ASSET PURCHASE AGREEMENT
Exhibit
2.1
between
Instant
Access Media, LLC,
a
Colorado limited liability company
and
NTN Buzztime,
Inc.,
a
Delaware corporation
___________________________
Dated as
of May 11, 2009
____________________________
This
Asset Purchase Agreement, dated May 11, 2009 (this "Agreement"), is entered into
by and between Instant Access Media, LLC, a Colorado limited liability company
("Seller"), and NTN
Buzztime, Inc., a Delaware corporation ("Buyer"). Unless
otherwise defined herein, capitalized terms shall have the meanings ascribed to
them in Exhibit A.
RECITALS
A. Seller
has been engaged in the business of delivering programming and advertising to
retail venues, such as sports and neighborhood bars and coliseums, over digital
broadcast networks (the "Business"). During
2008, Seller decided to wind down the Business and since that time, the Business
has been operated in a wind-down mode in anticipation of sale or liquidation of
the assets used in connection with the Business without the investment of any
additional capital.
B. Seller
desires to sell, and Buyer desires to buy, certain specified assets of Seller on
the terms and subject to the conditions set forth in this
Agreement.
In
consideration of the premises and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE
I
PURCHASE AND SALE OF
ASSETS
1.1 Purchase of
Assets. Upon the terms and subject to the conditions contained
in this Agreement, at the Closing, Seller shall sell, assign, transfer and
convey to Buyer, and Buyer shall purchase, acquire and accept from Seller, the
assets of Seller specified in this Section 1.1 (the "Purchased Assets"), free and
clear of all Liens, other than Permitted Liens. The Purchased Assets,
which include those assets set forth on Schedule 1.1, shall include
only the following:
(a) all of
Seller's rights under all licenses, permits, authorizations, orders,
registrations, certificates, approvals, consents and franchises required for the
use of the Purchased Assets, or any pending applications for any of the
foregoing;
(b) all of
the Seller IP Rights in the Intellectual Property set forth on Schedule 1.1(b);
(c) any
Contract set forth on Schedule 1.1(c) (together, the
"Purchased
Contracts");
(d) all of
Seller's customer deposits, prepayments, prepaid expenses, refunds, causes of
action, rights of recovery, rights of setoff and rights of recoupment existing
as of the Closing Date relating to the Purchased Assets;
(e) all of
Seller's advertiser and customer and supplier lists and all other sales,
marketing and supplier information that have been used in connection with the
Purchased Assets;
(f) all books
and records which relate to the Purchased Assets, including books, records,
ledgers, files, documents, correspondence, computer discs, computer files,
diagrams, construction data, blueprints, instruction manuals, maintenance
manuals, reports and similar documents used in connection with the Purchased
Assets;
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(g) all of
Seller's rights and interests in the trade names set forth on Schedule 1.1(g) and any and
all goodwill associated therewith;
(h) all
inventory set forth on Schedule 1.1(h) (the "Inventory");
(i) all
machinery, apparatus, furniture and fixtures, materials, supplies and other
equipment or property set forth on Schedule 1.1(i);
and
(j) all of
the rights and interests in, to and under any third party manufacturers'
warranties relating to the Purchased Assets, to the extent
assignable.
1.2 Excluded
Assets. Notwithstanding the foregoing, Seller is not selling,
assigning, transferring or conveying to Buyer hereunder and Buyer is not
purchasing hereunder any assets of Seller not set forth on Schedule 1.1 (collectively,
the "Excluded
Assets").
1.3 Assumed
Liabilities. In connection with the purchase and sale of the
Purchased Assets, Buyer shall only assume the Liabilities of Seller arising, or
relating to periods, on and after the Closing Date under the executory portion
of the Purchased Contracts specifically set forth on Schedule 1.3 (the "Assumed Liabilities"); provided, however, that the
Assumed Liabilities shall not include any Liabilities arising out of any breach
by Seller on or prior to the Closing of any provision of any such Purchased
Contract, including Liabilities arising out of Seller's failure to perform under
any such Purchased Contract in accordance with its terms prior to the
Closing. Notwithstanding anything to the contrary herein, the Assumed
Liabilities do not and shall not include the Excluded Liabilities.
1.4 Excluded
Liabilities. Notwithstanding anything in this Agreement to the
contrary, or any disclosure contained herein or made pursuant hereto, or
anything otherwise known to Buyer, Buyer does not assume and will not become
responsible for any Liability of Seller except the Assumed
Liabilities. Without limiting the generality of the foregoing, the
following are included among the Liabilities of Seller which Buyer does not
expressly or impliedly assume (collectively, the "Excluded
Liabilities"):
(a) all
Liabilities of Seller that exist or may arise under any Contract (other than the
Contracts that are Purchased Contracts or Assumed Liabilities), including those
Contracts set forth on Schedule 1.4(a);
(b) all
Indebtedness of Seller;
(c) all
Liabilities of Seller with respect to any expenses relating to the transactions
contemplated by this Agreement;
(d) all
Liabilities of Seller under any Environmental Law, including all Liabilities
which are attributable to non-compliance with federal, state, and local statutes
or regulations governing water discharges, air emissions, and to the disposal,
release, generation, treatment, transport, recycling or storage of any Hazardous
Materials at or from any property or facility owned, leased, used or occupied at
any time by Seller or any predecessor, including any predecessor in ownership,
or arising out of or attributable to arrangements for any of the foregoing by
Seller or any predecessor, including any predecessor in ownership, and any
environmental condition or violation of Environmental Law with respect to any
real property leased by Seller;
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(e) all
Liabilities of Seller with respect to all Taxes for all periods prior to the
Closing Date;
(f) all
Liabilities of Seller with respect to any pending, threatened or unasserted
Action including Liabilities relating to the Excluded Assets or to any leased
real property and Liabilities relating to any Tax owed, alleged to be owed, or
that may become owed to any Governmental Entity with respect to matters which
occurred prior to the Closing Date;
(g) all
product liability or product warranty obligations of Seller with respect to
matters which occurred prior to, or result from, arise out of or relate to any
period prior to the Closing Date;
(h) any
Liability of Seller incurred in connection with the execution, delivery or
performance of this Agreement;
(i) all
Liabilities of Seller which are attributable to non-compliance with applicable
Laws;
(j) all
Liabilities associated with any Employee Benefit Plan; and
(k) all
Liabilities that relate in any manner to any and all actions of Seller on or
after the Closing Date, including any actions relating to the remaining portion
of the Business and/or the wind down thereof.
1.5 Purchase
Price.
(a) The
aggregate consideration payable for the Purchased Assets consists of (i)
1,500,000 unregistered shares of Common Stock (the "Closing Shares"), (ii) the
Closing Warrants and (iii) the assumption by Buyer of the Assumed Liabilities
(collectively, the "Closing
Purchase Price"). At the Closing:
(1) Buyer
shall issue a certificate in the name of Seller representing the Closing Shares,
which shall be placed and held in the Holdback Account. The Closing
Shares shall remain in the Holdback Account for the Holdback Period to secure
the performance of the obligations of Seller under ARTICLE
VII. During the Holdback Period or until the Closing Shares have been
distributed from the Holdback Account, all dividends paid and distributions made
with respect to the Closing Shares shall be the property of Seller, and Seller
shall have the sole power to exercise all voting rights pertaining to the
Closing Shares. As soon as reasonably practicable (but in any event
within 10 Business Days) following the expiration of the Holdback Period, Buyer
shall cause to be released to the Seller all of the remaining Closing Shares, if
any, in excess of (i) any Closing Shares retained by Buyer pursuant to Section
7.9, and (ii) the Closing Shares calculated pursuant to the following sentence
to satisfy all unresolved, unsatisfied or disputed claims for Damages specified
in any Indemnification Demand delivered to Seller before the expiration of the
Holdback Period. If any claims for indemnification are unresolved,
unsatisfied or disputed as of the expiration of the Holdback Period, then Buyer
shall retain possession and custody of that portion of the Closing Shares that
equals the total maximum amount of Damages then reasonably being claimed by
Buyer in all such unresolved, unsatisfied or disputed claims, and as soon as
reasonably practicable following resolution of all such claims, Buyer shall
release to Seller the remaining Closing Shares, if any, not required to satisfy
such claims. Any dispute concerning the valuation of the indemnity
claim for purposes of retention of the Closing Shares or the number of Closing
Shares to be retained shall be resolved in accordance with Section
7.4(c).
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(2) Buyer
shall deliver to Seller each of the Closing Warrants.
(b) Following
placement of the Closing Shares in the Holdback Account and delivery by Buyer to
Seller of each of the Closing Warrants, as set forth above, Seller shall in all
events be solely responsible for any and all further distribution of proceeds to
its creditors and members, as appropriate, and Buyer shall in no way be liable
or responsible for distribution of any portion of the Closing Purchase Price
directly to any of Seller's creditors or members.
1.6 Earnout.
(a) Earnout
Consideration. Subject to the terms and conditions of this
Agreement, in addition to the Closing Purchase Price, Seller shall receive
additional consideration (the "Earnout Consideration") as set
forth below:
(1) 2010. With
respect to FY 2010, Buyer shall pay Seller the amount that equals the product of
(i) the Earnout Percentage times (ii) Buyer's Net Advertising Revenues for FY
2010.
(2) 2011. With
respect to FY 2011, Buyer shall pay Seller the amount that equals the product of
(i) the Earnout Percentage times (ii) Buyer's Net Advertising Revenues for FY
2011.
(3) 2012. With
respect to FY 2012, Buyer shall pay Seller the amount that equals the product of
(i) the Earnout Percentage times (ii) Buyer's Net Advertising Revenues for FY
2012.
If any
Retailers do not subscribe to Buyer's Buzztime Network and Buyer, in its
discretion, determines to continue to provide I-AM TV for any period after
December 31, 2009 to venues owned or operated by such Retailers, Buyer shall pay
Seller 15% of Buyer's Net Advertising Revenues earned from such venues with
respect to each of FY 2010, FY 2011 and FY 2012.
(b) Earnout
Payments. Subject to the terms and conditions in this
Agreement, Buyer shall pay any payments due to Seller under this Section 1.6
(each, an "Earnout
Payment") no later than 90 days after the end of each of FY 2010, FY 2011
and FY 2012, as the case may be, or in the event there is a dispute, any
undisputed portion of any such payment due will be paid no later than 90 days
after the end of each of FY 2010, FY 2011 and FY 2012, as the case may be, and
any disputed portion of any such payment will be paid within 30 days after such
dispute is finally resolved, whichever is later. Any Earnout Payment due shall
be paid by Buyer to Seller in immediately available funds by wire transfer to an
account designated by Seller. Following payment by Buyer to Seller of
an Earnout Payment, Seller shall in all events be solely responsible for any and
all further distribution of such Earnout Payment to its creditors and its
members, as appropriate, and Buyer shall in no way be liable or responsible for
distribution, or lack thereof, of any portion of any Earnout Payment directly to
any of Seller's creditors or its members.
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(c) Mechanics. Within
75 days after the end of each of FY 2010, FY 2011 and FY 2012, Buyer shall
deliver to Seller a statement that reflects Buyer's Net Advertising Revenues for
such year, as the case may be (each, a "Revenue Statement" and the
date on which the Revenue Statement is delivered by Buyer to Seller, the "Revenue Statement Date"),
together with a calculation of the Earnout Payment due pursuant to Section 1.6,
if any. The Revenue Statement shall be based upon the books and records of Buyer
and Buyer's financial statements, which shall have been prepared in accordance
with GAAP. The Revenue Statement shall be final and binding for purposes of this
Agreement unless, within 20 Business Days from the Revenue Statement Date
(during which 20-Business Day period Seller and its representatives shall have
access during reasonable business hours and subject to customary confidentiality
provisions to the book and records of Buyer and its Affiliates in order to
verify the amounts set forth in the Revenue Statement), Seller delivers written
notice to Buyer of any dispute or disagreement with the Revenue Statement
("Dispute Notice"). The
Dispute Notice shall specify, in reasonable detail, the nature and extent of
such
dispute or disagreement. If Seller timely delivers a Dispute Notice to Buyer,
Seller and Buyer shall promptly attempt to resolve such dispute or disagreement
in good faith. If Seller and Buyer are unable to resolve such dispute or
disagreement within 15 days after receipt by Buyer of the relevant Dispute
Notice, either Seller or Buyer may submit such dispute or disagreement for final
determination to a mutually acceptable independent registered public accounting
firm for final determination, provided that such
accounting firm shall not have performed accounting or audit services for Buyer
or Seller in the past year prior to such appointment (the "Determining Accountants"). The
Determining Accountants shall act as an arbitrator to determine and resolve such
dispute or disagreement based on the presentations by Seller, Buyer and their
respective representatives and in accordance with the terms of this Agreement.
The Determining Accountants shall make its determination regarding such dispute
or disagreement within 30 days after the date upon which Seller or Buyer submits
the dispute or disagreement to the Determining Accountants, and in that
undertaking shall not be required to follow any particular procedure but shall
proceed in a manner designed to achieve a speedy and economic resolution of the
dispute. The Determining Accountants shall set forth its determination, which
shall be final, binding and conclusive in a written statement delivered to Buyer
and Seller, stating its reason therefor. The Determining Accountants shall be
instructed to render its decision in accordance with the terms hereof, including
GAAP. The costs and expenses of the Determining Accountants shall be borne
equally by Buyer and Seller, unless the Net Advertising Revenues determined in
accordance with the decision of the Determining Accountants are greater than
110% of the Net Advertising Revenues set forth in the Revenue Statement, in
which case such costs shall be borne solely by Buyer. The Determining
Accountants' engagement pursuant to this Section 1.6(c) shall be limited solely
to the issues set forth in the Dispute Notice.
(d) Management of Buyer's
Business. The parties hereto acknowledge and agree that, from
and after the Closing, Buyer shall have the complete right, power and authority
to operate and control its business and operations, including the business that
relates to the Purchased Assets, in any manner as it shall determine in its sole
and absolute discretion.
(e) Offset.
Notwithstanding anything to the contrary herein, Buyer shall have a right to
offset against the Earnout Consideration in order to secure Seller's
indemnification obligations under ARTICLE VII.
(f) Assumption of Buyer's
Obligation. Simultaneous with or prior to the effective date of any
Change in Control Transaction, Buyer shall cause the Person surviving the Change
in Control Transaction to agree to assume Buyer's obligations under this Section
1.6, such that Seller's right to receive the Earnout Consideration that would
become due and payable to Seller in the absence of such change in Control
Transaction is not, in the reasonable judgment of Seller, impaired by such
Change in Control Transaction.
