prevent breaches of the provisions of Section 7(c). In
particular, the Parties acknowledge that the business of Xxxxxxxx.xxx is unique
and recognize and affirm that in the event Xxxxxxxx.xxx or W3i breaches Section
7(c), money damages would be inadequate and New Motion would have no adequate
remedy at law, so that New Motion shall have the right, in addition to any
other
rights and remedies existing in its favor, to enforce its rights under Section
7(c) by an action for specific performance, injunctive, and/or other equitable
relief.
(o) Submission
to Jurisdiction.
Each of
the Parties submits to the jurisdiction of any state or federal court sitting
in
New York, New York, in any action or proceeding arising out of or relating
to
this Agreement and agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court. Each Party also agrees not to
bring any action or proceeding arising out of or relating to this Agreement
in
any other court. Each of the Parties waives any defense of inconvenient forum
to
the maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other Party with respect
thereto. Any Party may make service on the other Party by sending or delivering
a copy of the process to the Party to be served at the address and in the manner
provided for the giving of notices in Section 9(g) above. Nothing in this
Section 9(o), however, shall affect the right of any Party to serve legal
process in any other manner permitted by law or in equity. Each Party agrees
that a final judgment in any action or proceeding so brought shall be conclusive
and may be enforced by suit on the judgment or in any other manner provided
by
law or in equity.
(p) Governing
Language.
This
Agreement has been negotiated and executed by the Parties in English. In the
event any translation of this Agreement is prepared for convenience or any
other
purpose, the provisions of the English version shall prevail.
SECTION
10. Tax
Disclosure Authorization.
Notwithstanding anything herein to the contrary, the Parties (and each Affiliate
and Person acting on behalf of any Party) agree that each Party (and each
employee, representative, and other agent of such Party) may disclose to any
and
all Persons, without limitation of any kind, the transaction’s tax treatment and
tax structure (as such terms are used in Code Sections 6011 and 6112 and
regulations thereunder) contemplated by this Agreement and all materials of
any
kind (including opinions or other tax analyses) provided to such Party or such
Person relating to such tax treatment and tax structure. This authorization
is
not intended to permit disclosure of any other information including (without
limitation) (A) any portion of any materials to the extent not related to the
transaction’s tax treatment or tax structure, (B) the identities of participants
or potential participants, (C) the existence or status of any negotiations,
(D)
any pricing or financial information (except to the extent such pricing or
financial information is related to the transaction’s tax treatment or tax
structure), or (E) any other term or detail not relevant to the transaction’s
tax treatment or the tax structure.
23
SECTION
11. DEFINITIONS.
“Accounts
Payable”
means
all trade payables and accrued liabilities of Xxxxxxxx.xxx as of June 1, 2008,
which are set forth on Schedule 1(a) hereto. It excludes any Affiliate
payables.
“Accounts
Receivable”
means
the accounts receivable and prepaid expenses of Xxxxxxxx.xxx as of June 1,
2008,
which are set forth on Schedule 1(b) hereto. It excludes any Affiliate
receivables.
“Accredited
Investor”
has the
meaning set forth in Regulation D promulgated under the Securities
Act.
“Acquired
Assets”
means
all right, title, and interest in and to the following assets of Xxxxxxxx.xxx:
its (a) Webpages, (b) tangible personal property, (c) Intellectual Property,
goodwill associated therewith, licenses and sublicenses granted and obtained
with respect thereto, and rights thereunder, remedies against infringements
thereof, and rights to protection of interests therein under the laws of all
jurisdictions, (d) Acquired Contracts, (e) accounts, notes, and other
receivables, including Accounts Receivable, (f) claims, deposits, prepayments,
refunds, causes of action, choses in action, rights of recovery, rights of
set-off, and rights of recoupment (including any such item relating to the
payment of Taxes), (g) copies of necessary books, records, ledgers, files,
documents, and correspondence, (h) customer lists, creative materials,
advertising and promotional materials, studies, reports, and other printed
or
written materials, (i) Short Code, and (j) Subscriber Database, provided,
however,
that
the Acquired Assets shall not include (i) its certificate of formation,
qualifications to conduct business as a foreign limited liability company,
arrangements with registered agents relating to foreign qualifications, taxpayer
and other identification numbers, seals, minute books, membership interest
transfer books, blank membership interest certificates, and other documents
relating to the organization, maintenance, and existence of Xxxxxxxx.xxx as
a
limited liability company, (ii) any of the rights of Xxxxxxxx.xxx under this
Agreement (or under any side agreement between Xxxxxxxx.xxx on the one hand
and
New Motion on the other hand entered into on or after the date of this
Agreement), (iii) Cash or (iv) any contract or agreement that is not an Acquired
Contract.
