ASSET PURCHASE AGREEMENT

 

Exhibit 2.1

 

 

 

 

ASSET PURCHASE AGREEMENT,

 

dated as of September 29, 2006,

 

between

 

MEDIALINK WORLDWIDE INCORPORATED

 

and

 

PR NEWSWIRE ASSOCIATION, LLC

 

 

 

 

 

 

 

 

ARTICLE I		DEFINITIONS	1
	1.1	DEFINITIONS	1
	1.2	CONSTRUCTION	1
ARTICLE II		PURCHASE AND SALE	2
	2.1	PURCHASE AND SALE OF THE PURCHASED ASSETS	2
	2.2	EXCLUDED ASSETS	3
	2.3	ASSUMED LIABILITIES	4
	2.4	EXCLUDED LIABILITIES	4
	2.5	PURCHASE PRICE	6
	2.6	CLOSING DATE	6
	2.7	CLOSING DELIVERIES	6
	2.8	CLOSING WORKING CAPITAL	8
	2.9	ALLOCATION	10
	2.10	ESCROW AGREEMENT	11
ARTICLE III		REPRESENTATIONS AND WARRANTIES OF THE SELLER	12
	3.1	ORGANIZATION AND GOOD STANDING	12
	3.2	AUTHORITY AND ENFORCEABILITY	12
	3.3	NO CONFLICTS; CONSENTS	13
	3.4	FINANCIAL STATEMENTS; NO LIABILITIES; ACCOUNTS RECEIVABLE	13
	3.5	TAXES	14
	3.6	COMPLIANCE WITH LAW; PERMITS	15
	3.7	TITLE AND CONDITION OF PURCHASED ASSETS	16
	3.8	SUFFICIENCY OF PURCHASED ASSETS	16
	3.9	INTELLECTUAL PROPERTY	16
	3.10	ABSENCE OF CERTAIN CHANGES OR EVENTS	19
	3.11	CONTRACTS	20
	3.12	LITIGATION; ORDERS	21
	3.13	EMPLOYEE BENEFITS	22
	3.14	LABOR AND EMPLOYMENT MATTERS	22
	3.15	ENVIRONMENTAL	23
	3.16	INSURANCE	24
	3.17	SUPPLIERS AND CUSTOMERS	24
	3.18	AFFILIATE TRANSACTIONS	24

	3.19	SOLVENCY	25
	3.20	BROKERS	25
	3.21	ESCHEATMENT	25
	3.22	PRIVACY	25
	3.23	COMPLETENESS OF DISCLOSURE	26
ARTICLE IV		REPRESENTATIONS AND WARRANTIES OF THE BUYER	26
	4.1	ORGANIZATION AND GOOD STANDING	26
	4.2	AUTHORITY AND ENFORCEABILITY	26
	4.3	NO CONFLICTS; CONSENTS	26
	4.4	LITIGATION	27
	4.5	SOLVENCY	27
	4.6	BROKERS	27
ARTICLE V		COVENANTS	27
	5.1	CONFIDENTIALITY	28
	5.2	RESTRICTIVE COVENANTS	28
	5.3	INSURANCE	29
	5.4	EMPLOYEE MATTERS	30
	5.5	CONSENTS	31
	5.6	PUBLIC ANNOUNCEMENTS	32
	5.7	NAMES	32
	5.8	TAXES	32
	5.9	BULK SALES LAWS	33
	5.10	DISCHARGE OF BUSINESS OBLIGATIONS AFTER CLOSING	33
	5.11	ACCESS TO BOOKS AND RECORDS	34
	5.12	OUTSTANDING CHECKS	35
	5.13	FURTHER ASSURANCES	35
ARTICLE VI		INDEMNIFICATION	35
	6.1	SURVIVAL	35
	6.2	INDEMNIFICATION BY THE SELLER	36
	6.3	INDEMNIFICATION BY THE BUYER	36
	6.4	INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS	37
	6.5	INDEMNIFICATION PROCEDURES FOR NON-THIRD PARTY CLAIMS	38
	6.6	TAX BENEFITS; INSURANCE	38

 

ASSET PURCHASE AGREEMENT

 

ASSET PURCHASE AGREEMENT, dated as of September 29, 2006 (the “ Agreement ”), between Medialink Worldwide Incorporated, a Delaware corporation (the “ Seller ”) and PR Newswire Association, LLC, a Delaware limited liability company (the “ Buyer ”).

 

WHEREAS, the Seller operates a national news release wire service under the trade name U.S. Newswire that distributes press releases, photographs and other information to news media, internet websites, portals and search engines and on-line services over electronic communications systems on behalf of governmental, public affairs and non-profit organizations, principally in the United States (the “ Business ”); provided , that the Business does not include text advisories issued by the Seller with respect to the Seller’s other businesses; and

 

WHEREAS, the parties desire that the Seller sell, assign, transfer, convey and deliver to the Buyer, and that the Buyer purchase, acquire and accept from the Seller, all of the right, title and interest of the Seller in and to the Purchased Assets (as hereinafter defined), and that the Buyer assume the Assumed Liabilities (as hereinafter defined), upon the terms and subject to the conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and the respective representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

1.1   Definitions . When used in this Agreement, defined terms shall have the meanings assigned to them in Annex I hereto.

 

1.2   Construction . For the purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires: (a) the meaning assigned to each term defined herein shall be equally applicable to both the singular and the plural forms of such term and vice versa, and words denoting any gender shall include all genders as the context requires; (b) where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning; (c) the terms “hereof”, “herein”, “hereunder”, “hereby” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement; (d) when a reference is made in this Agreement to an Article, Section, paragraph, Exhibit, Annex or Schedule, such reference is to an Article, Section, paragraph, Exhibit, Annex or Schedule of this Agreement unless otherwise specified; (e) the words “include”, “includes” and “including” when used in this Agreement shall be deemed to be modified by the words “without limitation”, unless otherwise specified; (f) a reference to any party to this Agreement or any other agreement or document shall include such party’s predecessors, successors and permitted assigns; (g) a reference to any Law means such Law as amended, modified, codified, replaced or reenacted, and all rules and regulations promulgated thereunder; and (h) all accounting terms used and not defined herein have the respective meanings given to them under GAAP.