1.7 Sales, Use and Transfer
Taxes. Seller shall be responsible for paying, shall promptly
discharge when due, and shall reimburse, indemnify and hold harmless Buyer from,
any sales or use, transfer, value added, real property gains, excise, stamp,
stamp duty, stamp duty reserve tax, or other Taxes imposed by reason of the
transfer of the Purchased Assets provided hereunder, and any deficiency,
interest or penalty asserted with respect thereto. Seller shall bear sole
responsibility for any Tax in the nature of an income, franchise or occupation
tax imposed on Seller as a result of the transfer of the Purchased Assets to
Buyer as provided herein.
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1.8 Allocation. The
Closing Purchase Price and any other consideration for the Purchased Assets, as
determined for U.S. federal income tax purposes pursuant to Treasury Regulation
Section 1.1060-1(c) (the "Tax
Purchase Price"), shall be allocated as set forth on Schedule 1.8, in
accordance with the provisions of Treasury Regulations Section 1.1060-1(c)
and the Treasury Regulations referred to therein. Buyer and Seller
shall execute and file all U.S. federal and applicable state income Tax Returns
in a manner consistent with any allocations agreed or determined pursuant hereto
and shall not take any position in any other Tax Return, before any Governmental
Entity, or in any tax proceeding that is inconsistent with any such allocation,
except pursuant to a final "determination" (as defined in Code Section 1313(a)
or corresponding provision of state, local or foreign law). Buyer
and Seller shall timely file any IRS Forms 8594, and any other
U.S. federal and applicable state income Tax Returns prepared in a manner
consistent with the allocations agreed or determined pursuant hereto and shall
file any other Tax Return with any state, local or foreign Governmental Entity
in a manner that is not inconsistent therewith. Any redetermination
of the Tax Purchase Price within the meaning of Treasury Regulations
Section 1.338-7 shall be made as required thereby and shall be taken into
account by Buyer and Seller in carrying out the provisions hereof and the
preparation and filing of Tax Returns referred to above to the extent
applicable.
1.9 Closing. Subject to the
satisfaction or waiver of the conditions set forth in this Agreement, the
closing of the transactions contemplated by this Agreement, including the
purchase and sale of the Purchased Assets (the "Closing"), shall take place
on: (a) May 11, 2009, or (b) such date, time and place as the parties
may agree (the "Closing
Date"). Notwithstanding the foregoing, the parties agree that
the Closing shall be deemed effective as of 12:01 a.m. on the Closing Date.
All documents that are to be delivered by one party to the other at the Closing,
shall be delivered by electronic means.
ARTICLE
II
REPRESENTATIONS AND
WARRANTIES OF SELLER
As of the
date hereof and as of the Closing Date, Seller represents and warrants to Buyer
as follows:
2.1 Organization. Seller
is a limited liability company, duly organized, validly existing and in good
standing under the laws of the State of Colorado. Seller has all
requisite power and authority to own and lease its assets and to operate its
business as the same are now being owned, leased and operated. Seller
is duly qualified or licensed to do business as a foreign corporation or foreign
entity in, and is in good corporate standing in, each jurisdiction in which the
nature of its business or its ownership of its properties requires it to be so
qualified or licensed. Schedule 2.1 sets forth a true
and complete list of (a) all jurisdictions in which Seller is qualified or
licensed to do business as a foreign corporation or foreign entity, and
(b) all powers of attorney granted by Seller to any third party that are
currently in effect and that may affect in any manner any of the Purchased
Assets on or after the Closing. All necessary action on the part of
Seller with respect to the consummation of the transactions contemplated hereby
has been taken. Seller has provided Buyer with a true, complete and
correct copy of its articles of organization and operating agreement, each as
currently in effect and reflecting any and all amendments thereto (collectively,
the "Organizational
Documents"). Each of the Organizational Documents is in full
force and effect, and Seller is not in violation of any provision
thereof.
2.2 Authorization. The
execution, delivery and performance by Seller of this Agreement, the other
Transaction Documents and each of the transactions contemplated hereby or
thereby have been duly and validly authorized by Seller, and no other act or
proceeding on the part of Seller, its board of directors, managers or members is
necessary to authorize the execution, delivery or performance by Seller of this
Agreement or any Transaction Document or the consummation of any of the
transactions contemplated hereby or thereby. This Agreement has been
duly executed and delivered by Seller and this Agreement constitutes, and the
Transaction Documents upon execution and delivery by Seller, will each
constitute, a valid and binding obligation of Seller, enforceable against Seller
in accordance with their respective terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect, relating to or limiting creditors'
rights generally and (ii) general principles of equity (whether considered in an
action in equity or at law). This Agreement and the transactions
contemplated hereby have been (y) unanimously approved by the board of directors
(which includes all managers of Seller) of Seller and (z) approved by the
holders of at least two-thirds of the outstanding shares of each of the Series A
preferred stock, Series B preferred stock and Series C preferred stock of
Seller.
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2.3 No
Conflict. The execution, delivery and performance by Seller of
this Agreement and the Transaction Documents and the consummation of each of the
transactions contemplated hereby or thereby will not (i) violate or conflict
with the Organizational Documents, (ii) violate, conflict with, result in any
material breach of, constitute a default under, result in the termination of,
result in the acceleration of any obligations under, result in a material change
in terms of, create in any party the right to accelerate, terminate, modify or
cancel, or require any consent or notice under, or create an event that, with
the giving of notice or the lapse of time, or both, would be a default under or
material breach of, any (A) Contract to which Seller is a party or by which it
is bound or affected or to which any of its assets is bound or affected; or (B)
judgment, order, writ, injunction, decree or demand of any Governmental Entity
which materially affects the ability of Seller to perform its obligations under
this Agreement; (iii) result in the creation or imposition of any Lien upon any
assets or any of the equity of Seller, or which affects the ability of Seller to
perform its obligations under this Agreement; (iv) except as set forth on Schedule 2.3, require any
declaration, filing or registration with, or authorization, consent or approval
of, exemption or other action by or notice to, any Governmental Entity or other
Person under the provisions of any Law or any Contract to which Seller is
subject, or by which Seller is bound or affected or by which Seller or any of
its assets are bound or affected. Notwithstanding the preceding sentence, no
representation is given as to the assignability of Restricted
Contracts.
2.4 Capitalization. As
of date of this Agreement, the outstanding membership interests of Seller, all
of which are duly authorized, consist of 1,223 Series A Shares, 1,370 Series B
Shares and 6,978 Series C Shares. Schedule 2.4 accurately sets
forth the authorized and outstanding securities of Seller and the number of
membership interests held by each member of Seller. Seller has no
outstanding securities which would entitle the holder thereof to acquire at any
time membership interests of Seller, including any debt, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive,
membership interests of Seller, and the number of membership interests of Seller
issuable upon conversion, exercise or exchange of such
securities. All of the issued and outstanding membership interests of
Seller are owned of record and beneficially by the members of Seller as set
forth on Schedule 2.4.
2.5 Legal
Proceedings. Except as set forth on Schedule 2.5, there are no,
and since January 1, 2006, there have been no (a) outstanding
judgments, orders, decrees, awards, stipulations or injunctions of any kind
against Seller that affect the Purchased Assets or (b) Actions pending or,
to Seller's Knowledge, threatened against Seller that affect the
Purchased Assets. There is no action, claim suit or proceeding
pending or, to Seller's Knowledge, threatened, by or against Seller that
challenges, or may have the effect of preventing, delaying, making illegal or
otherwise interfering with the execution and delivery by Seller of this
Agreement or any of the Transaction Documents or the performance of Seller
hereunder or thereunder.
2.6 Intellectual Property and
Proprietary Rights.
(a) Schedule 2.6(a) lists all
Intellectual Property owned, licensed to or used by Seller with respect to the
operation or use of the Purchased Assets in the conduct of Seller's business in
the ordinary course.
(b) None of
the Seller IP Rights interfere with, infringe upon, misappropriate or violate
any Intellectual Property rights of any Person, and Seller (and management level
employees with direct responsibility for Intellectual Property matters) has
never received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that Seller must license or refrain from using any Intellectual Property rights
of any Person). To Seller's Knowledge, no Person has interfered with,
infringed upon or misappropriated any of Seller IP Rights.
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(c) No
approval or consent of or payment of any consideration to any Person is required
so that the interest of Buyer in the Seller IP Rights shall continue to be in
full force and effect following the transactions contemplated by this
Agreement.
(d) No
licensing fees, royalties or payments are due or payable by Seller in connection
with the Seller IP Rights. Schedule 2.6(d) lists all actions
that must be taken within one year from the date hereof, including the payment
of any registration, maintenance, renewal fee, annuity fee and Tax or the filing
of any document, application or certificate for the purposes of maintaining,
perfecting or preserving or renewing any Seller IP Rights.
(e) Seller
does not have any obligation to compensate any Person for the development, use,
sale or exploitation of any of the Seller IP Rights nor has Seller granted to
any other Person or entity any license, option or other rights to develop, use,
sell or exploit in any manner any of the Seller IP Rights whether requiring the
payment of royalties or not.
(f) All of
the Seller IP Rights for which confidentiality is appropriate has been
maintained in confidence in accordance with protection procedures believed by
Seller to be adequate for protection customarily used in the industry to protect
rights of like importance. None of the former or current managers,
employees, agents, consultants or independent contractors of Seller have
authored, co-authored or otherwise contributed to or participated in the
conception and development of any of the Seller IP Rights.
2.7 Employees and Independent
Contractors. Seller will pay or otherwise satisfy all
obligations due to its employees in respect of their employment with Seller,
including if applicable, any wages, salaries, bonuses (including any bonuses
that arise out of the completion of the transactions contemplated hereby),
accrued vacation pay, and severance pay, and all payroll taxes payable with
respect to such employees, which will be discharged by Seller in accordance with
their terms. Buyer shall have no obligations or liabilities to any
employees or independent contractors of Seller whatsoever (other than as
specifically set forth in the Consulting Agreement), including but not limited
to any wages, salaries, bonuses (including any bonuses that arise out of the
completion of the transactions contemplated hereby or any Earnout Consideration,
if any), accrued vacation pay and severance pay, if any, owing to any employee
or independent contractors as a result of such Person's employment with
Seller.
2.8 [Intentionally
Omitted.]
2.9 Financial
Statements. Schedule 2.9 sets forth true
and complete copies of the following (collectively, the "Financial Statements")
(a) unaudited consolidated balance sheets of Seller as of December 31,
2007 and December 31, 2008, and the related unaudited statement of operations
for the twelve-month period ended December 31, 2008, and (b) the
unaudited consolidated balance sheet of Seller as of March 31, 2009 ("Acquisition Balance Sheet"),
and the related unaudited statement of operations for the three-month period
then ended, in each case prepared in a manner consistent with Seller's
historical accounting methods. Each of the Financial Statements has
been prepared from, and accurately reflects in all material respects, the books,
records and accounts maintained by Seller which, in reasonable detail,
accurately and reflect the material transactions and material dispositions of
the assets of Seller relating to the Business.
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2.10 [Intentionally
Omitted.]
2.11 Contracts.
(a) Schedule 2.11(a) lists all of
the following Contracts to which Seller is a party or by which Seller is bound
and which are currently in effect and that relate to the Purchased Assets
(including the subsection(s) below to which each such item is responsive) (each
a "Material
Contract"):
(1) warranties,
guaranties, or other similar undertakings by Seller;
(2) joint
venture, partnership or similar Contracts involving a sharing of profits,
losses, costs or Liabilities by Seller with any other Person;
(3) Contracts
continuing over a period of more than six months from the date thereof, not
terminable by Seller without penalty upon 30 days' or less notice;
(4) Contracts
relating to the marketing, sale, advertising or promotion of its products or
services, including the Contracts with Retailers;
(5) non
competition agreements with any current or former employee or independent
contractor;
(6) Contracts
that restrict or purport to restrict in any respect (including as to manner or
place) the ability of Seller to engage in any line of business or compete with
any Person;
(7) Contracts
that restrict or purport to restrict in any respect the right of Seller to sell
to or purchase from any other Person;
(8) Contracts
with respect to Intellectual Property, including Contracts with any current or
former employee or independent contractor regarding the appropriation or the
non-disclosure of any Intellectual Property;
(9) Contracts
providing for the payment of any cash or other compensation or benefits upon the
consummation of the transactions contemplated hereby;
(10) sales
representative or other Contracts obligating Seller to pay commissions to any
Person;
(11) Contracts
that grant a currently effective power of attorney to any Person;
(12) Contracts
that contain any provision requiring Seller to indemnify any other party
thereto; and
(13) all other
Contracts that are material to the Purchased Assets.
(b) Except as
disclosed on Schedule 2.11(b): (i) Seller has
not breached any Purchased Contract in any material respect that has not been
duly cured or reinstated; (ii) to the Knowledge of Seller, no other Person that
is a party to any Purchased Contract has breached any Purchased Contract in any
material respect that has not been duly cured or reinstated; (iii) Seller is not
in receipt of any claim of default under any Purchased Contract or other item;
and (iv) no event has occurred which with the passage of time or the giving of
notice or both would result in a material breach or default under any Purchased
Contract. Each Purchased Contract is valid, in full force and effect,
binding and enforceable against Seller, and, to Seller's Knowledge, against any
other Person that is a party thereto. The consummation of the
transactions contemplated by this Agreement will not (and will not give any
Person a right to) terminate or modify any rights of, or accelerate or augment
any obligation of, Seller under any Purchased Contract, other than Restricted
Contracts, and as to Restricted Contracts, Schedule 2.11(b) sets forth the
assignment provision of each Restricted Contract and any provision that provides
for the termination or modification of any right, or acceleration or
augmentation of any obligation, that may result from the consummation of the
transactions contemplated by this Agreement or any of the Transaction
Documents.
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(c) Seller
has delivered to Buyer copies of all Purchased Contracts, together with all
amendments, waivers or other changes thereto.