“Acquired
Contracts”
means
those contracts and agreements set forth on Schedule 2(o)(i)
hereto.
“Adverse
Consequences”
means
all actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court costs
and
attorneys' fees and expenses but specifically excluding consequential or
diminution in value claims.”
“Affiliate”
with
respect to any Person, means any other Person that, directly or indirectly,
is
controlled by, controls or is under common control with that Person. “Control,”
with respect to any Person, means the power, directly or indirectly, to direct
the management and policies of that Person.
“Affiliated
Group”
means
any affiliated group within the meaning of Code Section 1504(a).
24
“Assumed
Liabilities”
means
(a) all Accounts Payable, (b) all obligations of Xxxxxxxx.xxx under the Acquired
Contracts (i) to furnish goods, services, and other non-Cash benefits to another
party after the Closing or (ii) to pay for goods, services, and other non-Cash
benefits that another party will furnish to it after the Closing, and (c) all
other Liabilities and obligations arising from New Motion’s use of the Acquired
Assets after Closing, provided,
however,
that,
notwithstanding the above, the Assumed Liabilities shall not include (i) any
Liability of Xxxxxxxx.xxx for Taxes, (ii) any Liability of Xxxxxxxx.xxx for
income, transfer, sales, use, and other Taxes arising in connection with the
consummation of the transactions contemplated hereby (including any income
Taxes
arising because Xxxxxxxx.xxx is transferring the Acquired Assets), (iii) any
Liability of Xxxxxxxx.xxx for the unpaid Taxes of any Person under Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise, (iv) any obligation of
Xxxxxxxx.xxx to indemnify any Person (including any Xxxxxxxx.xxx Members) by
reason of the fact that such Person was a governor, manager, officer, employee,
or agent of Xxxxxxxx.xxx or was serving at the request of Xxxxxxxx.xxx as a
partner, trustee, governor, director, manager, officer, employee, or agent
of
another entity (whether such indemnification is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise and whether such indemnification is pursuant to any statute, charter
document, operating agreement, or otherwise), (v) any Liability of Xxxxxxxx.xxx
for costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, (vi) any Excluded Indebtedness and
Obligations, (vii) any Liability in connection with Regulatory Actions arising
from occurrences or events before the Closing Date, (viii) any Liability
associated with Consumer Complaints arising from occurrences or events before
the Closing Date, except for refunds issued in the Ordinary Course of Business,
(ix) any Liability associated with the compensation, benefits or negligence
of
any governor, manager, officer, or other employee of Xxxxxxxx.xxx, (x) any
Liability associated with Permitted Liens in existence as of the Closing, (xi)
any Liability under any contract or agreement that is not an Acquired Contract,
or (xii) any Liability or obligation of Xxxxxxxx.xxx under this Agreement (or
under any side agreement between Xxxxxxxx.xxx on the one hand and New Motion
on
the other hand entered into on or after the date of this Agreement).
“Bank
Account”
means
the following account of Xxxxxxxx.xxx:
Account
Numbers ABA 3622025249 and
Routing
Number: 000000000
Xxxxx
Fargo Bank, N.A.
000
Xxxxxxxxxx Xxxxxx
Xxx
Xxxxxxxxx, XX 00000
“Cash”
means
cash and cash equivalents (including the Bank Accounts, marketable securities
and short-term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
“Closing”
has
the
meaning set forth in Section 1(d) above.
“Closing
Date”
has
the
meaning set forth in Section 1(d) above.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Confidential
Information”
means
any information concerning the business and affairs of Xxxxxxxx.xxx that is
not
already generally available to the public.
