ASSET PURCHASE AGREEMENT, dated as of September 29, 2006, between MEDIALINK WORLDWIDE INCORPORATED and PR NEWSWIRE ASSOCIATION, LLC
Exhibit
2.1
dated
as
of September 29, 2006,
between
MEDIALINK
WORLDWIDE INCORPORATED
and
PR
NEWSWIRE ASSOCIATION, LLC
ARTICLE I |
DEFINITIONS
|
1
|
|
1.1
|
DEFINITIONS
|
1
|
|
1.2
|
CONSTRUCTION
|
1
|
|
ARTICLE II |
PURCHASE
AND SALE
|
2
|
|
2.1
|
PURCHASE
AND SALE OF THE PURCHASED ASSETS
|
2
|
|
2.2
|
EXCLUDED
ASSETS
|
3
|
|
2.3
|
ASSUMED
LIABILITIES
|
4
|
|
2.4
|
EXCLUDED
LIABILITIES
|
4
|
|
2.5
|
PURCHASE
PRICE
|
6
|
|
2.6
|
CLOSING
DATE
|
6
|
|
2.7
|
CLOSING
DELIVERIES
|
6
|
|
2.8
|
CLOSING
WORKING CAPITAL
|
8
|
|
2.9
|
ALLOCATION
|
10
|
|
2.10
|
ESCROW
AGREEMENT
|
11
|
|
ARTICLE III |
REPRESENTATIONS
AND WARRANTIES OF THE SELLER
|
12
|
|
3.1
|
ORGANIZATION
AND GOOD STANDING
|
12
|
|
3.2
|
AUTHORITY
AND ENFORCEABILITY
|
12
|
|
3.3
|
NO
CONFLICTS; CONSENTS
|
13
|
|
3.4
|
FINANCIAL
STATEMENTS; NO LIABILITIES; ACCOUNTS RECEIVABLE
|
13
|
|
3.5
|
TAXES
|
14
|
|
3.6
|
COMPLIANCE
WITH LAW; PERMITS
|
15
|
|
3.7
|
TITLE
AND CONDITION OF PURCHASED ASSETS
|
16
|
|
3.8
|
SUFFICIENCY
OF PURCHASED ASSETS
|
16
|
|
3.9
|
INTELLECTUAL
PROPERTY
|
16
|
|
3.10
|
ABSENCE
OF CERTAIN CHANGES OR EVENTS
|
19
|
|
3.11
|
CONTRACTS
|
20
|
|
3.12
|
LITIGATION;
ORDERS
|
21
|
|
3.13
|
EMPLOYEE
BENEFITS
|
22
|
|
3.14
|
LABOR
AND EMPLOYMENT MATTERS
|
22
|
|
3.15
|
ENVIRONMENTAL
|
23
|
|
3.16
|
INSURANCE
|
24
|
|
3.17
|
SUPPLIERS
AND CUSTOMERS
|
24
|
|
3.18
|
AFFILIATE
TRANSACTIONS
|
24
|
i
3.19
|
SOLVENCY
|
25
|
|
3.20
|
BROKERS
|
25
|
|
3.21
|
ESCHEATMENT
|
25
|
|
3.22
|
PRIVACY
|
25
|
|
3.23
|
COMPLETENESS
OF DISCLOSURE
|
26
|
|
ARTICLE IV |
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
|
26
|
|
4.1
|
ORGANIZATION
AND GOOD STANDING
|
26
|
|
4.2
|
AUTHORITY
AND ENFORCEABILITY
|
26
|
|
4.3
|
NO
CONFLICTS; CONSENTS
|
26
|
|
4.4
|
LITIGATION
|
27
|
|
4.5
|
SOLVENCY
|
27
|
|
4.6
|
BROKERS
|
27
|
|
ARTICLE V |
COVENANTS
|
27
|
|
5.1
|
CONFIDENTIALITY
|
28
|
|
5.2
|
RESTRICTIVE
COVENANTS
|
28
|
|
5.3
|
INSURANCE
|
29
|
|
5.4
|
EMPLOYEE
MATTERS
|
30
|
|
5.5
|
CONSENTS
|
31
|
|
5.6
|
PUBLIC
ANNOUNCEMENTS
|
32
|
|
5.7
|
NAMES
|
32
|
|
5.8
|
TAXES
|
32
|
|
5.9
|
BULK
SALES LAWS
|
33
|
|
5.10
|
DISCHARGE
OF BUSINESS OBLIGATIONS AFTER CLOSING
|
33
|
|
5.11
|
ACCESS
TO BOOKS AND RECORDS
|
34
|
|
5.12
|
OUTSTANDING
CHECKS
|
35
|
|
5.13
|
FURTHER
ASSURANCES
|
35
|
|
ARTICLE VI |
INDEMNIFICATION
|
35
|
|
6.1
|
SURVIVAL
|
35
|
|
6.2
|
INDEMNIFICATION
BY THE SELLER
|
36
|
|
6.3
|
INDEMNIFICATION
BY THE BUYER
|
36
|
|
6.4
|
INDEMNIFICATION
PROCEDURE FOR THIRD PARTY CLAIMS
|
37
|
|
6.5
|
INDEMNIFICATION
PROCEDURES FOR NON-THIRD PARTY CLAIMS
|
38
|
|
6.6
|
TAX
BENEFITS; INSURANCE
|
38
|
ii
6.7
|
CONTINGENT
CLAIMS
|
39
|
|
6.8
|
EFFECT
OF INVESTIGATION; WAIVER
|
39
|
|
6.9
|
OTHER
RIGHTS AND REMEDIES NOT AFFECTED
|
39
|
|
ARTICLE VII |
MISCELLANEOUS
|
39
|
|
7.1
|
INTENTIONALLY
OMITTED
|
39
|
|
7.2
|
NOTICES
|
39
|
|
7.3
|
AMENDMENTS
AND WAIVERS
|
41
|
|
7.4
|
EXPENSES
|
41
|
|
7.5
|
SUCCESSORS
AND ASSIGNS
|
41
|
|
7.6
|
GOVERNING
LAW
|
41
|
|
7.7
|
CONSENT
TO JURISDICTION
|
41
|
|
7.8
|
COUNTERPARTS
|
42
|
|
7.9
|
THIRD
PARTY BENEFICIARIES
|
42
|
|
7.10
|
ENTIRE
AGREEMENT
|
42
|
|
7.11
|
CAPTIONS
|
42
|
|
7.12
|
SEVERABILITY
|
42
|
|
7.13
|
SPECIFIC
PERFORMANCE
|
43
|
|
7.14
|
INTERPRETATION
|
43
|
iii
ASSET
PURCHASE AGREEMENT, dated as of September 29, 2006 (the “Agreement”),
between Medialink Worldwide Incorporated, a Delaware corporation (the
“Seller”)
and PR
Newswire Association, LLC, a Delaware limited liability company (the
“Buyer”).
WHEREAS,
the Seller operates a national news release wire service under the trade name
U.S. Newswire that distributes press releases, photographs and other information
to news media, internet websites, portals and search engines and on-line
services over electronic communications systems on behalf of governmental,
public affairs and non-profit organizations, principally in the United States
(the “Business”);
provided,
that
the Business does not include text advisories issued by the Seller with respect
to the Seller’s other businesses; and
WHEREAS,
the parties desire that the Seller sell, assign, transfer, convey and deliver
to
the Buyer, and that the Buyer purchase, acquire and accept from the Seller,
all
of the right, title and interest of the Seller in and to the Purchased Assets
(as hereinafter defined), and that the Buyer assume the Assumed Liabilities
(as
hereinafter defined), upon the terms and subject to the conditions of this
Agreement.
NOW,
THEREFORE, in consideration of the foregoing premises and the respective
representations, warranties, covenants and agreements contained herein, and
for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions.
When
used in this Agreement, defined terms shall have the meanings assigned to them
in Annex
I
hereto.
1.2 Construction.
For the
purposes of this Agreement, except as otherwise expressly provided herein or
unless the context otherwise requires: (a) the meaning assigned to each term
defined herein shall be equally applicable to both the singular and the plural
forms of such term and vice versa, and words denoting any gender shall include
all genders as the context requires; (b) where a word or phrase is defined
herein, each of its other grammatical forms shall have a corresponding meaning;
(c) the terms “hereof”, “herein”, “hereunder”, “hereby” and “herewith” and words
of similar import shall, unless otherwise stated, be construed to refer to
this
Agreement as a whole and not to any particular provision of this Agreement;
(d)
when a reference is made in this Agreement to an Article, Section, paragraph,
Exhibit, Annex or Schedule, such reference is to an Article, Section, paragraph,
Exhibit, Annex or Schedule of this Agreement unless otherwise specified; (e)
the
words “include”, “includes” and “including” when used in this Agreement shall be
deemed to be modified by the words “without limitation”, unless otherwise
specified; (f) a reference to any party to this Agreement or any other agreement
or document shall include such party’s predecessors, successors and permitted
assigns; (g) a reference to any Law means such Law as amended, modified,
codified, replaced or reenacted, and all rules and regulations promulgated
thereunder; and (h) all accounting terms used and not defined herein have the
respective meanings given to them under GAAP.
ARTICLE
II
PURCHASE
AND SALE
2.1 Purchase
and Sale of the Purchased Assets.
Upon
the terms and subject to the conditions of this Agreement, the Seller hereby
sells, assigns, transfers, conveys and delivers, to the Buyer, and the Buyer
hereby purchases, acquires and accepts from the Seller, free and clear of all
Liens (other than Permitted Liens), all of the right, title and interest of
the
Seller and its Affiliates in, to and under all of the assets, properties and
rights (of every kind and description) that are owned or licensed by the Seller
or its Affiliates and relate to or are used in connection with the Business
other than the Excluded Assets (the “Purchased
Assets”),
including, without limitation, the following assets, properties and rights:
(a) all
website, text releases, photos and other content (whether current or archived)
related to or used in connection with the Business (regardless of whether such
content is contained on or within Excluded Assets);
(b) all
Business Intellectual Property;
(c) all
customer and supplier lists (whether relating to existing or lapsed customers)
related to or used in connection with the Business (regardless of whether such
lists are contained on or within Excluded Assets);
(d) all
Equipment and inventory related to or used in connection with the
Business;
(e) all
Contracts to which the Seller or any of its Affiliates is a party (including
all
In-Bound Licenses and Work Product Agreements) that are related to or used
in
connection with the Business and all rights thereunder (the “Assigned
Contracts”);
(f) all
Accounts Receivable of the Business (other than Intercompany
Accounts);
(g) all
Permits related to or used in connection with the operation of the
Business;
2
(h) all
Books
and Records related to or used in connection with the Business (regardless
of
whether such Books and Records are contained on or within Excluded
Assets);
(i) except
as
set forth in Section 2.2(g), all prepaid expenses related to or used in
connection with the Business (the “Assigned
Prepaid Expenses”);
(j) all
telephone numbers related to or used in connection with the
Business;
(k) all
security deposits, xxxxxxx deposits and all other forms of deposit or security
placed with or by the Seller that are related to or used in connection with
the
Business, in each case, only to the extent related to a Purchased
Asset;
(l) all
rights, recoveries, refunds (other than Tax refunds, in respect of Taxes that
are Excluded Liabilities), counterclaims, rights to offset, choses in actions,
rights under all warranties, representations and guarantees made by suppliers
of
products, materials or equipment or components thereof, other rights and claims
(whether known or unknown, matured or unmatured, contingent or accrued) against
third parties, in each case, that are related to or used in connection with
the
Business; and
(m) all
other
intangible rights and properties, including goodwill of the Business as a going
concern and e-mail, website, Internet, facsimile and telephone numbers, listings
and addresses, in each case, that are related to or used in connection with
the
Business.
2.2 Excluded
Assets.
The
Purchased Assets do not include, and the Seller is not selling, assigning,
transferring, conveying or delivering, and the Buyer is not purchasing,
acquiring or accepting from the Seller, any of the assets, properties or rights
set forth in this Section 2.2 (collectively, the “Excluded
Assets”):
(a) all
assets, properties and rights that are not related to or used in connection
with
the Business;
(b) other
than as provided in Section 2.1(j), all cash, cash equivalents and securities
owned or otherwise held by the Seller, including, bank deposits, investments
in
so-called “money market” funds, commercial paper funds, certificates of deposit,
Treasury bills and accrued interest thereon;
(c) all
bank
and other depository accounts of the Seller;
(d) all
corporate seals, Organizational Documents, stock record books, corporate record
books containing minutes of meetings of directors and shareholders, Tax Returns
and all other records having to do with the organization or capitalization
of
the Seller and its Affiliates (the “Excluded
Books and Records”);
3
(e) all
Benefit Plans;
(f) any
shares of capital stock or other equity interests owned by the Seller;
(g) all
prepaid Taxes and refunds of Taxes relating to the Seller for any period or
portion thereof ending on or prior to the Effective Time;
(h) all
Intercompany Accounts;
(i) all
assets, properties and rights set forth on Section
2.2(i) of the Seller Disclosure Schedule;
(j) all
real
property owned or leased by the Seller;
(k) all
of
the Seller’s insurance policies; and
(l) all
rights of the Seller under this Agreement, the Ancillary Agreements and any
other agreement, certificate, instrument or other document executed and
delivered by the Seller or the Buyer in connection with the transactions
contemplated hereby, or any side agreement between the Seller and the Buyer
entered into on or after the date of this Agreement.
2.3 Assumed
Liabilities.
Upon
the terms and subject to the conditions of this Agreement, the Buyer shall
assume effective as of the Effective Time, and from and after the Effective
Time
the Buyer shall pay, discharge or perform when due, as appropriate, only the
following Liabilities of the Seller (the “Assumed
Liabilities”),
and
no other Liabilities:
(a) all
Current Liabilities in an amount not to exceed the amount set forth for each
such Liability in the Final Working Capital;
(b) all
Liabilities in respect of the Assigned Contracts but only to the extent that
such Liabilities (i) are required to be performed after the Effective Date,
(ii)
were incurred in the ordinary course of business consistent with past practice
and (iii) do not relate to any failure to perform, improper performance,
warranty or other breach, default or violation by the Seller on or prior to
the
Effective Date; and
(c) all
Liabilities for payment of bonuses and commissions to Transferred Employees
for
the current fiscal year but only to the extent (i) such amounts have been
accrued for in the calculation of the Final Working Capital and (ii) such bonus
and commission plans and arrangements are disclosed in Section
3.13(a) of the Seller Disclosure Schedule.
2.4 Excluded
Liabilities.
Neither
the Buyer nor any of its Affiliates shall assume any Liabilities of the Seller
or its Affiliates (such unassumed Liabilities, the “Excluded
Liabilities”)
other
than those specifically set forth in Section 2.3. Without limiting the
generality of the foregoing, in no event shall the Buyer or any of its
Affiliates assume or incur any Liability in respect of, and the Seller and
its
Affiliates shall remain bound by and liable for, and shall pay, discharge or
perform when due, the following Liabilities of the Seller:
4
(a) all
Liabilities for Taxes imposed on or relating to the Business or the Purchased
Assets for any taxable period or portion thereof ending on or before the
Effective Date, and all Liabilities for Taxes imposed on or relating to the
Seller or any of its Affiliates for any taxable period;
(b) all
Liabilities in respect of the Excluded Assets and Yahoo Payables;
(c) all
Liability for Intercompany Accounts;
(d) all
Indebtedness of
the
Business or the Seller;
(e) all
product Liability, warranty and similar claims for damages or injury to person
or property, claims of infringement of Intellectual Property rights and all
other Liabilities, regardless of when made or asserted, which arise out of
or
are based upon any events occurring or actions taken or omitted to be taken
by
the Seller or its Affiliates, or otherwise arising out of or incurred in
connection with the conduct of the Business, on or before the Effective
Date;
(f) all
Liabilities arising out of (i) the ownership or operation of the Business or
the
ownership, use or operation of the Purchased Assets at any time prior to the
Effective Time or (ii) the ownership, operation or condition of any real
property currently or formerly owned, operated or leased by the
Seller;
(g) all
Liabilities arising out of or resulting from any Benefit Plan;
(h)
except
as specifically provided in Section 2.3(c), all compensation related Liabilities
(including deferred or accrued bonuses) and all other employee-related
Liabilities (including, severance, salaries, commissions, worker’s compensation,
COBRA benefits and compensation related liabilities, whether accrued or
deferred, including among others, deferred bonuses), whether or not arising
under Law or Contract, owing to the Seller’s Employees and consultants;
(i) all
Liabilities owed by the Seller or the Business to any Affiliate of the Seller,
or to any family member of an Affiliate of the Seller; and
(j) all
Liabilities of the Seller under this Agreement, the Ancillary Agreements and
any
other agreement, certificate, instrument or other document executed and
delivered by the Seller in connection with the transactions contemplated hereby
or thereby and all Liabilities arising out of or incurred in connection with
the
negotiation, preparation and execution of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby, including Taxes and fees and expenses of counsel, accountants and
other
experts.
5
2.5 Purchase
Price.
The
consideration to be paid by the Buyer to the Seller for the Purchased Assets
(the “Purchase
Price”) shall
be
(i) Nineteen Million Dollars ($19,000,000), subject to adjustment as set forth
in Section 2.8 (the “Upfront
Purchase Price”)
plus
(ii) the
Earnout Amount (if any) as determined pursuant to Annex
II,
minus
(iii)
the Clawback Amount (if any) as determined pursuant to Annex
II plus
(iv) the
assumption of the Assumed Liabilities.