2.12 Compliance with
Laws. Seller is not in violation of or in default in any
material respect under any foreign or domestic (federal, state or local) law,
statute, treaty, rule, regulation, ordinance, franchise, permit, concession,
license, order, decree, consent decree or similar instrument or determination or
award applicable to it by which the ownership or use of any of the Purchased
Assets is bound or affected (including any labor, environmental, occupational
health, zoning or other law, regulation or ordinance). Except as set
forth on Schedule 2.12, Seller has not
committed, been charged with, or, to Seller's Knowledge, been under
investigation with respect to, nor does there exist, any material violation of
any provision of any federal, state or local law or administrative regulation in
respect of Seller or the Purchased Assets that relates to the ownership or use
of the Purchased Assets.
2.13 Permits, Licenses,
Etc. Schedule 2.13(a) contains a
complete listing of all Government Licenses used by Seller in the conduct of the
Business in the ordinary course. Seller owns or possesses all right,
title and interest in and to all of the Government Licenses that are necessary
to own and use the Purchased Assets in connection with operation of the Business
in the ordinary course. Seller is in compliance with the terms and
conditions of such Government Licenses and has not received any notice that it
is in violation of any of the terms or conditions of any such Government
Licenses. Except as set forth on Schedule 2.13(b), all of such
Government Licenses are currently effective and valid, and will remain so upon
consummation of the transactions contemplated by this Agreement. To
Seller's Knowledge, no event has occurred or circumstances exist which would
currently or upon notice or lapse of time constitute a default under any of such
Government Licenses. To Seller's Knowledge, there is no threatened
suspension, cancellation or invalidation of any such Government
License.
2.14 Taxes.
(a) All Tax
Returns required to be filed by or on behalf of Seller, on or before the date
hereof were materially true, correct and complete as of the date filed, or if
amended on or before the date hereof, were materially true, correct and complete
after giving effect to such amendment. All such Tax Returns that were
required to be filed were duly and timely filed (taking into account any
extension of time to file granted or obtained) and all Taxes (including, Taxes
withheld from employees' salaries and all other withholding Taxes and
obligations and deposits required to be made by or with respect to Seller) due
have been timely paid, or to the extent not due and payable as of the date
hereof, adequate provision for the payment thereof has been made on the
Acquisition Balance Sheet.
(b) Except as
set forth on Schedule
2.14(b), no Tax Return of Seller has been examined by or settled with any
tax authority during the last seven years. During the last seven
years, no deficiency, delinquency or default for any Taxes relating to Seller or
its receipts, income, sales, transactions or other business activities has been
claimed, proposed or assessed against Seller, nor has Seller received written
notice of any such deficiency, delinquency or default; and there is no audit,
examination, investigation, claim, assessment, action, suit, or proceeding,
pending or, to Seller's Knowledge, proposed by any tax authority, with respect
to any Tax or with respect to any Tax Return of Seller.
(c) There are
no Liens on the Purchased Assets relating to or attributable to Taxes, other
than for Taxes not yet due and payable. To Seller's Knowledge, no
Governmental Entity has asserted any claim relating to or attributable to Taxes,
which, if adversely determined, would result in any Lien on the Purchased
Assets.
(d) No
extension or waiver of any statute of limitations has been requested of or
granted by Seller with respect to any Tax for any period. No
extension or waiver of time within which to file any Tax Return has been
requested by or granted to Seller with respect to any Tax Return that has not
been filed. No power of attorney with respect to Taxes has been
executed by Seller or filed with any tax authority with respect to Seller during
the last three years.
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(e) To
Seller's Knowledge, no claim has ever been made by an authority in a
jurisdiction where Seller does not file Tax Returns that Seller is or may be
subject to taxation by that jurisdiction.
(f) Seller is
not a party to, bound by, or obligated under any tax sharing or allocation
agreements, tax indemnification agreement or similar Contract whether written or
unwritten.
(g) Seller
is, and has at all times been, an entity classified as a partnership for U.S.
federal and relevant state income tax purposes.
(h) There is
no tax ruling, request for ruling or settlement, compromise, closing or Tax
collection agreement in effect or pending which does or could reasonably be
expected to affect the liability of Seller for Taxes for any period after the
Closing Date.
(i) Seller is
not required to document a transfer pricing methodology in compliance with Code
Section 482 and any related provisions, the Treasury Regulations
thereunder, and any comparable provisions of state, local or foreign Tax
law. Seller has not agreed to, and is not required to include in
income, any adjustment pursuant to Code Section 482 (or similar provision
of other law or regulations), nor has any Tax authority proposed in writing, or,
to Seller's Knowledge, is any Tax authority considering, such
adjustment.
(j) Seller
has never incurred any liability for the Taxes of any Person as a transferee or
successor, by Contract, or otherwise.
(k) Seller
has no interest in and is not subject to any joint venture, partnership, or
other Contract which is treated as a partnership for U.S. federal Tax
purposes.
(l) Seller is
not successor to any other Person by way of merger, reorganization or similar
transaction.
(m) Seller
has not made any payments, is not obligated to make any payment(s), and is not a
party to any agreement that could obligate Seller to make any
payment(s) that would not be deductible under either Code
Sections 280G or 162(m).
(n) No
property owned by Seller is treated as "tax-exempt use property" within the
meaning of Code Section 168(h).
(o) Seller
has disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662.
(p) Seller
has not been a party to a transaction that constitutes a "reportable
transaction" within the meaning of Treasury Regulation
Section 1.6011-4(b) (or a similar provision of state
law).
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(q) Seller
does not have and has never had any obligation to register a tax shelter under
Code Section 6111 or to file any disclosure or maintain any list pursuant
to Code Section 6112 and regulations promulgated thereunder.
(r) Seller
has previously provided Buyer with the following information with respect to
Seller as of the most recent practicable date: each state, county, local
municipal, domestic or foreign jurisdiction in which Seller (i) files, or
is or has been required to file, a Tax Return relating to Taxes of any kind,
(ii) is required to register for Tax purposes, (iii) is or has been
liable for any Taxes on a "nexus" basis at any time, (iv) is qualified to
do business, (v) owns or regularly uses property, (vi) has any
employee or in which any employee of Seller is regularly present, or
(vii) has any agent, representative or distributor.
2.15 Brokers. Except
as set forth on Schedule 2.15, there are no
claims or rights to brokerage commissions, finders fees or similar compensation
in connection with the transactions contemplated by this Agreement based on any
Contract made or alleged to have been made by or on behalf of Seller or any of
its Affiliates, officers, employees or directors. All fees and
expenses related to the items set forth on Schedule 2.15 will be paid by
Seller at or prior to the Closing, and neither Buyer nor any of its Affiliates
shall have any liability of any kind with respect thereto.
2.16 Assets.
(a) [Intentionally
Omitted.]
(b) [Intentionally
Omitted.]
(c) Seller
has good title to, a valid leasehold interest in, or valid rights to use, all
the Purchased Assets free and clear of all Liens other than Permitted Liens. To
the Knowledge of Seller, each tangible asset included in the Purchased Assets is
free from material defects (patent and latent), has been maintained
substantially in accordance with normal industry practice, and is in good
operating condition and repair (subject to normal wear and tear).
(d) Seller
has the full right to contribute, convey, transfer, assign and deliver the
Purchased Assets (subject to Section 4.6 in the case of Restricted Contracts)
without the need to obtain the consent or approval of or pay any consideration
to any Person.
(e) At and as
of the Closing, Seller will convey the Purchased Assets to Buyer by bills of
sale, certificates of title and other instruments of assignment and transfer
effective in each case to vest in Buyer, and Buyer will have, good and valid
record and marketable title to all of the Purchased Assets, free and clear of
all Liens other than Permitted Liens.
2.17 [Intentionally
Omitted.]
2.18 [Intentionally
Omitted.]
2.19 [Intentionally
Omitted.]
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2.20 Warranty
Liability. Schedule 2.20(a) contains a true,
correct and complete description of the service warranties provided by
Seller. To the Knowledge of Seller, there have not been any material
deviations from such warranties, and neither Seller nor any of its salespeople,
employees, distributors or agents is authorized to undertake obligations to any
customer or to other third parties in excess of such
warranties. Seller has not, to Seller's Knowledge, made any oral
warranty with respect to any of its products or services. Seller has
provided Buyer with a true, correct and complete schedule of all warranty claims
against Seller since January 1, 2006. Except as set forth on
Schedule 2.20(b), all third party
manufacturers' warranties relevant to the Purchased Assets are assignable,
without requiring the consent of or the payment of any consideration to any
Person.
2.21 Inventory. Schedule 2.21 sets forth a
true, accurate and complete list of inventory of Seller as of the date of this
Agreement.
2.22 [Intentionally
Omitted.]
2.23 No Undisclosed
Liabilities. There is no Liability to which any of the
Purchased Assets is subject, or by which any of the Purchased Assets is bound or
affected, except for Liabilities set forth in the Acquisition Balance Sheet and
Liabilities that are not material that have arisen after the date of the
Acquisition Balance Sheet in the ordinary course of business consistent with
past practice.
2.24 [Intentionally
Omitted.]
2.25 Indebtedness. Except
for Indebtedness described on Schedule 2.25(a) hereto, Seller
has no Indebtedness outstanding at the date hereof that affects or is secured by
any Purchased Asset. Except as disclosed on Schedule 2.25(b) hereto, Seller is
not in default with respect to any such outstanding Indebtedness or any
instrument relating thereto. No Indebtedness of Seller or any instrument or
agreement relating thereto purports to limit the operation or use of the
Purchased Assets. Seller has furnished to Buyer complete and correct
copies of all Contracts (including all amendments, supplements, waivers and
consents) relating to (a) any Indebtedness of Seller that affects or is
secured by any Purchased Asset, (b) any conditional sale or other title
retention agreement with respect to any Purchased Asset, (c) any purchase
money mortgage or other agreement securing all or part of the purchase price of
any Purchased Asset, and (d) any capital leases of any Purchased
Asset.
2.26 [Intentionally
Omitted.]
2.27 [Intentionally
Omitted.]
2.28 [Intentionally
Omitted.]
2.29 Investment
Representations.
(a) [Intentionally
Omitted].
(b) Investment
Representations. Seller represents, warrants and covenants to Buyer that
Seller is acquiring the Securities for its own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities Act.
Seller is either (i) an "accredited investor(s)" as such term is defined in Rule
501(a) under the Securities Act, or (ii) has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of acquiring the Securities.
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(c) Investment Risks.
Seller acknowledges and is aware that: (i) there are substantial restrictions on
the transferability of the Securities, (ii) the Securities will not be, and
Seller does not have the right to require that the Securities be, registered
under the Securities Act; (iii) the certificates representing the Securities
shall bear a legend similar to the legend set out below and (iv) such legend
shall not be removed from any such certificates unless either (A) such
Securities are sold under an effective registration statement under the
Securities Act, or (B) Seller delivers to Buyer a written opinion of counsel, in
form and substance satisfactory to Buyer, that no such registration is required
and that the transfer will not otherwise violate the Securities Act, the
Exchange Act or applicable state securities laws.
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") UNDER
XXXXXXX 0 XX XXX XXXXXX XXXXXX SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), IN RELIANCE UPON ONE OR MORE EXEMPTIONS FROM REGISTRATION OR
QUALIFICATION AFFORDED BY THE SECURITIES ACT AND/OR RULES PROMULGATED BY THE
COMMISSION PURSUANT THERETO. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
ALSO NOT BEEN REGISTERED OR QUALIFIED (AS THE CASE MAY BE) UNDER THE SECURITIES
LAWS OF ANY XXXXX XX XXXXXXXXX XX XXX XXXXXX XXXXXX (THE "BLUE SKY LAWS"), IN
RELIANCE UPON ONE OR MORE EXEMPTIONS FROM REGISTRATION OR QUALIFICATION (AS THE
CASE MAY BE) AFFORDED UNDER SUCH SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR THE HOLDER'S OWN ACCOUNT FOR INVESTMENT PURPOSES ONLY AND NOT WITH
A VIEW FOR RESALE OR DISTRIBUTION.
(d) Opportunity to Ask
Questions. During the course of the transaction contemplated by this
Agreement, and before acquiring the Securities, Seller has had the opportunity
(i) to be provided with financial and other written information about Buyer
included in all documents Buyer has publicly filed with the SEC, and (ii) to ask
questions and receive answers concerning the business of Buyer and its finances.
Seller has, to the extent it has availed itself of this opportunity, received
satisfactory information and answers.
(e) Sophistication.
Seller represents that by reason of its business or financial experience or the
business or financial experience of Seller's professional advisors who are
unaffiliated with and who are not compensated by Buyer or any Affiliate or
selling agent of Buyer, directly or indirectly, Seller has the capacity to
protect its own interests in connection with the transactions contemplated by
this Agreement.
(f) Reliance by
Buyer. Seller understands that the foregoing representations
and warranties are to be relied upon by Buyer as a basis for exemption of the
sale of the Securities under the Securities Act and under the securities laws of
all applicable states and for other purposes.
(g) Permitted Transfer.
Seller may Transfer some or all of the Securities to a Permitted Transferee if
all of the following conditions are met (any such transfer, a "Permitted
Transfer"):
(1) Within
the five Business Day period before such Transfer, the Company receives a
completed and duly executed Accredited Investor Questionnaire and Investment
Representation Letter Agreement, a form of which is attached hereto as Exhibit J, from such
Permitted Transferee.
(2) At the
time of such Transfer, such Permitted Transferee is an "accredited investor" (as
such term is defined in Rule 501(a) under the Securities Act).
(3) Such
Permitted Transferee agrees in writing to be bound by the provisions contained
in Section 4.8.
A
Permitted Transfer will not be subject to approval of Buyer and no legal opinion
of legal counsel shall be required in connection therewith
Notwithstanding
anything to the contrary herein, for the avoidance of doubt, if any or all of
the Closing Shares are Transferred to a Permitted Transferee before the
expiration of the Holdback Period, such Closing Shares shall remain in and
subject to the Holdback Account through the expiration of the Holdback
Period.
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ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF BUYER
As of the
date hereof and as of the Closing Date, Buyer represents and warrants to Seller
as follows:
3.1 Organization and
Qualification. Buyer is an entity duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to perform its obligations under
this Agreement. Buyer is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary.
3.2 Authorization. The
execution, delivery and performance by Buyer of this Agreement and each other
Transaction Document to which it is a party and each of the transactions
contemplated hereby or thereby have been duly and validly authorized by Buyer,
and no other corporate act or proceeding on the part of Buyer, its board of
directors or its shareholders is necessary to authorize the execution, delivery
or performance by Buyer of this Agreement or any Transaction Document to which
it is a party or the consummation of any of the transactions contemplated hereby
or thereby. This Agreement has been duly executed and delivered by
Buyer and this Agreement constitutes, and the Transaction Documents upon
execution and delivery by Buyer, will each constitute, a valid and binding
obligation of Buyer, enforceable against Buyer in accordance with their
respective terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect, relating to or limiting creditors' rights generally and
(ii) general principles of equity (whether considered in an action in equity or
at law).
