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ASSET PURCHASE AGREEMENT
AMONG
ROO GROUP, INC.
ROO MEDIA CORPORATION
RJM PRICE & COMPANY, INC.
AND
ROBERTSON PRICE
DATED AS OF JANUARY 22, 2007
TABLE OF CONTENTS
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ARTICLE
I.
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PURCHASE
AND SALE OF ASSETS.
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1
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1.
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Sale
of Assets
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1
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1.2.
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Excluded
Assets
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2
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1.3.
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Assumed
Liabilities; Excluded Liabilities; Employees.
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2
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1.4.
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Purchase
Price; Adjustment; Payment.
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2
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1.5.
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Purchase
Price Allocation
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4
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1.6.
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Records
and Contracts
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4
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1.7.
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Further
Assurances
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4
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1.8.
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Sales
and Transfer Taxes
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4
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1.9.
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Transfer
of Subject Assets
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4
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ARTICLE
II.
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CLOSING
AND TERMINATION
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4
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2.1.
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Closing
Date
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4
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2.
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Termination
of Agreement
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5
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2.3.
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Procedure
Upon Termination
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5
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2.4.
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Effect
of Termination
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5
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ARTICLE
III.
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REPRESENTATIONS
AND WARRANTIES OF THE SELLER AND THE OWNER
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5
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3.1.
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Organization
and Good Standing
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5
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3.2.
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Authorization
of Agreement
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5
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3.3.
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Ownership
of Seller
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6
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3.4.
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No
Subsidiaries
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6
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3.5.
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Conflicts;
Consents of Third Parties.
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6
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3.6.
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Ownership
and Transfer of Assets
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6
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3.7.
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Financial
Statements
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7
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3.8.
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No
Undisclosed Liabilities
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7
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3.9.
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Absence
of Certain Developments
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7
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3.10.
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Taxes.
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8
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3.11.
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Real
Property.
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10
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3.12.
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Tangible
Personal Property.
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10
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3.13.
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Intangible
Property
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11
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3.14.
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Material
Contracts
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11
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3.15.
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Employee
Benefits.
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12
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3.16.
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Labor.
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12
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3.17.
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Litigation
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13
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3.18.
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Compliance
with Laws; Permits.
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13
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3.19.
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Environmental
Matters
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13
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3.20.
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Insurance
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14
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3.21.
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Inventories;
Receivables; Payables.
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14
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3.22.
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Customers
and Suppliers
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14
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3.23.
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Banks
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14
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3.24.
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No
Misrepresentations
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14
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3.25.
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Financial
Advisors
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15
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3.26.
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Investment
Intention
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15
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3.27.
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Accredited
Investor
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15
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3.28.
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Patriot
Act
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15
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ARTICLE
IV.
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REPRESENTATIONS
AND WARRANTIES OF PURCHASER AND PURCHASER
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16
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4.1.
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Organization
and Good Standing.
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16
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4.2.
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Authorization
of Agreement.
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16
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4.3.
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Conflicts;
Consents of Third Parties.
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17
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4.
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Litigation
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17
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4.9.
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Financial
Advisors
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17
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4.10.
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Patriot
Act
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17
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4.11.
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No
Knowledge of Breaches
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18
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ARTICLE
V.
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COVENANTS
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18
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5.1.
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Access
to Information
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18
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5.2.
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Conduct
of the Business Pending the Closing.
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18
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5.3.
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Consents
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20
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5.4.
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Other
Actions
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20
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5.5.
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No
Solicitation
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20
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5.6.
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Preservation
of Records
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20
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5.7.
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Publicity
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21
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5.8.
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Use
of Name
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21
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5.9.
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Employment
Agreements
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21
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ARTICLE
VI.
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CONDITIONS
TO CLOSING
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22
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6.1.
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Conditions
Precedent to Obligations of Parent and Purchaser
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22
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6.2.
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Conditions
Precedent to Obligations of the Seller and Owner
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23
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ARTICLE
VII.
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DOCUMENTS
TO BE DELIVERED
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24
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7.1.
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Documents
to be Delivered by the Seller
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24
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7.2.
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Documents
to be Delivered by the Parent
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24
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ARTICLE
VIII.
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INDEMNIFICATION
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24
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8.1.
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Indemnification.
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24
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8.2.
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Limitations
on Indemnification
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25
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8.3.
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Indemnification
Procedures.
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25
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ARTICLE
IX.