2.6 Closing
Date.
The
consummation of the transactions contemplated by this Agreement (the
“Closing”)
shall
(a) take place simultaneously with the execution of this Agreement at the
offices of Xxxxxx, Xxxxx & Xxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
or as otherwise mutually determined by the parties and (b) shall be effective
at
11:59 p.m. (New York City time) on September 30, 2006 (the “Effective
Time”).
The
date on which the Closing occurs is referred to in this Agreement as the
“Closing
Date”
and
the
date on which the Effective Time occurs is referred to in this Agreement as
the
“Effective
Date”.
2.7 Closing
Deliveries.
(a) Deliveries
by the Seller at the Closing.
At the
Closing, the Seller shall deliver or cause to be delivered to the Buyer the
following:
(i) a
xxxx of
sale, substantially in the form of Exhibit
A
hereto
(the “Xxxx
of Sale”),
duly
executed by the Seller;
(ii) an
assumption agreement, substantially in the form of Exhibit
B
hereto
(the “Assumption
Agreement”),
duly
executed by the Seller;
(iii) intellectual
property assignments, substantially in the form of Exhibit
C
hereto
(the “Intellectual
Property Assignments”),
duly
executed by the Seller;
(iv) the
Escrow Agreement, duly executed by the Seller;
(v) a
transition services agreement, substantially in the form of Exhibit
D
hereto
(the “Transition
Services Agreement”),
duly
executed by the Seller;
(vi) a
services agreement, substantially in the form of Exhibit
E hereto
(the “Services
Agreement”),
duly
executed by the Seller;
(vii) such
other good and sufficient instruments of transfer as the Buyer reasonably deems
necessary and appropriate to vest in the Buyer all right, title and interest
in,
to and under the Purchased Assets;
6
(viii) certificates
of good standing for the Seller in all jurisdictions where it is incorporated
or
registered to carry on the Business;
(ix) a
certificate of the Secretary of the Seller dated the Effective Date and
certifying that attached thereto are true and complete copies of all resolutions
adopted by the Board of Directors of the Seller in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements, and
that all such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by this
Agreement and the Ancillary Agreements;
(x) evidence
in form and substance satisfactory to the Buyer that all Liens (other than
Permitted Liens) with respect to the Purchased Assets have been released;
(xi) evidence
in form and substance reasonably satisfactory to the Buyer that all Yahoo
Payables (other than the Third Quarter Yahoo Payable) have been paid and
satisfied; and
(xii) a
completed certification of non-foreign status pursuant to Section 1.1445-2(b)(2)
of the Treasury regulations duly executed by the Seller.
(b) Deliveries
by the Buyer at the Closing.
(i) At
the
Closing, the Buyer shall deliver:
(A) to
the
Seller, an amount equal to (1) the Upfront Purchase Price minus
(2) the
General Escrow Amount minus
(3) the
Clawback Escrow Amount plus
(4) the
Estimated Working Capital Surplus Amount by
wire
transfer of immediately available funds to the accounts designated in writing
by
the Seller to the Buyer prior to the Closing Date;
(B) to
the
Escrow Agent, an amount equal to the (1) the General Escrow Amount plus
(2) the
Clawback Escrow Amount by wire transfer of immediately available funds in
accordance with the Escrow Agreement;
(ii) At
the
Closing, the Buyer shall deliver to the Seller the following:
(A) the
Assumption Agreement, duly executed by the Buyer;
(B) the
Intellectual Property Assignments, duly executed by the Buyer;
(C) the
Escrow Agreement, duly executed by the Buyer;
7
(D) the
Transition Services Agreement, duly executed by the Buyer; and
(E) the
Services Agreement, duly executed by the Buyer.
2.8 Closing
Working Capital.
(a) For
purposes of this Agreement the “Estimated
Working Capital”
means
an amount equal to $450,296.
(b) Within
ninety (90) days after the Effective Date, the Buyer will prepare, or cause
to
be prepared, and deliver to the Seller an unaudited statement (the “Closing
Working Capital Statement”),
which
shall set forth the Buyer’s calculation of Working Capital as of the Effective
Date (the “Closing
Working Capital”).
The
Closing Working Capital Statement shall be prepared (i) in accordance with
GAAP,
(ii) in accordance with the accounting principles, methodologies and policies
used in the preparation of the Financial Statements which are set forth in
Section
3.4(a)(ii) of the Seller Disclosure Schedule
(regardless of whether such principles, methodologies and policies are
consistent with GAAP) and (iii) to the extent not inconsistent with GAAP, in
accordance with the accounting principles, methodologies and policies used
in
the preparation of the Financial Statements which are set forth in Section
3.4(a)(iii) of the Seller Disclosure Schedule.
At the
Buyer’s request, the Seller (i) shall assist, and shall cause its Subsidiaries,
Affiliates and each of their respective representatives to assist, the Buyer
and
its representatives in the preparation of the Closing Working Capital Statement,
(ii) shall provide the Buyer and its representatives with any information
reasonably requested by them in connection therewith and (iii) shall give the
Buyer and its representatives access, during normal business hours and upon
reasonable notice, to the Seller’s personnel, properties and books and records
for such purpose. An example of the calculation of the Working Capital in
accordance with this section, based on the Seller’s August 31, 2006 balance
sheet, is set forth as Exhibit
F
hereto.
(c) Upon
receipt from the Buyer, the Seller shall have thirty (30) days to review the
Closing Working Capital Statement (the “Review
Period”).
At
the Seller’s request, the Buyer (i) shall cooperate and assist the Seller and
its representatives in reviewing the Closing Working Capital Statement and
the
materials used in its preparation and (ii) shall provide the Seller and its
representatives with any information reasonably requested by them in connection
therewith. If the Seller disagrees with the Buyer’s computation of Closing
Working Capital, the Seller may, on or prior to the last day of the Review
Period, deliver a written notice to the Buyer (the “Notice
of Objection”),
which
sets forth its specific objections to the Buyer’s calculation of Closing Working
Capital. Any Notice of Objection shall specify those items or amounts with
which
the Seller disagrees, together with a detailed written explanation of the
reasons for disagreement with each such item or amount, and shall set forth
the
Seller’s calculation of Closing Working Capital based on such objections. To the
extent not set forth in the Notice of Objection, the Seller shall be deemed
to
have agreed with the Buyer’s calculation of all other items and amounts
contained in the Closing Working Capital Statement.
8
(d) Unless
the Seller delivers the Notice of Objection to the Buyer on or prior to the
last
day of the Review Period, the Seller shall be deemed to have accepted the
Buyer’s calculation of Closing Working Capital and the Closing Working Capital
Statement shall be final, conclusive and binding. If the Seller delivers the
Notice of Objection to the Buyer within the Review Period, the Buyer and the
Seller shall, during the thirty (30) days following such delivery or any
mutually agreed extension thereof, use their commercially reasonable efforts
to
reach agreement on the disputed items and amounts in order to determine the
amount of Closing Working Capital. If, at the end of such period or any mutually
agreed extension thereof, the Buyer and the Seller are unable to resolve their
disagreements, they shall jointly retain and refer their disagreements to
Deloitte & Touche USA LLP (or, if such firm shall decline or is unable to
act, or has a material relationship with the Buyer or the Seller or any of
their
respective Affiliates) another nationally recognized independent accounting
firm
mutually acceptable to the Buyer and the Seller (the “Independent
Expert”).
The
parties shall instruct the Independent Expert promptly to review this
Section 2.8 and to determine solely with respect to the disputed items and
amounts so submitted whether and to what extent, if any, the Closing Working
Capital set forth in the Closing Working Capital Statement requires adjustment.
The Independent Expert shall base its determination solely on written
submissions by the Buyer and the Seller and not on an independent review. The
Buyer and the Seller shall make available to the Independent Expert all relevant
books and records and other items reasonably requested by the Independent
Expert. As promptly as practicable, but in no event later than thirty (30)
days
after its retention, the Independent Expert shall deliver to the Buyer and
the
Seller a report which sets forth its resolution of the disputed items and
amounts and its calculation of Closing Working Capital; provided
that in
no event shall Closing Working Capital, as determined by the Independent Expert,
be less than the Buyer’s calculation of Closing Working Capital set forth in the
Closing Working Capital Statement, nor more than the Seller’s calculation of
Closing Working Capital set forth in the Notice of Objection. The decision
of
the Independent Expert shall be final, conclusive and binding on the parties.
The costs and expenses of the Independent Expert shall be allocated between
the
parties 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 Expert. Each party agrees to execute, if requested
by the Independent Expert, a reasonable engagement letter, including customary
indemnities in favor of the Independent Expert.
(e) For
purposes of this Agreement, “Final
Working Capital”
means
the Closing Working Capital: (i) as shown in the Closing Working Capital
Statement delivered by the Buyer to the Seller pursuant to Section 2.8(b),
if no Notice of Objection with respect thereto is timely delivered by the Seller
to the Buyer pursuant to Section 2.8(c); or (ii) if a Notice of
Objection is so delivered, (A) as agreed by the Buyer and the Seller
pursuant to Section 2.8(d) or (B) in the absence of such agreement, as
shown in the Independent Expert’s calculation delivered pursuant to
Section 2.8(d).
9
(f) Within
three (3) Business Days after the Final Working Capital has been finally
determined pursuant to this Section 2.8,
(i) if
the
Final Working Capital is less than the Estimated Working Capital, the Seller
shall pay to the Buyer, as an adjustment to the Purchase Price, in the manner
and with interest as provided in this Section 2.8(f), an amount of cash equal
to
the difference between the Final Working Capital and the Estimated Working
Capital; and
(ii) if
the
Final Working Capital is greater than the Estimated Working Capital, the Buyer
shall pay to the Seller, as an adjustment to the Purchase Price, in the manner
and with interest as provided in this Section 2.8(f), an amount of cash equal
to
the difference between Final Working Capital and the Estimated Working
Capital.
Any
such
payment shall be made by wire transfer of immediately available funds to an
account designated in writing by the Buyer or the Seller, as the case may be,
at
least one Business Day prior to such transfer. The amount of any payment to
be
made pursuant to this Section 2.8(f) shall bear interest from and including
the
Effective Date to but excluding the date of payment at a rate per annum equal
to
2.0%. Such interest shall be calculated daily on the basis of a year of 365
days
and the actual number of days elapsed, without compounding.
(g) Any
rights accruing to a party under this Section 2.8 shall be in addition to and
independent of the rights to indemnification under Article VI and any payments
made to any party under this Section 2.8 shall not be subject to the terms
of
Article VI. For clarification, any disputes or conflict as to the calculation
of
the Final Working Capital shall be governed by this Section 2.8 and not by
Article VI, and any amounts paid pursuant to this Section 2.8 shall not be
deemed a “Loss” as defined in such Article VI and shall not be subject to the
limitations set forth in Article VI.
2.9 Allocation.
As soon
as reasonably practicable following the Closing, Buyer shall deliver to Seller
an allocation statement setting forth the Buyer’s allocation of the Purchase
Price and those Assumed Liabilities that are liabilities for U.S. federal income
tax purposes pursuant to Section 1060 of the Code and any other applicable
Tax
Laws (as the same may be revised pursuant to the following sentence, the
“Allocation
Statement”).
In
the event that the Purchase Price is adjusted pursuant to Section 2.8 or Annex
II, the Buyer shall deliver to the Seller a revised Allocation Statement as
soon
as reasonably practicable following such adjustment. Except as otherwise
required by Law, the Buyer and the Seller shall file all Tax Returns (such
as
IRS Form 8594 or any other forms or reports required to be filed pursuant to
Section 1060 of the Code or any comparable provisions of Law (“Section
1060 Forms”))
in a
manner that is consistent with the Allocation Statement and refrain from taking
any action inconsistent therewith. The Buyer and the Seller shall file such
Section 1060 Forms timely and in the manner required by applicable Law. The
Buyer and the Seller agree to treat any payments made pursuant to the
indemnification provisions of this Agreement as an adjustment to the Purchase
Price for Tax purposes.
10
2.10 Escrow
Agreement.
(a) Simultaneously
with the execution of this Agreement, the parties shall enter into an escrow
agreement, substantially in the form of Exhibit
G
hereto
(the “Escrow
Agreement”),
pursuant to which the Buyer will deposit with JPMorgan Chase Bank, N.A., as
escrow agent (the “Escrow
Agent”)
(A)
$1,000,000 (the “Clawback
Escrow Amount”)
plus
(B)
$1,900,000 (the “General
Escrow Amount”).
(b) Clawback
Escrow.
The
Clawback Escrow Amount together with any interest accrued on such funds
(collectively, the “Clawback
Escrow Funds”)
shall
be held by the Escrow Agent and paid to the Buyer and/or the Seller (as
applicable) in accordance with Annex II.
(c) General
Escrow.
(i) The
General Escrow Amount together with any interest accrued on such funds
(collectively, the “General
Escrow Funds”)
shall
be available to the Buyer to satisfy any amounts owed to the Buyer pursuant
to
this Agreement (including: (a) payments to be made to the Buyer in connection
with the calculation of the Final Working Capital pursuant to Section 2.8 and
(b) payments to be made to the Buyer pursuant to the Seller’s indemnification
obligations; but excluding payment of the Clawback Amount (if any) pursuant
to
Annex
II).
(ii) In
accordance with, and subject to, the provisions of the Escrow
Agreement:
(A) on
the
fifth (5th) Business Day after the delivery by the Buyer’s independent auditors
of the Buyer’s final audited financial statements for the fiscal year ending
December 31, 2006, but in no event later than April 30, 2007, the Buyer and
the
Seller shall take all action required by the Escrow Agreement to cause the
Escrow Agent to pay to the Seller a portion of the General Escrow Funds equal
to
(I) the total amount of General Escrow Funds then held in escrow minus
(II) any
amount which is then the subject of any outstanding claim or dispute to which
the General Escrow Funds applies and to which notice of such claim or dispute
has been delivered to the Seller in accordance with this Agreement minus
(III)
$950,000;
(B) on
the
first (1st) anniversary of the Effective Date, the Buyer and the Seller shall
take all action required by the Escrow Agreement to cause the Escrow Agent
to
pay to the Seller a portion of the General Escrow Funds equal to (I) any
remaining portion of the General Escrow Funds which has not been previously
paid
over to the Buyer or the Seller minus
(II) any
amount which is then the subject of any outstanding claim or dispute to which
the General Escrow Funds applies and to which notice of such claim or dispute
has been delivered to the Seller in accordance with this Agreement; and
11
(C) if
at any
time after the first (1st) anniversary of the Effective Date the value of the
remaining General Escrow Funds exceed the sum at that time of all outstanding
claims or disputes to which the General Escrow Funds apply and to which notice
of such claim or dispute has been delivered to the Seller in accordance with
this Agreement, the Buyer and the Seller shall take all action required by
the
Escrow Agreement to cause the Escrow Agent to pay to the Seller such excess
amount.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE SELLER
The
Seller represents and warrants to the Buyer that each statement contained in
this Article III is true and correct, except as set forth in the disclosure
schedule dated and delivered as of the date hereof by the Seller to the Buyer
(the “Seller
Disclosure Schedule”),
which
is attached to this Agreement and is designated therein as being the Seller
Disclosure Schedule. The Seller Disclosure Schedule has been arranged in
sections corresponding to each representation and warranty set forth in this
Article III. The disclosure of any matter in one section of the Seller
Disclosure Schedule shall be treated as disclosed in the other sections of
the
Seller Disclosure Schedule, but only to the extent that, from the text of such
disclosure, it would be clear to a Person that has reviewed the entire Seller
Disclosure Schedule and exercises reasonable business judgment, that the listed
matter is applicable to such other section of the Seller Disclosure Schedule,
and 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.
3.1 Organization
and Good Standing.
Except
as set forth in Section
3.1 of the Seller Disclosure Schedule,
the
Seller is a corporation, duly organized, validly existing and in good standing
under the Laws of the State of Delaware, has all requisite power to own, lease
and operate its properties and to carry on its business (including the Business)
as now being conducted, and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which it owns or
leases property or conducts any business (including the Business) so as to
require such qualification. Section
3.1 of the Seller Disclosure Schedule
contains
a complete and accurate list of each jurisdiction in which the Company is
required to be qualified in order to conduct the Business as currently being
conducted. The Seller is not in default under its Organizational Documents.
3.2 Authority
and Enforceability.
The
Seller has the requisite power and authority to enter into this Agreement and
each of the Ancillary Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Seller of
this Agreement and each of the Ancillary Agreements to which it is a party
and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Seller. This
Agreement and each of the Ancillary Agreements to which it is a party have
been
duly executed and delivered by the Seller. Assuming due authorization, execution
and delivery by the Buyer and each other party thereto, this Agreement and
each
of the Ancillary Agreements constitute a valid and binding obligation of the
Seller, enforceable against the Seller in accordance with its terms, except
as
such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
creditors’ rights generally, and (b) the availability of injunctive relief
and other equitable remedies. This Agreement, together with the Ancillary
Agreements, will effectively vest in the Buyer good, valid and marketable title
to all the Purchased Assets free and clear of all Liens (other than Permitted
Liens).
12
3.3 No
Conflicts; Consents.