3.3 No
Conflict. The execution, delivery and performance by Buyer of
this Agreement and the Transaction Documents to which it is a party and the
consummation of each of the transactions contemplated hereby or thereby will not
(i) violate or conflict with the certificate of incorporation, bylaws or other
organizational documents of Buyer, (ii) violate, conflict with, result in any
material breach of, constitute a default under, result in the termination of,
result in the acceleration of any obligations under, result in a material change
in terms of, create in any party the right to accelerate, terminate, modify or
cancel, or require any consent or notice under, or create an event that, with
the giving of notice or the lapse of time, or both, would be a default under or
material breach of, any (A) Contract to which Buyer is a party or by which it is
bound or affected or to which any of its assets is bound or affected; or (B)
judgment, order, writ, injunction, decree or demand of any Governmental Entity
which materially affects the ability of Buyer to perform its obligations under
this Agreement; (iii) result in the creation or imposition of any Lien upon any
assets or any of the equity of Buyer, or which affects the ability to conduct
its business as conducted prior to the date of this Agreement or perform its
obligations under this Agreement; (iv) require any declaration, filing or
registration with, or authorization, consent or approval of, exemption or other
action by or notice to, any Governmental Entity or other Person under the
provisions of any Law or any Contract to which Buyer is subject, or by which
Buyer is bound or affected or by which Buyer or any of its assets are bound or
affected other than (y) the notice and/or application to NYSE Amex for the
issuance and sale of the Securities and the listing of the Underlying Shares for
trading thereon in the time and manner required thereby and (z) the filing of
Form D with the SEC and such filings as are required to be made under applicable
state securities laws.
3.4 Legal
Proceedings. There is no action, claim, suit or proceeding
pending or, to the Knowledge of Buyer, threatened, by or against Buyer that
challenges, or may have the effect of preventing, delaying, making illegal or
otherwise interfering with the execution and delivery by Buyer of this Agreement
or any of the Transaction Documents to which it is a party or the performance of
Buyer hereunder or thereunder or which would, if such action, claim, suit or
proceeding were adversely determined, have or reasonably be expected to result
in a Buyer Material Adverse Effect.
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3.5 Issuance of
Securities. The Closing Securities are duly authorized and,
when issued for the consideration as set forth in this Agreement, will be duly
and validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by Buyer other than Liens and restrictions on transfer provided for in
this Agreement. The Underlying Shares, when issued in accordance with
the terms of the Closing Warrants, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by Buyer other than
restrictions on transfer provided for in this Agreement or the Closing
Warrants. Buyer has reserved from its duly authorized capital stock
such number of shares of Common Stock that may be required to be issued upon
exercise of the Closing Warrants in accordance with their respective
terms.
3.6 SEC
Reports. Buyer has filed all reports, schedules, forms,
statements and other documents required to be filed by Buyer under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, since January 1, 2009 (the foregoing materials, including the
exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the "SEC Reports") on a timely
basis or has received a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports (i) were complete and accurate in all material
respects and (ii) complied in all material respects with the requirements of the
Securities Act and the Exchange Act, as applicable.
3.7 Preemptive and Other
Rights. No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. The issuance
and sale of the Securities and the Common Stock to be issued under the
Securities Purchase Agreement will not obligate Buyer to issue shares of Common
Stock or other securities to any Person and, except with respect to adjustments
to the conversion price of the Company's Series A Convertible Preferred Stock as
set forth in Buyer's certificate of incorporation, will not result in a right of
any holder of Buyer's securities to adjust the exercise, conversion, exchange or
reset price under any of such securities.
3.8 Financial
Statements. The audited consolidated financial statements and
unaudited interim consolidated financial statements of Buyer (including, in each
case, the notes, if any, thereto) included in the Form 10-K filed by Buyer with
the SEC on March 24, 2009, fairly present, in all material respects, the assets,
liabilities and consolidated financial position of Buyer as of the dates
indicated and the results of operations for the periods then ended.
3.9 Brokers. There
are no claims or rights to brokerage commissions, finders fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any Contract made or alleged to have been made by or on behalf of Buyer
or any of its Affiliates, officers, employees or directors.
3.10 Private
Placement. Assuming the accuracy of Seller's representations
and warranties set forth in Section 2.29, no registration under the Securities
Act is required for the offer and sale of the Securities by Buyer to Seller as
contemplated hereby. Subject to NYSE Amex Approval, the issuance and sale of the
Securities hereunder does not contravene the rules and regulations of NYSE
Amex.
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3.11 Disclosure. Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, Buyer confirms that neither it nor
any other Person acting on its behalf has provided Seller or its agents or
counsel with any information that it believes constitutes or might constitute
material, nonpublic information. The Buyer understands and confirms
that the Seller will rely on the foregoing representation in effecting
transactions in securities of Buyer.
3.12 Buyer
Acknowledgement. BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT
FOR SELLER'S EXPRESS WARRANTIES AND REPRESENTATIONS CONTAINED IN THE TRANSACTION
DOCUMENTS, BUYER IS PURCHASING THE PURCHASED ASSETS "AS-IS", "WHERE-IS", "WITH
ALL FAULTS", AND SELLER DISCLAIMS ANY OTHER WARRANTY OR REPRESENTATION, EITHER
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER WITH RESPECT TO THE PURCHASED
ASSETS OR THE BUSINESS (OTHER THAN SELLER'S EXPRESS REPRESENTATIONS CONTAINED IN
THE TRANSACTION DOCUMENTS) INCLUDING, FITNESS FOR ANY PARTICULAR PURPOSE,
DESIGN, SUITABILITY OR MERCHANTABILITY THEREOF, THE QUALITY OR WORKMANSHIP
THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS.
ARTICLE
IV
COVENANTS
4.1 Employee
Matters.
(a) Employment. Effective
as of the Closing Date, the consulting agreement attached hereto as Exhibit B (the "Consulting Agreement"),
between Buyer and Xxxxxxxx X. Case ("Consultant"), shall be
effective.
(b) No Rights Conferred Upon
Employees. The parties hereby acknowledge that, other than the
consulting relationship with Consultant, Buyer is under no obligation to employ
any current or future employee of Seller. Without limiting the
foregoing, except as specifically set forth in the Consulting Agreement, Buyer
shall be under no obligation to (i) continue the employment of any employee
of Seller after the Closing Date, and nothing in this Agreement shall confer any
rights or remedies under this Agreement on any employee of Seller or
(ii) continue coverage under any Employee Benefit Plan.
(c) COBRA Continuation
Coverage. On and after the Closing Date, Seller shall be
responsible for (i) complying with all notice requirements of COBRA, and (ii)
providing COBRA continuation coverage to all "M&A qualified beneficiaries,"
as that term is defined by Treasury Regulations §54.4980B-9, Q&A-4, with
respect to the transactions contemplated by this Agreement for at least the
maximum period that continuation coverage may be available to the M&A
qualified beneficiaries (including any second qualifying events experienced by
the M&A qualified beneficiaries) under COBRA. Notwithstanding the
foregoing, the term "M&A qualified beneficiaries" for purposes of this
Section 4.1(c) shall not include any Person employed by Seller prior to the
Closing Date who is employed by Buyer or an affiliate on or after the Closing
Date.
4.2 Cooperation; Payment of
Taxes.
(a) To the
extent relevant to the Purchased Assets, each party shall (i) provide the
other with such assistance as may reasonably be required in connection with the
preparation of any Tax Return and the conduct of any audit or other examination
by any taxing authority or in connection with judicial or administrative
proceedings relating to any liability for Taxes and (ii) retain and provide
the other with all records or other information that may be relevant to the
preparation of any Tax Return, or the conduct of any audit or examination, or
other proceeding relating to Taxes.
-18-
(b) Notwithstanding
the provisions of ARTICLE VII, (i) Seller agrees to indemnify and hold Buyer
harmless from and against, and Seller shall be solely responsible for and make
all payments in respect of, any and all Taxes that relate to, arise from or
result from Seller's operation of the Business or Seller's use or ownership of
the Purchased Assets prior to the Closing Date; and (ii) Buyer agrees to
indemnify and hold Seller harmless from and against, and Buyer shall be solely
responsible for and make all payments in respect of, any and all Taxes that
relate to, arise from or result from Buyer's use or ownership of the Purchased
Assets on or after the Closing Date.
4.3 Cooperation With
Intellectual Property Assignments. Seller agrees to execute
and deliver at the request of Buyer, all documents, instruments and assignments
reasonably requested by Buyer, and to perform any other reasonable acts Buyer
may require in order to vest all of right, title, and interest in and
to the Seller IP Rights in Buyer or to provide evidence to support any of the
foregoing in the event such evidence is reasonably deemed necessary by Buyer to
the extent such evidence is in the possession or control of Seller.
4.4 Confidentiality. Seller
acknowledges and agrees to continue to abide by the terms and conditions of the
Confidentiality Agreement. Notwithstanding the foregoing or anything
to the contrary in the Confidentiality Agreement, Seller agrees not to divulge
or disclose or use for its benefit or purposes at any time after the Closing any
information with respect to the Purchased Assets or Buyer, unless such
information has already become public (without violation of this
Agreement). The information intended to be protected hereby shall
include financial information, customers, sales representatives, and anything
else having an economic or pecuniary benefit to Buyer or Seller.
4.5 Use of
Name. Buyer is purchasing all of Seller's rights to the trade
names of Seller, including the name "I AM TV," and therefore Seller shall not be
entitled to use the name "I AM TV," or any derivations or variations thereof, or
any confusingly similar name as a corporate, business or trade name or title
anywhere in the world from and after the Closing. Seller shall,
promptly following with the Closing, undertake and promptly pursue all necessary
action so as to permit the use of Seller's trade names by Buyer and its
Affiliates from and after the Closing.
4.6 Purchased
Contracts.
(a) This
Agreement and the Assignment and Assumption Agreement shall constitute an
assignment to Buyer of the benefit of all the Purchased Contracts which are
capable of assignment without the consent of any third party in each case with
effect from the Closing.
(b) Buyer
shall, as from the Closing Date, perform and fulfill all of the Purchased
Contracts, except where any Purchased Contract (a "Restricted Contract") contains
a prohibition on assignment or requires a written novation or consent from a
third party, which in each case has been triggered at the Closing by the sale
and purchase of the Purchased Assets pursuant to this Agreement ("Contract Consent"), and such
Contract Consent has not been obtained prior to the Closing Date, then the
provisions set out in this Section 4.6(b) shall apply in respect of each such
Restricted Contract, and this Agreement and the Assignment and Assumption
Agreement shall not constitute an assignment or attempted assignment if such
assignment or attempted assignment would constitute a breach of such Restricted
Contract. All Restricted Contracts are listed and described in Schedule 4.6(b).
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(1) After the
Closing, Seller shall, at Buyer's request, take reasonable steps to obtain the
necessary Contract Consents, and Buyer shall co-operate with Seller for such
purpose; provided, that, except as otherwise explicitly set forth on Schedule 4.6(c), any fees or
expenses incurred by Seller in connection with obtaining any Contract Consent
shall be the responsibility of and reimbursed by Buyer.
(2) Until the
required Contract Consent has been obtained in respect of each Restricted
Contract, to the extent that the parties are lawfully able to do so under the
terms of the Restricted Contract, Buyer shall or shall cause, all obligations
under the Restricted Contract to be performed in accordance with their terms and
as agent or sub-contractor of Seller and shall, in accordance with ARTICLE VII,
indemnify and hold harmless Seller against any Damages arising out of or in
connection with the performance of the Restricted Contract after the Closing
Date. Seller shall or shall cause any monies, goods or other benefits received
under such Restricted Contract to be held as trustee of Buyer and shall promptly
upon receipt account to Buyer for the benefit received.
(3) If, in
respect of any Restricted Contract, it is not possible to lawfully implement the
procedure set forth in this Section 4.6(b) without first obtaining the required
Contract Consent, Seller and Buyer shall in good faith consider and use their
reasonable efforts to agree on how to handle such Restricted Contract until the
Contract Consent has been obtained, including alternative structures through
which Buyer may receive the benefits under the Restricted Contract. Seller shall
use its reasonable efforts to comply with any reasonable directions of Buyer in
respect of such Restricted Contract (at Buyer's cost), and Buyer shall, in
accordance with ARTICLE VII, indemnify and hold harmless Seller against any
Damages arising out of or in connection with the Restricted
Contract.
(c) Each of
Buyer and Seller acknowledges that they have made agreements with respect to the
responsibility of Buyer and Seller for termination or modification of certain
Purchased Contracts, and for treatment of certain liabilities under such
Purchased Contracts as Assumed Liabilities or Excluded Liabilities, as set forth
in Schedule
4.6(c).
Each of Buyer and Seller acknowledges that in the event of any inconsistency or
conflict between the provisions of Schedule 4.6(c) and the other
provisions of this Agreement, the provisions of Schedule 4.6(c) shall
control.
4.7 Payment of the Closing
Purchase Price and Earnout Consideration. Seller shall be
solely responsible for further distributing the Closing Purchase Price and the
Earnout Consideration, if any, when and if received by Seller from Buyer, to
those Persons entitled to any portion of the Closing Purchase Price and the
Earnout Consideration.
4.8 Transfer
Restrictions. Seller acknowledges and agrees that the Securities may only
be disposed of in compliance with state and federal securities
laws. Without in any way limiting the representations set forth in
Section 2.29, Seller further agrees not to Transfer all or any portion of the
Securities, unless and until:
(a) there is
then in effect a registration statement under the Securities Act covering such
proposed Transfer and such Transfer is made in accordance with such registration
statement; or
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(b) Seller
shall have notified Buyer of the proposed Transfer and shall have furnished
Buyer with a statement of the circumstances surrounding the proposed Transfer,
and, at the expense of Seller or the transferee, with an opinion of counsel,
reasonably satisfactory to Buyer, that such Transfer will not require
registration of such securities under the Securities Act and that such Transfer
is in compliance with applicable state securities laws.
Notwithstanding
the provisions of Sections 4.8(a) and 4.8(b), no such registration statement or
opinion of counsel shall be required for any Transfer of any Securities in a
Permitted Transfer or in compliance with Rule 144 promulgated under the
Securities Act.