 

ARTICLE II

 

PURCHASE AND SALE

2.1   Purchase and Sale of the Purchased Assets . Upon the terms and subject to the conditions of this Agreement, the Seller hereby sells, assigns, transfers, conveys and delivers, to the Buyer, and the Buyer hereby purchases, acquires and accepts from the Seller, free and clear of all Liens (other than Permitted Liens), all of the right, title and interest of the Seller and its Affiliates in, to and under all of the assets, properties and rights (of every kind and description) that are owned or licensed by the Seller or its Affiliates and relate to or are used in connection with the Business other than the Excluded Assets (the “ Purchased Assets ”), including, without limitation, the following assets, properties and rights:

 

(a)   all website, text releases, photos and other content (whether current or archived) related to or used in connection with the Business (regardless of whether such content is contained on or within Excluded Assets);

 

(b)   all Business Intellectual Property;

 

(c)   all customer and supplier lists (whether relating to existing or lapsed customers) related to or used in connection with the Business (regardless of whether such lists are contained on or within Excluded Assets);

 

(d)   all Equipment and inventory related to or used in connection with the Business;

 

(e)   all Contracts to which the Seller or any of its Affiliates is a party (including all In-Bound Licenses and Work Product Agreements) that are related to or used in connection with the Business and all rights thereunder (the “ Assigned Contracts ”);

 

(f)   all Accounts Receivable of the Business (other than Intercompany Accounts);

 

(g)   all Permits related to or used in connection with the operation of the Business;

 

(h)   all Books and Records related to or used in connection with the Business (regardless of whether such Books and Records are contained on or within Excluded Assets);

 

(i)   except as set forth in Section 2.2(g), all prepaid expenses related to or used in connection with the Business (the “ Assigned Prepaid Expenses ”);

 

(j)   all telephone numbers related to or used in connection with the Business;

 

(k)   all security deposits, earnest deposits and all other forms of deposit or security placed with or by the Seller that are related to or used in connection with the Business, in each case, only to the extent related to a Purchased Asset;

 

(l)   all rights, recoveries, refunds (other than Tax refunds, in respect of Taxes that are Excluded Liabilities), counterclaims, rights to offset, choses in actions, rights under all warranties, representations and guarantees made by suppliers of products, materials or equipment or components thereof, other rights and claims (whether known or unknown, matured or unmatured, contingent or accrued) against third parties, in each case, that are related to or used in connection with the Business; and

 

(m)   all other intangible rights and properties, including goodwill of the Business as a going concern and e-mail, website, Internet, facsimile and telephone numbers, listings and addresses, in each case, that are related to or used in connection with the Business.

2.2   Excluded Assets . The Purchased Assets do not include, and the Seller is not selling, assigning, transferring, conveying or delivering, and the Buyer is not purchasing, acquiring or accepting from the Seller, any of the assets, properties or rights set forth in this Section 2.2 (collectively, the “ Excluded Assets ”):

 

(a)   all assets, properties and rights that are not related to or used in connection with the Business;

 

(b)   other than as provided in Section 2.1(j), all cash, cash equivalents and securities owned or otherwise held by the Seller, including, bank deposits, investments in so-called “money market” funds, commercial paper funds, certificates of deposit, Treasury bills and accrued interest thereon;

 

(c)   all bank and other depository accounts of the Seller;

 

(d)   all corporate seals, Organizational Documents, stock record books, corporate record books containing minutes of meetings of directors and shareholders, Tax Returns and all other records having to do with the organization or capitalization of the Seller and its Affiliates (the “ Excluded Books and Records ”);

 

(e)   all Benefit Plans;

 

(f)   any shares of capital stock or other equity interests owned by the Seller;

 

(g)   all prepaid Taxes and refunds of Taxes relating to the Seller for any period or portion thereof ending on or prior to the Effective Time;

 

(h)   all Intercompany Accounts;

 

(i)   all assets, properties and rights set forth on Section 2.2(i) of the Seller Disclosure Schedule ;

 

(j)   all real property owned or leased by the Seller;

 

(k)   all of the Seller’s insurance policies; and

 

(l)   all rights of the Seller under this Agreement, the Ancillary Agreements and any other agreement, certificate, instrument or other document executed and delivered by the Seller or the Buyer in connection with the transactions contemplated hereby, or any side agreement between the Seller and the Buyer entered into on or after the date of this Agreement.

 

2.3   Assumed Liabilities . Upon the terms and subject to the conditions of this Agreement, the Buyer shall assume effective as of the Effective Time, and from and after the Effective Time the Buyer shall pay, discharge or perform when due, as appropriate, only the following Liabilities of the Seller (the “ Assumed Liabilities ”), and no other Liabilities:

 

(a)   all Current Liabilities in an amount not to exceed the amount set forth for each such Liability in the Final Working Capital;

 

(b)   all Liabilities in respect of the Assigned Contracts but only to the extent that such Liabilities (i) are required to be performed after the Effective Date, (ii) were incurred in the ordinary course of business consistent with past practice and (iii) do not relate to any failure to perform, improper performance, warranty or other breach, default or violation by the Seller on or prior to the Effective Date; and

 

(c)   all Liabilities for payment of bonuses and commissions to Transferred Employees for the current fiscal year but only to the extent (i) such amounts have been accrued for in the calculation of the Final Working Capital and (ii) such bonus and commission plans and arrangements are disclosed in Section 3.13(a) of the Seller Disclosure Schedule .

 

2.4   Excluded Liabilities . Neither the Buyer nor any of its Affiliates shall assume any Liabilities of the Seller or its Affiliates (such unassumed Liabilities, the “ Excluded Liabilities ”) other than those specifically set forth in Section 2.3. Without limiting the generality of the foregoing, in no event shall the Buyer or any of its Affiliates assume or incur any Liability in respect of, and the Seller and its Affiliates shall remain bound by and liable for, and shall pay, discharge or perform when due, the following Liabilities of the Seller:

 

(a)   all Liabilities for Taxes imposed on or relating to the Business or the Purchased Assets for any taxable period or portion thereof ending on or before the Effective Date, and all Liabilities for Taxes imposed on or relating to the Seller or any of its Affiliates for any taxable period;

 

(b)   all Liabilities in respect of the Excluded Assets and Yahoo Payables;

 

(c)   all Liability for Intercompany Accounts;

 

(d)   all Indebtedness   of the Business or the Seller;

 

(e)   all product Liability, warranty and similar claims for damages or injury to person or property, claims of infringement of Intellectual Property rights and all other Liabilities, regardless of when made or asserted, which arise out of or are based upon any events occurring or actions taken or omitted to be taken by the Seller or its Affiliates, or otherwise arising out of or incurred in connection with the conduct of the Business, on or before the Effective Date;

 

(f)   all Liabilities arising out of (i) the ownership or operation of the Business or the ownership, use or operation of the Purchased Assets at any time prior to the Effective Time or (ii) the ownership, operation or condition of any real property currently or formerly owned, operated or leased by the Seller;

 

(g)   all Liabilities arising out of or resulting from any Benefit Plan;

 

(h)   except as specifically provided in Section 2.3(c), all compensation related Liabilities (including deferred or accrued bonuses) and all other employee-related Liabilities (including, severance, salaries, commissions, worker’s compensation, COBRA benefits and compensation related liabilities, whether accrued or deferred, including among others, deferred bonuses), whether or not arising under Law or Contract, owing to the Seller’s Employees and consultants;

 

(i)   all Liabilities owed by the Seller or the Business to any Affiliate of the Seller, or to any family member of an Affiliate of the Seller; and

 

(j)   all Liabilities of the Seller under this Agreement, the Ancillary Agreements and any other agreement, certificate, instrument or other document executed and delivered by the Seller in connection with the transactions contemplated hereby or thereby and all Liabilities arising out of or incurred in connection with the negotiation, preparation and execution of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, including Taxes and fees and expenses of counsel, accountants and other experts.