“Consumer
Complaints”
means
a
subscriber allegation of wrongdoing.
“Disclosure
Schedule”
has
the
meaning set forth in Section 2 above.
25
“Excluded
Indebtedness and Obligations”
means
any indebtedness owed by Xxxxxxxx.xxx to its Affiliates.
“Financial
Statements”
has
the
meaning set forth in Section 2(g) above.
“New
Motion”
has
the
meaning set forth in the preface above.
“New
Motion Note”
has
the
meaning set forth in Section 1(c) above.
“GAAP”
means
United States generally accepted accounting principles as in effect from time
to
time, consistently applied.
“Governmental
Authority”
means
any court, administrative agency or commission or other governmental authority
or instrumentality, domestic or foreign.
“Intellectual
Property”
means
all of the following in any jurisdiction throughout the world: (a) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications,
and
invention disclosures, together with all reissuances, divisionals,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names (including, but not limited to,
xxxxxxxx.xxx) (i.e.,
any alphanumeric designation registered with or assigned by a domain name
registrar, registry, or domain name registration authority as part of an
electronic address on the Internet) and
rights in telephone numbers, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works and derivative works thereof, all
copyrights, and all applications, registrations, and renewals in connection
therewith, (d) all trade secrets and confidential business information
(including ideas, research and development, know-how, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all computer
software (including source code, executable code, data, databases, and related
documentation), and (g) all advertising and promotional materials and (h) all
copies and tangible embodiments thereof (in whatever form or
medium).
“Knowledge”
means
actual knowledge of a person after reasonable investigation.
“Liability”
means
any liability or obligation of whatever kind or nature (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or
to
become due), including any liability for Taxes.
“Lien”
means
any mortgage, pledge, lien, encumbrance, charge, or other security interest
other
than (a)
liens
for Taxes not yet due and payable, (b) purchase money liens and liens securing
rental payments under capital lease arrangements, and (c) other liens arising
in
the Ordinary Course of Business and not incurred in connection with the
borrowing of money.
26
“Material
Adverse Effect”
or
“Material
Adverse Change”
means
any effect or change that would be materially adverse to the business or assets
of Xxxxxxxx.xxx, taken as a whole, or to the ability of any Party to consummate
timely the transactions contemplated hereby; provided that none of the following
shall be deemed to constitute, and none of the following shall be taken into
account in determining whether there has been, a Material Adverse Effect or
Material Adverse Change: (a) any adverse change, event, development, or effect
arising from or relating to (1) general business or economic conditions,
including such conditions related to the business of Xxxxxxxx.xxx, (2) national
or international political or social conditions, including the engagement by
the
United States in hostilities, whether or not pursuant to the declaration of
a
national emergency or war, or the occurrence of any military or terrorist attack
upon the United States, or any of its territories, possessions, or diplomatic
or
consular offices or upon any military installation, equipment or personnel
of
the United States, (3) financial, banking, or securities markets (including
any
disruption thereof and any decline in the price of any security or any market
index), (4) changes in United States generally accepted accounting principles,
(5) changes in laws, rules, regulations, orders, or other binding directives
issued by any governmental entity or (6) the taking of any action contemplated
by this Agreement and the other agreements contemplated hereby, (b) any existing
event, occurrence, or circumstance with respect to which New Motion has actual
knowledge as of the date hereof and (c) any adverse change in or effect on
the
business of Xxxxxxxx.xxx that is cured by Xxxxxxxx.xxx before the earlier of
(1)
the Closing Date and (2) the date on which this Agreement is terminated pursuant
to Section 6 hereof.
“Most
Recent Balance Sheet”
means
the balance sheet contained within the Most Recent Financial
Statements.
“Most
Recent Financial Statements”
has
the
meaning set forth in Section 2(g) above.
“Most
Recent Fiscal Month End”
has
the
meaning set forth in Section 2(g) above.
“Most
Recent Fiscal Year End”
has
the
meaning set forth in Section 2(g) above.
“Xxxxxxxx.xxx”
has
the
meaning set forth in the preface above.