4.9 Covenant to terminate
Retailer Contracts.
(a) At such
time and in such manner as is mutually agreed upon by Seller and Buyer, but not
more than 45 days after the Closing, Seller will provide each Retailer with a
notice terminating Seller’s Contracts with such Retailer (each such Contract, a
"Retailer
Contract"). Such notice will be substantially in the form of
Exhibit M, with
such changes as may be agreed by Buyer and Seller. Seller hereby appoints Buyer
as Seller’s agent under each Retailer Contract to remove any Purchased Asset
from the premises of the Retailer and to repair and restore the Retailer’s
premises as a result thereof, and Buyer accepts such appointment. From time to
time, as and when requested by Buyer, Seller shall, at Buyer’s cost and expense,
execute and deliver, or cause to be executed and delivered, such documents and
instruments and shall take, or cause to be taken, such further or other actions
as Buyer may reasonably deem necessary or desirable to carry out the intent and
purposes of such appointment.
(b) Buyer
agrees that (i) neither the termination of the Retailer Contracts, any claim by
any Retailer that such termination is not in accordance with or is a breach of
such Retailer’s Retailer Contract, nor any demand by a Retailer to remove any
Purchased Asset or to repair or restore the Retailer’s premises, in each such
case, solely as a result of the termination of such Retailer's Retailer Contract
in accordance with and pursuant to Section 4.9(a), shall constitute an
inaccuracy or breach of any representation contained in Sections 2.3 and 2.11(b)
or give rise to any claim by Buyer against Seller under Section 7.2 in respect
of a breach of any representation contained in Sections 2.3 and 2.11(b) and (ii)
notwithstanding Sections 1.3 and 1.4, Buyer shall be solely responsible for any
claims or demands by any Retailer that Seller or Buyer remove any Purchased
Asset from such Retailer’s premises solely as a result of the termination of
such Retailer's Retailer Contract in accordance with and pursuant to Section
4.9(a), or repair or restore such Retailer’s premises as a result of the removal
of any Purchased Asset therefrom or reimburse any Retailer for the costs of such
repair or restoration. For avoidance of doubt, the parties agree that any
Liabilities of Seller under the Retailer Contracts, including Liabilities
arising from the termination thereof pursuant to Section 4.9(a), other than
those described in clause (ii) of the preceding sentence shall be deemed to be
an Excluded Liability for purposes of ARTICLE VII. Buyer agrees that
any Retailer claims or demands described in clause (ii) of the first sentence of
this Section 4.9(b) shall be deemed to be an Assumed Liability for purposes of
ARTICLE VII.
ARTICLE
V
CLOSING CONDITIONS AND
DELIVERABLES
5.1 Conditions Precedent to
Buyer's Obligations. The obligation of Buyer to consummate the
Closing and otherwise cause the transactions contemplated by this Agreement to
be consummated are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (to the extent noncompliance is not waived in
writing by Buyer):
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(a) Each of
the representations and warranties of Seller shall have been accurate in all
material respects as of the date of this Agreement and shall be accurate in all
material respects as of the Closing Date as if made on and as of the Closing
Date (except for any representation or warranty made as of a specific date,
which shall have been accurate in all material respects as of such date);
provided, however, that, for purposes of determining the accuracy of such
representations and warranties as of the foregoing dates, all materiality
qualifications limiting the scope of such representations and warranties shall
be disregarded.
(b) All of
the covenants and obligations in this Agreement that Seller is required to
comply with or to perform at or prior to the Closing shall have been complied
with and performed in all material respects.
(c) Buyer
shall have received a xxxx of sale (the "Xxxx of Sale") and an
assignment, assumption, and general conveyance (the "Assignment and Assumption
Agreement"), duly executed by Seller in favor of Buyer for transfer of
the Purchased Assets in substantially the forms attached hereto as Exhibits D and E, respectively,
dated as of the Closing Date.
(d) Buyer
shall have received an assignment from Seller of all right, title and interest
of Seller in all the Seller IP Rights (the "Seller IP Assignment"), duly
executed by Seller in favor of Buyer as described in Schedule 1.1, in substantially
the form attached hereto as Exhibit F, dated
as of the Closing Date.
(e) Buyer
shall have received the Consulting Agreement duly executed by Consultant, dated
as of the Closing Date.
(f) Buyer
shall have received the non-competition agreement in the form attached hereto as
Exhibit G (the
"Non-Competition
Agreement"), between Buyer and Consultant duly executed by Consultant,
dated as of the Closing Date.
(g) Buyer
shall have received from Seller a certificate of an officer of Seller certifying
as to the amount of Indebtedness of Seller outstanding on the Closing Date, and
specifying the amount owed to each creditor listed thereon (the "Certificate of
Indebtedness").
(h) The
parties to (i) the employment agreement dated January 1, 2006 between Seller and
Xxxxxxxx X. Case and (ii) the employment agreement dated January 1, 2006 between
Seller and Xxxxx X. Xxxxxx, shall have entered into written agreements to
terminate or modify each such employment agreement, which written agreements
shall be to Buyer's satisfaction and fully executed copies of which shall be
delivered to Buyer at the Closing, such that upon execution of such written
agreements, Buyer shall have no Liability under either such employment agreement
and Seller shall have no obligation to require Buyer to assume any of Seller's
obligations under either such employment agreement.
(i) Buyer
shall have received certificates of good standing as of the most recent
practicable date from the Secretary of State of each state where Seller is
incorporated or qualified to do business.
(j) All
filings, authorizations and approvals and consents necessary to consummate the
transactions contemplated by this Agreement shall have been made with or
obtained from all applicable Governmental Entities and other Persons, as the
case may be, including NYSE Amex Approval and the consents (other than consents
with respect to Restricted Contracts) identified in Schedule
2.3.
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(k) Since the
date of this Agreement, there shall not have occurred any Seller Material
Adverse Effect, and no event shall have occurred or circumstance shall exist
that, in combination with any other events or circumstances, could reasonably be
expected to have or result in a Seller Material Adverse Effect.
(l) No
temporary restraining order, preliminary or permanent injunction or other order
preventing the consummation of the transactions contemplated by this Agreement
shall have been issued by any court of competent jurisdiction or other
Governmental Entity and remain in effect, and there shall not be any Law enacted
or deemed applicable to the transactions contemplated by this Agreement that
makes the consummation of the transactions contemplated by this Agreement
illegal.
(m) There
shall not be pending or threatened any Action, and neither Buyer nor Seller
shall have received any communication from any Person in which such Person
indicates a material likelihood of commencing any Action or taking any other
action: (i) challenging or seeking to restrain, prohibit, rescind or unwind the
consummation of the transactions contemplated by this Agreement; (ii) relating
to the transactions contemplated by this Agreement and seeking to obtain from
Buyer or any of its subsidiaries or Seller any damages or other relief that
could reasonably be expected to be material to Buyer or have a material adverse
effect on the Purchased Assets; or (iii) that could materially and adversely
affect the right or ability of Buyer to own or use the Purchased
Assets.
(n) Buyer
shall have received all required consents from Seller related to Buyer's use of
Seller's trade names, including the name "I AM TV" and any derivation or
variation thereof, on the Closing Date and thereafter.
(o) Buyer
shall have received evidence to Buyer's satisfaction that all third party
invention assignment agreements with respect to the Seller IP Rights have been
properly executed in favor of Seller;
(p) Seller
shall have received approval of this Agreement and the transactions contemplated
hereby from holders of at least two-thirds of the outstanding shares of each of
the Series A preferred stock, Series B preferred stock and Series C preferred
stock of Seller, voting in accordance with applicable law and the Organizational
Documents.
(q) Buyer
shall have received a certificate duly executed by the chief executive officer
of Seller certifying that Seller has secured all necessary approvals authorizing
the execution, delivery and performance by Seller of this Agreement and the
transactions contemplated hereby and certifying that the conditions set forth in
Sections 5.1(a), 5.1(b), 5.1(h), 5.1(k), 5.1(l), 5.1(m) and 5.1(p) have been
duly satisfied.
(r) Buyer
shall have received the Securities Purchase Agreement duly executed by the
purchaser parties thereto and Buyer shall have received an aggregate of at least
$750,000 from the purchaser parties thereto.
(s) Buyer
shall have received the registration rights agreement, substantially in the form
attached hereto as Exhibit K (the "Registration Rights
Agreement"), duly executed from each other party thereto.
(t) Buyer
shall have received the general release of claims, substantially in the form
attached hereto as Exhibit L, executed
from each of the Principal Creditors.
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Any
agreement or document to be delivered to Buyer pursuant to this
Section 5.1, the form of which is not attached to this Agreement as an
exhibit, shall be in form and substance reasonably satisfactory to
Buyer.
5.2 Conditions Precedent to
Seller's Obligations. The obligation of Seller to consummate
the Closing and otherwise cause the transactions contemplated by this Agreement
to be consummated are subject to the satisfaction, at or prior to the Closing,
of each of the following conditions (to the extent noncompliance is not waived
in writing by Seller):
(a) Each of
the representations and warranties of Buyer shall have been accurate in all
material respects as of the date of this Agreement and shall be accurate in all
material respects as of the Closing Date as if made on and as of the Closing
Date (except for any representation or warranty made as of a specific date,
which shall have been accurate in all material respects as of such date);
provided, however, that, for purposes of determining the accuracy of such
representations and warranties as of the foregoing dates, all materiality
qualifications limiting the scope of such representations and warranties shall
be disregarded.
(b) All of
the covenants and obligations in this Agreement that Buyer is required to comply
with or to perform at or prior to the Closing shall have been complied with and
performed in all material respects.
(c) Seller
shall have received the Assignment and Assumption Agreements duly executed by
Buyer, dated as of the Closing Date.
(d) Seller
shall have received the Seller IP Assignment duly executed by Buyer, dated as of
the Closing Date.
(e) Buyer
shall have secured all necessary corporate and other approvals authorizing the
execution, delivery and performance by Buyer of this Agreement and the
transactions contemplated hereby, including without limitation the NYSE Amex
Approval.
(f) No
temporary restraining order, preliminary or permanent injunction or other order
preventing the consummation of the transactions contemplated by this Agreement
shall have been issued by any court of competent jurisdiction or other
Governmental Entity and remain in effect, and there shall not be any Law enacted
or deemed applicable to the transactions contemplated by this Agreement that
makes the consummation of the transactions contemplated by this Agreement
illegal.
(g) Since the
date of this Agreement, there shall not have occurred any Buyer Material Adverse
Effect, and no event shall have occurred or circumstance shall exist that, in
combination with any other events or circumstances, would reasonably be expected
to have or result in a Buyer Material Adverse Effect.
(h) There
shall not be pending or threatened any Action, and neither Buyer nor Seller
shall have received any communication from any Person in which such Person
indicates a material likelihood of commencing any Action or taking any other
action that if adversely determined would reasonably be expected to
have a Buyer Material Adverse Effect.
(i) Seller
shall have received a certificate executed by an executive officer of Buyer
confirming that the conditions set forth in Sections 5.2(a), 5.2(b), 5.2(e),
5.2(f) and 5.2(g) have been duly satisfied.
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(j) Buyer
shall have delivered to Seller each of the Closing Warrants in accordance with
Section 1.5 and shall have delivered the Closing Shares into the Holdback
Account.
(k) Buyer
shall have duly executed and delivered the Securities Purchase Agreement to the
purchaser parties thereto and Buyer shall have issued to such purchaser parties
the Common Stock of Buyer issuable thereunder.
(l) Buyer
shall have duly executed and delivered to Seller the Registration Rights
Agreement.
(m) Buyer
shall have made offers to hire the employees listed on Schedule 5.2(m).
Any
agreement or document to be delivered to Seller pursuant to this
Section 5.2, the form of which is not attached to this Agreement as an
exhibit, shall be in form and substance reasonably satisfactory to
Seller.
ARTICLE
VI
TERMINATION
6.1 Termination. This
Agreement may be terminated prior to the Closing Date:
(a) by mutual
written consent of Buyer and Seller;
(b) by either
Buyer or Seller if the transactions contemplated by this Agreement shall not
have been consummated by June 11, 2009 (the "End Date"); provided, however,
that a party shall not be permitted to terminate this Agreement pursuant to this
Section 6.1(b) if the failure to consummate the transactions contemplated by
this Agreement by the End Date is attributable to a failure on the part of such
party to perform any covenant or obligation in this Agreement required to be
performed by such party at or prior to the Closing Date;
(c) by Buyer
if a court of competent jurisdiction or other Governmental Entity shall have
issued a final and nonappealable order, writ injunction or decree or shall have
taken any other final and nonappealable action, having the effect of permanently
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement;
(d) by Seller
if a court of competent jurisdiction or other Governmental Entity shall have
issued a final and nonappealable order, writ injunction or decree or shall have
taken any other final and nonappealable action, having the effect of permanently
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement;
(e) by Buyer
if: (i) any of Seller's representations and warranties contained in this
Agreement shall be inaccurate as of the date of this Agreement or shall have
become inaccurate as of a date subsequent to the date of this Agreement (as if
made on such subsequent date) such that the condition set forth in Section
5.1(a) would not be satisfied (it being understood that, for purposes of
determining the accuracy of such representations and warranties as of the date
of this Agreement or as of any subsequent date, all materiality qualifications
limiting the scope of such representations and warranties shall be disregarded);
(ii) any of Seller's covenants or obligations contained in this Agreement shall
have been breached such that the condition set forth in Section 5.1(b) would not
be satisfied; or (iii) there shall have been a Material Adverse Effect following
the date of this Agreement; provided, however, that, for purposes of clauses
"(i)" and "(ii)" above, if an inaccuracy in any of Seller's representations and
warranties (as of the date of this Agreement or as of a date subsequent to the
date of this Agreement) or a breach of a covenant or obligation by Seller is
curable by Seller by the End Date and Seller is continuing to exercise its
reasonable best efforts to cure such inaccuracy or breach, then Buyer may not
terminate this Agreement under this Section 6.1(e) on account of such inaccuracy
or breach unless such inaccuracy or breach shall remain uncured as of the End
Date; or
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(f) by Seller
if: (i) any of Buyer's representations and warranties contained in this
Agreement shall be inaccurate as of the date of this Agreement or shall have
become inaccurate as of a date subsequent to the date of this Agreement (as if
made on such subsequent date) such that the condition set forth in Section
5.2(a) would not be satisfied (it being understood that, for purposes of
determining the accuracy of such representations and warranties as of the date
of this Agreement or as of any subsequent date, all materiality qualifications
limiting the scope of such representations and warranties shall be disregarded);
or (ii) any of Buyer's covenants or obligations contained in this Agreement
shall have been breached such that the condition set forth in Section 5.2(b)
would not be satisfied; provided, however, that if an inaccuracy in any of
Buyer's representations and warranties as of a date subsequent to the date of
this Agreement or a breach of a covenant or obligation by Buyer is curable by
Buyer and Buyer is continuing to exercise commercially reasonable efforts to
cure such inaccuracy or breach, then Seller may not terminate this Agreement
under this 6.1(f) on account of such inaccuracy or breach unless such inaccuracy
or breach shall remain uncured as of the End Date.