(a) Except
as
set forth in Section
3.3(a) of the Seller Disclosure Schedule,
the
execution and delivery of this Agreement and the Ancillary Agreements by the
Seller does not, the performance by the Seller of its obligations hereunder
and
thereunder and the consummation of the transactions contemplated hereby and
thereby (in each case, with or without the giving of notice or lapse of time,
or
both) will not, directly or indirectly, (i) violate the provisions of any of
the
Organizational Documents of the Seller, (ii) violate or constitute a default,
an
event of default or an event creating rights of acceleration, termination,
cancellation, imposition of additional obligations or loss of rights under
any
Contract to which the Seller is a party or by which the Purchased Assets are
bound (including any Assigned Contracts), (iii) assuming compliance by the
Seller with the matters referred to in Section 3.3(b), violate or conflict
with
any Law, Permit or Order applicable to the Seller or give any Governmental
Entity or other Person the right to challenge any of the transactions
contemplated by this Agreement or the Ancillary Agreements or to exercise any
remedy, obtain any relief under or revoke or otherwise modify any rights held
under, any such Law, Permit or Order or (iv) result in the creation of any
Liens
(other than Permitted Liens) upon any of the Purchased Assets.
(b) Except
as
set forth in Section
3.3(b) of the Seller Disclosure Schedule,
no
Permit or Order of, registration, declaration or filing with, or notice to
any
Person is required by the Seller in connection with the execution and delivery
of this Agreement and the Ancillary Agreements, the performance by the Seller
of
its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby.
3.4 Financial
Statements; No Liabilities; Accounts Receivable.
(a) True
and
complete copies of (i) the unaudited balance sheet of the Business as at
December 31, 2004 and December 31, 2005 and the unaudited statement of earnings
and retained earnings of the Business for the years ended December 31, 2004
and
December 31, 2005 and (ii) the unaudited balance sheet of the Business as at
August 31, 2006 and the unaudited consolidated statement of earnings and
retained earnings of the Seller for the eight-months then ended (the
“Interim
Financial Statements”
and
together with the financial statements set forth in clause (i), the
“Financial
Statements”)
are
set forth in Section
3.4(a)(i) of the Seller Disclosure Schedule.
Except
as set forth in Section
3.4(a)(ii) of the Seller Disclosure Schedule
or as
qualified in this sentence for the Interim Financial Statements, the Financial
Statements have been prepared in accordance with United States generally
accepted accounting principles (“GAAP”)
applied on a consistent basis throughout the periods involved and, to the extent
not inconsistent with GAAP, in accordance with the accounting principles,
methodologies and policies set forth in Section
3.4(a)(iii) of the Seller Disclosure Schedule
and, in
the case of the Interim Financial Statements, subject to normal year-end
adjustments (which adjustments will not, individually or in the aggregate,
be
material in amount) and the absence of footnotes. The Financial Statements
are
based on the books and records of the Seller (which are true and correct),
and
fairly present the financial condition of the Business as of the respective
dates they were prepared and the results of the operations of the Business
for
the periods indicated. The Seller maintains with respect to the Business a
standard system of accounting established and administered in accordance with
GAAP.
13
(b) The
Seller has no Liabilities except (a) those which are adequately reflected or
reserved against in the Financial Statements and (b) those which have been
incurred in the ordinary course of business, consistent with past practice,
since August 31, 2006 and which are not, individually or in the aggregate,
material in amount.
(c) Section
3.4(c)(i) of the Seller Disclosure Schedule
sets
forth a complete and accurate aging list of all Accounts Receivable of the
Business as of September 25, 2006. All such Accounts Receivable are (i) valid
and genuine, have arisen solely out of bona fide sales and deliveries of goods,
performance of services and other business transactions in the ordinary course
of the Business consistent with past practice, (ii) not subject to valid
defenses, set-offs or counterclaims, and (iii) collectible within 90 days after
billing at the full recorded amount thereof less the recorded allowance for
bad
debt set forth on Section
3.4(c)(ii) of the Seller Disclosure Schedule
(which
allowance for bad debt has been determined in accordance with GAAP consistent
with past practice). No further goods or services are required to be provided
in
order to complete the sales and to entitle the Seller or their assignees to
collect the Accounts Receivable in full and none of the Accounts Receivable
has
been pledged or assigned to any other Person.
(d) All
Yahoo
Payables (other than the Third Quarter Yahoo Payable) have been paid and
satisfied in full.
3.5 Taxes.
(a) All
Tax
Returns relating to the Business or the Purchased Assets required to be filed
by
the Seller prior to the Effective Date have been filed in a timely manner
(taking into account all extensions of due dates), (ii) such Tax Returns were
accurate and complete in all respects as of the time of filing and (iii) all
Taxes relating to the Business or the Purchased Assets due and owing by the
Seller (whether or not shown on such Tax Returns) have been paid when
due.
14
(b) All
Taxes
relating to the Business or the Purchased Assets required to have been withheld
and paid by the Seller prior to the Effective Date in connection with amounts
paid or owing to any employee, independent contractor, creditor, shareholder
or
other third party have been withheld and timely paid.
(c) There
is
no dispute or claim concerning any Tax liabilities relating to the Business
or
the Purchased Assets either (i) claimed or raised by any authority in writing
or
(ii) as to which any of the officers of the Seller have knowledge based upon
personal contact with any agent of such authority. With respect to the Business
and the Purchased Assets, the Seller 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. There are no Liens for Taxes upon, pending against,
or
to the Knowledge of the Seller, threatened against the Business or any of the
Purchased Assets.
(d) None
of
the Assumed Liabilities is an obligation to make a payment that will not be
deductible under Section 280G of the Code. To the Knowledge of the Seller,
no
claim has been made in the last three years by a Governmental Entity in a
jurisdiction where the Business does not file Tax Returns that the Business
is
or may be subject to taxation by that jurisdiction in connection with the
activities of the Business or the presence of the Purchased Assets. The Seller
has not received nor is subject to any written ruling of a taxing authority
relating to Taxes in connection with the activities of the Business or the
presence of the Purchased Assets or entered into any written and legally binding
agreement with a taxing authority relating to Taxes in connection with the
activities of the Business or the presence of the Purchased Assets.
3.6 Compliance
with Law; Permits.
(a) The
Seller has conducted, and is conducting, the Business in compliance in all
material respects with all applicable Laws.
(b) Except
as
set forth on Section
3.6(b)(i) of the Seller Disclosure Schedule,
the
Seller owns, holds or lawfully uses in the operation of the Business all
material Permits which are necessary for it to (i) conduct the Business as
currently conducted free and clear of all Liens and (ii) to own and use the
assets (including the Purchased Assets) owned or used by the Seller in the
conduct of the Business free and clear of all Liens. Each such Permit is listed
on Section
3.6(b)(ii) of the Seller Disclosure Schedule
(the
“Material
Permits”),
is
valid and in full force and effect and is a Purchased Asset.
(c) No
event
has occurred and no circumstances exist that (with or without the passage of
time or the giving of notice) may result in a violation of, conflict with or
failure on the part of the Seller (i) to conduct the Business in compliance
with
all applicable Laws or (ii) to comply with the terms of any Material Permit.
The
Seller has not received notice regarding any violation of, conflict with, or
failure to conduct the Business in compliance with, any applicable Law or
Material Permit. The Seller is not in default (or received notice of any claim
of default) with respect to any Material Permit.
15
3.7 Title
and Condition of Purchased Assets.
(a) Section
3.7(a) of the Seller Disclosure Schedule
sets
forth a complete and accurate list of all tangible Purchased Assets, specifying
whether such properties and assets are owned or leased and where such property
or asset is located as of the Effective Time.
(b) The
Seller has good and marketable title to, or a valid interest in, all of the
Purchased Assets, free and clear of all Liens (other than Permitted
Liens).
(c) The
tangible Purchased Assets are in good operating condition, working order and
repair, subject to ordinary wear and tear, free from defects, are usable in
the
ordinary course of the Business and are suitable for the purposes for which
they
are currently being used or are proposed to be used.
3.8 Sufficiency
of Purchased Assets.
Except
as set forth in Section
3.8 of the Seller Disclosure Schedule,
(i) the
Purchased Assets constitute all of the assets and properties of the Seller
that
are related to or used in connection with the Business and are necessary to
permit the Buyer to carry on the Business immediately following the Effective
Time in the same manner as presently conducted and proposed to be conducted,
(ii) no assets related to or used in connection with the Business are owned
by
any Affiliate or Subsidiary of the Seller and (iii) none of the Excluded Assets
are material to the Business.
3.9 Intellectual
Property.
(a) As
used
in this Agreement, “Intellectual
Property”
means
all: (i) inventions (whether or not patentable), trade secrets, technical data,
databases, customer and subscriber lists, designs, on-line and other tools,
methods, processes, technology (including know-how and show-how), ideas, source
code, research and development information, product road maps and other
proprietary information and materials whether or not subject to statutory
registration (“Proprietary
Information”);
(ii)
trademarks and service marks, trade names, logos, domain names, trade dress
and
all goodwill associated therewith (“Trademarks”);
(iii)
copyrights and copyrightable works, documentation, advertising copy, marketing
materials, web-sites, servers, specifications, mask works, drawings, graphics,
databases, recordings and other works of authorship (collectively, “Copyrights”);
(iv)
computer programs, including any and all software implementations of algorithms,
hardware, models and methodologies, whether in source code or object code,
design documents, operating systems and specifications, flow-charts, user
manuals and training materials relating thereto and any translations thereof
(collectively, “Software”);
(v)
patents and patent rights (“Patents”);
(vi)
copies and tangible embodiments of all of the foregoing as well as related
documentation in whatever form or medium; (vii) all pending applications for
and
registrations of any of the foregoing, both foreign and domestic; and (viii)
the
right to xxx for infringement of past payment, if any, in connection with any
of
the foregoing.
16
(b) Section
3.9(b)(i) of the Seller Disclosure Schedule
lists
(by name, owner and, where applicable, registration number and jurisdiction
of
registration, application, certification or filing) all Intellectual Property
that is owned by the Seller (whether exclusively, jointly with another Person
or
otherwise) that is related to or used in connection with the Business
(“Owned
Business Intellectual Property”);
provided
that the
Seller Disclosure Schedule is not required to list items of Owned Business
Intellectual Property which are immaterial to the Business. Except as described
in Section
3.9(b)(ii) of the Seller Disclosure Schedule,
the
Seller owns the entire right, title and interest to all Owned Business
Intellectual Property free and clear of all Liens. Such Owned Business
Intellectual Property, together with the Seller’s rights under the In-Bound
Licenses listed on Section
3.9(c) of the Seller Disclosure Schedule
(collectively, the “Business
Intellectual Property”),
constitutes all the Intellectual Property that is related to, used in connection
with or necessary for the operation of the Business as it is currently conducted
and as proposed to be conducted.
(c) Section
3.9(c) of the Seller Disclosure Schedule
lists
all licenses, sublicenses and other agreements pursuant to which a third party
authorizes the Seller to use, practice any rights under, or grant sublicenses
with respect to, any Intellectual Property owned by a third party that is
related to or used in connection with the Business, other than “shrink-wrap” and
similar commercially available end-user licenses (“In-Bound
Licenses”),
including the incorporation of any such Intellectual Property into products
of
the Business and, with respect to each In-Bound License, whether the In-Bound
License is exclusive or non-exclusive.
(d) Section
3.9(d) the Seller Disclosure Schedule
lists
all licenses, sublicenses and other agreements pursuant to which the Seller
authorizes a third party to use, practice any rights under, or grant sublicenses
with respect to, any Owned Business Intellectual Property or pursuant to which
the Seller grants rights to use or practice any rights under any Intellectual
Property owned by a third party in connection with the Business (“Out-Bound
Licenses”)
and,
with respect to each Out-Bound License, whether the Out-Bound License is
exclusive or non-exclusive.
(e) Except
as
set forth in Section
3.9(e) of the Seller Disclosure Schedule,
all
registrations with and applications to Governmental Entities in respect of
Owned
Business Intellectual Property are valid and in full force and effect and except
as set forth in Section
3.9(e) of the Seller Disclosure Schedule,
there
are no actions that must be taken by the Buyer within 120 days after the date
hereof, including the payment of any registration, maintenance or renewal fees
or the filing of any documents, applications or certificates for the purposes
of
maintaining, perfecting or preserving or renewing any such Owned Business
Intellectual Property.
17
(f) To
the
Knowledge of the Seller, there are no challenges (or any basis therefore) with
respect to the validity or enforceability of any Owned Business Intellectual
Property. Section
3.9(f) of the Seller Disclosure Schedule
lists
the status of any proceedings or actions before the United States Patent and
Trademark Office or any other Governmental Entity anywhere in the world related
to any of the Owned Business Intellectual Property, including the due date
for
any outstanding response by the Seller in such proceedings. The Seller has
not
taken any action or failed to take any action that could reasonably be expected
to result in the abandonment, cancellation, forfeiture, relinquishment,
invalidation, waiver or unenforceability of any Owned Business Intellectual
Property and is not in default (and with the giving of notice or lapse of time
or both would not be in default) under any In-Bound License. Section
3.9(f) of the Seller Disclosure Schedule
lists
all previously held registrations of, or applications for, Intellectual Property
that is related to or was used in connection with the Business that the Seller
has abandoned, cancelled, forfeited or relinquished during the 12 months prior
to the date of this Agreement.
(g) To
the
Knowledge of the Seller, the Business Intellectual Property and the operation
of
the Business as currently conducted and as proposed to be conducted in the
future do not infringe or otherwise violate the Intellectual Property rights
of
any third party and the Seller has not received any communication alleging
that
the Business Intellectual Property or the operation of Business is infringing
any Intellectual Property rights of a third party. No Action has been
instituted, or, to the Seller’s Knowledge, threatened, relating to any
Intellectual Property formerly or currently used by the Seller in connection
with the Business and none of the Business Intellectual Property is subject
to
any outstanding Order. There are no restrictions on the direct or indirect
transfer of any of the Business Intellectual Property or any license. To the
Seller’s Knowledge, no Person has infringed or is infringing any Intellectual
Property rights of the Seller or has otherwise misappropriated or is otherwise
misappropriating any Business Intellectual Property.
(h) With
respect to the Proprietary Information related to or used in connection with
the
Business, the documentation relating thereto is current, accurate and sufficient
in detail and content to identify and explain it and to allow its full and
proper use without reliance on the special knowledge or memory of others. The
Seller has taken commercially reasonable steps to protect and preserve the
confidentiality of all Proprietary Information related to or used in connection
with the Business that derives value from being kept secret and confidential
and
any receipt or use by, or disclosure to, a third party of such Proprietary
Information has been pursuant to the terms of binding written confidentiality
and non-use agreement between the Seller and such third party (“Nondisclosure
Agreements”).
True
and complete copies of the Nondisclosure Agreements, and any amendments thereto,
have been provided to the Buyer. The Seller is, and to the Seller’s Knowledge,
all other parties thereto are, in compliance with the provisions of the
Nondisclosure Agreements or the other Contracts pursuant to which a third party
has disclosed to, or authorized the Seller to use, Proprietary Information
owned
by such third party.
18
(i) Section
3.9(i) of the Seller Disclosure Schedule
lists
(i) all of the former employees, consultants and contractors of the Seller
that
have executed and delivered enforceable agreements regarding the protection
of
Owned Business Intellectual Property and providing valid written assignments
of
all Intellectual Property conceived or developed by such employees, consultants
or contractors in connection with their services for the Seller that refers
to
or is used in connection with the Business (“Work
Product Agreements”)
and
(ii) all current employees who have not executed and delivered enforceable
Work
Product Agreements. True and complete copies of the Work Product Agreements
have
been provided to the Buyer. No current or former employee, consultant or
contractor or any other Person has any right, claim or interest to any of the
Owned Business Intellectual Property.
(j) No
employee, consultant or contractor of the Seller has been, is or will be, by
performing services for the Seller, in violation of any term of any employment,
invention disclosure or assignment, confidentiality or non-competition agreement
or other restrictive covenant or any Order as a result of such employee’s,
consultant’s or contractor’s employment with the Seller or any services rendered
by such employee, consultant or contractor.
(k) All
Intellectual Property that has been distributed, sold or licensed to a third
party by the Seller in connection with the Business that is covered by warranty
conformed and conforms to, and performed and performs in accordance with, the
representations and warranties provided with respect to such Intellectual
Property by or on behalf of the Seller for the time period during which such
representations and warranties apply.
(l) Except
as
set forth in Section
3.9(l) of the Seller Disclosure Schedule,
to the
Knowledge of the Seller: the Software included in the Business Intellectual
Property is free of any disabling codes or instructions (a “Disabling
Code”),
and
any virus or other intentionally created, undocumented contaminant (a
“Contaminant”),
that
may, or may be used to, access, modify, delete, damage or disable any embedded
control systems or that may result in damage thereto. The Seller has taken
reasonable steps and implemented reasonable procedures to ensure that its and
their internal computer systems used in connection with the Business are free
from Disabling Codes and Contaminants. The Seller has taken reasonable steps
to
safeguard the embedded control systems of the Business and restrict unauthorized
access thereto.
(m) Except
as
set forth in Section
3.9(m) of the Seller Disclosure Schedule:
no
Public Software: (A) forms part of any Business Intellectual Property; (B)
was,
or is, used in connection with the development of any Owned Business
Intellectual Property or any products or services developed or provided by
the
Business; or (C) was, or is, incorporated or distributed, in whole or in part,
in conjunction with Business Intellectual Property.
3.10 Absence
of Certain Changes or Events.