 

2.5   Purchase Price . The consideration to be paid by the Buyer to the Seller for the Purchased Assets (the “ Purchase Price ”)   shall be (i) Nineteen Million Dollars ($19,000,000), subject to adjustment as set forth in Section 2.8 (the “ Upfront Purchase Price ”) plus (ii) the Earnout Amount (if any) as determined pursuant to Annex II , minus (iii) the Clawback Amount (if any) as determined pursuant to Annex II   plus (iv) the assumption of the Assumed Liabilities.

 

2.6   Closing Date . The consummation of the transactions contemplated by this Agreement (the “ Closing ”) shall (a) take place simultaneously with the execution of this Agreement at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York or as otherwise mutually determined by the parties and (b) shall be effective at 11:59 p.m. (New York City time) on September 30, 2006 (the “ Effective Time ”). The date on which the Closing occurs is referred to in this Agreement as the “ Closing Date ” and the date on which the Effective Time occurs is referred to in this Agreement as the “ Effective Date ”.

 

2.7   Closing Deliveries .  

 

(a)   Deliveries by the Seller at the Closing . At the Closing, the Seller shall deliver or cause to be delivered to the Buyer the following:

 

(i)   a bill of sale, substantially in the form of Exhibit A hereto (the “ Bill of Sale ”), duly executed by the Seller;

 

(ii)   an assumption agreement, substantially in the form of Exhibit B hereto (the “ Assumption Agreement ”), duly executed by the Seller;

 

(iii)   intellectual property assignments, substantially in the form of Exhibit C hereto (the “ Intellectual Property Assignments ”), duly executed by the Seller;

 

(iv)   the Escrow Agreement, duly executed by the Seller;

 

(v)   a transition services agreement, substantially in the form of Exhibit D hereto (the “ Transition Services Agreement ”), duly executed by the Seller;

 

(vi)   a services agreement, substantially in the form of Exhibit E hereto (the “ Services Agreement ”), duly executed by the Seller;

 

(vii)   such other good and sufficient instruments of transfer as the Buyer reasonably deems necessary and appropriate to vest in the Buyer all right, title and interest in, to and under the Purchased Assets;

 

(viii)   certificates of good standing for the Seller in all jurisdictions where it is incorporated or registered to carry on the Business;

 

(ix)   a certificate of the Secretary of the Seller dated the Effective Date and certifying that attached thereto are true and complete copies of all resolutions adopted by the Board of Directors of the Seller in connection with the transactions contemplated by this Agreement and the Ancillary Agreements, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated by this Agreement and the Ancillary Agreements;

 

(x)   evidence in form and substance satisfactory to the Buyer that all Liens (other than Permitted Liens) with respect to the Purchased Assets have been released;

 

(xi)   evidence in form and substance reasonably satisfactory to the Buyer that all Yahoo Payables (other than the Third Quarter Yahoo Payable) have been paid and satisfied; and

 

(xii)   a completed certification of non-foreign status pursuant to Section 1.1445-2(b)(2) of the Treasury regulations duly executed by the Seller.

 

(b)   Deliveries by the Buyer at the Closing .

 

(i)   At the Closing, the Buyer shall deliver:

 

(A)   to the Seller, an amount equal to (1) the Upfront Purchase Price minus (2) the General Escrow Amount minus (3) the Clawback Escrow Amount plus (4) the Estimated Working Capital Surplus Amount   by wire transfer of immediately available funds to the accounts designated in writing by the Seller to the Buyer prior to the Closing Date;

 

(B)   to the Escrow Agent, an amount equal to the (1) the General Escrow Amount plus (2) the Clawback Escrow Amount by wire transfer of immediately available funds in accordance with the Escrow Agreement;

 

(ii)   At the Closing, the Buyer shall deliver to the Seller the following:

 

(A)   the Assumption Agreement, duly executed by the Buyer;

 

(B)   the Intellectual Property Assignments, duly executed by the Buyer;

 

(C)   the Escrow Agreement, duly executed by the Buyer;

 

(D)   the Transition Services Agreement, duly executed by the Buyer; and

 

(E)   the Services Agreement, duly executed by the Buyer.

 

2.8   Closing Working Capital .

 

(a)   For purposes of this Agreement the “ Estimated Working Capital ” means an amount equal to $450,296.

 

(b)   Within ninety (90) days after the Effective Date, the Buyer will prepare, or cause to be prepared, and deliver to the Seller an unaudited statement (the “ Closing Working Capital Statement ”), which shall set forth the Buyer’s calculation of Working Capital as of the Effective Date (the “ Closing Working Capital ”). The Closing Working Capital Statement shall be prepared (i) in accordance with GAAP, (ii) in accordance with the accounting principles, methodologies and policies used in the preparation of the Financial Statements which are set forth in Section 3.4(a)(ii) of the Seller Disclosure Schedule (regardless of whether such principles, methodologies and policies are consistent with GAAP) and (iii) to the extent not inconsistent with GAAP, in accordance with the accounting principles, methodologies and policies used in the preparation of the Financial Statements which are set forth in Section 3.4(a)(iii) of the Seller Disclosure Schedule . At the Buyer’s request, the Seller (i) shall assist, and shall cause its Subsidiaries, Affiliates and each of their respective representatives to assist, the Buyer and its representatives in the preparation of the Closing Working Capital Statement, (ii) shall provide the Buyer and its representatives with any information reasonably requested by them in connection therewith and (iii) shall give the Buyer and its representatives access, during normal business hours and upon reasonable notice, to the Seller’s personnel, properties and books and records for such purpose. An example of the calculation of the Working Capital in accordance with this section, based on the Seller’s August 31, 2006 balance sheet, is set forth as Exhibit F hereto.