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MISCELLANEOUS
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26
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9.1.
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Payment
of Sales, Use or Similar Taxes
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26
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9.2.
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Survival
of Representations and Warranties
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27
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9.3.
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Expenses
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27
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9.4.
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Specific
Performance
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27
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9.5.
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Further
Assurances
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27
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9.6.
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Submission
to Jurisdiction; Consent to Service of Process
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27
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9.7.
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Entire
Agreement; Amendments and Waivers
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28
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9.8.
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Table
of Contents and Headings
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28
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9.9.
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Notices
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28
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9.10.
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Severability
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29
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9.11.
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Binding
Effect; Assignment
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29
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ASSET PURCHASE AGREEMENT
ASSET
PURCHASE AGREEMENT, dated as of January 18, 2007 (the
“Agreement”), between ROO Group, Inc., a Delaware
corporation (the “Parent”), ROO Media Corporation,
a Delaware corporation and a wholly owned subsidiary of Parent
(“Purchaser”), RJM Price & Company, Inc., a
Delaware corporation, (the “Seller”), and
Robertson Price (the “Owner”).
W I T N E S S E T H:
WHEREAS,
subject to the terms and conditions hereof, Seller desires to
sell, transfer and assign to Purchaser, and Purchaser desires
to purchase from Seller, all of the properties, rights and
assets constituting the business of Seller, which is engaged
in the business of online broadcast video and operates under
the name “MyVideoDaily” (the
“Business”); and
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties
hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE OF ASSETS.
1.1.
Sale of Assets. Seller
agrees to sell, assign, transfer and deliver to Purchaser, and
Purchaser agrees to purchase from Seller, all of Seller’s
right, title and interest in and to all of the properties, assets
and business of the Business, of every kind and description,
tangible and intangible, real, personal or mixed, and wherever
located, but excluding the Excluded Assets, including, without
limitation, the following:
(a)
Equipment. All
assets of any kind or nature, including all inventory, software,
supplies and other tangible personal property of every kind and
description owned by Seller and used or held for use in connection
with the Business, all as set forth on Schedule 1.1(a) attached
hereto (“Equipment”);
(b)
Contracts. All
of the rights of Seller under, and interest of Seller in and to,
all contracts relating to the Business, a true, correct and
complete list of which contracts is attached hereto as Schedule
1.1(b) (“Contracts”);
(c)
Intellectual Property. All
of Seller’s Intellectual Property relating to the Business,
as set forth on Schedule 1.1(c) attached hereto;
(d)
Goodwill. All
of the goodwill of Seller in, and the going concern value of, the
Business, and all of the business and customer lists and accounts,
proprietary information, marketing materials and collateral and
trade secrets related to the Business;
(e)
Records. All
of Seller’s customer logs, location files and records, and
other business files and records, in each case relating to the
Business; and
The
assets, properties and business of Seller being sold to and
purchased by Parent under this Section 1.1 are referred to
herein collectively as the “Assets.”
1.2.
Excluded Assets. There
shall be excluded from the Assets and retained by Seller, all
assets identified on Schedule 1.2 attached hereto, and all other
assets of Seller which are not used or held for use in connection
with the Business or otherwise necessary to the operation of the
Business (the “Excluded Assets”) .
1.3.
Liabilities; Employees.
(a)
Liabilities. Except
as otherwise expressly agreed to herein, Purchaser shall not
assume, pay or be liable for any liability or obligation of Seller
of any kind or nature at any time existing or asserted, whether,
known, unknown, fixed, contingent or otherwise, not specifically
assumed herein by Parent or Purchaser or assumed by virtue of the
acquisition of one or more Assets, and any liability or obligation
relating to, resulting from or arising out of (i) the Excluded
Assets, (ii) the employees of the Business or (iii) any fact
existing or event occurring prior to, or relating to the operation
of the Business prior to, the date hereof.
(b)
Employees, Wages and Benefits.
(i)
Seller’s only employee is Robertson Price. Seller shall
terminate Robertson Price as an employee effective as of the
Closing Date and neither Parent nor Purchaser shall assume or have
any obligations or liabilities with respect to such employee,
including, without limitation, any severance
obligation.
(ii)
Parent shall enter into an employment agreement with Robertson
Price, substantially in the form of Exhibit A hereto, (the
“Employment Agreement”).