Except
as set forth in Section
3.10 of the Seller Disclosure Schedule,
since
December 31, 2005: (a) there has not been any material adverse change, and
no
event has occurred that could reasonably be expected to have a material adverse
change, in the condition (financial or otherwise), operations, prospects or
results of operations of the Business; (b) the Seller has operated the Business,
the Purchased Assets and the Assumed Liabilities in the ordinary course
consistent with past practice; (c) there has not been any material damage,
destruction or loss with respect to the assets, properties and rights of the
Business, whether or not covered by insurance; and (d) the Seller has not:
(i)
sold, leased, transferred or assigned any property or assets related to or
used
on connection with the Business, except for granting non-exclusive Out-Bound
Licenses and the sale of obsolete Equipment, in each case in the ordinary course
of the Business consistent with past practice; (ii) mortgaged, pledged or
subjected to Liens any assets, properties or rights related to or used on
connection with the Business; (iii) entered into, amended, modified, canceled
or
waived any rights under, any Contract that would be required to be disclosed
on
Section
3.11(a) of the Seller Disclosure Schedule
and no
such Contract has been terminated or cancelled; (iv) taken any action outside
the ordinary course of the Business; or (v) made any change in the accounting
practices related to the Business.
19
3.11 Contracts.
(a) Except
as
set forth in Section
3.11(a) of the Seller Disclosure Schedule,
the
Seller is not party to, nor is the Business or any of the Purchased Assets
bound
by:
(i) any
Contract or series of related Contracts that is related to or used in connection
with the Business for the purchase or sale by the Seller of materials, supplies,
goods, services, equipment or other assets that involves (A) annual payments
by
or to the Seller of $20,000 or more, or (B) aggregate payments by or to the
Seller of $40,000 or more;
(ii) any
partnership, joint venture or similar Contract that is related to or used in
connection with the Business;
(iii) any
distribution, dealer, representative or sales agency Contract that is related
to
or used in connection with the Business;
(iv) any
Lease
or Contract for the lease of personal property that is related to or used in
connection with the Business;
(v) any
note,
debenture, bond, equipment trust, letter of credit, loan or other Contract
for
the borrowing or lending of money (other than to employees for travel expenses
in the ordinary course of business) or agreement or arrangement for a line
of
credit or guarantee, pledge or undertaking of the Indebtedness of any other
Person relating to or effecting the Business or the Purchased Assets;
(vi) any
Contract with any Governmental Entity that is related to or used in connection
with the Business;
20
(vii) any
Contract that is related to or used in connection with the Business for any
capital expenditure or leasehold improvement;
(viii) any
Contract which restrains the ability of the Business to engage or compete in
any
manner or in any business;
(ix) any
Out-Bound License or In-Bound License;
(x) any
Contract relating to the acquisition or disposition of any material business
(whether by merger, sale of stock, sale of assets or otherwise) that is related
to or engaged in the Business; and
(xi) any
Contract that is otherwise material to the Business and not previously disclosed
pursuant to this Section 3.11.
(b) The
Contracts required to be listed in Section
3.11(a) of the Seller Disclosure Schedule
are
collectively referred to as the “Material
Contracts”.
Seller
has delivered accurate and complete copies of each Material Contract to the
Buyer. Except as set forth in Section
3.11(b) of the Seller Disclosure Schedule,
(i)
each Material Contract is valid and enforceable in all material respects in
accordance with its terms, (ii) the Seller has complied with and is in
compliance with, and to the Seller’s Knowledge, all other parties thereto have
complied with and are in compliance with, the provisions of each Material
Contract in all material respects, (iii) the Seller is not, and to Seller’s
Knowledge, no other party thereto is, in material default in the performance,
observance or fulfillment of any obligation, covenant, condition or other term
contained in any Material Contract, and the Seller has not given or received
notice to or from any Person relating to any such alleged or potential default
that has not been cured and (iv) no event has occurred which with or without
the
giving of notice or lapse of time, or both, may conflict with or result in
a
violation or breach of, or give any Person the right to exercise any remedy
under or accelerate the maturity or performance of, or cancel, terminate or
modify, any Material Contract.
3.12 Litigation;
Orders.
(a) Except
as
set forth in Section
3.12(a) of the Seller Disclosure Schedule,
there
is no action, suit or proceeding, claim, arbitration, litigation or
investigation (each, an “Action”),
(i)
pending or, to the Seller’s Knowledge, threatened against or affecting the
Seller that is related to the Business, or (ii) that challenges or seeks to
prevent, enjoin or otherwise materially delay the transactions contemplated
by
this Agreement or the Ancillary Agreements. No event has occurred or
circumstances exist that may give rise or serve as a basis for any such Action.
There is no material unsatisfied judgment, penalty or award against the Seller
that is related to the Business or affecting the Purchased Assets.
(b) Section
3.12(b) of the Seller Disclosure Schedule
sets
forth each Order entered, issued or rendered by any Governmental Entity to
which
(i) the Seller is subject that is related to the Business or (ii) the Purchased
Assets are subject. The Seller is in compliance with each such Order. No event
has occurred or circumstances exist that may constitute or result in (with
or
without notice or lapse of time) a violation of any such Order
21
3.13 Employee
Benefits.
(a) All
Benefit Plans sponsored, maintained or contributed to by the Seller with respect
to any employee engaged by the Business within the past six years are listed
in
Section
3.13(a)(i) of the Seller Disclosure Schedule,
written
summaries relating to such Benefit Plans have been delivered or made available
to the Buyer. Copies of documentation relating to the Benefit Plans set forth
on
Section
3.13(a)(ii) of the Seller Disclosure Schedule
have
been delivered or made available to the Buyer (including copies of written
Benefit Plans, written descriptions of oral Benefit Plans, summary plan
descriptions, the most recent annual return and IRS determination
letters).
(b) Except
as
disclosed in Section
3.13(b) of the Seller Disclosure Schedule:
(i) each
Benefit Plan has at all times been maintained and administered in all material
respects in accordance with its terms and with the requirements of all
applicable law, including ERISA and the Code;
(ii) each
Benefit Plan of the Seller and its ERISA Affiliate of the Seller intended to
qualify under section 401(a) of the Code has at all times since its adoption
been so qualified, the Seller has provided to the Buyer a copy of each such
Benefit Plan’s most recently received favorable determination letter from the
Internal Revenue Service indicating such qualification, nothing has occurred
since the issuance of such determination letter that could cause such Benefit
Plans to lose their qualified status under Section 401(a) of the Code and each
trust which forms a part of any such plan has at all times since its adoption
been tax-exempt under section 501(a) of the Code;
(iii) neither
the Seller, nor any entity that would be deemed to be under “common control”, as
defined in Section 4001(b) of ERISA, with the Seller (an “ERISA
Affiliate”),
has
ever (i) maintained a pension plan subject to Title IV of ERISA or Section
412
of the Code, or (ii) contributed to any “multiemployer plan” as defined by
Section 3(37) of ERISA; and
(iv) no
Benefit Plan provides health or death benefit coverage beyond the termination
of
an employee’s employment, except as required by Part 6 of Subtitle B of Title I
of ERISA or section 4980B of the Code or any State laws requiring continuation
of benefits coverage following termination of employment.
3.14 Labor
and Employment Matters.
22
(a) Section
3.14(a) of the Seller Disclosure Schedule
sets
forth: (i) a true and complete list (including title and position) of all
individuals employed by the Seller that are engaged in the Business (each such
individual, an “Employee”)
and
each contractor and consultant engaged in the Business, in each case, as of
the
date hereof; (ii) the base compensation and benefits of each such Employee,
contractor and consultant; and (iii) a true and complete list of all Employees
working in the United States who are not U.S. citizens and a description of
the
legal status under which each such Employee is permitted to work in the United
States. All Employees who are performing services for the Business in the United
States are legally able to work in the United States and will be able to
continue to work in the Business in the United States following the consummation
of the transactions contemplated by this Agreement. Except as disclosed on
Section
3.14(a) of the Seller Disclosure Schedule,
all
Employees, contractors and consultants are employed by the Seller on an “at
will” basis and may be terminated at any time with or without cause and without
any severance or other Liability to the Seller or the Buyer.
(b) Except
as
set forth in Section
3.14(b) of Seller Disclosure Schedule:
(i) The
Seller is not a party or subject to any labor union or collective bargaining
agreement with respect to any Employee. There have not been, and there are
not
pending or, to the Seller’s Knowledge, threatened, any labor disputes, work
stoppages, petitions for representation, pickets, work slow-downs due to labor
disagreements or any actions or arbitrations that involve Employees. There
is no
unfair labor practice, charge or complaint pending, unresolved or, to the
Seller’s Knowledge, threatened before the National Labor Relations Board
relating to the Business or any Employee. No event has occurred or circumstance
exist that may provide the basis of any work stoppage or other labor dispute
with respect to the Business.
(ii) The
Seller is not a party to any Contract which restricts the Seller from
relocating, closing or terminating any of its operations or facilities related
to or used in the Business or any portion thereof. The Seller has not
effectuated a “plant closing” (as defined in the WARN Act) or a “mass lay-off”
(as defined in the WARN Act), in either case affecting any site of employment
or
facility of the Seller, except in accordance with the WARN Act. The consummation
of the transactions contemplated by this Agreement will not create liability
for
any act by the Seller on or prior to the Effective Date under the WARN Act
or
any other Law respecting reductions in force or the impact on employees of
plant
closings or sales of businesses.
(c) Section
3.14(c) of Seller Disclosure Schedule
sets
forth a list of each written employment agreement entered into by the Seller
with respect to an employee engaged in the Business.
3.15 Environmental.
The
Seller is in compliance with all Environmental Laws applicable to the Business
and the Purchased Assets. The Seller possesses and is in compliance with all
Permits required under Environmental Law for the conduct of the Business. There
are no actions pending against the Seller with respect to the Business or
Purchased Assets alleging a violation of any Environmental Law.
23
3.16 Insurance.
Section
3.16 of the Seller Disclosure Schedule
sets
forth (a) a list of each insurance policy and fidelity bond which covers the
Business, the Purchased Assets or any officer or employee of the Seller that
is
engaged in the Business (the “Policies”)
and
(b) a list of all pending claims and the claims history with respect to the
Business, the Purchased Assets or any officer or employee of the Seller that
is
engaged in the Business during the current year and the preceding three years
(including with respect to insurance obtained but not currently maintained).
There are no pending claims under any of such Policies as to which coverage
has
been questioned, denied or disputed by the insurer or in respect of which the
insurer has reserved its rights. All Policies are issued by an insurer that
is
financially sound and reputable, are in full force and effect and are
enforceable in accordance with their terms. To the Seller’s Knowledge, such
Policies provide adequate insurance coverage for the Business. Such Policies
are
sufficient for compliance with all Laws and Contracts to which the Seller is
a
party or by which it is bound in connection with the Business. All premiums
due
under the Policies have been paid in full or, with respect to premiums not
yet
due, accrued. The Seller has not received a notice of cancellation of any Policy
or of any material changes that are required in the conduct of the Business
as a
condition to the continuation of coverage under, or renewal of, any such Policy.
There is no existing default or event which, with the giving of notice or lapse
of time or both, would constitute a default under any Policy or entitle any
insurer to terminate or cancel any Policy with respect to the Business. The
Seller does not have any Knowledge of any threatened termination of any Policy.
The Seller does not have any self-insurance arrangements.
3.17 Suppliers
and Customers.
Section
3.17 of the Seller Disclosure Schedule
sets
forth: (a) each supplier from whom the Business purchases exceeded $20,000
in
the year ended December 31, 2005 or the eight-month period ended August 31,
2006
or that is otherwise material to the Business; (b) each supplier who constitutes
a sole or primary source of supply to the Business; (c) with respect to the
year
ended December 31, 2005 and the eight-month period ended August 31, 2006, a
list
of the Business’ top 20 customers by revenue for such year or period; and (d)
each customer of the Business’ broadcast business. The relationships of the
Business with each supplier and customer required to be listed on Section
3.17 of the Seller Disclosure Schedule
are good
commercial working relationships. No such supplier or customer has canceled
or
otherwise terminated, or threatened to cancel or otherwise terminate, its
relationship with the Business. The Seller has not received notice that any
such
supplier or customer may cancel, terminate or otherwise materially and adversely
modify its relationship with the Business or limit its services, supplies or
materials to the Business, either as a result of the consummation
of the transactions contemplated by this Agreement
or
otherwise.
3.18 Affiliate
Transactions.
Except
as set forth on Section
3.18 of the Seller Disclosure Schedule,
no
Affiliate of the Seller is a party to any Contract with the Seller that is
related or used in connection with the Business or is included in the Purchased
Assets or has any interest in any of the Purchased Assets or Assumed Liabilities
of the Seller, other than indirect interests in such by virtue of their
ownership interest in the Seller. Except as set forth on Section
3.18 of the Seller Disclosure Schedule,
there
are no inter-company services provided to the Seller with respect to the
Business by any Affiliate of the Seller or by any member of the immediate family
of any director, officer, employee or direct or indirect stockholder (other
than
services provided by any such Persons as directors, officers or employees of
the
Seller).
24
3.19 Solvency.
Immediately after giving effect to the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements: (i) the Seller
will
be able to pay its Liabilities (including the Excluded Liabilities) as they
become due in the usual course of its business; (ii) the Seller will not have
unreasonably small capital with which to conduct its present or proposed
business; and (iii) the Seller will have assets (calculated at fair market
value) that exceed its Liabilities.
3.20 Brokers.
No
broker, finder or investment banker is entitled to any brokerage, finder’s,
investment banker’s or other fee or commission in connection with the
transactions contemplated by this Agreement or the Ancillary Agreements based
upon arrangements made by or on behalf of the Seller or its
Affiliates.
3.21 Escheatment.
Except
as set forth in Section
3.21 of the Seller Disclosure Schedule,
the
Business does not have any subscription Liability, escheatment Liability or
any
Liability related to unclaimed or abandoned property Laws. The Seller is not
a
party to any ongoing escheatment, unclaimed or abandoned property-related
investigations or actions by any Governmental Entity with respect to the
Business, and there is no threatened escheatment or abandoned property-related
investigation or Action by any Governmental Entity with respect to the Business.
To the Seller’s Knowledge, there are no facts or circumstances that could
reasonably be expected to lead to (with or without due notice or lapse of time
or both) any escheatment, unclaimed or abandoned property-related Liability
or
any escheatment, unclaimed or abandoned property investigation or Action by
any
Governmental Entity with respect to the Business.
3.22 Privacy.
All
data that has been collected, acquired, stored, processed, maintained, treatment
or otherwise used by the Business has been collected, acquired, stored,
processed, maintained, treated and used in accordance with all applicable Laws
and industry standards. The Business has not received a notice of noncompliance
with applicable data protection laws, rules, regulations, guidelines or industry
standards. The Business has made all registrations that the Business is required
to have made in relation to the processing of data, and is in good standing
with
respect to such registrations, with all fees due prior to or as of the Effective
Date duly made. The Business’ practices are, and have always been, in compliance
with (i) its then-current privacy policy, including the privacy policy posted
on, Business’ websites, and (ii) its customers’ privacy policies, when required
to do so by Contract. The Business has obtained any and all necessary consents
from customers with regard to its collection and dissemination of personal
customer information in accordance with any applicable privacy policy published
or otherwise communicated by the Business and all applicable Laws.
25
3.23 Completeness
of Disclosure.
No
representation or warranty by the Seller in this Agreement, and no statement
made by the Seller in the Seller Disclosure Schedule or the Ancillary Agreements
contains any untrue statement of a material fact or omits or will omit to state
a material fact required to be stated herein or therein or necessary to make
any
statement herein or therein not misleading.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
The
Buyer
represents and warrants to the Seller that each statement contained in this
Article IV is true and correct:
4.1 Organization
and Good Standing.
The
Buyer is a limited liability company duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation, has all
requisite corporate power to own, lease and operate its properties and to carry
on its business as now being conducted. The Buyer is not in default under its
Organizational Documents.
4.2 Authority
and Enforceability.
The
Buyer has the requisite power and authority to enter into this Agreement and
each of the Ancillary Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Buyer of
this
Agreement and each of the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been
duly
authorized by all necessary action on the part of the Buyer. This Agreement
and
each of the Ancillary Agreements to which it is a party has been duly executed
and delivered by the Buyer. Assuming due authorization, execution and delivery
by the Seller, this Agreement and each of the Ancillary Agreements constitute,
the valid and binding obligation of the Buyer enforceable against it in
accordance with its terms, except as such enforceability may be limited by
(i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to creditors’ rights generally, and (ii) the availability
of injunctive relief and other equitable remedies.
4.3 No
Conflicts; Consents.
(a) The
execution and delivery of this Agreement and the Ancillary Agreements by the
Buyer does not, and the performance by the Buyer of its obligations hereunder
and thereunder and the consummation of the transactions contemplated hereby
and
thereby (in each case, with or without the giving of notice or lapse of time,
or
both) will not, directly or indirectly, (i) violate the provisions of any of
the
Organizational Documents of the Buyer, (ii) violate or constitute a default,
an
event of default or an event creating rights of acceleration, termination,
cancellation, imposition of additional obligations or loss of rights under
any
Contract to which the Buyer is a party or (iii) assuming compliance by the
Buyer
with the matters referred to in Section 4.3(b), violate or conflict with any
Law, Permit or Order applicable to the Seller or give any Governmental Entity
or
other Person the right to challenge any of the transactions contemplated by
this
Agreement or the Ancillary Agreements or to exercise any remedy, obtain any
relief under or revoke or otherwise modify any rights held under, any such
Law,
Permit or Order, except in the case of clauses (i), (ii) and (iii) where such
violation, default, event or other item would not reasonably be expected
materially to impair or delay the ability of Buyer to perform its obligations
under this Agreement or the Ancillary Agreements, including the ability to
pay
the Earnout Payment in accordance with Annex
II.