 

(c)   Upon receipt from the Buyer, the Seller shall have thirty (30) days to review the Closing Working Capital Statement (the “ Review Period ”). At the Seller’s request, the Buyer (i) shall cooperate and assist the Seller and its representatives in reviewing the Closing Working Capital Statement and the materials used in its preparation and (ii) shall provide the Seller and its representatives with any information reasonably requested by them in connection therewith. If the Seller disagrees with the Buyer’s computation of Closing Working Capital, the Seller may, on or prior to the last day of the Review Period, deliver a written notice to the Buyer (the “ Notice of Objection ”), which sets forth its specific objections to the Buyer’s calculation of Closing Working Capital. Any Notice of Objection shall specify those items or amounts with which the Seller disagrees, together with a detailed written explanation of the reasons for disagreement with each such item or amount, and shall set forth the Seller’s calculation of Closing Working Capital based on such objections. To the extent not set forth in the Notice of Objection, the Seller shall be deemed to have agreed with the Buyer’s calculation of all other items and amounts contained in the Closing Working Capital Statement.

 

(d)   Unless the Seller delivers the Notice of Objection to the Buyer on or prior to the last day of the Review Period, the Seller shall be deemed to have accepted the Buyer’s calculation of Closing Working Capital and the Closing Working Capital Statement shall be final, conclusive and binding. If the Seller delivers the Notice of Objection to the Buyer within the Review Period, the Buyer and the Seller shall, during the thirty (30) days following such delivery or any mutually agreed extension thereof, use their commercially reasonable efforts to reach agreement on the disputed items and amounts in order to determine the amount of Closing Working Capital. If, at the end of such period or any mutually agreed extension thereof, the Buyer and the Seller are unable to resolve their disagreements, they shall jointly retain and refer their disagreements to Deloitte & Touche USA LLP (or, if such firm shall decline or is unable to act, or has a material relationship with the Buyer or the Seller or any of their respective Affiliates) another nationally recognized independent accounting firm mutually acceptable to the Buyer and the Seller (the “ Independent Expert ”). The parties shall instruct the Independent Expert promptly to review this Section 2.8 and to determine solely with respect to the disputed items and amounts so submitted whether and to what extent, if any, the Closing Working Capital set forth in the Closing Working Capital Statement requires adjustment. The Independent Expert shall base its determination solely on written submissions by the Buyer and the Seller and not on an independent review. The Buyer and the Seller shall make available to the Independent Expert all relevant books and records and other items reasonably requested by the Independent Expert. As promptly as practicable, but in no event later than thirty (30) days after its retention, the Independent Expert shall deliver to the Buyer and the Seller a report which sets forth its resolution of the disputed items and amounts and its calculation of Closing Working Capital; provided that in no event shall Closing Working Capital, as determined by the Independent Expert, be less than the Buyer’s calculation of Closing Working Capital set forth in the Closing Working Capital Statement, nor more than the Seller’s calculation of Closing Working Capital set forth in the Notice of Objection. The decision of the Independent Expert shall be final, conclusive and binding on the parties. The costs and expenses of the Independent Expert shall be allocated between the parties based upon the percentage which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party, as determined by the Independent Expert. Each party agrees to execute, if requested by the Independent Expert, a reasonable engagement letter, including customary indemnities in favor of the Independent Expert.

 

(e)   For purposes of this Agreement, “ Final Working Capital ” means the Closing Working Capital: (i) as shown in the Closing Working Capital Statement delivered by the Buyer to the Seller pursuant to Section 2.8(b), if no Notice of Objection with respect thereto is timely delivered by the Seller to the Buyer pursuant to Section 2.8(c); or (ii) if a Notice of Objection is so delivered, (A) as agreed by the Buyer and the Seller pursuant to Section 2.8(d) or (B) in the absence of such agreement, as shown in the Independent Expert’s calculation delivered pursuant to Section 2.8(d).

 

(f)   Within three (3) Business Days after the Final Working Capital has been finally determined pursuant to this Section 2.8,

 

(i)   if the Final Working Capital is less than the Estimated Working Capital, the Seller shall pay to the Buyer, as an adjustment to the Purchase Price, in the manner and with interest as provided in this Section 2.8(f), an amount of cash equal to the difference between the Final Working Capital and the Estimated Working Capital; and

 

(ii)   if the Final Working Capital is greater than the Estimated Working Capital, the Buyer shall pay to the Seller, as an adjustment to the Purchase Price, in the manner and with interest as provided in this Section 2.8(f), an amount of cash equal to the difference between Final Working Capital and the Estimated Working Capital.

 

Any such payment shall be made by wire transfer of immediately available funds to an account designated in writing by the Buyer or the Seller, as the case may be, at least one Business Day prior to such transfer. The amount of any payment to be made pursuant to this Section 2.8(f) shall bear interest from and including the Effective Date to but excluding the date of payment at a rate per annum equal to 2.0%. Such interest shall be calculated daily on the basis of a year of 365 days and the actual number of days elapsed, without compounding.

 

(g)   Any rights accruing to a party under this Section 2.8 shall be in addition to and independent of the rights to indemnification under Article VI and any payments made to any party under this Section 2.8 shall not be subject to the terms of Article VI. For clarification, any disputes or conflict as to the calculation of the Final Working Capital shall be governed by this Section 2.8 and not by Article VI, and any amounts paid pursuant to this Section 2.8 shall not be deemed a “Loss” as defined in such Article VI and shall not be subject to the limitations set forth in Article VI.

 

2.9   Allocation . As soon as reasonably practicable following the Closing, Buyer shall deliver to Seller an allocation statement setting forth the Buyer’s allocation of the Purchase Price and those Assumed Liabilities that are liabilities for U.S. federal income tax purposes pursuant to Section 1060 of the Code and any other applicable Tax Laws (as the same may be revised pursuant to the following sentence, the “ Allocation Statement ”). In the event that the Purchase Price is adjusted pursuant to Section 2.8 or Annex II, the Buyer shall deliver to the Seller a revised Allocation Statement as soon as reasonably practicable following such adjustment. Except as otherwise required by Law, the Buyer and the Seller shall file all Tax Returns (such as IRS Form 8594 or any other forms or reports required to be filed pursuant to Section 1060 of the Code or any comparable provisions of Law (“ Section 1060 Forms ”)) in a manner that is consistent with the Allocation Statement and refrain from taking any action inconsistent therewith. The Buyer and the Seller shall file such Section 1060 Forms timely and in the manner required by applicable Law. The Buyer and the Seller agree to treat any payments made pursuant to the indemnification provisions of this Agreement as an adjustment to the Purchase Price for Tax purposes.

 

2.10   Escrow Agreement .

 

(a)   Simultaneously with the execution of this Agreement, the parties shall enter into an escrow agreement, substantially in the form of Exhibit G hereto (the “ Escrow Agreement ”), pursuant to which the Buyer will deposit with JPMorgan Chase Bank, N.A., as escrow agent (the “ Escrow Agent ”) (A) $1,000,000 (the “ Clawback Escrow Amount ”) plus (B) $1,900,000 (the “ General Escrow Amount ”).