6.2 Effect of
Termination. In the event of the termination of this Agreement
as provided in Section 6.1, this Agreement shall be of no further force or
effect; provided, however, that: (a) this Section 6.2, Section 6.3 and ARTICLE
VIII shall survive the termination of this Agreement and shall remain in full
force and effect; (b) the Confidentiality Agreement shall survive the
termination of this Agreement and shall remain in full force and effect in
accordance with its terms; and (c) the termination of this Agreement shall not
relieve any party from any liability for any inaccuracy in any representation or
warranty or willful breach of any covenant, obligation or other provision
contained in this Agreement.
6.3 Expenses. All
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the transactions contemplated hereby are
consummated.
ARTICLE
VII
INDEMNIFICATION
7.1 Survival of Representations
and Warranties and Covenants.
(a) The
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement and the closing and the consummation of
the transactions contemplated hereby (and any examination or investigation by or
on behalf of any party hereto) for a period of 12 months from the Closing Date
(the "Cut-Off
Date"). Notwithstanding the foregoing, (i) any obligation
in respect of a claim for indemnity as a result of a breach of any
representation or warranty of any party that is asserted in writing with
reasonable specificity as to the nature and, if then reasonably determinable,
amount of the claim prior to the Cut-Off Date or the applicable Tax Claims Date,
in each case as applicable, shall survive past such date until finally resolved
or settled, (ii) any obligation in respect of a claim by a party for indemnity
arising from or related to a breach of the representations and warranties set
forth in Section 2.14 (Taxes) shall survive until 30 days following the
expiration of the applicable statute of limitations (the "Tax Claims" and such date, the
"Tax Claims Date"); and
(iii) any obligation in respect of a claim by a party for indemnity arising
from or related to a breach of the representations and warranties set forth in
Sections 2.1 (Organization), 2.2 (Authority), 2.15 (Brokers),
2.16 (Purchased Assets), 2.29 (Investment Representations), 3.1 (Organization),
3.2 (Authorization), 3.5 (Issuance of Securities), 3.10 (Brokers) or 3.13 (Buyer
Acknowledgement), a breach of a covenant set forth in ARTICLE IV, a claim
arising from or related to fraud or willful misrepresentation on the part of the
other party, or a claim by Buyer with respect to the Excluded Assets or Excluded
Liabilities, or by Seller with respect to the Assumed Liabilities, shall survive
indefinitely (collectively, the "Indefinite
Claims").
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(b) No Action
may be commenced with respect to any representation or warranty, or covenant
hereunder, or in any writing delivered pursuant hereto, unless written notice,
setting forth in reasonable detail the claimed breach thereof, shall be
delivered pursuant to Section 8.6 to the party or parties against whom
liability for the claimed breach is charged on or before the termination of the
survival period specified in Section 7.1(a) for such representation,
warranty, covenant or agreement; provided, that the
foregoing shall not apply to an Action related to any Indefinite
Claim.
7.2 Indemnification by
Seller. Subject to the provisions of this ARTICLE VII, Seller
covenants and agrees to defend, indemnify and hold harmless Buyer and each of
its directors, officers, Affiliates, successors, assigns and agents from and
against and with respect to any Damages directly or indirectly relating to,
resulting from or arising out of any and all of the
following: (i) any inaccuracy in or breach of any representation
or warranty in ARTICLE II, (ii) the failure of Seller to perform or observe
any covenant, agreement or provision to be performed or observed pursuant to
this Agreement, (iii) the operation of the Business or use of the Purchased
Assets before the Closing Date or any claims, actions or litigation concerning
the same, and (iv) any Excluded Assets or Excluded
Liabilities.
7.3 Indemnification by
Buyer. Buyer covenants and agrees to defend, indemnify and
hold harmless Seller and its directors, officers, affiliates, successors,
assigns and agents, as applicable, from and against any and all Damages relating
to, resulting from or arising out of any and all of the
following: (i) any inaccuracy in or breach of any representation
or warranty in ARTICLE III, (ii) the failure of Buyer to perform or observe
any covenant, agreement or provision to be performed or observed pursuant to
this Agreement, (iii) the use of the Purchased Assets on or after the
Closing Date for periods on or after the Closing Date or any claims, actions or
litigation concerning the same and (iv) any Assumed Liability.
7.4 Indemnification Claim
Procedure.
(a) In order
to seek indemnification under this ARTICLE VII (other than with respect to Third
Party Claims), a party entitled to indemnification under Section 7.2 or Section
7.3 (an "Indemnified
Party") shall deliver a written demand (an "Indemnification Demand") to
Seller (in the case of Indemnification Demands from Buyer) or Buyer (in the case
of Indemnification Demands from Seller) which contains (i) a description of and
if reasonably determinable at the time such demand is delivered, the amount of
any Damages incurred or reasonably expected to be incurred by the Indemnified
Party (the "Asserted Damages
Amount"), (ii) a statement that the Indemnified Party may be entitled to
indemnification under this ARTICLE VII for such Damages and a reasonable
explanation of the basis therefor, and (iii) a demand for indemnification
hereunder and payment of all such Damages.
(b) Within 30
days after delivery of an Indemnification Demand to Seller or Buyer (as the case
may be), such party shall deliver to the other of such parties a written
response (the "Response") in which the party
providing the Response shall either: (i) agree that the Indemnified Party is
entitled to receive all of the Asserted Damages Amount, if any (in which case,
if the Indemnified Party is (A) Buyer, then, unless Seller shall have elected in
the Response to pay the Asserted Damages Amount to Buyer in cash in accordance
with a payment method reasonable acceptable to Buyer and such payment is
actually made by Seller to Buyer in full and in cash within five Business Days
of the later of (a) the date Buyer receives such Response or (b) the date the
amount of the Asserted Damages Amount is determined, Buyer shall be entitled to
retain as an offset, without any further action by Seller, a portion (up to all)
of the Closing Shares or the Earnout Consideration equal to such Asserted
Damages Amount in satisfaction thereof, and such offset shall be deemed to occur
automatically such as to reduce the Closing Shares otherwise deliverable to
Seller upon the expiration of the Holdback Period (and any extended period
required to resolve any timely made claims for indemnification) or the Earnout
Consideration, if any, and Seller shall, in accordance with a payment method
reasonably acceptable to Buyer, pay to Buyer cash equal to any remainder of such
Asserted Damages Amount not offset from the Closing Shares or the Earnout
Consideration, if any, or (B) Seller, then Buyer shall, in accordance with a
payment method reasonably acceptable to Seller, pay to Seller cash equal to the
amount of such Asserted Damages Amount (in either case, subject to the
limitations of Section 7.6)); (ii) agree that the Indemnified Party is entitled
to receive part, but not all, of the Asserted Damages Amount (such portion, the
"Agreed Portion") (in
which case, if the Indemnified Party is (A) Buyer, then, unless Seller shall
have elected in the Response to pay the Agreed Portion to Buyer in cash in
accordance with a payment method reasonable acceptable to Buyer and such payment
is actually made by Seller to Buyer in full and in cash within five Business
Days of the later of (a) the date Buyer receives such Response or (b) the date
the amount of the Agreed Portion is determined, Buyer shall be entitled to
retain as an offset, without any further action by Seller, a portion (up to all)
of the Closing Shares or
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the
Earnout Consideration equal to the Agreed Portion in satisfaction thereof, and
such offset shall be deemed to occur automatically such as to reduce the Closing
Shares otherwise deliverable to Seller upon the expiration of the Holdback
Period (and any extended period required to resolve any timely made claims for
indemnification) or the Earnout Consideration, if any, and Seller shall, in
accordance with a payment method reasonably acceptable to Buyer, pay to Buyer
cash equal to any remainder of such Agreed Portion not offset from the Closing
Shares or the Earnout Consideration, if any, or (B) Seller, then Buyer shall, in
accordance with a payment method reasonably acceptable to Seller, pay to Seller
cash equal to the amount of such Agreed Portion (in either case, subject to the
limitations of Section 7.6)); or (iii) dispute that the Indemnified Party is
entitled to receive any of the Asserted Damages Amount. Upon any cash payment by
Seller to Buyer of the Asserted Dollar Amount or Agreed Portion,
Buyer shall no longer be entitled to offset the Closing Shares and Earnout
Consideration by the amount of such payment and shall release to Seller a
portion of the Closing Shares, if any, then held in the Holdback Account equal
to the amount of such payment divided by the Deemed Share Value.
(c) In the
event that the party providing a Response shall (i) dispute that the Indemnified
Party is entitled to receive any of the Asserted Damages Amount, or (ii) agree
that the Indemnified Party is entitled to only an Agreed Portion of the Asserted
Damages Amount, Buyer and Seller shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of the indemnification
claims that comprise the Asserted Damages Amount (or the portion of the Asserted
Damages Amount not comprising the Agreed Portion). If Buyer and
Seller should so agree, then Buyer, unless Buyer and Seller shall have entered
into a written agreement pursuant to which Seller unconditionally agrees to pay
to Buyer such amount of Damages upon which Buyer and Seller agree (as
applicable) in cash in accordance with a payment method reasonable acceptable to
Buyer and such payment is actually made by Seller to Buyer in full and in cash
within five Business Days of the later of (a) the date such written agreement is
entered into or (b) the date the agreed upon amount of Damages is determined,
shall be entitled to retain as an offset, without any further action by Seller,
a portion (up to all) of the Closing Shares or the Earnout Consideration equal
to such amount of Damages upon which Buyer and Seller agree (as applicable) in
satisfaction thereof, and such offset shall be deemed to occur automatically
such as to reduce the Closing Shares otherwise deliverable to Seller upon the
expiration of the Holdback Period (and any extended period required to resolve
any timely made claims for indemnification) or the Earnout Consideration, if
any, and Seller shall, in accordance with a payment method reasonably acceptable
to Buyer, pay to Buyer cash equal to any remainder of such Damages not offset
from the Closing Shares or the Earnout Consideration, if any. If no
such agreement can be reached after good faith negotiation within 15 days after
delivery of a Response, then, at the request of either party, the parties shall
submit the dispute to a mutually acceptable arbitrator in San Diego County,
California designated by the American Arbitration Association, under its rules
for Commercial Arbitration, for binding and final resolution. If such arbitrator
determines that Buyer is entitled to any portion of the Asserted Damages Amount
in dispute (or the portion of the Asserted Damages Amount not comprising the
Agreed Portion in dispute), then Buyer, unless Seller shall have paid to Buyer
in full and in cash within five Business Days of the later of (a) the date such
determination or (b) the date the amount of Damages is determined, and in
accordance with a payment method reasonable acceptable to Buyer the entire
amount to which Buyer is entitled, shall be entitled to retain as an offset,
without any further action by Seller, a portion (up to all) of the Closing
Shares or the Earnout Consideration equal to such amount of Damages to which
Buyer and is entitled as determined by the arbitrator in satisfaction thereof,
and such offset shall be deemed to occur automatically such as to reduce the
Closing Shares otherwise deliverable to Seller upon the expiration of the
Holdback Period (and any extended period required to resolve any timely made
claims for indemnification) or the Earnout Consideration, if any. The
fees and expenses of the arbitration shall be paid as determined by the
arbitrator.
-28-
7.5 Defending Third Party
Claims.
(a) If an
Indemnified Party receives notice of the assertion by any Person (other than a
party hereto) of any claim or of the commencement by any such Person of any
Action with respect to which an Indemnifying Party is or may be obligated to
provide indemnification (a "Third Party Claim"), the
Indemnified Party shall promptly notify the Indemnifying Party in writing of the
Third Party Claim (the "Third
Party Claim
Notice"); provided, however, that the
failure to provide such notice shall not relieve or otherwise affect the
obligation of the Indemnifying Party to provide indemnification hereunder,
except to the extent that such failure or delay materially prejudices the
defense thereof.
(b) The
Indemnifying Party shall be entitled to participate in the defense of a Third
Party Claim after receipt of a Third Party Claim Notice. Within 30
days after receipt of a Third Party Claim Notice, the Indemnifying Party may
assume the defense of the Third Party Claim subject of such Third Party Claim
Notice, in which case the Indemnifying Party shall have the authority to
negotiate, compromise and settle such Third Party Claim, if and only if all of
the following conditions are satisfied:
(1) the
Indemnifying Party shall have confirmed in writing that it is obligated
hereunder to indemnify the Indemnified Party with respect to such Third Party
Claim;
(2) the
Indemnified Party shall not have given the Indemnifying Party written notice
that it has determined, in the exercise of its reasonable discretion and in good
faith, that a conflict of interest make separate representation by the
Indemnified Party's own counsel advisable; and
(3) such
Third Party Claim involves only money damages and does not seek an injunction or
other equitable relief.
The
Indemnified Party shall retain the right to employ its own counsel and to
participate in the defense of any Third Party Claim, the defense of which has
been assumed by the Indemnifying Party pursuant hereto, but the Indemnified
Party shall bear and shall be solely responsible for its own costs and expenses
in connection with such participation unless: (A) the employment of
such counsel has been specifically authorized by the Indemnifying Party in
writing, (B) the Indemnifying Party has failed to assume the defense and employ
counsel in accordance with Section 7.5(b), or (C) the named parties to such
Third Party Claim (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party, and the Indemnified Party
reasonably believes that there may be one or more material legal defenses
available to the Indemnified Party that are different from or additional to
those available to the Indemnifying Party (other than differing interests
associated with an Indemnifying Party's obligation to indemnify), in which cases
the fees and expenses of the Indemnified Party's counsel shall be paid by the
Indemnifying Party on a current basis.