26
(b) No
Permit
or Order of, registration, declaration or filing with, or notice to any Person
is required by the Buyer in connection with the execution and delivery of this
Agreement and the Ancillary Agreements, the performance by the Buyer of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby, except for any such Permits, Orders,
registrations, declarations, filings and notices the failure to obtain which
would not reasonably be expected to materially impair the ability of Buyer
to
perform its respective obligations under this Agreement and the Ancillary
Agreements to which Buyer is a party, including the ability to pay the Earnout
Payment in accordance with Annex
II.
4.4 Litigation.
There
is no Action pending or, to the knowledge of the Buyer threatened, against
the
Buyer which (a) challenges or seeks to enjoin, alter or materially delay the
consummation of the transactions contemplated by this Agreement or the Ancillary
Agreements or (b) would reasonably be expected to materially impair the ability
of Buyer to perform its obligations under this Agreement and the Ancillary
Agreements to which Buyer is a party.
4.5 Solvency.
Immediately after giving effect to the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements: (i) the Buyer
will
be able to pay its Liabilities (including, in the case of the Buyer, the Assumed
Liabilities) as they become due in the usual course of its business; (ii) the
Buyer will not have unreasonably small capital with which to conduct its present
or proposed business; and (iii) the Buyer will have assets (calculated at fair
market value) that exceed its Liabilities.
4.6 Brokers.
No
broker, finder or investment banker is entitled to any brokerage, finder’s,
investment banker’s or other fee or commission in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements based
upon arrangements made by or on behalf of the Buyer or any of its
Affiliates.
ARTICLE
V
COVENANTS
27
5.1 Confidentiality.
From
and after the Closing Date, the Seller will, and will cause its Affiliates
to,
hold, and will use its reasonable best efforts to cause its and their respective
officers, directors, employees, accountants, counsel, consultants, advisors
and
agents (“Representatives”)
to
hold, in confidence any and all information, whether written or oral, concerning
the Business and the Purchased Assets, except to the extent that the Seller
can
show that such information (a) is in the public domain through no fault of
the
Seller or any of its Affiliates or their respective Representatives or (b)
is
lawfully acquired by the Seller or any of its Affiliates after the Effective
Date from sources that are not prohibited from disclosing such information
by a
legal, contractual or fiduciary obligation. If the Seller or any of its
Affiliates or Representatives is compelled to disclose any such information
by
judicial or administrative process or by other requirements of Law, the Seller
shall promptly (and, in any event, no later than 48 hours prior to such
disclosure) notify the Buyer in writing and shall disclose only that portion
of
such information that the Seller is advised by its counsel in writing is legally
required to be disclosed; provided
that the
Seller, at the Buyer’s expense, shall exercise its reasonable best efforts to
obtain an appropriate protective order or other reasonable assurance that
confidential treatment will be accorded such information. The Seller, at the
Buyer’s expense, shall enforce for the benefit of the Buyer all confidentiality,
assignment of inventions and similar agreements between the Seller and any
other
party relating to the Purchased Assets that are not Assigned Contracts. The
parties acknowledge that the Seller will be required to file a Form 8-K
disclosing the transactions contemplated hereby, and such disclosure shall
not
be deemed a violation of this Section 5.1; provided
that the
Seller shall allow the Buyer time to review and comment on such Form 8-K in
advance of such filing.
5.2 Restrictive
Covenants.
(a) The
Seller covenants that, commencing on the Closing Date and ending on the fifth
anniversary of the Closing Date (the “Restricted
Period”),
the
Seller, its Subsidiaries or their respective Affiliates shall not, directly
or
indirectly, in any capacity, engage in or have any direct or indirect ownership
interest in, or permit its name to be used in connection with, any business
anywhere in the United States which is engaged, either directly or indirectly,
in the business of developing, marketing or selling any products or equipment
or
providing any services which are competitive with products, marketed, sold
or
under development by, or services provided by, the Business as of the Effective
Date (the “Restricted
Business”);
provided,
however,
that
(i) the performance by the Seller of its obligations under the Services
Agreement shall not be deemed a violation of this Section 5.2(a) and (ii) the
fulfillment of any incidental request by the Seller’s customers shall not be
deemed a violation of this Section 5.2(a) provided that the Seller fulfills
such
request solely by directing the Buyer or its Affiliates to fulfill such request
pursuant to the Services Agreement. It is recognized that the Restricted
Business is expected to be conducted throughout the United States and
that
more narrow geographical limitations of any nature on this non-competition
covenant (and the covenant set forth in Section 5.2(b)) are therefore not
appropriate.
28
(b) The
Seller covenants that during the Restricted Period, none of the Seller, its
Subsidiaries or Affiliates shall, (i) solicit the employment or engagement
of
services of any Transferred Employee, or persuade, induce or attempt to persuade
or induce any such Person to leave his, her or its employment or to refrain
from
providing services to the Buyer or its Affiliates, (ii) solicit or induce,
or in any manner attempt to solicit or induce, or cause or authorize any other
Person to solicit or induce any Person to cease, diminish or not commence doing
business with the Buyer or its Affiliates solely as related to the Business
or
the Purchased Assets, or (iii) disparage the Business to any Person;
provided,
however,
that
(i) general solicitations for employment not specifically targeting the Buyer’s
personnel shall not be considered a breach of this Section and (ii) the Seller
may solicit but not hire persons who are referred to the Seller by search firms,
employment agencies or other similar entities provided that such entities have
not been instructed by the Seller to solicit the employees of the Buyer; and
(iii) the Seller may solicit and hire an employee that responded to a published
advertisement, including web or other job postings or a job fair.
(c) The
Seller acknowledges that the restrictions contained in this Section 5.2 are
reasonable and necessary to protect the legitimate interests of the Buyer and
constitute a material inducement to the Buyer to enter into this Agreement
and
consummate the transactions
contemplated by this Agreement.
The
Seller acknowledges that any violation of this Section 5.2 will result in
irreparable injury to the Buyer and agrees that the Buyer shall be entitled
to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits
and
other benefits arising from any violation of this Section 5.2, which rights
shall be cumulative and in addition to any other rights or remedies to which
the
Buyer may be entitled. Without limiting the generality of the foregoing, the
Restricted Period shall be extended for an additional period equal to any period
during which the Seller is in breach of its obligations under this Section
5.2.
(d) In
the
event that any covenant contained in this Section 5.2 should ever be adjudicated
to exceed the time, geographic, product or service or other limitations
permitted by applicable Law in any jurisdiction, then any court is expressly
empowered to reform such covenant, and such covenant shall be deemed reformed,
in such jurisdiction to the maximum time, geographic, product or service or
other limitations permitted by applicable Law. The covenants contained in this
Section 5.2 and each provision thereof are severable and distinct covenants
and
provisions. The invalidity or unenforceability of any such covenant or provision
as written shall not invalidate or render unenforceable the remaining covenants
or provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such covenant or
provision in any other jurisdiction.
5.3 Insurance.
Effective as of the Effective Date, the Business and the Purchased Assets shall
cease to be insured by the Seller’s insurance policies; provided,
however,
that
with respect to insurance coverage written on an “occurrence basis”, to the
extent that the Purchased Assets and the Assumed Liabilities were insured under
such policies, the Buyer shall have rights (to the extent permitted under such
policies) under such policies to the extent the events giving rise as a claim
under such policies occurred prior to the Effective Time. The Seller agrees,
at
the Buyer’s request and cost, to cooperate with the Buyer in making claims under
the Seller’s insurance policies in connection with insurable events that
occurred prior to the Effective Time, and shall remit any recoveries promptly
to
the Buyer.
29
5.4 Employee
Matters.
(a) The
Buyer
shall offer employment to each of the Employees set forth on Exhibit
H
hereto;
provided
that
such offers of employment shall be on terms and conditions measured immediately
following the Effective Time (including with respect to compensation and Benefit
Plans) that, in the aggregate, are substantially similar to those in effect
immediately prior to the Effective Time and which are disclosed on Section
3.14(a) of the Seller Disclosure Schedule;
provided
that
such terms and conditions shall not include equity, incentive compensation,
defined benefit pension plans or post-retirement welfare plans, if any. The
Seller shall use its reasonable best efforts to assist the Buyer in employing
as
new employees of the Buyer, all Employees to whom Buyer has offered employment
pursuant to this Section 5.4(a). Any Employees who accept the Buyer’s offer of
employment and commence employment with the Buyer shall be referred to,
collectively, as “Transferred
Employees”.
The
Seller shall terminate the employment of all Transferred Employees with the
Seller effective immediately prior to the Effective Time. The Buyer shall in
no
way be obligated to continue to employ any Transferred Employee for any specific
period of time.
(b) Except
as
specifically provided in Section 2.3(c) with respect to bonuses and commissions,
any and all Liabilities relating to or arising out of the employment, or
cessation of employment, of any Employee (whether or not a Transferred Employee)
with the Seller on, prior to or after the close of business on the Effective
Date shall be the sole responsibility of the Seller including wages and other
remuneration due through the close of business on the Effective Date.
(c) Subject
to the requirements of Section 5.4(a), the Buyer shall offer to Transferred
Employees such Benefit Plans and arrangements as it deems appropriate in its
sole discretion. Except as specifically provided in Section 2.3(c) with respect
to bonuses and commissions, the Buyer shall not assume any Liability under
any
of the Seller’s Benefit Plans.
(d) All
Transferred Employees who are participants in any Seller’s Benefit
Plan that
is
an employee pension benefit plan shall retain their accrued benefits and/or
account balances under each such plan as of the Effective Date, the Seller
shall
retain Liability for the payment of benefits as and when such Transferred
Employees become eligible therefor under such plans and the Buyer shall not
have
any Liability under such plans. All Transferred Employees shall become fully
vested in their accrued benefits and/or account balances under the Seller’s
employee pension benefit plans as of the Effective Time.
30
(e) The
Seller shall be liable for any severance, separation, deferred compensation
or
similar benefits that are payable (i) to any Person who is or was an employee
of
the Seller and who is not a Transferred Employee, including any Person whose
employment with the Business was terminated prior to the Effective Time (the
“Seller
Employees”),
and
(ii) except as specifically provided in Section 2.3(c) with respect to bonuses
and commissions, to Transferred Employees, to the extent that such Transferred
Employee’s right to severance, separation, deferred compensation or similar
benefits arises as a result of the transactions contemplated by this Agreement
and the Ancillary Agreements.
(f) The
Seller shall be liable for the administration and payment of all workers’
compensation and health and welfare Liabilities and benefits with respect to
(i)
Transferred Employees to the extent resulting from claims, events,
circumstances, exposures, conditions or occurrences occurring on or prior to
such Transferred Employee commencing his employment with the Buyer, and (ii)
the
Seller Employees who do not become Transferred Employees. The Buyer shall be
liable for the administration and payment of all workers’ compensation and
health and welfare Liabilities and benefits with respect to Transferred
Employees to the extent resulting from claims, events, circumstances, exposures,
conditions or occurrences occurring after the Effective Time.
(g) The
Seller shall retain and perform all Liabilities and maintain all insurance
under
the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”)
with
respect to the Seller Employees and their covered dependents; provided
that the
Buyer shall perform all of its obligations under COBRA with respect to
Transferred Employees that become covered by any group health insurance plan
of
Buyer.
(h) Except
as
expressly set forth in this Section 5.4 with respect to Transferred Employees,
the Buyer shall have no obligation with respect to any Employee. Nothing in
this
Agreement confers upon any Employee or Transferred Employee any rights or
remedies of any nature or kind whatsoever under or by reason of this Section
5.4. Nothing in this Agreement shall (i) impose an obligation on the Buyer
to
offer employment to any Employee or (ii) limit the right of the Buyer to
terminate or reassign any Transferred Employee after the Effective Time or
to
change the terms and conditions of his or her employment in any
manner.
5.5 Consents.
To the
extent that any Purchased Assets are not assignable without the consent, waiver
or approval of another Person, this Agreement shall not be deemed to constitute
an assignment, an attempted assignment or an undertaking to assign such
Purchased Asset if such consent or approval is not given or if such an
assignment, attempted assignment or undertaking otherwise would constitute
a
breach thereof or cause a loss of benefits thereunder. After the Effective
Date,
the Seller, upon the Buyer’s written request, shall use its reasonable best
efforts to obtain any and all such third party consents or approvals for the
assignment of all Purchased Assets. The Seller shall cooperate with the Buyer
in
any reasonable arrangement designed to provide for the Buyer after the Effective
Time the benefits intended to be assigned to the Buyer under the applicable
Purchased Asset, including enforcement at the cost and for the account of the
Buyer of any and all rights of the Seller against the other party thereto
arising out of the breach or cancellation thereof by such other party or
otherwise. Nothing contained in this Section 5.5 or elsewhere in this Agreement
shall be deemed (a) a waiver by the Buyer of its right to have received on
the
Effective Date an effective assignment of all of the Purchased Assets or (b)
an
agreement to exclude from the Purchased Assets any Purchased Asset as to which
a
consent, waiver or approval may be necessary.
31
5.6 Public
Announcements.
Neither
the Buyer nor the Seller shall, nor shall any of their respective Affiliates,
without the approval of the other party, issue any press releases or otherwise
make any public statements with respect to the transactions contemplated by
this
Agreement, except as may be required by applicable Law or by obligations
pursuant to any listing agreement with any securities exchange or stock market,
in which case the party required to make the release or announcement shall
allow
the other party reasonable time to comment on such release or announcement
in
advance of such issuance; provided
that
each of the parties may make internal announcements to their respective
employees regarding the transactions contemplated by this Agreement and the
Ancillary Agreements.
5.7 Names.
After
the Effective Time, the Seller shall not have any further right to use, nor
shall it use, “U.S.
Newswire”, or any name or trademark confusingly similar thereto, in any capacity
whatsoever.
5.8 Taxes.
(a) Each
of
the Seller and the Buyer shall pay half of all federal, state and local sales,
stamp, documentary, recording, value added, registration, conveyance and real
estate and other transfer Taxes, if any, due as a result of the purchase, sale
or transfer of the Purchased Assets in accordance herewith whether imposed
by
Law on the Seller or the Buyer. The Buyer shall file all necessary documentation
and Tax Returns with respect to such Taxes. Upon the request of the Buyer,
the
Seller shall furnish the Buyer with proof of such payment. Upon the request
of
the Seller, the Buyer shall furnish the Seller with proof of such payment.
(b) All
real
property Taxes, personal property Taxes and similar ad valorem obligations
levied with respect to the Purchased Assets for a taxable period that includes
(but does not end on) the Effective Date shall be apportioned between the Seller
and the Buyer as of the Effective Date based on the number of days of such
taxable period included in the period ending with and including the Effective
Date (with respect to any such taxable period, the “Pre-Closing
Tax Period”),
and
the number of days of such taxable period beginning after the Effective Date
(with respect to any such taxable period, the “Post-Closing
Tax Period”).
The
Seller shall be liable for the proportionate amount of such Taxes that is
attributable to the Pre-Closing Tax Period, and the Buyer shall be liable for
the proportionate amount of such Taxes that is attributable to the Post-Closing
Period. If bills for such Taxes have not been issued as of the Effective Date,
and, if the amount of such Taxes for the period including the Effective Date
is
not then known, the apportionment of such Taxes shall be made at Closing on
the
basis of the prior period's Taxes. After Closing, upon receipt of bills for
the
period including the Closing Date, adjustments to the apportionment shall be
made by the parties, so that if either party paid more than its proper share
at
the Closing, the other party shall promptly reimburse such party for the excess
amount paid by them.
32
(c) The
Buyer
and the Seller agree to furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information and assistance relating
to
the Business, the Purchased Assets and Assumed Liabilities (including access
to
books and records) as is reasonably necessary for the filing of all Tax Returns,
the making of any election relating to Taxes, the preparation for any audit
by
any Taxing Authority, and the prosecution or defense of any Action relating
to
any Tax. Any expenses incurred in furnishing such information or assistance
shall be borne by the party requesting it.
5.9 Bulk
Sales Laws.
The
Buyer and the Seller hereby waive compliance by the Buyer and the Seller with
the bulk sales Law and any other similar Laws in any applicable jurisdiction
in
respect of the transactions contemplated by this Agreement and the Ancillary
Agreements; provided,
that
the Seller shall pay and discharge when due all claims of creditors asserted
against the Buyer or the Purchased Assets by reason of such noncompliance and
shall take promptly all necessary actions required to remove any Lien which
may
be placed upon any of the Purchased Assets by reason of such
noncompliance.
5.10 Discharge
of Business Obligations After Closing.
(a) From
and
after the Effective Time, the Seller shall pay and discharge on a timely basis
all of the Excluded Liabilities. Notwithstanding the foregoing, the Seller
shall
pay and discharge in full the Third Quarter Yahoo Payable no later than November
15, 2006.
(b) From
and
after the Effective Time, the Buyer shall pay and discharge on a timely basis
all of the Assumed Liabilities.
(c) From
and
after the Effective Time, if the Seller or its Affiliates receives or collects
any funds relating to any Accounts Receivable or any other Purchased Asset,
the
Seller or its Affiliate shall remit such funds to the Buyer within five Business
Days after its receipt thereof. The Seller hereby appoints the Buyer as its
true
and lawful attorney-in-fact, in the name of the Seller, but on behalf of Buyer
to (i) receive and open all mail, packages and other communications addressed
to
the Seller, and (ii) demand and receive all Accounts Receivable and endorse
without recourse the name the Seller on any check or any other form of payment
received by the Buyer on account of the Business or the Purchased Assets
transferred to the Buyer hereunder. The Seller hereby agrees that the foregoing
appointment shall be coupled with an interest and shall be irrevocable.