 

(b)   Clawback Escrow . The Clawback Escrow Amount together with any interest accrued on such funds (collectively, the “ Clawback Escrow Funds ”) shall be held by the Escrow Agent and paid to the Buyer and/or the Seller (as applicable) in accordance with Annex II.

 

(c)   General Escrow .

 

(i)   The General Escrow Amount together with any interest accrued on such funds (collectively, the “ General Escrow Funds ”) shall be available to the Buyer to satisfy any amounts owed to the Buyer pursuant to this Agreement (including: (a) payments to be made to the Buyer in connection with the calculation of the Final Working Capital pursuant to Section 2.8 and (b) payments to be made to the Buyer pursuant to the Seller’s indemnification obligations; but excluding payment of the Clawback Amount (if any) pursuant to Annex II ).

 

(ii)   In accordance with, and subject to, the provisions of the Escrow Agreement:

 

(A)   on the fifth (5th) Business Day after the delivery by the Buyer’s independent auditors of the Buyer’s final audited financial statements for the fiscal year ending December 31, 2006, but in no event later than April 30, 2007, the Buyer and the Seller shall take all action required by the Escrow Agreement to cause the Escrow Agent to pay to the Seller a portion of the General Escrow Funds equal to (I) the total amount of General Escrow Funds then held in escrow minus (II) any amount which is then the subject of any outstanding claim or dispute to which the General Escrow Funds applies and to which notice of such claim or dispute has been delivered to the Seller in accordance with this Agreement minus (III) $950,000;

 

(B)   on the first (1st) anniversary of the Effective Date, the Buyer and the Seller shall take all action required by the Escrow Agreement to cause the Escrow Agent to pay to the Seller a portion of the General Escrow Funds equal to (I) any remaining portion of the General Escrow Funds which has not been previously paid over to the Buyer or the Seller minus (II) any amount which is then the subject of any outstanding claim or dispute to which the General Escrow Funds applies and to which notice of such claim or dispute has been delivered to the Seller in accordance with this Agreement; and

 

(C)   if at any time after the first (1st) anniversary of the Effective Date the value of the remaining General Escrow Funds exceed the sum at that time of all outstanding claims or disputes to which the General Escrow Funds apply and to which notice of such claim or dispute has been delivered to the Seller in accordance with this Agreement, the Buyer and the Seller shall take all action required by the Escrow Agreement to cause the Escrow Agent to pay to the Seller such excess amount.

ARTICLE III

 

The Seller represents and warrants to the Buyer that each statement contained in this Article III is true and correct, except as set forth in the disclosure schedule dated and delivered as of the date hereof by the Seller to the Buyer (the “ Seller Disclosure Schedule ”), which is attached to this Agreement and is designated therein as being the Seller Disclosure Schedule. The Seller Disclosure Schedule has been arranged in sections corresponding to each representation and warranty set forth in this Article III. The disclosure of any matter in one section of the Seller Disclosure Schedule shall be treated as disclosed in the other sections of the Seller Disclosure Schedule, but only to the extent that, from the text of such disclosure, it would be clear to a Person that has reviewed the entire Seller Disclosure Schedule and exercises reasonable business judgment, that the listed matter is applicable to such other section of the Seller Disclosure Schedule, and the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein, unless the representation or warranty has to do with the existence of the document or other item itself.

 

3.1   Organization and Good Standing . Except as set forth in Section 3.1 of the Seller Disclosure Schedule , the Seller is a corporation, duly organized, validly existing and in good standing under the Laws of the State of Delaware, has all requisite power to own, lease and operate its properties and to carry on its business (including the Business) as now being conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which it owns or leases property or conducts any business (including the Business) so as to require such qualification. Section 3.1 of the Seller Disclosure Schedule contains a complete and accurate list of each jurisdiction in which the Company is required to be qualified in order to conduct the Business as currently being conducted. The Seller is not in default under its Organizational Documents.

 

3.2   Authority and Enforceability . The Seller has the requisite power and authority to enter into this Agreement and each of the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Seller of this Agreement and each of the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Seller. This Agreement and each of the Ancillary Agreements to which it is a party have been duly executed and delivered by the Seller. Assuming due authorization, execution and delivery by the Buyer and each other party thereto, this Agreement and each of the Ancillary Agreements constitute a valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to creditors’ rights generally, and (b) the availability of injunctive relief and other equitable remedies. This Agreement, together with the Ancillary Agreements, will effectively vest in the Buyer good, valid and marketable title to all the Purchased Assets free and clear of all Liens (other than Permitted Liens).

 

3.3   No Conflicts; Consents .

 

(a)   Except as set forth in Section 3.3(a) of the Seller Disclosure Schedule , the execution and delivery of this Agreement and the Ancillary Agreements by the Seller does not, the performance by the Seller of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby (in each case, with or without the giving of notice or lapse of time, or both) will not, directly or indirectly, (i) violate the provisions of any of the Organizational Documents of the Seller, (ii) violate or constitute a default, an event of default or an event creating rights of acceleration, termination, cancellation, imposition of additional obligations or loss of rights under any Contract to which the Seller is a party or by which the Purchased Assets are bound (including any Assigned Contracts), (iii) assuming compliance by the Seller with the matters referred to in Section 3.3(b), violate or conflict with any Law, Permit or Order applicable to the Seller or give any Governmental Entity or other Person the right to challenge any of the transactions contemplated by this Agreement or the Ancillary Agreements or to exercise any remedy, obtain any relief under or revoke or otherwise modify any rights held under, any such Law, Permit or Order or (iv) result in the creation of any Liens (other than Permitted Liens) upon any of the Purchased Assets.

 

(b)   Except as set forth in Section 3.3(b) of the Seller Disclosure Schedule , no Permit or Order of, registration, declaration or filing with, or notice to any Person is required by the Seller in connection with the execution and delivery of this Agreement and the Ancillary Agreements, the performance by the Seller of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby.

 

3.4   Financial Statements; No Liabilities; Accounts Receivable .

 

(a)   True and complete copies of (i) the unaudited balance sheet of the Business as at December 31, 2004 and December 31, 2005 and the unaudited statement of earnings and retained earnings of the Business for the years ended December 31, 2004 and December 31, 2005 and (ii) the unaudited balance sheet of the Business as at August 31, 2006 and the unaudited consolidated statement of earnings and retained earnings of the Seller for the eight-months then ended (the “ Interim Financial Statements ” and together with the financial statements set forth in clause (i), the “ Financial Statements ”) are set forth in Section 3.4(a)(i) of the Seller Disclosure Schedule . Except as set forth in Section 3.4(a)(ii) of the Seller Disclosure Schedule or as qualified in this sentence for the Interim Financial Statements, the Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods involved and, to the extent not inconsistent with GAAP, in accordance with the accounting principles, methodologies and policies set forth in Section 3.4(a)(iii) of the Seller Disclosure Schedule and, in the case of the Interim Financial Statements, subject to normal year-end adjustments (which adjustments will not, individually or in the aggregate, be material in amount) and the absence of footnotes. The Financial Statements are based on the books and records of the Seller (which are true and correct), and fairly present the financial condition of the Business as of the respective dates they were prepared and the results of the operations of the Business for the periods indicated. The Seller maintains with respect to the Business a standard system of accounting established and administered in accordance with GAAP.