(c) Subject
to the foregoing provisions of this Section 7.5, for a period of 20 days
after delivery of a Third Party Claim Notice, the Indemnifying Party shall have
the right to object in a written statement to the claim made in the Third Party
Claim Notice that the Indemnifying Party is or may be obligated to indemnify the
Indemnified Party (an "Objection"), and such
statement shall have been delivered to the Indemnified Party prior to the
expiration of such 20-day period. If an Objection has been timely
made, the Indemnifying Party and Indemnified Party shall attempt in good faith
to agree upon the indemnification rights and obligations of the respective
parties with respect to the claim or claims relating to the Third Party Claim
Notice. Any such agreement reached between the Indemnifying Party and
Indemnified Party shall be set forth in a written memorandum signed by both
parties. If the parties cannot come to such agreement within 15 days
after receipt by the Indemnified Party of the Objection, then, at the request of
either party, the parties shall submit the dispute to a mutually acceptable
arbitrator in San Diego County, California designated by the American
Arbitration Association, under its rules for Commercial Arbitration, for binding
and final resolution. The fees and expenses of the arbitration shall be paid as
determined by the arbitrator.
-29-
7.6 Limitations on
Indemnity.
(a) Buyer and
Seller are not entitled to indemnity under this ARTICLE VII except to the extent
that the aggregate amount of indemnifiable Damages incurred by the respective
party, in the aggregate, exceeds Ten Thousand Dollars ($10,000) (the "Threshold Amount"), in which
case the party seeking indemnification may bring a claim for the entire amount
of such Damages from dollar one. The parties agree that they will not
submit any claim for indemnification pursuant to this ARTICLE VII unless and to
the extent that the aggregate amount of all Damages for which indemnity is
claimed exceeds the Threshold Amount; provided, however, that the
Threshold Amount shall not apply in respect of a Tax Claim or Indefinite
Claims.
(b) Notwithstanding
any other provision of this Agreement, the maximum aggregate amount for which
Seller shall be liable hereunder for indemnity arising from or related to breach
of Seller's representations and warranties shall be the Deemed Share Value of
the Closing Shares plus the amount of Earnout Consideration, if
any.
7.7 Relationship Between Assumed
Liabilities and Indemnification. Subject to the provisions of
this ARTICLE VII, Buyer shall be entitled to indemnification pursuant to this
ARTICLE VII for Damages in respect of the breach by Seller of the
representations and warranties contained in ARTICLE II even if such Damages
would otherwise be assumed by Buyer under Section 1.3.
7.8 Exclusive
Remedy. This ARTICLE VII sets forth the sole and exclusive remedies
of Buyer and Seller, and their respective successors and assigns for
any Action any of them may assert or attempt to assert against the other to the
extent the Action in any way relates to this Agreement or its negotiation,
execution, delivery or performance, any alleged breach of or default under this
Agreement, or the transactions contemplated hereby, regardless of whether such
Action is based in tort (for example, intentional or negligent
misrepresentation) or contract, or arises at law or in equity; provided, however, the
foregoing limitation shall not apply to a claim arising from or relating to
fraud or willful misrepresentation on the part of the other party.
7.9 Right of Offset.
Notwithstanding anything to the contrary herein, unless Buyer shall have
received a cash payment from Seller in lieu of such offset in accordance with
Sections 7.4(b) and (c), as the case may be, Buyer may offset any amount to
which it may be entitled under this ARTICLE VII against the Closing Shares and
any other amount otherwise payable to Seller under this Agreement or under any
document delivered in connection herewith, including with respect to any Earnout
Payment. For purposes of exercising Buyer's offset rights against the
Closing Shares, the value per share of the Closing Shares shall be deemed to be
the closing price per share of the Common Stock as reported on NYSE Amex (or any
successor exchange or trading market on which the Common Stock is primarily
exchanged or traded) on the Closing Date (the "Deemed Share
Value"). The exercise of such right of offset by Buyer in good
faith, whether or not ultimately determined to be justified, will not constitute
a breach of this Agreement. Buyer shall not be obligated to proceed
against Seller before exercising its rights under this Section 7.9.
ARTICLE
VIII
MISCELLANEOUS
8.1 Rules of
Construction. This Agreement has been negotiated by the
parties and is to be interpreted according to its fair meaning as if the parties
had prepared it together and not strictly for or against any
party. All references in this Agreement to articles, sections,
schedules and exhibits are to articles, sections, schedules and exhibits of or
to this Agreement unless expressly otherwise indicated. At each place
in this Agreement where the context so requires, the masculine, feminine or
neuter gender includes others. "Including" or "include" means
"including without limitation" and "include without limitation," respectively.
"Or" is used in the inclusive sense of "and/or." Currency amounts
referenced herein, unless otherwise specified, are in
U.S. dollars.
-30-
8.2 Further
Actions. From time to time, as and when requested by any party
hereto, each other party shall execute and deliver, or cause to be executed and
delivered, such documents and instruments and shall take, or cause to be taken,
such further or other actions as the requesting party may reasonably deem
necessary or desirable to carry out the intent and purposes of this Agreement,
to transfer, assign and deliver the Purchased Assets to Buyer and its respective
successors and assigns effective as of the Closing Date (or to evidence the
foregoing) and to consummate and give effect to the other transactions,
covenants and agreements contemplated hereby.
8.3 Expenses. Except
as expressly set forth herein, the parties shall bear their own legal fees and
other costs and expenses with respect to the negotiation, execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereunder.
8.4 Entire
Agreement. This Agreement, which includes the all schedules
and exhibits hereto and the other documents, agreements and instruments executed
and delivered pursuant to this Agreement, contains the entire agreement between
the parties hereto with respect to the transactions contemplated by this
Agreement and supersedes all prior arrangements, understandings, proposals,
prospectuses, projections and related materials with respect thereto, other than
the Confidentiality Agreement, which shall survive in accordance with its
terms.
8.5 Descriptive
Headings. The descriptive headings of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
8.6 Notices. All
notices or other communications which are required or permitted hereunder shall
be in writing and shall be sufficiently given if (a) delivered personally
or (b) sent by registered or certified mail, postage prepaid, or
(c) sent by overnight courier with a nationally recognized courier, or
(d) sent via facsimile confirmed in writing in any of the foregoing
manners, as follows:
|
If
to Seller:
|
Instant
Access Media, LLC
000
Xxxxx Xxxxxx
Xxxxxx,
XX 00000
Attention: Xxxxxxxx
Case
Fax:
000.000.0000
|
|
|
With
a copy to:
|
Xxxxxx
Xxxxx Xxxx & Xxxx, P.C.
0000
Xxxxxxx Xxxxx
000
X. Xxxxx Xxxxxx
Xxxxxx,
XX 00000-0000
Fax:
000.000.0000
Attention:
A. Xxxxxxx Xxxxxxxxxxxx
|
|
-31-
|
If
to Buyer:
|
NTN
Buzztime, Inc.
0000
Xx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxx,
XX 00000
Attention: Xxxxxx
Xxxxxx
Fax: 000.000.0000
|
|
|
With
a copy to:
|
Xxxxxxxx
Xxxxxx Xxxxxxx & Xxxxxxx, LLP
00000
Xx Xxxxxx Xxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000-0000
Attention: Xxxx
Xxxxxxxxx
Fax: 000.000.0000
|
|
If sent
by mail, notice shall be considered delivered five Business Days after the date
of mailing, and if sent by any other means set forth above, notice shall be
considered delivered upon receipt thereof. Any party may by notice to
the other parties change the address or facsimile number to which notice or
other communications to it are to be delivered or mailed.
8.7 Publicity. Buyer
shall have sole control over any press release, public announcement, statement
or acknowledgment (collectively, "Public Statements") with
respect to this Agreement and the consummation of the transactions contemplated
herein; provided, however, that prior to the release of any Public Statements,
Seller shall be afforded the right to review the Public Statements.
8.8 Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to the choice
of law principles thereof.
8.9 Assignment. This
Agreement shall inure to the benefit of and shall be binding upon the parties
hereto and their respective successors and permitted assigns. This
Agreement shall not be assignable (whether voluntarily or involuntarily,
directly or indirectly or by operation of law) by Seller without the written
consent of Buyer and any such purported assignment by Seller without such
consent shall be void, provided that any assignee of Securities pursuant to an
assignment permitted under this Agreement, including any Permitted Assignee,
shall automatically and without any consent of Buyer, succeed to the rights of
Seller hereunder, including the rights of Seller under Section 4.7 and Article
VII, insofar as such rights relate to the Securities so assigned.
8.10 Waivers and
Amendments. Any amendment or supplementation of this Agreement
shall be effective only if in writing signed by each of the parties
hereto. Any waiver of any term or condition of this Agreement shall
be effective only if in writing signed by the party giving the
waiver. A waiver of any breach or failure to enforce any of the terms
or conditions of this Agreement shall not in any way affect, limit or waive a
party's rights hereunder at any time to enforce strict compliance thereafter
with every term or condition of this Agreement, except to the extent such future
rights are specifically included within the scope of such written
waiver.
-32-
8.11 Third Party
Rights. This Agreement shall not create benefits on behalf of
any other Person (including any broker or finder or employee of Seller),
and this Agreement shall be effective only as between the parties hereto,
their successors and permitted assigns.
8.12 Severability. If
any term or provision of this Agreement or the application thereof to any
circumstance shall, in any jurisdiction, be invalid or unenforceable, such term
or provision shall be ineffective as to such jurisdiction to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
such term or provision in any other jurisdiction, the remaining terms and
provisions of this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or
enforceable.
8.13 Counterparts. This
Agreement may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement. Facsimile
and PDF signatures shall be treated as if they were originals.
[SIGNATURE
PAGE FOLLOWS]
-33-
IN
WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto
have caused this Agreement to be duly executed and delivered as a sealed
instrument as of the date and year first above written.
| BUYER | SELLER |
| NTN Buzztime, Inc., | Instant Access Media, LLC, |
| a Delaware corporation. | a Colorado limited liability company |
| By: /s/ Xxxxxx Xxxxxx | By: /s/ Xxxxxxxx X. Case |
| Name: Xxxxxx Xxxxxx | Name: Xxxxxxxx X. Case |
| Title: Chief Financial Officer | Title: Chief Operating Officer |
[Signature Page to Asset Purchase
Agreement]
LIST OF
EXHIBITS**
|
Exhibit
A
|
Definitions
|
|
Exhibit
B
|
Case
Consulting Agreement
|
|
Exhibit
C
|
[Reserved]
|
|
Exhibit
D
|
Xxxx
of Sale
|
|
Exhibit
E
|
Assignment
and Assumption Agreement
|
|
Exhibit
F
|
Seller
IP Assignment
|
|
Exhibit
G
|
Form
of Non-Competition Agreement
|
|
Exhibit
H
|
Form
of Warrant
|
|
Exhibit
I
|
Securities
Purchase Agreement
|
|
Exhibit
J
|
Accredited
Investor Questionnaire and Investment
Representation
Letter Agreement
|
|
Exhibit
K
|
Registration
Rights Agreement
|
|
Exhibit
L
|
General
Release of Claims
|
|
Exhibit
M
|
Form
of Notice to Retailers
|
** The
exhibits set forth above and the other schedules referenced in this agreement
have been omitted. NTN Buzztime, Inc. will furnish copies of the omitted
exhibits and schedules to the Commission upon request.
EXHIBIT A
DEFINITIONS
The terms
defined in this Exhibit A,
whenever used in this Agreement (including in any schedule to this Agreement),
shall have the respective meanings indicated below for all purposes of this
Agreement, unless otherwise indicated in this Agreement (or the applicable
schedule):
"$0.50 Warrant": means a
warrant, substantially in the form attached hereto as Exhibit H, to
purchase 1,000,000 unregistered shares of Common Stock, with an exercise price
of $0.50 per share.
"$1.00 Warrant": means a
warrant, substantially in the form attached hereto as Exhibit H, to
purchase 1,000,000 unregistered shares of Common Stock, with an exercise price
of $1.00 per share.
"$1.50 Warrant": means a
warrant, substantially in the form attached hereto as Exhibit H, to
purchase 1,000,000 unregistered shares of Common Stock, with an exercise price
of $1.50 per share.
"Action": means any claim,
action, suit, arbitration, hearing, inquiry, proceeding, complaint, charge or
investigation of any kind, whether civil, criminal or administrative, at law or
in equity and any appeal from any of the foregoing.
"Affiliate": with
respect to any Person, means any Person directly or indirectly through one or
more intermediaries, that controls, is controlled by, or is under common control
with such other Person.
"Assumed
Liabilities": as defined in Section 1.3.
"Business": as
defined in the Recitals.
"Business Day" means Monday
through Friday, excluding any day of the year on which banks are required or
authorized to close in the State of California.
"Buyer Material Adverse Effect"
means (i) a material adverse effect on the business of Buyer and its
Subsidiaries, taken as a whole or (ii) a material adverse effect on Buyer's
ability to perform in any material respect on a timely basis its obligations
under any Transaction Document.
"Change in Control
Transaction": means the occurrence of any of the following: (i) Buyer is
party to a merger or consolidation which results in the voting securities of
Buyer outstanding immediately prior thereto failing to continue to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving or another entity) at least 50% of the combined voting power of
the voting securities of Buyer or such surviving or other entity outstanding
immediately after such merger or consolidation; or (ii) the sale or disposition
of all or substantially all of Buyer's assets.
"Closing": as defined in
Section 1.9.
"Closing Date": as defined in
Section 1.9.
"Closing Purchase
Price": as defined in Section 1.5(a).
"Closing Securities": means the
Closing Shares and the Closing Warrants.
"Closing Shares" as defined in
Section 1.5(a).
"Closing Warrants":
collectively, the $0.50 Warrant, the $1.00 Warrant and the $1.50
Warrant.
"Code": Internal
Revenue Code of 1986, as amended.
"Common Stock": means shares of
Buyer's common stock, $0.005 par value per share.
"Confidentiality Agreement":
means that certain Nondisclosure Agreement dated December 10, 2008 by and
between Seller and Buyer, as the same may be amended from time to
time.
"Consulting
Agreement": as defined in Section 4.1(a).
"Consultants": as
defined in Section 4.1(a).
"Contract": means any written
or oral contract, agreement, instrument, commitment, arrangement, understanding
or undertaking (including leases, franchises, bonds, guaranties, licenses,
mortgages, notes, guarantees, sublicenses, subcontracts and purchase
orders).