33
(d) From
and
after the Effective Time, if the Buyer or its Affiliates receives or collects
any funds relating to any Excluded Asset, the Buyer or its Affiliate shall
remit
such funds to the Seller within five Business Days after its receipt
thereof.
(e) All
mail,
faxes, e-mails, deliveries, telephone inquiries and correspondence received
after the Closing by the Buyer which (i) is addressed to an Employee that is
not
a Transferred Employee and (ii) is not related to the Business (the
“Correspondence
for the Seller”)
will
promptly be forwarded by the Buyer to the Seller. Promptly following the
Effective Time, the Buyer will cause the Designated Email Accounts to be closed
and for automatic notices to be provided to any person that sends correspondence
to a Designated Email Account informing such person that the account has been
closed; provided
if for
any reason the Buyer receives an email intended for a person that is not a
Transferred Employee, then Buyer will promptly forward such email to the
Seller. The
Buyer
agrees to (A) not establish email accounts with names the same as, or similar
to, the Designated Email Accounts and (B) use commercially reasonable efforts
not to divulge or use any information derived from Correspondence for Seller.
For purposes of clarity, the parties acknowledge that the Buyer shall be
entitled to open all mail, faxes, e-mails, deliveries, telephone inquiries
and
correspondence that may potentially be Correspondence for the Seller to
determine whether such items are in fact Correspondence for the Seller.
For
purposes of this Section 5.10(e), “Designated
Email Accounts”
means
the email accounts corresponding to the following email addresses:
xxxxxxxxx@xxxxxxxxxx.xxx; xxxxxxxxx@xxxxxxxxxx.xxx;
xxxxxxxx@xxxxxxxxxx.xxx; and xxxxxxx@xxxxxxxxxx.xxx.
(f) All
mail,
faxes, e-mails, deliveries, telephone inquiries and correspondence received
after the Closing by the Seller which is related to the Business (including
mail, faxes, e-mails, deliveries, telephone inquiries and correspondence
addressed to U.S. Newswire or any Employee (regardless of whether such Employee
is a Transferred Employee)) (the “Correspondence
for the Buyer”)
will
promptly be forwarded by the Seller to the Buyer. The Seller agrees to use
commercially reasonable efforts not to divulge or use any information derived
from Correspondence for the Buyer. For purposes of clarity, the parties
acknowledge that the Seller shall be entitled to open all mail, faxes, e-mails,
deliveries, telephone inquiries and correspondence that may potentially be
Correspondence for the Buyer to determine whether such items are in fact
Correspondence for the Buyer.
5.11 Access
to Books and Records.
Each of
the Seller and the Buyer shall preserve until the sixth anniversary of the
Effective Date all records possessed or to be possessed by such party relating
to any of the assets, Liabilities or business of the Business prior to the
Effective Time. After the Effective Date, where there is a legitimate business
purpose, such party shall provide the other party with access, upon prior
reasonable written request specifying the need therefore, during regular
business hours, to (i) the officers and employees of such party and (ii) the
books of account and records of such party, but, in each case, only to the
extent relating to the assets, Liabilities or business of the Business prior
to
the Effective Time, and the other party and its representatives shall have
the
right to make copies of such books and records at their sole cost; provided,
however,
that
the foregoing right of access shall not be exercisable in such a manner as
to
interfere unreasonably with the normal operations and business of such party.
Such records may nevertheless be destroyed by a party if such party sends to
the
other party written notice of its intent to destroy records, specifying with
particularity the contents of the records to be destroyed. Such records may
then
be destroyed after the 30th day after such notice is given unless the other
party objects to the destruction in which case the party seeking to destroy
the
records shall deliver such records to the objecting party at the objecting
party’s cost.
34
5.12 Outstanding
Checks.
The
Seller shall take all actions necessary to cause its banks to honor all checks
drawn on the Seller’s bank or other deposit or savings accounts prior to the
Effective Time that are related to the Business which have not been honored
as
of the Effective Time (including maintaining adequate funds in each account
equal to the aggregate amount of outstanding checks drawn on such
account).
5.13 Further
Assurances.
Each of
the Buyer and the Seller shall execute such documents and other instruments
and
take such further actions as may reasonably be required or desirable to carry
out the provisions hereof and consummate the transactions contemplated by this
Agreement.
ARTICLE
VI
INDEMNIFICATION
6.1 Survival.
(a) Except
as
otherwise expressly provided in this Section 6.1(a), all representations and
warranties contained in this Agreement, the Ancillary Agreements, any Schedule,
certificate or other document delivered pursuant to this Agreement or the
Ancillary Agreements, shall survive the Closing for a period of one year. The
representations and warranties of the Seller contained in Sections 3.2
(Authority and Enforceability) and 3.7(b) (Title to Purchased Assets), and
the
representations and warranties of the Buyer contained in Section 4.2 (Authority
and Enforceability) shall survive until six years after the Closing. The
representations and warranties of the Seller contained in Sections 3.8
(Sufficiency of Purchased Assets), 3.18 (Affiliate Transactions) and 3.20
(Brokers) and the representations and warranties of the Buyer contained in
Section 4.5 (Brokers) shall survive until two years after the Closing. The
representations and warranties of Seller contained in Sections 3.5 (Taxes),
3.13
(Employee Benefits), 3.15 (Environmental), 3.21 (Escheatment) and 3.22 (Privacy)
shall survive the Closing until 60 days after the expira-tion of the applicable
statute of limitations period (after giving effect to any waivers and extensions
thereof).
(b) The
period for which a representation or warranty, covenant or agreement survives
the Closing is referred to herein as the “Applicable
Survival Period”.
In the
event notice of claim for indemnification under Section 6.2 or 6.3 is given
within the Applicable Survival Period, the representation or warranty, covenant
or agreement that is the subject of such indemnification claim (whether
or not formal legal action shall have been commenced based upon such
claim)
shall
survive with respect to such claim until such claim is finally resolved.
The
Indemnitor shall indemnify the Indemnitee for all Losses (subject to the
limitations set forth herein, if applicable) that the Indemnitee may incur
in
respect of such claim, regardless of when incurred.
35
6.2 Indemnification
by the Seller.
(a) Subject
to the limitations set forth herein, the Seller shall indemnify and defend
Buyer
and its Affiliates and their respective stockholders, members, managers,
officers, directors, employees, agents, successors and assigns (the
“Buyer
Indemnitees”)
against, and shall hold them harmless from, any and all losses, damages, claims
(including third party claims), charges, liability, action, suit, proceeding,
interest, penalties, Taxes, costs and expenses (including reasonable legal,
consultant, accounting and other professional fees and fees and costs incurred
in enforcing rights under this Section 6.2) (collectively, “Losses”)
resulting from, arising out of, or incurred by any Buyer Indemnitee in
connection with, or otherwise with respect to: (i) any inaccuracy or breach
of
any representation or warranty of the Seller contained in this Agreement or
any
of the Ancillary Agreements (without regard and without giving effect to any
“materiality”, “material adverse effect” or similar qualification contained in
any such representation or warranty); (ii) any breach, non-compliance, violation
or non-fulfillment of any covenant or agreement of the Seller contained in
this
Agreement or any of the Ancillary Agreements (without regard and without giving
effect to any “materiality”, “material adverse effect” or similar qualification
contained in any such covenant or agreement); (iii) any Excluded Liability
(including any Liability arising from the ownership or operation of the Business
or the ownership, use or operation of the Purchased Assets at any time prior
to
the Effective Time) regardless of whether or not the Seller Disclosure Schedule
discloses any such Excluded Liability; (iv) any fees, expenses or other payments
incurred or owed by the Seller to any agent, broker, investment banker or other
firm or person retained or employed by it in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements; and (v) fraudulent
transfer Laws or the failure to comply with any bulk sales Laws and similar
Laws.
(b) The
Seller shall not be liable for any Losses pursuant to Section 6.2(a)(i) (other
than with respect to the Dollar One Representations) unless and until the
aggregate amount of all Losses incurred by the Buyer Indemnitees under Section
6.2(a)(i) exceeds $150,000, (the “Cushion
Amount”),
and
then, subject to the terms and conditions hereof, the Seller shall pay to the
Buyer the amount by which the Losses exceed the Cushion Amount; provided
that the
cumulative indemnification obligation of the Seller under Section 6.2(a)(i)
(other than with respect to Fundamental Representations) shall in no event
exceed $5,000,000. The foregoing limitations shall not apply in the case of
willful or intentional breach, gross negligence or fraud.
6.3 Indemnification
by the Buyer.
36
(a) The
Buyer
shall indemnify and defend the Seller and its Affiliates and their respective
stockholders, members, managers, officers, directors, employees, agents,
successors and assigns (the “Seller
Indemnitees”)
against, and shall hold them harmless from, any and all Losses resulting from,
arising out of, or incurred by any Seller Indemnitee in connection with, or
otherwise with respect to: (i) any inaccuracy or breach of any representation
or
warranty of the Buyer contained in this Agreement or any of the Ancillary
Agreements (without regard and without giving effect to any “materiality”,
“material adverse effect” or similar qualification contained in any such
representation or warranty); (ii) any breach, non-compliance, violation or
non-fulfillment of any covenant or agreement of the Buyer contained in this
Agreement or any of the Ancillary Agreements (without regard and without giving
effect to any “materiality”, “material adverse effect” or similar qualification
contained in any such covenant or agreement); (iii) any fees, expenses or other
payments incurred or owed by the Buyer or its Affiliates to any agent, broker,
investment banker or other firm or person retained or employed by it in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements; and (iv) any Assumed Liabilities.
(b) The
Buyer
shall not be liable for any Losses pursuant to Section 6.3(a)(i) (other than
with respect to the Dollar One Representations) unless and until the aggregate
amount of all Losses incurred by the Seller Indemnitees under Section 6.3(a)(i)
exceeds the Cushion Amount, and then, subject to the terms and conditions
hereof, the Buyer shall pay to the Seller the amount by which the Losses exceed
the Cushion Amount; provided
that the
cumulative indemnification obligation of the Buyer under Section 6.3(a)(i)
(other than with respect to Fundamental Representations) shall in no event
exceed $5,000,000. The foregoing limitations shall not apply (i) to the payment
of the Purchase Price (as adjusted) and/or the Earnout Amount by the Buyer,
or
(ii) in the case of willful or intentional breach, gross negligence or fraud.
6.4 Indemnification
Procedure for Third Party Claims
(a) In
the
event that an Indemnitee receives notice of the assertion of any claim or the
commencement of any Action by a third party in respect of which indemnity may
be
sought under the provisions of this Article VI (a “Third Party Claim”), the
Indemnitee shall notify the Indemnitor in writing of such Third Party Claim
(such notice, a “Notice of Claim”); provided
that the
failure or delay in notifying the Indemnitor of such Third Party Claim will
not
relieve the Indemnitor of any liability it may have to the Indemnitee, except
and only to the extent that such failure or delay causes actual harm to the
Indemnitor with respect to such Third Party Claim.
(b) The
Indemnitor will have 180 days from the date on which the Indemnitor received
the
Notice of Claim (the “Indemnitor Defense
Review Period”) to
notify
the Indemnitee that the Indemnitor desires to assume the defense or prosecution
of such Third Party Claim and any litigation resulting therefrom with counsel
reasonably acceptable to the Indemnitee and at the sole cost and expense of
the
Indemnitor (a “Third Party Defense”). If the Indemnitor assumes the Third Party
Defense in accordance herewith, (i) the Indemnitee may retain separate
co-counsel at its sole cost and expense and participate in the defense of the
Third Party Claim but the Indemnitor shall control the investigation, defense
and settlement thereof; (ii) the Indemnitor will not consent to the entry of
any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnitee which shall not be
unreasonably withheld; (iii) the Indemnitor shall be conclusively deemed to
have
acknowledged that the Third Party Claim is within the scope of its indemnity
obligation under this Agreement; (iv) the Indemnitor shall conduct the Third
Party Defense actively and diligently, and (v) the Indemnitee will provide
reasonable cooperation in the Third Party Defense. Notwithstanding the
foregoing, if counsel for the Indemnitee reasonably determines that there is
a
conflict between the positions of the Indemnitor and the Indemnitee in
conducting the defense of such action or that there are legal defenses available
to such Indemnitee different from or in addition to those available to the
Indemnitor, then counsel for the Indemnitee shall be entitled, if the Indemnitee
so elects, to conduct the defense to the extent reasonably determined by such
counsel to protect the interests of the Indemnitee, at the expense of the
Indemnitor.
37
(c) During
the Indemnitor Defense Review Period and if the Indemnitor does not assume
the
Third Party Defense within 180 days of receipt of the Notice of Claim, the
Indemnitee shall have the right to assume the Third Party Defense with counsel
of its choice at the expense of the Indemnitor; provided, however, that the
Indemnitor shall have the right, at its expense, to participate in such Third
Party Defense but the Indemnitee shall control the investigation, defense and
settlement thereof. The Indemnitee shall conduct the Third Party Defense
actively and diligently, and the Indemnitor will provide reasonable cooperation
in the Third Party Defense. The Indemnitee shall have the right to consent
to
the entry of any judgment or enter into any settlement with respect to the
Third
Party Claim in any manner and on such terms as it may deem appropriate without
the consent of the Indemnitor; provided, however, that the amount of any
settlement made or entry of any judgment consented to by the Indemnitee without
the consent of the Indemnitor (not to be unreasonably withheld or delayed)
shall
not be determinative of the validity of the claim.
(d) In
connection with any Third Party Claim, the Indemnitor hereby consents to the
nonexclusive jurisdiction of any court in which an Action in respect of a
Third-Party Claim is brought against any Indemnitee for purposes of any claim
that the Indemnitee may have under this Article VI with respect to such Action
or the matters alleged therein and agrees that process may be served on the
Indemnitor with respect to such a claim anywhere in the world.
6.5 Indemnification
Procedures for Non-Third Party Claims.
In the
event of a claim that does not involve a Third Party Claim being asserted
against it, the Indemnitee shall send a notice of claim to the Indemnitor.
The
notice of claim shall set forth the amount, if known, or, if not known, an
estimate of the foreseeable maximum amount of claimed Losses (which estimate
shall not be conclusive of the final amount of such Losses) and a description
of
the basis for such claim. The Indemnitor will have 30 days from receipt of
such
notice of claim to confirm or dispute the claim and will reasonably cooperate
and assist the Indemnitee in determining the validity of the claim for
indemnity. If the Indemnitor does not give notice to the Indemnitee that it
disputes such claim within 30 days after its receipt of the notice of claim,
the
claim specified in such notice of claim will be conclusively deemed a Loss
subject to indemnification hereunder.
38
6.6 Tax
Benefits; Insurance.
The
amount of Losses payable under this Article VI by the Indemnitor shall be
reduced by any and all amounts actually recovered by the Indemnitee in respect
of such Losses under applicable insurance policies or from any other Person
alleged to be responsible therefor; provided that nothing in this Agreement
shall be deemed to require the Indemnitee to pursue and collect on any recovery
available under any of its insurance policies or from any other Person. If
an
Indemnitee receives any amounts in respect of any particular Loss under
applicable insurance policies or from any other Person alleged to be responsible
for such Losses subsequent to an indemnification payment by the Indemnitor
for
such Losses, it shall promptly pay to such Indemnitor an amount (if any) equal
to (i) the amount previously received by the Indemnitee under this Article
VI
with respect to such Loss plus (ii) the amount received by the Indemnitee in
respect of such Loss under applicable insurance policies or from any other
Person (net of any expenses incurred by such Indemnitee in collecting such
amount) minus (iii) the actual amount of the Loss incurred by the Indemnitee
(without regard to any limitations on indemnification set forth in this Article
VI).
6.7 Contingent
Claims.
Nothing
herein shall be deemed to prevent an Indemnitee from making a claim hereunder
for potential or contingent claims or demands; provided
that the
notice of claim sets forth the specific basis for any such contingent claim
to
the extent then feasible and the Indemnitee has reasonable grounds to believe
that such a claim may be made.
6.8 Effect
of Investigation; Waiver.
An
Indemnitee’s right to indemnification or other remedies based upon the
representations, warranties, covenants and agreements of the Indemnitor will
not
be affected by any investigation or knowledge of the Indemnitee or any waiver
by
the Indemnitee of any condition based on the accuracy of any representation
or
warranty, or compliance with any covenant or agreement. Such representations,
warranties, covenants and agreements shall not be affected or deemed waived
by
reason of the fact that the Indemnitee knew or should have known that any
representation or warranty might be inaccurate or that the Indemnitor failed
to
comply with any agreement or covenant. Any investigation by such party shall
be
for its own protection only and shall not affect or impair any right or remedy
hereunder.
6.9 Other
Rights and Remedies Not Affected.
Except
as otherwise provided in this agreement (including Sections 5.2 and 7.13),
the
indemnification rights of the parties under this Article VI shall be the sole
exclusive remedy for any breach of this Agreement or the Ancillary
Agreements,.
39
ARTICLE
VII
MISCELLANEOUS
7.1 Intentionally
Omitted.