 

(b)   The Seller has no Liabilities except (a) those which are adequately reflected or reserved against in the Financial Statements and (b) those which have been incurred in the ordinary course of business, consistent with past practice, since August 31, 2006 and which are not, individually or in the aggregate, material in amount.

 

(c)   Section 3.4(c)(i) of the Seller Disclosure Schedule sets forth a complete and accurate aging list of all Accounts Receivable of the Business as of September 25, 2006. All such Accounts Receivable are (i) valid and genuine, have arisen solely out of bona fide sales and deliveries of goods, performance of services and other business transactions in the ordinary course of the Business consistent with past practice, (ii) not subject to valid defenses, set-offs or counterclaims, and (iii) collectible within 90 days after billing at the full recorded amount thereof less the recorded allowance for bad debt set forth on Section 3.4(c)(ii) of the Seller Disclosure Schedule (which allowance for bad debt has been determined in accordance with GAAP consistent with past practice). No further goods or services are required to be provided in order to complete the sales and to entitle the Seller or their assignees to collect the Accounts Receivable in full and none of the Accounts Receivable has been pledged or assigned to any other Person.

 

(d)   All Yahoo Payables (other than the Third Quarter Yahoo Payable) have been paid and satisfied in full.

 

3.5   Taxes .

 

(a)   All Tax Returns relating to the Business or the Purchased Assets required to be filed by the Seller prior to the Effective Date have been filed in a timely manner (taking into account all extensions of due dates), (ii) such Tax Returns were accurate and complete in all respects as of the time of filing and (iii) all Taxes relating to the Business or the Purchased Assets due and owing by the Seller (whether or not shown on such Tax Returns) have been paid when due.

 

(b)   All Taxes relating to the Business or the Purchased Assets required to have been withheld and paid by the Seller prior to the Effective Date in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder or other third party have been withheld and timely paid.

 

(c)   There is no dispute or claim concerning any Tax liabilities relating to the Business or the Purchased Assets either (i) claimed or raised by any authority in writing or (ii) as to which any of the officers of the Seller have knowledge based upon personal contact with any agent of such authority. With respect to the Business and the Purchased Assets, the Seller has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. There are no Liens for Taxes upon, pending against, or to the Knowledge of the Seller, threatened against the Business or any of the Purchased Assets.

 

(d)   None of the Assumed Liabilities is an obligation to make a payment that will not be deductible under Section 280G of the Code. To the Knowledge of the Seller, no claim has been made in the last three years by a Governmental Entity in a jurisdiction where the Business does not file Tax Returns that the Business is or may be subject to taxation by that jurisdiction in connection with the activities of the Business or the presence of the Purchased Assets. The Seller has not received nor is subject to any written ruling of a taxing authority relating to Taxes in connection with the activities of the Business or the presence of the Purchased Assets or entered into any written and legally binding agreement with a taxing authority relating to Taxes in connection with the activities of the Business or the presence of the Purchased Assets.

 

3.6   Compliance with Law; Permits .

 

(a)   The Seller has conducted, and is conducting, the Business in compliance in all material respects with all applicable Laws.

 

(b)   Except as set forth on Section 3.6(b)(i) of the Seller Disclosure Schedule , the Seller owns, holds or lawfully uses in the operation of the Business all material Permits which are necessary for it to (i) conduct the Business as currently conducted free and clear of all Liens and (ii) to own and use the assets (including the Purchased Assets) owned or used by the Seller in the conduct of the Business free and clear of all Liens. Each such Permit is listed on Section 3.6(b)(ii) of the Seller Disclosure Schedule (the “ Material Permits ”), is valid and in full force and effect and is a Purchased Asset.

 

(c)   No event has occurred and no circumstances exist that (with or without the passage of time or the giving of notice) may result in a violation of, conflict with or failure on the part of the Seller (i) to conduct the Business in compliance with all applicable Laws or (ii) to comply with the terms of any Material Permit. The Seller has not received notice regarding any violation of, conflict with, or failure to conduct the Business in compliance with, any applicable Law or Material Permit. The Seller is not in default (or received notice of any claim of default) with respect to any Material Permit.

 

3.7   Title and Condition of Purchased Assets .

 

(a)   Section 3.7(a) of the Seller Disclosure Schedule sets forth a complete and accurate list of all tangible Purchased Assets, specifying whether such properties and assets are owned or leased and where such property or asset is located as of the Effective Time.

 

(b)   The Seller has good and marketable title to, or a valid interest in, all of the Purchased Assets, free and clear of all Liens (other than Permitted Liens).

 

(c)   The tangible Purchased Assets are in good operating condition, working order and repair, subject to ordinary wear and tear, free from defects, are usable in the ordinary course of the Business and are suitable for the purposes for which they are currently being used or are proposed to be used.

 

3.8   Sufficiency of Purchased Assets . Except as set forth in Section 3.8 of the Seller Disclosure Schedule , (i) the Purchased Assets constitute all of the assets and properties of the Seller that are related to or used in connection with the Business and are necessary to permit the Buyer to carry on the Business immediately following the Effective Time in the same manner as presently conducted and proposed to be conducted, (ii) no assets related to or used in connection with the Business are owned by any Affiliate or Subsidiary of the Seller and (iii) none of the Excluded Assets are material to the Business.

 

3.9   Intellectual Property .

 

(a)   As used in this Agreement, “ Intellectual Property ” means all: (i) inventions (whether or not patentable), trade secrets, technical data, databases, customer and subscriber lists, designs, on-line and other tools, methods, processes, technology (including know-how and show-how), ideas, source code, research and development information, product road maps and other proprietary information and materials whether or not subject to statutory registration (“ Proprietary Information ”); (ii) trademarks and service marks, trade names, logos, domain names, trade dress and all goodwill associated therewith (“ Trademarks ”); (iii) copyrights and copyrightable works, documentation, advertising copy, marketing materials, web-sites, servers, specifications, mask works, drawings, graphics, databases, recordings and other works of authorship (collectively, “ Copyrights ”); (iv) computer programs, including any and all software implementations of algorithms, hardware, models and methodologies, whether in source code or object code, design documents, operating systems and specifications, flow-charts, user manuals and training materials relating thereto and any translations thereof (collectively, “ Software ”); (v) patents and patent rights (“ Patents ”); (vi) copies and tangible embodiments of all of the foregoing as well as related documentation in whatever form or medium; (vii) all pending applications for and registrations of any of the foregoing, both foreign and domestic; and (viii) the right to sue for infringement of past payment, if any, in connection with any of the foregoing.