"Damages": means any and all
losses, liabilities, obligations, costs, expenses, orders, decrees, damages
(including incidental and consequential damages) or judgments of any kind or
nature whatsoever (including costs of investigation and defense reasonable
attorneys', accountants' and experts' fees, and disbursements of
counsel).
"Deemed Share Value": as
defined in Section 7.9.
"Dispute Notice": as defined in
Section 1.6(d)
"Earnout Consideration": as
defined in Section Section 1.6(a).
"Earnout Percentage": means the
quotient obtained by dividing (i) the New Venues by (ii) the Total
Venues.
"Earnout Notice": as defined in
Section 1.6(c).
"Earnout Notice Date": as
defined in Section 1.6(c).
"Earnout Payment": as defined
in Section 1.6(b).
"Employee Benefit Plan": means
any pension, profit-sharing, deferred compensation, bonus, stock option, share
appreciation right, severance, group or individual health, dental, medical, life
insurance, survivor benefit, or similar plan, policy or arrangement, whether
formal or informal, for the benefit of any director, officer, consultant or
employee, whether active or terminated, of Seller.
"Environmental Laws": means all
civil and criminal, foreign, international, provincial, federal, state and local
laws, rules, regulations, orders, ordinances, policies, guidance documents and
common law, which govern or relate to pollution, protection or restoration of
the environment, natural resources, safety and health, Releases or threatened
Releases of Hazardous Materials, solid or hazardous waste, or otherwise relating
to the manufacture, processing, distribution, use, recycling, treatment,
storage, Release, transport or handling of Hazardous Materials and all laws and
regulations with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Materials, together with any
governmental entity interpretations of each of the foregoing.
"Exchange Act": means the
Securities Exchange Act of 1934, as amended.
"Excluded
Assets": as defined in Section 1.2.
"Excluded
Liabilities": as defined in Section 1.4.
"FY 2010": means Buyer's full
fiscal year ending December 31, 2010.
"FY 2011": means Buyer's full
fiscal year ending December 31, 2011.
"FY 2012": means Buyer's full
fiscal year ending December 31, 2012.
"GAAP": means generally
accepted accounting principles as in effect in the United States.
"Government Licenses" means all
permits, licenses, franchises, orders, registrations, certificates, variances,
approvals and other authorizations obtained from any Governmental Entity,
including those listed on Schedule 2.11.
"Governmental
Entity": means any foreign, federal, state, municipal or local
government, governmental, regulatory or administrative authority, agency,
instrumentality or commission or any United States court, tribunal, or judicial
or arbitral body of any nature; or any United States body exercising, or
entitled to exercise, any administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power of any nature.
"Hazardous Materials": means
(i) any chemical, compound, material, mixture or substance that is now or
hereafter defined or listed in, or otherwise classified pursuant to, any
Environmental Laws as a "hazardous substance", "hazardous material", "hazardous
waste", "extremely hazardous waste", "acutely hazardous waste", "radioactive
waste", "infectious waste", "biohazardous waste", "toxic substance",
"pollutant", "toxic pollutant", "contaminant" , "special waste", as well as any
formulation not mentioned herein intended to define, list, or classify
substances by reason of deleterious properties, including ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity "EP
toxicity," or "TCLP toxicity"; (ii) petroleum, natural gas, natural gas liquids,
liquefied natural gas, synthetic gas usable for fuel (or mixtures of natural gas
and such synthetic gas) and ash produced by a resource recovery facility
utilizing a municipal solid waste stream, and drilling fluids, produced waters
and other wastes associated with the exploration, development or production of
crude oil, natural gas, or geothermal resources; (iii) "hazardous substance" as
defined in Section 25281(f) of the California Health and Safety Code; (iv)
"waste" as defined in Section 13050(d) of the California Water Code (v) asbestos
in any form; (vi) urea formaldehyde foam insulation; (vii) transformers or other
equipment which contain dielectric fluid containing levels of polychlorinated
biphenyls (PCBs); (viii) radon; and (ix) any other chemical, material, or
substance that, because of its quantity, concentration, or physical or chemical
characteristics, exposure to which is limited or regulated for health and safety
reasons by any governmental authority, or which poses a present or potential
hazard to human health and safety or to the environment if released into the
workplace or the environment
"Holdback Account": means the
account consisting of the Closing Shares to be established by and administered
by Buyer to secure the indemnification obligations of Seller under ARTICLE
VII.
"Holdback Period": means the
period beginning with the Closing Date and ending on the one year anniversary of
the Closing Date.
"Indebtedness": means, as at
any date of determination thereof (without duplication): (i) all
obligations of Seller for borrowed money or funded indebtedness or issued in
substitution for or exchange for borrowed money or funded indebtedness
(including obligations in respect of principal, accrued interest, any applicable
prepayment charges or premiums and any unpaid fees, expenses or other monetary
obligations in respect thereof); (ii) any indebtedness evidenced by any
note, bond, debenture or other debt security; (iii) all obligations for
reimbursement then required to be made of any obligor on any banker's acceptance
or similar transactions (including all letters of credit and all obligations
thereunder); (iv) all obligations for the deferred purchase price of
property or conditional sale obligations of Seller under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business); (v) any obligations with
respect to the termination of any interest rate hedging or swap agreements;
(vi) all obligations of the type referred to in clauses (i) through
(v) of any Person for the payment of which Seller is responsible or liable,
directly or indirectly, as guarantor, obligor, surety or otherwise;
(vii) obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of
Seller but only to the extent of the value of the property or asset that is
subject to such Lien; and (viii) any outstanding but not cleared
checks.
"Intellectual Property": means:
(i) inventions and discoveries (whether or not patentable and whether or not
reduced to practice), improvements thereto, and patents, patent applications,
invention disclosures, and other rights of invention, worldwide, including any
reissues, divisions, continuations and continuations-in-part, provisionals,
reexamined patents or other applications or patents claiming the benefit of the
filing date of any such application or patent; (ii) trademarks, service marks,
trade names, trade dress, logos, domain names, product names and slogans,
including any common law rights, registrations, and applications for
registration for any of the foregoing, and the goodwill associated with all of
the foregoing, worldwide; (iii) copyrightable works, all rights in copyrights,
including moral rights, copyrights, website content, and other rights of
authorship and exploitation, and any applications, registrations and renewals in
connection therewith, worldwide; (iv) trade secrets and confidential business
and technical information, including web site user information, customer and
supplier lists and related information, pricing and cost information, business
and marketing plans, advertising statistics, any other financial, marketing and
business data, technical data, specifications, schematics and know-how; (v) to
the extent not covered by subsections (i) through (iv), above, Software and web
sites (including all related computer code and content); (vi) rights to exclude
others from appropriating any of such intellectual property, including the
rights to xxx for and remedies against past, present and future infringements of
any or all of the foregoing and rights of priority and protection of interests
therein; and (vii) any other proprietary, intellectual property and other rights
relating to any or all of the foregoing anywhere in the world.
"Knowledge of Buyer" and "Buyer's
Knowledge": any particular fact, circumstance, event or other
matter in question of which any of Buyer's executive officers and directors have
knowledge. An individual shall be deemed to have knowledge of a
particular fact, circumstance, event or other matter if (i) such fact,
circumstance, event or other matter is reflected in one or more documents,
written or electronic, that are or have been in such individual's possession or
that would likely be reviewed by an individual who has the duties and
responsibilities of such individual in the customary performance of such duties
and responsibilities or (ii) such knowledge would be obtained from
reasonable and customary inquiry of those Persons employed by Buyer charged with
administrative or operational responsibility for such matter.
"Knowledge of Seller" and
"Seller's
Knowledge": any particular fact, circumstance, event or other
matter in question of which either Xxxxxxxx X. Case, Xxxxx X. Xxxxxx or any
of Seller's other officers and directors have knowledge. An
individual shall be deemed to have knowledge of a particular fact, circumstance,
event or other matter if (i) such fact, circumstance, event or other matter
is reflected in one or more documents, written or electronic, that are or have
been in such individual's possession or that would likely be reviewed by an
individual who has the duties and responsibilities of such individual in the
customary performance of such duties and responsibilities or (ii) such
knowledge would be obtained from reasonable and customary inquiry of those
Persons employed by Seller charged with administrative or operational
responsibility for such matter.
"Law": means any United States
federal, state, municipal or local statute, law, ordinance, regulation, rule,
code, executive order, injunction, judgment, decree or other order of any
Governmental Entity.
"Liabilities": means any and
all debts, liabilities, commitments and obligations of any kind, whether fixed,
contingent or absolute, matured or unmatured, liquidated or unliquidated,
accrued or not accrued, asserted or not asserted, known or unknown, determined,
determinable or otherwise, whenever or however arising (including, whether
arising out of any contract or tort based on negligence or strict liability) and
whether or not the same would be required by GAAP to be reflected in financial
statements or disclosed in the notes thereto.
"Lien": means any
charge, claim, community property interest, condition, equitable interest, lien,
license, option, pledge, security interest, right of first refusal or
restriction of any kind, including any restriction on use, voting, transfer,
receipt of income or exercise of any other attribute of ownership.
"Material Contract": as defined
in Section 2.11(a).
"Net Advertising Revenues":
means the gross in-venue, on screen advertising and sponsorship revenues of
Buyer and its Affiliates net of agency commissions, applicable taxes and
collection fees and credit card fees.
"New Venues": means the
aggregate number of venues owned or operated by Retailers that subscribe to
Buyer's Buzztime iTV Network as of December 31, 2009. For the avoidance of
doubt, the parties agree and acknowledge that the maximum possible aggregate
number of New Venues (being the total number of venues owned or operated by
Retailers on the date hereof) is 368.
"NYSE Amex Approval": means
approval from NYSE Amex for the additional listing of shares of Common Stock
with respect to the Closing Shares and the Underlying Securities.
"Organizational Documents": as
defined in Section 2.1.
"Permitted
Liens": means Liens for Taxes not yet due and
payable.
"Permitted Transfer": as
defined in Section 2.27(c).
"Permitted Transferee": means
any of the following Persons: (i) Ushas, LLC; (ii) Xxxxxx Xxxxxxx; (iii)
Xxxxxxxx Inc.; and (iv) X'Xxxxx Community Property Trust.
"Person": means any individual,
sole proprietorship, partnership, joint venture, trust, unincorporated
association, corporation, limited liability company, entity or Governmental
Entity.
"Principal Creditors": means
each of the following Persons: (i) Ushas, LLC; and (ii) Xxxxxx
Xxxxxxx.
"Purchased Assets": as defined
in Section 1.1
"Purchased Contracts": as
defined in Section 1.1(b).
"Restricted Contracts": as
defined in Section 4.6(b).
"Retailer": means each party
(other than Seller) to each of the retailer agreements entered into between
Seller and such party relating to the installation of large screen, high
definition televisions and related equipment upon such party's premises to
broadcast digital video programming to such party's customers and employees in
effect as of the date hereof.
"SEC": means the United States
Securities and Exchange Commission.
"Securities": means the Closing
Shares, the Closing Warrants and the shares of Common Stock issuable upon
exercise of the Closing Warrants.
"Securities Act": means the
Securities Act of 1933, as amended.
"Securities Purchase
Agreement": means the securities purchase agreement, substantially in the
form attached hereto as Exhibit I, entered
into between Buyer and the purchaser parties thereto, each of which is an
"accredited investor" under federal securities laws, pursuant to which such
purchasers shall purchase from Buyer an aggregate of $750,000 of unregistered
shares Common Stock at a purchase price of $0.30 per share.
"Seller IP Rights": means all
of the rights and interests of Seller in Intellectual Property used in, or
useful with respect to the operation or use of the Purchased Assets in the
conduct of Seller's business in the ordinary course, wherever
located, remedies against infringement thereof and rights of protection of
interests therein and all related goodwill, including Software and the other
Intellectual Property and related rights as set forth on Schedule 1.1(b).
"Seller Material Adverse
Effect": means any material adverse effect on the Purchased Assets
or the Assumed Liabilities, taken as a whole.
"Software": means the computer
software included in the Software Rights.
"Software Rights": means all
(i) computer programs, (ii) computer databases (including, but not limited to,
databases used in conjunction with such computer programs) and (iii),
specifications, manuals and materials associated therewith, owned, licensed or
used by Seller, excluding generally available off-the-shelf microcomputer and
work station software
"Subsidiary": with respect to
any Person, means any corporation a majority (by number of votes) of the
outstanding shares of any class or classes of which shall at the time be owned
by such Person or by a Subsidiary of such Person, if the holders of the shares
of such class or classes (i) are ordinarily, in the absence of contingencies,
entitled to vote for the election of a majority of the directors (or Persons
performing similar functions) of the issuer thereof, even though the right so to
vote has been suspended by the happening of such a contingency, or (ii) are at
the time entitled, as such holders, to vote for the election of a majority of
the directors (or Persons performing similar functions) of the issuer thereof,
whether or not the right so to vote exists by reason of the happening of a
contingency.
"Tax" or, collectively, "Taxes": means (i) any and
all federal, state, local, or non-U.S. income, franchise, sales and use
taxes, real and personal property (tangible and intangible) taxes, gross
receipts taxes, documentary transfer taxes, excise taxes, employment taxes,
withholding taxes, unemployment insurance contributions, unclaimed property,
value added taxes and any other taxes or governmental charges of any kind,
however denominated, including any interest, penalties and additions to tax in
respect thereto, and (ii) any liability for the payment of any amounts of
the type described in clause (i) as a result of any express or implied
obligation to indemnify any other Person as a result of any obligations under
any agreements or arrangements with any other Person with respect to such
amounts, or as a successor or transferee, or pursuant to the provisions of
Treasury Regulation 1.1502-6 (and any comparable provision of state, foreign or
local law).
"Tax Purchase Price": as
defined in Section 1.8.
"Tax Return": means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
"Total Venues": means the
aggregate number of venues that subscribe to Buyer's Buzztime iTV Network as of
December 31, 2009.
"Transaction Documents": means
each of agreements contemplated by this Agreement including the Securities
Purchase Agreement.
"Transfer": means any sale,
assignment, transfer, conveyance, pledge, hypothecation or other disposition,
voluntarily or involuntarily, by operation of law, with or without
consideration, or otherwise (including by way of intestacy, will, gift,
bankruptcy, receivership, levy, execution, charging order or other similar sale
or seizure by legal process).
"Underlying Shares": means the
shares of Common Stock issuable upon exercise of the Closing
Warrants.