7.2 Notices.
Any
notice, request, demand, waiver, consent, approval or other communication which
is required or permitted hereunder shall be in writing and shall be deemed
given: (a) on the date established by the sender as having been delivered
personally, (b) on the date delivered by a private courier as established by
the
sender by evidence obtained from the courier, (c) on the date sent by facsimile,
with confirmation of transmission, if sent during normal business hours of
the
recipient, if not, then on the next business day, or (d) on the fifth Business
Day after the date mailed, by certified or registered mail, return receipt
requested, postage prepaid. Such communications, to be valid, must be addressed
as follows::
If
to the
Buyer, to:
United
Business Media, Inc.
000
Xxxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxxx,
XX 00000
Attn:
Xxxxx
Xxxxxxxx,
Senior
Vice President & General Counsel
Fax:
000-000-0000
With
a
required copy to:
Xxxxxx,
Xxxxx & Bockius LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
XX 00000
Attn:
Xxxxxxx Xxxxxx, Esq.
Facsimile:
000-000-0000
If
to the
Seller, to:
Medialink
Worldwide Incorporated
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
XX 00000
Attn:
Xxxxxxx X. Xxxxxxxx
Facsimile:
(000) 000-0000
With
a
required copy to:
Tashlik,
Kreutzer, Goldwyn & Xxxxxxxx P.C.
00
Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx
Xxxx, XX 00000
Attn:
Xxxxxxxx Xx. Tashlik, Esq.
Facsimile:
(000) 000-0000
40
or
to
such other address or to the attention of such Person or Persons as the
recipient party has specified by prior written notice to the sending party
(or
in the case of counsel, to such other readily ascertainable business address
as
such counsel may hereafter maintain). If more than one method for sending notice
as set forth above is used, the earliest notice date established as set forth
above shall control.
7.3 Amendments
and Waivers.
(a) Any
provision of this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and is signed, in the case of an amendment,
by
each party to this Agreement, or in the case of a waiver, by the party against
whom the waiver is to be effective.
(b) No
failure or delay by any party in exercising any right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. To the maximum extent permitted by Law, (i)
no
waiver that may be given by a party shall be applicable except in the specific
instance for which it was given and (ii) no notice to or demand on one party
shall be deemed to be a waiver of any obligation of such party or the right
of
the party giving such notice or demand to take further action without notice
or
demand.
7.4 Expenses.
Except
as otherwise specifically provided in this Agreement, each party shall bear
its
own costs and expenses in connection with this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby, including
all
legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties.
7.5 Successors
and Assigns.
This
Agreement may not be assigned by either party hereto without the prior written
consent of the other party; provided that,
without
such consent, the Buyer may transfer or assign this Agreement, in whole or
in
part or from time to time, to one or more of its Affiliates, but no such
transfer or assignment will relieve the Buyer of its obligations hereunder.
Subject to the foregoing, all of the terms and provisions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective executors, heirs, personal representatives, successors and
assigns.
7.6 Governing
Law.
This
Agreement shall be governed by and interpreted and enforced in accordance with
the Laws of the State of New York, without giving effect to any choice of Law
or
conflict of Laws rules or provisions (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.
41
7.7 Consent
to Jurisdiction.
Each
party hereto irrevocably submits to the exclusive jurisdiction of any state
or
federal court located within the County of New York in the State of
New York for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby, and agrees to
commence any such action, suit or proceeding only in such courts. Each party
further agrees that service of any process, summons, notice or document by
U.S.
registered mail to such party’s respective address set forth herein shall be
effective service of process for any such action, suit or proceeding. Each
party
irrevocably and unconditionally waives any objection to the laying of venue
of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in such courts, and hereby irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE ANCILLARY
AGREEMENTS, THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY OR THE ACTIONS
OF
SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
HEREOF AND THEREOF.
7.8 Counterparts.
This
Agreement may be executed in counterparts, and any party hereto may execute
any
such counterpart, each of which when executed and delivered shall be deemed
to
be an original and all of which counterparts taken together shall constitute
but
one and the same instrument. This Agreement shall become effective when each
party hereto shall have received a counterpart hereof signed by the other party
hereto. The parties agree that the delivery of this Agreement, and the delivery
of the Ancillary Agreements and any other agreements and documents at the
Closing, may be effected by means of an exchange of facsimile or electronically
transferred signatures.
7.9 Third
Party Beneficiaries.
No
provision of this Agreement is intended to confer upon any Person other than
the
parties hereto any rights or remedies hereunder; except that in the case of
Article VI hereof, the other Indemnitees and their respective heirs, executors,
administrators, legal representatives, successors and assigns, are intended
third party beneficiaries of such sections and shall have the right to enforce
such sections in their own names.
7.10 Entire
Agreement.
This
Agreement, the Ancillary Agreements, and the other documents, instruments and
agreements specifically referred to herein or therein or delivered pursuant
hereto or thereto set forth the entire understanding of the parties hereto
with
respect to the transactions
contemplated by this Agreement.
All
Exhibits, Annexes and Schedules referred to herein are intended to be and hereby
are specifically made a part of this Agreement. Any and all previous agreements
and understandings between or among the parties regarding the subject matter
hereof, whether written or oral, are superseded by this Agreement.
42
7.11 Captions.
All
captions contained in this Agreement are for convenience of reference only,
do
not form a part of this Agreement and shall not affect in any way the meaning
or
interpretation of this Agreement.
7.12 Severability.
Subject
to Section 5.2, any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability
in
any jurisdiction shall not invalidate or render unenforceable such provision
in
any other jurisdiction.
7.13 Specific
Performance.
The
Buyer and the Seller each agree that irreparable damage would occur in the
event
that any of the provisions of this Agreement were not performed by them in
accordance with the terms hereof and that each party shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at
Law
or equity.
7.14 Interpretation.
The
parties hereto have participated jointly in the negotiation and drafting of
this
Agreement, and any rule of construction or interpretation otherwise requiring
this Agreement to be construed or interpreted against any party by virtue of
the
authorship of this Agreement shall not apply to the construction and
interpretation hereof.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
43
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date first above
written.
SELLER:
MEDIALINK
WORLDWIDE INCORPORATED
By:
Name:
Title:
BUYER:
PR
NEWSWIRE ASSOCIATION, LLC
By:
Name:
Title:
[Signature
Page to Asset Purchase Agreement]
Annex
I
Index
of Defined Terms
1. Defined
Terms.
When
used in the Agreement, the following terms shall have the meanings assigned
to
them in this section.
“Accounts
Receivable”
means
(a) any trade accounts receivable and other rights to payment owed to the
Business and (b) any other account or note receivable of the Seller related
to
the Business, together with, in each case, the full benefit of any security
interest of any Seller therein and any claim, remedy or other right related
to
the foregoing.
“Affiliate”
means,
with respect to any specified Person, any other Person directly or indirectly
Controlling, Controlled by or under common Control with such specified
Person.
“Ancillary
Agreements”
means
the Xxxx of Sale, the Assumption Agreement, the Intellectual Property
Assignments, the Escrow Agreement, the Transition Services Agreement and the
other agreements, instruments and documents delivered in connection with this
Agreement or another Ancillary Agreement.
“Benefit
Plan”
means
(a) any “employee benefit plan” as defined in ERISA Section 3(3), including any
(i) nonqualified deferred compensation or retirement plan or arrangement which
is an Employee Pension Benefit Plan (as defined in ERISA Section 3(2)), (ii)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (iii) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan (as defined in ERISA Section 3(37)) and (iv) Employee Welfare
Benefit Plan (as defined in ERISA Section 3(1)) or material fringe benefit
plan
or program, or (b) stock purchase, stock option, severance pay, employment,
change-in-control, vacation pay, company awards, salary continuation, sick
leave, excess benefit, bonus or other incentive compensation, life insurance,
or
other employee benefit plan, contract, program, policy or other arrangement,
whether or not subject to ERISA.
“Books
and Records”
means
books
of
account, manuals, general, financial, warranty and shipping records, invoices,
customer and supplier lists, correspondence, engineering, maintenance and
operating records, advertising and promotional materials, credit records of
customers and other documents, records and files, in each case of the Seller
that are related to or used in connection with the Business, including books
and
records relating to Business Intellectual Property.
“Business
Day”
means
a
day other than a Saturday, Sunday or other day on which banks located in New
York City, New York are authorized or required by Law to close.
“Code”
means
the Internal Revenue Code of 1986 and the rules and regulations promulgated
thereunder.
I-i
“Contract”
means
any agreement, contract, license, lease, commitment, arrangement or
understanding, written or oral, including any sales order or purchase
order.
“Control”
means,
when used with respect to any Person, the power to direct the management and
policies of such person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise and the terms “controlling”
and
“controlled”
shall
have meanings correlative to the foregoing.
“Current
Assets”
means
the aggregate amount of (i) the Accounts Receivable of the Business (net of
the
Seller’s allowance for bad debt and any accounts receivable credit balances) and
(ii) the Assigned Prepaid Expenses (other than those relating to Taxes). For
purposes of clarity, Current Assets shall not include any assets of the Seller’s
Norwalk Print Division.
“Current
Liabilities”
means
the aggregate amount of the Seller’s (i) accounts payable, (ii) accrued expenses
(including accrued bonuses and commissions to Transferred Employees for the
current fiscal year but excluding Taxes and Yahoo Payables) and
(iii) deferred
revenue, in each case to the extent solely related to the Business. For purposes
of clarity, Current Liabilities shall not include any Liabilities related to
or
arising out of the Seller’s Norwalk Print Division.
“Dollar
One Representations”
means
(a) in the case of the Seller, the representations and warranties contained
in
Sections 3.2 (Authority and Enforceability), 3.5 (Taxes), 3.13 (Employee
Benefits), 3.15 (Environmental), 3.18 (Affiliate Transactions), 3.20 (Brokers),
3.21 (Escheatment) and 3.22 (Privacy) and (b) in the case of the Buyer, the
representations and warranties contained in Sections 4.1 (Organization and
Good
Standing), 4.2 (Authority and Enforceability) and 4.5 (Brokers).
“Environmental
Law”
means
all
Laws relating to pollution or protection of the environment (including ambient
air, surface water, ground water, land surface or subsurface strata, inland
wetlands and watercourses) and worker
health and safety,
including such Laws relating to solid waste, community right-to-know, hazard
communication, noise, radioactive material, natural resource protection, and
emissions, discharges, releases or threatened releases of hazardous materials,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of hazardous
materials,
whether
now existing or subsequently amended or enacted.
“Equipment”
means
machinery, fixtures, furniture, supplies, accessories, materials, equipment,
parts, automobiles, trucks, vehicles, office equipment, computers, servers,
hardware, telephones and all other items of tangible personal property that
are
owned, leased or otherwise used by the Seller.
“ERISA”
means
the Employee Retirement Income Security Act of 1974 and any regulations or
rulings issued thereunder.
I-ii
“Estimated
Working Capital Surplus”
means
an amount equal to Estimated Working Capital minus
Target
Working Capital.
“Fundamental
Representations”
means
(a) in the case of the Seller, the representations and warranties contained
in
Sections 3.2 (Authority and Enforceability), 3.5 (Taxes), 3.7(b) (Title to
Purchased Assets), 3.8 (Sufficiency of Purchased Assets), 3.13 (Employee
Benefits), 3.15 (Environmental), 3.18 (Affiliate Transactions), 3.20 (Brokers),
3.21 (Escheatment) and 3.22 (Privacy) and (b) in the case of the Buyer, the
representations and warranties contained in Sections 4.1 (Organization and
Good
Standing), 4.2 (Authority and Enforceability) and 4.5 (Brokers).
“Governmental
Entity”
means
any entity or body exercising executive, legislative, judicial, regulatory
or
administrative functions of or pertaining to United States federal, state,
local
or municipal government, foreign, international, multinational or other
government, including any department, commission, board, agency, bureau,
subdivision, instrumentality, official or other regulatory, administrative
or
judicial authority thereof, and any non-governmental regulatory body to the
extent that the rules and regulations or orders of such body have the force
of
Law.
“Indebtedness”
means
any of the following: (a) any indebtedness for borrowed money, (b) any
obligations evidenced by bonds, debentures, notes or other similar instruments,
(c) any obligations to pay the deferred purchase price of property or services,
except trade accounts payable and other current Liabilities arising in the
ordinary course of business, (d) any obligations as lessee under capitalized
leases, (e) any indebtedness created or arising under any conditional sale
or
other title retention agreement with respect to acquired property, (f) any
obligations, contingent or otherwise, under acceptance credit, letters of credit
or similar facilities, (g) a guarantee of the obligations of any other Person,
and (h) any guaranty of any of the foregoing.
“Indemnitee”
means
any Person that is seeking indemnification from an Indemnitor pursuant to the
provisions of this Agreement.
“Indemnitor”
means
any party to this Agreement from which any Indemnitee is seeking indemnification
pursuant to the provisions of this Agreement.
“Intercompany
Accounts”
means
all accounts, notes and other monies (a) receivable by the Business from the
Seller or any its Affiliates or (b) payable by the Business to the Seller or
any
of its Affiliates.
“Knowledge”
of
the
Seller or any similar phrase means with respect to any fact or matter, the
actual knowledge of the officers of the Seller (including Xxxxxxxx Xxxxxxxxx,
Xxxxxxx X. Xxxxxxxx, Xxxxx Xxxxxx, Xxxxxxx XxXxxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxx,
Xxxx XxXxxxxx and Xxxx Xxxxxxx), together with such knowledge that such officers
would reasonably be expected to discover after due investigation concerning
the
existence of the fact or matter in question.
I-iii
“Law”
means
any statute, law (including common law), constitution, treaty, ordinance, code,
order, decree, judgment, rule, regulation and any other binding requirement
or
determination of any Governmental Entity.
“Liabilities”
means
liabilities, obligations or commitments of any nature whatsoever, asserted
or
unasserted, known or unknown, absolute or contingent, accrued or unaccrued,
matured or unmatured or otherwise.
“Lien”
means,
with respect to any property or asset, any mortgage, deed of trust, lien
(statutory or otherwise), pledge, charge, security interest, hypothecation,
right of way, easement, encroachment, community property interest, equitable
interest, servitude, option, right of first refusal, restriction on voting
or
transfer, adverse claim or any other encumbrance in respect of such property
or
asset.
“Order”
means
any award,
injunction, judgment, decree, order, ruling, subpoena or verdict or other
decision issued,
promulgated or entered by or with any Governmental Entity or arbitrator of
competent jurisdiction.
“Organizational
Documents”
means,
with respect to any entity, the certificate of incorporation, the articles
of
incorporation, by-laws, articles of organization, partnership agreement, limited
liability company agreement, formation agreement, joint venture agreement or
other similar organizational documents of such entity (in each case, as
amended).
“Permit”
means
any authorization, approval, consent, certificate, declaration, filing,
notification, qualification, registration, license, permit or franchise or
any
waiver of any of the foregoing, of or from, or to be filed with or delivered
to,
any Person or pursuant to any Law.
“Permitted
Liens”
means
(a) Liens arising under this Agreement or the Ancillary Agreements, (b)
Liens created by or through the Buyer and (c) Liens set forth in Section
1.1 of the Seller Disclosure Schedule.
“Person”
means
an individual, a corporation, a partnership, a limited liability company, a
trust, an unincorporated association, a Governmental Entity or any agency,
instrumentality or political subdivision of a Governmental Entity, or any other
entity or body.
“Public
Software”
means
any software that contains, or is derived in any manner (in whole or in part)
from, any software that is distributed as free software, open source software
or
similar licensing or distribution models.
“Subsidiary”
or
“Subsidiaries”
means,
with respect to any Person, any other Person that is directly or indirectly
Controlled by the first Person.
“Target
Working Capital”
means
an amount equal to $300,296.
I-iv
“Tax”
or
“Taxes”
means
any and all federal, state, local, or foreign net or gross income, gross
receipts, net proceeds, sales, use, ad valorem, value added, franchise,
bank shares, withholding, payroll, employment, excise, property, abandoned
property, escheat, deed, stamp, alternative or add-on minimum, environmental,
profits, windfall profits, transaction, license, lease, service, service use,
occupation, severance, energy, unemployment, social security, workers'
compensation, capital, premium, and other taxes, assessments, customs, duties,
fees, levies, or other governmental charges of any nature whatever, whether
disputed or not, together with any interest, penalties, additions to tax, or
additional amounts with respect thereto.
“Tax
Returns”
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.
“Third
Quarter Yahoo Payable”
means
the $25,000 Yahoo Payable related to the quarter ending September 30,
2006.
“Working
Capital”
means
the aggregate amount of Current Assets less the aggregate amount of Current
Liabilities, but excluding the Excluded Liabilities, and shall be calculated
(i)
in accordance with GAAP, (ii) in accordance with the accounting principles,
methodologies and policies used in the preparation of the Financial Statements
which are set forth in Section
3.4(a)(ii) of the Seller Disclosure Schedule
(regardless of whether such principles, methodologies and policies are
consistent with GAAP) and (iii) to the extent not inconsistent with GAAP, in
accordance with the accounting principles, methodologies and policies used
in
the preparation of the Financial Statements which are set forth in Section
3.4(a)(iii) of the Seller Disclosure Schedule.
“Yahoo
Payables”
means
any payables by the Seller or the Business arising prior to the Effective Time
under that certain Content Lease Agreement, dated November 30, 2000 between
Yahoo! Inc. and U.S. Newswire, a division of Medialink Worldwide Incorporated,
including any amounts owed by the Seller or the Business to Yahoo! Inc. prior
to
the Effective Time for internet distribution costs.
"$"
means
United States dollars.
2. Other
Defined Terms.