 

(b)   Section 3.9(b)(i) of the Seller Disclosure Schedule lists (by name, owner and, where applicable, registration number and jurisdiction of registration, application, certification or filing) all Intellectual Property that is owned by the Seller (whether exclusively, jointly with another Person or otherwise) that is related to or used in connection with the Business (“ Owned Business Intellectual Property ”); provided that the Seller Disclosure Schedule is not required to list items of Owned Business Intellectual Property which are immaterial to the Business. Except as described in Section 3.9(b)(ii) of the Seller Disclosure Schedule , the Seller owns the entire right, title and interest to all Owned Business Intellectual Property free and clear of all Liens. Such Owned Business Intellectual Property, together with the Seller’s rights under the In-Bound Licenses listed on Section 3.9(c) of the Seller Disclosure Schedule (collectively, the “ Business Intellectual Property ”), constitutes all the Intellectual Property that is related to, used in connection with or necessary for the operation of the Business as it is currently conducted and as proposed to be conducted.

 

(c)   Section 3.9(c) of the Seller Disclosure Schedule lists all licenses, sublicenses and other agreements pursuant to which a third party authorizes the Seller to use, practice any rights under, or grant sublicenses with respect to, any Intellectual Property owned by a third party that is related to or used in connection with the Business, other than “shrink-wrap” and similar commercially available end-user licenses (“ In-Bound Licenses ”), including the incorporation of any such Intellectual Property into products of the Business and, with respect to each In-Bound License, whether the In-Bound License is exclusive or non-exclusive.

 

(d)   Section 3.9(d) the Seller Disclosure Schedule lists all licenses, sublicenses and other agreements pursuant to which the Seller authorizes a third party to use, practice any rights under, or grant sublicenses with respect to, any Owned Business Intellectual Property or pursuant to which the Seller grants rights to use or practice any rights under any Intellectual Property owned by a third party in connection with the Business (“ Out-Bound Licenses ”) and, with respect to each Out-Bound License, whether the Out-Bound License is exclusive or non-exclusive.

 

(e)   Except as set forth in Section 3.9(e) of the Seller Disclosure Schedule , all registrations with and applications to Governmental Entities in respect of Owned Business Intellectual Property are valid and in full force and effect and except as set forth in Section 3.9(e) of the Seller Disclosure Schedule , there are no actions that must be taken by the Buyer within 120 days after the date hereof, including the payment of any registration, maintenance or renewal fees or the filing of any documents, applications or certificates for the purposes of maintaining, perfecting or preserving or renewing any such Owned Business Intellectual Property.

 

(f)   To the Knowledge of the Seller, there are no challenges (or any basis therefore) with respect to the validity or enforceability of any Owned Business Intellectual Property. Section 3.9(f) of the Seller Disclosure Schedule lists the status of any proceedings or actions before the United States Patent and Trademark Office or any other Governmental Entity anywhere in the world related to any of the Owned Business Intellectual Property, including the due date for any outstanding response by the Seller in such proceedings. The Seller has not taken any action or failed to take any action that could reasonably be expected to result in the abandonment, cancellation, forfeiture, relinquishment, invalidation, waiver or unenforceability of any Owned Business Intellectual Property and is not in default (and with the giving of notice or lapse of time or both would not be in default) under any In-Bound License. Section 3.9(f) of the Seller Disclosure Schedule lists all previously held registrations of, or applications for, Intellectual Property that is related to or was used in connection with the Business that the Seller has abandoned, cancelled, forfeited or relinquished during the 12 months prior to the date of this Agreement.

 

(g)   To the Knowledge of the Seller, the Business Intellectual Property and the operation of the Business as currently conducted and as proposed to be conducted in the future do not infringe or otherwise violate the Intellectual Property rights of any third party and the Seller has not received any communication alleging that the Business Intellectual Property or the operation of Business is infringing any Intellectual Property rights of a third party. No Action has been instituted, or, to the Seller’s Knowledge, threatened, relating to any Intellectual Property formerly or currently used by the Seller in connection with the Business and none of the Business Intellectual Property is subject to any outstanding Order. There are no restrictions on the direct or indirect transfer of any of the Business Intellectual Property or any license. To the Seller’s Knowledge, no Person has infringed or is infringing any Intellectual Property rights of the Seller or has otherwise misappropriated or is otherwise misappropriating any Business Intellectual Property.

 

(h)   With respect to the Proprietary Information related to or used in connection with the Business, the documentation relating thereto is current, accurate and sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the special knowledge or memory of others. The Seller has taken commercially reasonable steps to protect and preserve the confidentiality of all Proprietary Information related to or used in connection with the Business that derives value from being kept secret and confidential and any receipt or use by, or disclosure to, a third party of such Proprietary Information has been pursuant to the terms of binding written confidentiality and non-use agreement between the Seller and such third party (“ Nondisclosure Agreements ”). True and complete copies of the Nondisclosure Agreements, and any amendments thereto, have been provided to the Buyer. The Seller is, and to the Seller’s Knowledge, all other parties thereto are, in compliance with the provisions of the Nondisclosure Agreements or the other Contracts pursuant to which a third party has disclosed to, or authorized the Seller to use, Proprietary Information owned by such third party.

 

(i)   Section 3.9(i) of the Seller Disclosure Schedule lists (i) all of the former employees, consultants and contractors of the Seller that have executed and delivered enforceable agreements regarding the protection of Owned Business Intellectual Property and providing valid written assignments of all Intellectual Property conceived or developed by such employees, consultants or contractors in connection with their services for the Seller that refers to or is used in connection with the Business (“ Work Product Agreements ”) and (ii) all current employees who have not executed and delivered enforceable Work Product Agreements. True and complete copies of the Work Product Agreements have been provided to the Buyer. No current or former employee, consultant or contractor or any other Person has any right, claim or interest to any of the Owned Business Intellectual Property.

 

(j)   No employee, consultant or contractor of the Seller has been, is or will be, by performing services for the Seller, in violation of any term of any employment, invention disclosure or assignment, confidentiality or non-competition agreement or other restrictive covenant or any Order as a result of such employee’s, consultant’s or contractor’s employment with the Seller or any services rendered by such employee, consultant or contractor.

 

(k)   All Intellectual Property that has been distributed, sold or licensed to a third party by the Seller in connection with the Business that is covered by warranty conformed and conforms to, and performed and performs in accordance with, the representations and warranties provided with respect to such Intellectual Property by or on behalf of the Seller for the time period during which such representations and warranties apply.