(iii)
Seller shall pay all wages, salaries, commissions, and the cost of
all fringe benefits provided to its employee which shall have
become due for work performed as of and through the date hereof,
and Seller shall collect and pay all Taxes in respect of such
wages, salaries, commissions and benefits.
(iv)
Seller acknowledges and agrees that neither Parent nor Purchaser
shall acquire any rights or interests of Seller in, or assume or
have any obligations or liabilities of Seller under, any benefit
plans maintained by Seller, or for the benefit of the employee of
Seller, including, without limitation, obligations for
severance.
1.4.
Purchase Price; Adjustments.
(a)
Purchase Price. In
consideration of the sale by Seller to Purchaser of the Assets,
Parent shall pay to Seller an amount up to One Million, Three
Hundred and Fifty Dollars ($1,350,000).
(b)
Payment of Purchase Price. The
Purchase Price will be paid as follows:
(i)
$250,000 in cash upon execution of this Agreement (“Initial
Payment”), which shall be non-refundable absent a breach by
the Seller of this Agreement; provided that for purposes of this
Section 1.4(b)(i), a breach of the Employment Agreement shall not
be deemed a breach of this Agreement;
(ii)
$1,000,000 in shares of Parent’s common stock, par value
$.0001 per share (the “Shares”), payable in equal
quarterly installments at a price per share which shall be equal to
the average closing price of the Parent’s common stock over
the final 20 Trading Days of the quarterly period in which certain
milestones (the “Milestones”) set forth in the attached
Schedule 1.4(b)(ii) are achieved; provided however, that for
purposes of calculating the number of shares under this Section
b(ii) the per share price shall not be less than $2.00;
and
(iii)
$100,000
payable on the second-year anniversary date of the Closing;
provided that, if Robertson Price’s employment with the
Company has been terminated (a) by Robertson Price due to a breach
by Parent or Purchaser of either the Employment Agreement or this
Agreement (and not cured within the permitted cure-period), or (b)
by Parent for any reason other than for “Cause” (as
defined in the Employment Agreement), then the payment described in
this Section 1.4(b)(iii) shall become immediately due and payable
on the date of such termination.
For
purposes of this subsection (b) the term “Trading
Day” shall mean any day on which the Parent’s
Common Stock is listed or quoted on any of the New York Stock
Exchange, the American Stock Exchange, Nasdaq Stock Market or
the Over-the-Counter Bulletin Board.
(c)
Escrow. The Initial Payment shall be deposited in escrow account of
Seller’s Attorney, Simon J. Lincoln, Esq. and shall be
released on or about January 5, 2006 (“Release Date”).
Absent a court order instructing him otherwise, Escrow Agent shall
automatically release this Initial Payment to Seller on or after
the Release Date.
(d)
Adjustments .
If Robertson Price shall have been terminated by ROO for
“Cause” as defined in the Employment Agreement within
six (6) months of the Closing Date, Seller shall return to Parent
and Purchaser, 50% of the Shares that shall have been issued to
Seller through such date.
(e)
Shares. If,
through or as a result of any merger, consolidation, sale of all or
substantially all of the assets of the Parent, reorganization,
recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, (i) the
outstanding shares of Common Stock are increased, decreased or
exchanged for a different number or kind of shares or other
securities of the Parent, or (ii) additional shares or new or
different shares or other securities of the Parent or other
non-cash assets are distributed with respect to such shares of
Common Stock, an appropriate and proportionate adjustment shall be
made in Section 1.4(b)(ii) with respect to (x) the number and
kind of shares or other securities subject to issuances of Shares,
and (y) the minimum price for each Share.
(f)
Payment Designee .
Seller may designate one or more third parties to receive any
payment described in this Section 1.4. Such designation shall be in
writing and delivered as required pursuant to Section 9.9. Parent
agrees to deliver all subsequent payments to such designee(s);
provided however, such designee shall be required to execute a
document satisfactory to counsel to Parent and/or Purchaser which
shall include the representations contained in Sections 3.26, 3.27,
3.28, 3.29, and 3.30 of this Agreement.
1.5.
Purchase Price Allocation. Parent,
Purchaser and Seller shall mutually agree on the allocation of the
Purchase Price. Such allocation shall be binding upon Parent,
Purchaser and Seller for all purposes (including financial
accounting purposes, financial and regulatory reporting purposes
and tax purposes). Parent, Purchaser and Seller each further agrees
to file its Federal income tax returns and its other tax returns
reflecting such allocation, Form 8594 and any other reports
required by Section 1060 of the Internal Revenue Code of 1986, as
amended (the “Code”).