“Xxxxxxxx.xxx
Membership Interests”
means
the relative interests of the Xxxxxxxx.xxx Members in Xxxxxxxx.xxx, as set
forth
in the Disclosure Schedules hereto.
“Xxxxxxxx.xxx
Members”
means
any person who or that holds any Xxxxxxxx.xxx Membership Interests.
“Net
Working Capital”
means
the excess of Xxxxxxxx.xxx’s Accounts Receivable over Xxxxxxxx.xxx’s Accounts
Payable.
“Ordinary
Course of Business”
means
Xxxxxxxx.xxx’s ordinary course of business consistent with past custom and
practice (including with respect to quantity and frequency).
“Party”
has
the
meaning set forth in the preface above.
“Permitted
Liens”
means
(i) Liens for Taxes or other governmental charges, assessments or levies that
are not delinquent, (ii) landlord’s, mechanic’s, carrier’s, workmen’s,
repairmen’s or other similar Liens arising or incurred in the ordinary course of
business that do not materially detract from the value of the property
encumbered thereby, (iii) other Liens the existence of which do not materially
impair the operations of Xxxxxxxx.xxx in the ordinary course or the value of
its
assets taken as a whole, (iv) minor imperfections of title, conditions,
easements and reservations of rights, including easements and reservations
of,
or rights of others for, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, encroachments, covenants and
restrictions and (v) any inchoate Liens for Taxes.
“Person”
means
an individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, any other business entity, or a governmental entity (or any
department, agency, or political subdivision thereof).
27
“Purchase
Price”
has
the
meaning set forth in Section 1(c) above.
“Regulatory
Actions”
means
an allegation of wrongdoing, including requests for information, investigations
and formal complaints.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Short
Code”
means
the short code number 36726 only.
“Subscriber
Database”
means
the listing of all active Xxxxxxxx.xxx subscribers that could be billed on
the
Closing Date.
“Subsidiary”
means,
with respect to any Person, any corporation, limited liability company,
partnership, association, or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of
governors, directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited
liability company, partnership, association, or other business entity (other
than a corporation), a majority of the partnership or other similar ownership
interests thereof is at the time owned or controlled, directly or indirectly,
by
that Person or one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons own a majority ownership interest
in
such a business entity (other than a corporation) if such Person or Persons
shall be allocated a majority of such business entity’s gains or losses or shall
be or control any managing director or general partner of such business entity
(other than a corporation). The term “Subsidiary”
shall
include all Subsidiaries of such Subsidiary.
“Tax”
or
“Taxes”
means
any federal, state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, whether computed on a separate or
consolidated, unitary or combined basis or in any other manner, including any
interest, penalty, or addition thereto, whether disputed or not and including
any obligation to indemnify or otherwise assume or succeed to the Tax liability
of any other Person.
“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.
“True-up
Payments”
shall
have the meaning set forth in Section 1(d) above.
“Webpages”
means
all
pages
active on the domain Xxxxxxxx.xxx any sub-domains and any other pages used
by
Xxxxxxxx.xxx to acquire subscribers. Notwithstanding the foregoing it excludes
any pages used by third parties to acquire subscribers for
Xxxxxxxx.xxx.
[REMAINDER
OF THIS PAGE INTENTIONALLY BLANK]
28
IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date
first above written.
|
a
Delaware corporation
|
||
|
By:
|
/s/ Xxxxxx Xxxx | |
|
Xxxxxx
Xxxx, Chief Executive Officer
|
||
|
XXXXXXXX.XXX,
LLC,
|
||
|
a
Minnesota limited liability company
|
||
|
By:
|
/s/ Xxxxxx Xxxxxxx | |
|
Xxxxxx
Xxxxxxx, Chief Manager/President
|
||
|
Acknowledged
and Agreed to solely with respect to
Sections
7(a), 7(c), 7(d), 8, 9(g) and 9(i):
|
||
|
W3i
|
||
|
a
|
Minnesota limited liability company | |
|
By:
|
/s/ Xxxxxx Xxxxxxx | |
|
Xxxxxx
Xxxxxxx, Chief Manager/President
|
||
29