 

(l)   Except as set forth in Section 3.9(l) of the Seller Disclosure Schedule , to the Knowledge of the Seller: the Software included in the Business Intellectual Property is free of any disabling codes or instructions (a “ Disabling Code ”), and any virus or other intentionally created, undocumented contaminant (a “ Contaminant ”), that may, or may be used to, access, modify, delete, damage or disable any embedded control systems or that may result in damage thereto. The Seller has taken reasonable steps and implemented reasonable procedures to ensure that its and their internal computer systems used in connection with the Business are free from Disabling Codes and Contaminants. The Seller has taken reasonable steps to safeguard the embedded control systems of the Business and restrict unauthorized access thereto.

 

(m)   Except as set forth in Section 3.9(m) of the Seller Disclosure Schedule : no Public Software: (A) forms part of any Business Intellectual Property; (B) was, or is, used in connection with the development of any Owned Business Intellectual Property or any products or services developed or provided by the Business; or (C) was, or is, incorporated or distributed, in whole or in part, in conjunction with Business Intellectual Property.

 

3.10   Absence of Certain Changes or Events . Except as set forth in Section 3.10 of the Seller Disclosure Schedule , since December 31, 2005: (a) there has not been any material adverse change, and no event has occurred that could reasonably be expected to have a material adverse change, in the condition (financial or otherwise), operations, prospects or results of operations of the Business; (b) the Seller has operated the Business, the Purchased Assets and the Assumed Liabilities in the ordinary course consistent with past practice; (c) there has not been any material damage, destruction or loss with respect to the assets, properties and rights of the Business, whether or not covered by insurance; and (d) the Seller has not: (i) sold, leased, transferred or assigned any property or assets related to or used on connection with the Business, except for granting non-exclusive Out-Bound Licenses and the sale of obsolete Equipment, in each case in the ordinary course of the Business consistent with past practice; (ii) mortgaged, pledged or subjected to Liens any assets, properties or rights related to or used on connection with the Business; (iii) entered into, amended, modified, canceled or waived any rights under, any Contract that would be required to be disclosed on Section 3.11(a) of the Seller Disclosure Schedule and no such Contract has been terminated or cancelled; (iv) taken any action outside the ordinary course of the Business; or (v) made any change in the accounting practices related to the Business.

 

3.11   Contracts .

 

(a)   Except as set forth in Section 3.11(a) of the Seller Disclosure Schedule , the Seller is not party to, nor is the Business or any of the Purchased Assets bound by:

 

(i)   any Contract or series of related Contracts that is related to or used in connection with the Business for the purchase or sale by the Seller of materials, supplies, goods, services, equipment or other assets that involves (A) annual payments by or to the Seller of $20,000 or more, or (B) aggregate payments by or to the Seller of $40,000 or more;

 

(ii)   any partnership, joint venture or similar Contract that is related to or used in connection with the Business;

 

(iii)   any distribution, dealer, representative or sales agency Contract that is related to or used in connection with the Business;

 

(iv)   any Lease or Contract for the lease of personal property that is related to or used in connection with the Business;

 

(v)   any note, debenture, bond, equipment trust, letter of credit, loan or other Contract for the borrowing or lending of money (other than to employees for travel expenses in the ordinary course of business) or agreement or arrangement for a line of credit or guarantee, pledge or undertaking of the Indebtedness of any other Person relating to or effecting the Business or the Purchased Assets;

 

(vi)   any Contract with any Governmental Entity that is related to or used in connection with the Business;

 

(vii)   any Contract that is related to or used in connection with the Business for any capital expenditure or leasehold improvement;

 

(viii)   any Contract which restrains the ability of the Business to engage or compete in any manner or in any business;

 

(ix)   any Out-Bound License or In-Bound License;

 

(x)   any Contract relating to the acquisition or disposition of any material business (whether by merger, sale of stock, sale of assets or otherwise) that is related to or engaged in the Business; and

 

(xi)   any Contract that is otherwise material to the Business and not previously disclosed pursuant to this Section 3.11.

 

(b)   The Contracts required to be listed in Section 3.11(a) of the Seller Disclosure Schedule are collectively referred to as the “ Material Contracts ”. Seller has delivered accurate and complete copies of each Material Contract to the Buyer. Except as set forth in Section 3.11(b) of the Seller Disclosure Schedule , (i) each Material Contract is valid and enforceable in all material respects in accordance with its terms, (ii) the Seller has complied with and is in compliance with, and to the Seller’s Knowledge, all other parties thereto have complied with and are in compliance with, the provisions of each Material Contract in all material respects, (iii) the Seller is not, and to Seller’s Knowledge, no other party thereto is, in material default in the performance, observance or fulfillment of any obligation, covenant, condition or other term contained in any Material Contract, and the Seller has not given or received notice to or from any Person relating to any such alleged or potential default that has not been cured and (iv) no event has occurred which with or without the giving of notice or lapse of time, or both, may conflict with or result in a violation or breach of, or give any Person the right to exercise any remedy under or accelerate the maturity or performance of, or cancel, terminate or modify, any Material Contract.

 

3.12   Litigation; Orders .

 

(a)   Except as set forth in Section 3.12(a) of the Seller Disclosure Schedule , there is no action, suit or proceeding, claim, arbitration, litigation or investigation (each, an “ Action ”), (i) pending or, to the Seller’s Knowledge, threatened against or affecting the Seller that is related to the Business, or (ii) that challenges or seeks to prevent, enjoin or otherwise materially delay the transactions contemplated by this Agreement or the Ancillary Agreements. No event has occurred or circumstances exist that may give rise or serve as a basis for any such Action. There is no material unsatisfied judgment, penalty or award against the Seller that is related to the Business or affecting the Purchased Assets.

 

(b)   Section 3.12(b) of the Seller Disclosure Schedule sets forth each Order entered, issued or rendered by any Governmental Entity to which (i) the Seller is subject that is related to the Business or (ii) the Purchased Assets are subject. The Seller is in compliance with each such Order. No event has occurred or circumstances exist that may constitute or result in (with or without notice or lapse of time) a violation of any such Order

 

3.13   Employee Benefits .

 

(a)   All Benefit Plans sponsored, maintained or contributed to by the Seller with respect to any employee engaged by the Business within the past six years are listed in Section 3.13(a)(i) of the Seller Disclosure Schedule , written summaries relating to such Benefit Plans have been delivered or made available to the Buyer. Copies of documentation relating to the Benefit Plans set forth on Section 3.13(a)(ii) of the Seller Disclosure Schedule have been delivered or made available to the Buyer (including copies of written Benefit Plans, written descriptions of oral Benefit Plans, summary plan descriptions, the most recent annual return and IRS determination letters).

 

(b)   Except as disclosed in Section 3.13(b) of the Seller Disclosur