The
following terms have the meanings assigned to such terms in the Sections of
the
Agreement set forth below:
Action
|
3.12
|
Agreement
|
Preamble
|
Allocation
Statement
|
2.9
|
Applicable
Survival Period
|
6.1(b)
|
Assigned
Contracts
|
2.1(f)
|
Assumed
Liabilities
|
2.3
|
Assigned
Prepaid Expenses
|
2.1(j)
|
I-v
Assumption
Agreement
|
2.7(a)(ii)
|
Xxxx
of Sale
|
2.7(a)(i)
|
Business
|
Recitals
|
Business
Intellectual Property
|
3.9(b)
|
Buyer
|
Preamble
|
Buyer
Indemnitees
|
6.2(a)
|
Clawback
Escrow
|
2.10(b)
|
Clawback
Escrow Amount
|
2.10(a)
|
Clawback
Escrow Funds
|
2.10(b)
|
Closing
|
2.6
|
Closing
Date
|
2.6
|
Closing
Working Capital
|
2.8(a)
|
Closing
Working Capital Statement
|
2.8(a)
|
COBRA
|
5.4(g)
|
Contaminant
|
3.9(l)(i)
|
Copyrights
|
3.9(a)
|
Correspondence
for the Buyer
|
5.10(f)
|
Correspondence
for the Seller
|
5.10(e)
|
Cushion
Amount
|
6.2(b)
|
Disabling
Code
|
3.9(l)(iv)
|
Earnout
Payment
|
2.5
|
Effective
Date
|
2.6
|
Effective
Time
|
2.6
|
Employee
|
3.14(a)
|
ERISA
Affiliate
|
3.13(b)(iii)
|
Escrow
Agent
|
2.10
|
Escrow
Agreement
|
2.10
|
Estimated
Working Capital
|
2.8(a)
|
Excluded
Assets
|
2.2
|
Excluded
Books and Records
|
2.2(d)
|
Excluded
Liabilities
|
2.4
|
Designated
Email Accounts
|
5.10(e)
|
Final
Working Capital
|
2.8(d)
|
Financial
Statements
|
3.4(a)
|
GAAP
|
3.4(a)
|
I-vi
General
Escrow Amount
|
2.10(a)
|
General
Escrow Funds
|
2.10(c)(i)
|
In-Bound
Licenses
|
3.9(c)
|
Indemnitor
Defense Review Period
|
6.4(b)
|
Independent
Expert
|
2.8(c)
|
Intellectual
Property
|
3.9(a)
|
Intellectual
Property Assignments
|
2.7(a)(iii)
|
Interim
Financial Statements
|
3.4(a)
|
Losses
|
6.2(a)
|
Material
Contract
|
3.11(b)
|
Material
Permit
|
3.6(b)
|
Nondisclosure
Agreements
|
3.9(h)
|
Notice
of Claim
|
6.4(a)
|
Notice
of Objection
|
2.8(b)
|
Out-Bound
Licenses
|
3.9(d)
|
Owned
Business Intellectual Property
|
3.9(b)
|
Patents
|
3.9(a)
|
Policies
|
3.16
|
Pre-Closing
Tax Period
|
5.8(b)
|
Post-Closing
Tax Period
|
5.8(b)
|
Proprietary
Information
|
3.9(a)
|
Public
Software
|
3.9(l)(ii)
|
Purchase
Price
|
2.5
|
Purchased
Assets
|
2.1
|
Representatives
|
5.1
|
Restricted
Business
|
5.2(a)
|
Restricted
Period
|
5.2(a)
|
Review
Period
|
2.8(b)
|
Section
1060 Forms
|
2.9
|
Seller
|
Preamble
|
Seller
Disclosure Schedule
|
Preamble
to Article III
|
Seller
Employees
|
5.4(e)
|
Seller
Indemnitees
|
6.3(a)
|
Services
Agreement
|
2.7(a)(vi)
|
Software
|
3.9(a)
|
Third
Party Claim
|
6.4
|
Third
Party Defenses
|
6.4
|
Trademarks
|
3.9(a)
|
Transferred
Employee
|
5.4(a)
|
Transition
Services Agreement
|
2.7(a)(v)
|
Upfront
Purchase Price
|
2.5
|
Work
Product Agreements
|
3.9(i)
|
I-vii
Annex
II
Earnout/Clawback
(a) Promptly
following the Effective Time, the Buyer shall conduct or cause to be conducted
an audit of the Business’ financial performance and results for the Earnout
Period (the “Audit”).
The
Buyer shall use commercially reasonable efforts to complete the audit within
sixty (60) days after the Effective Date. The Seller, at the Buyer’s request,
shall (i) cooperate and assist the Buyer and its representatives in conducting
the Audit, (ii) provide the Buyer and its representatives with any information
reasonably requested by them in connection with such Audit and (iii) give the
Buyer and its representatives access, during normal business hours and upon
reasonable notice, to the Seller’s personnel, representatives, properties and
books and records for such purpose.
(b) Promptly
following the completion of the Audit (and, in any event, within ninety (90)
days after the Effective Date), the Buyer shall prepare, or cause to be
prepared, and deliver to the Seller a statement (the “EBIT
Statement”)
setting forth the Buyer’s determination of the Earnout Period EBIT, the Earnout
Amount and the Clawback Amount. The EBIT Statement shall be prepared (i) in
accordance with GAAP, (ii) in accordance with the accounting principles,
methodologies and policies used in the preparation of the Financial Statements
which are set forth in Section
3.4(a)(ii) of the Seller Disclosure Schedule
(regardless of whether such principles, methodologies and policies are
consistent with GAAP) and (iii) to the extent not inconsistent with GAAP, in
accordance with the accounting principles, methodologies and policies used
in
the preparation of the Financial Statements which are set forth in Section
3.4(a)(iii) of the Seller Disclosure Schedule.
An
example of the calculation of the Earnout Period EBIT in accordance with this
section, based on the Seller’s August 31, 2006 balance sheet, is set forth as
Exhibit
I
hereto.
If the Buyer’s determination of the Earnout Period EBIT as set forth on the EBIT
Statement is more
than or
equal
to $2,050,000,
then (A) the Buyer shall promptly pay to the Seller by wire transfer of
immediately available funds to an account designated in writing by the Seller
an
amount (the “First Earnout
Payment Amount”)
equal
to 50% of the Earnout Amount set forth on the EBIT Statement (if any) and (B)
the Buyer and the Seller shall cause the Escrow Agent to pay the Seller in
accordance with the Escrow Agreement the Clawback Escrow Funds.
II-i
(c) Upon
receipt from the Buyer, the Seller shall have thirty (30) days to review the
EBIT Statement (the “EBIT Review
Period”).
Following delivery of the EBIT Statement to the Seller and at the Seller’s
request, the Buyer shall (i) cooperate and assist the Seller and its
representatives in reviewing the EBIT Statement and the materials used in its
preparation and (ii) provide the Seller and its representatives with any
information reasonably requested by them in connection with such review. If
the
Seller disagrees with the Buyer’s computation of the Earnout Period EBIT, the
Seller may, on or prior to the last day of the EBIT Review Period, deliver
a
written notice to the Buyer (the “Notice
of EBIT Objection”),
which
sets forth its specific objections to the Buyer’s calculation of the Earnout
Period EBIT. Any Notice of EBIT Objection shall specify those items or amounts
with which the Seller disagrees, together with a detailed written explanation
of
the reasons for disagreement with each such item or amount, and shall set forth
the Seller’s determination of the Earnout Period EBIT, the Earnout Amount and
the Clawback Amount based on such objections. To the extent not set forth in
the
Notice of EBIT Objection, the Seller shall be deemed to have agreed with the
Buyer’s calculation of all other items and amounts contained in the EBIT
Statement. If the Seller’s determination of the Earnout Period EBIT as set forth
on the Notice of EBIT Objection, is less
than
$2,050,000, then the Buyer and the Seller shall promptly cause the Escrow Agent
to (A) pay to the Buyer in accordance with the Escrow Agreement from the
Clawback Escrow Funds an amount (the “First Clawback
Payment Amount”)
equal
to 50% of the Clawback Amount set forth on the Notice of EBIT Objection and
(B)
pay to the Seller in accordance with the Escrow Agreement from the Clawback
Escrow Funds an amount equal to (x) the aggregate amount of the Clawback Escrow
Funds (prior to paying the First Clawback Payment Amount) minus
(y) the
Clawback Amount set forth on the EBIT Statement. If (I) the Seller’s
determination of the Earnout Period EBIT as set forth on the Notice of EBIT
Objection, is equal
to or
more
than
$2,050,000 and (II) the Buyer’s determination of the Earnout Period EBIT as set
forth on the EBIT Statement is less
than
$2,050,000, then the Buyer and the Seller shall cause the Escrow Agent to pay
the Seller in accordance with the Escrow Agreement an amount equal to (1) the
aggregate amount of the Clawback Escrow Funds minus
(2) the
Clawback Amount set forth on the EBIT Statement.
(d) Unless
the Seller delivers the Notice of EBIT Objection to the Buyer on or prior to
the
last day of the EBIT Review Period, (i) the Seller shall be deemed to have
accepted the Buyer’s calculation of the Earnout Period EBIT, the Earnout Amount
and the Clawback Amount and (ii) the EBIT Statement and the determination of
the
Earnout Period EBIT, the Earnout Amount and the Clawback Amount set forth on
the
EBIT Statement shall be final, conclusive and binding. If the Seller delivers
the Notice of EBIT Objection to the Buyer within the Review Period, the Buyer
and the Seller shall, during the thirty (30) days following such delivery or
any
mutually agreed extension thereof, use their commercially reasonable efforts
to
reach agreement on the disputed items and amounts in order to determine the
amount of the Earnout Period EBIT. If, at the end of such period or any mutually
agreed extension thereof, the Buyer and the Seller are unable to resolve their
disagreements, they shall jointly retain and refer their disagreements to the
Independent Expert. The parties shall instruct the Independent Expert promptly
to review this Annex
II
and to
determine solely with respect to the disputed items and amounts so submitted
whether and to what extent, if any, the Earnout Period EBIT set forth in the
EBIT Statement requires adjustment. The Independent Expert shall base its
determination solely on written submissions by the Buyer and the Seller and
not
on an independent review. The Buyer and the Seller shall make available to
the
Independent Expert all relevant books and records and other items reasonably
requested by the Independent Expert. As promptly as practicable, but in no
event
later than thirty (30) days after its retention, the Independent Expert shall
deliver to the Buyer and the Seller a report which sets forth its resolution
of
the disputed items and amounts and its calculation of the Earnout Period EBIT;
provided
that in
no event shall the Earnout Period EBIT, as determined by the Independent Expert,
be less than the Buyer’s calculation of the Earnout Period EBIT set forth in the
EBIT Statement, nor more than the Seller’s calculation of the Earnout Period
EBIT set forth in the Notice of EBIT Objection. The decision of the Independent
Expert shall be final, conclusive and binding on the parties. The costs and
expenses of the Independent Expert shall be allocated between the parties 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 Expert. Each party agrees to execute, if requested by the
Independent Expert, a reasonable engagement letter, including customary
indemnities in favor of the Independent Expert.
II-ii
(e) For
purposes of this Agreement, “Final
Earnout Period EBIT”
means
the Earnout Period EBIT: (i) as shown in the EBIT Statement delivered by the
Buyer to the Seller pursuant to section (b) of this Annex
II,
if no
Notice of EBIT Objection with respect thereto is timely delivered by the Seller
to the Buyer pursuant to section (c) of this Annex
II;
or (ii)
if a Notice of EBIT Objection is so delivered, (A) as agreed by the Buyer and
the Seller pursuant to section (d) of this Annex
II
or (B)
in the absence of such agreement, as shown in the Independent Expert’s
calculation delivered pursuant to section (d) of this Annex
II.
(f) If
the
Final Earnout Period EBIT has not been determined within three months of the
Buyer’s delivery of the EBIT Statement, and:
(i)
the
Buyer’s determination of the Earnout Period EBIT as set forth on the EBIT
Statement is more
than
$2,050,000, then on the six month anniversary of the Buyer’s delivery of the
EBIT Statement, the Buyer shall pay to the Seller by wire transfer of
immediately available funds to an account designated in writing by the Seller
an
amount (the “Second
Earnout Payment Amount”)
equal
to (x) the Earnout Amount set forth on the EBIT Statement minus
(y) the
First Earnout Payment Amount; or
(ii) the
Seller’s determination of the Earnout Period EBIT as set forth on the Notice of
EBIT Objection, is less
than
$2,050,000, then the Buyer and the Seller shall cause the Escrow Agent to pay
to
the Buyer in accordance with the Escrow Agreement from the Clawback Escrow
Funds
an amount (the “Second
Clawback Payment Amount”)
equal
to (x) the Clawback Amount set forth on the Notice of EBIT Objection
minus
(y) the
First Clawback Payment Amount.
(g) Within
five (5) Business Days after Final Earnout Period EBIT has been finally
determined pursuant to this Annex II:
(i) if
the
Final Earnout Period EBIT is more
than
$2,050,000, the Buyer shall
(A) pay
to
the Seller by wire transfer of immediately available funds to an account
designated in writing by the Seller an amount equal to (x) the Final Earnout
Amount minus
(y) the
First Earnout Payment Amount (if any) minus
(z) the
Second Earnout Payment Amount (if any);
II-iii
(B) the
Buyer
and the Seller shall cause the Escrow Agent to pay the Seller in accordance
with
the Escrow Agreement any remaining Clawback Escrow Funds.
(ii) if
the
Final Earnout Period EBIT is less
than
$2,050,000, the Buyer and the Seller shall:
(A) cause
the
Escrow Agent to pay to the Buyer in accordance with the Escrow Agreement from
the Clawback Escrow Funds an amount equal to (x) the Final Clawback Amount
minus
(y) the
First Clawback Payment Amount (if any) minus
(z) the
Second Clawback Payment Amount (if any); and
(B) cause
the
Escrow Agent to pay to the Seller in accordance with the Escrow Agreement the
Clawback Escrow Funds (if any) remaining after the payment of the amounts set
forth in section (g)(ii)(A) of this Annex
II.
(iii) if
the
Final Earnout Period EBIT is equal to $2,050,000, the Buyer and the Seller
shall
cause the Escrow Agent to pay to the Seller in accordance with the Escrow
Agreement any remaining Clawback Escrow Funds.
(h) Any
rights accruing to a party under this Annex
II
shall be
in addition to and independent of the rights to indemnification under Article
VI
and any payments made to any party under this Annex
II
shall
not be subject to the terms of Article VI.
(i) When
used
in this Annex II, the following terms shall have the meanings assigned to them
in this section. All other capitalized terms used in this Annex II but not
otherwise defined shall have the meanings given them in the Asset Purchase
Agreement to which this is an annex.
(i) “Clawback
Amount”
means
(A) if the Earnout Period EBIT is less
than
$2,050,000, an amount equal to (x) (1) $2,050,000 minus
(2) the
Earnout Period EBIT multiplied by
(y)
$9.27; provided
that in
no event shall the Clawback Amount be more than the amount of the Clawback
Escrow Funds and (B) if the Earnout Period EBIT is equal
to or more
than
$2,050,000, an amount equal to $0.
(ii) “Earnout
Amount”
means
(A) if the Earnout Period EBIT is more
than
$2,050,000, an amount equal to (x)(1) the Earnout Period EBIT minus
(2)
$2,050,000 multiplied by
(y)
$10.00; provided
that in
no event shall the Earnout Amount be more than $4,000,000 and (B) if the Earnout
Period EBIT is equal
to or less
than
$2,050,000, an amount equal to $0.
(iii) “Earnout
Period EBIT”
means
the earnings before interest and taxes of the Business for the Earnout Period,
each as calculated (i) in accordance with GAAP, (ii) in accordance with the
accounting principles, methodologies and policies used in the preparation of
the
Financial Statements which are set forth in Section
3.4(a)(ii) of the Seller Disclosure Schedule
(regardless of whether such principles, methodologies and policies are
consistent with GAAP) and (iii) to the extent not inconsistent with GAAP, in
accordance with the accounting principles, methodologies and policies used
in
the preparation of the Financial Statements which are set forth in Section
3.4(a)(iii) of the Seller Disclosure Schedule.
Notwithstanding the foregoing, the parties agree that for purposes of
determining Earnout Period EBIT:
II-iv
(A)
all
applicable incentive and other compensation amounts (including all medical,
dental, vision, life and disability insurance, pension amounts, profit sharing
payments, sales commissions and payroll taxes) shall be recorded as expenses
in
accordance with GAAP;
(B)
all
costs
and expenses shall be recorded on an accrual basis;
(C)
any
inter-company charges or services (including corporate and central services)
associated with, provided to or incurred by the Business shall be charged at
a
fair market rate;
(D) none
of
the legal, accounting or similar fees or expenses incurred by the Seller in
connection with the negotiation, preparation and execution of the Agreement
shall be recorded as expenses; and
(E) in
the
event that any fiscal period that includes expenses related to the operation
of
the Business during the Earnout Period ends after the end of the Earnout Period,
for purposes of calculating the Earnout Period EBIT the portion of such expenses
related to the Earnout Period shall be recorded as expenses of the Business
during the Earnout Period.
(iv) “Earnout
Period”
means
the twelve month period ending on September 30, 2006.
(v)
“Final
Clawback Amount”
means
the Clawback Amount determined based on the Final Earnout Period
EBIT.
(vi) “Final
Earnout Amount”
means
the Earnout Amount determined based on the Final Earnout Period
EBIT.
II-v