1.6.
Records and Contracts. Seller
shall deliver to Parent and Purchaser all of the Contracts, with
such assignments thereof and consents to assignments as are
necessary to assure Parent and Purchaser of the full benefit of the
same. Seller shall also deliver to Parent and Purchaser all of
Seller’s files and records constituting Assets.
1.7.
Further Assurances. Seller
shall, from time to time after the consummation of the transactions
contemplated herein, at the request of Parent or Purchaser and
without further consideration, execute and deliver further
instruments of transfer and assignment and take such other action
as Parent or Purchaser may reasonably require to more effectively
transfer and assign to, and vest in, Parent or Purchaser the Assets
free and clear of all Liens.
1.8.
Sales and Transfer Taxes. All
sales, transfer, use, recordation, documentary, stamp, excise
taxes, personal property taxes, fees and duties (including any real
estate transfer taxes) under applicable law incurred in connection
with this Agreement or the transactions contemplated hereby will be
borne and paid by Parent.
1.9.
Transfer of Subject Assets. Seller
shall deliver or cause to be delivered to Purchaser good and
sufficient instruments of transfer transferring to Purchaser title
to all of the Assets, together with all required consents. Such
instruments of transfer (a) shall contain appropriate warranties
and covenants which are usual and customary for transferring the
type of property involved under the laws of the jurisdictions
applicable to such transfers, (b) shall be in form and substance
reasonably satisfactory to Purchaser and its counsel, (c) shall
effectively vest in Purchaser good and marketable title to all of
the Assets free and clear of all Liens (as hereafter defined), and
(d) where applicable, shall be accompanied by evidence of the
discharge of all Liens against the Assets.
ARTICLE II.
CLOSING AND TERMINATION
2.1.
Closing Date. Subject
to the satisfaction of the conditions set forth in Sections 6.1 and
6.2 hereof (or the waiver thereof by the party entitled to waive
that condition), the closing of the sale and purchase of the Assets
provided for in Section 1.1 hereof (the “Closing”)
shall take place at the offices of Sichenzia Ross Friedman Ference
LLP located at 1065 Avenue of the Americas, 21st Floor, New York,
NY 10018 (or at such other place as the parties may mutually agree
upon) on or before January 31, 2007 (or on such other date as the
parties may mutually agree upon). The date on which the Closing
shall be held is referred to in this Agreement as the
“Closing Date”
2.2.
Termination of Agreement. This
Agreement may be terminated prior to the Closing as
follows:
(a)
by mutual written consent of the Seller and the Parent;
or
(b)
by the Seller or the Parent if there shall be in effect a final
nonappealable order of a court, government or governmental agency
or body of competent jurisdiction (“Governmental Body”)
of competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated
hereby; it being agreed that the parties hereto shall promptly
appeal any adverse determination which is not nonappealable (and
pursue such appeal with reasonable diligence).
2.3.
Procedure Upon Termination. In
the event of termination and abandonment by the Parent or the
Seller, or both, pursuant to Section 2.2 hereof, written notice
thereof shall forthwith be given to the other party or parties, and
this Agreement shall terminate, and the purchase of the Assets
hereunder shall be abandoned, without further action by the Parent
or the Seller. If this Agreement is terminated as provided herein
each party shall redeliver all documents, work papers and other
material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same.
2.4.
Effect of Termination. In
the event that this Agreement is validly terminated as provided
herein, then each of the parties shall be relieved of their duties
and obligations arising under this Agreement after the date of such
termination and such termination shall be without liability to the
Parent or the Seller; provided, however, that nothing in this
Section 2.4 shall relieve the Parent or the Seller of any liability
for a breach of this Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
OWNER
The
Seller hereby represents and warrants to the Parent and
Purchaser that:
3.1.
Organization and Good Standing.
The Seller is a Delaware corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation as set forth above and has all requisite power
and authority to own, lease and operate its properties and to carry
on its business as now conducted. The Seller is duly qualified or
authorized to do business as a foreign company and is in good
standing under the laws of each jurisdiction in which it owns or
leases real property and each other jurisdiction in which the
conduct of its business or the ownership of its properties requires
such qualification or authorization, except where failure to be so
qualified would not have a material adverse effect on the business,
assets or financial condition of the Seller taken as a whole
(“Material Adverse Effect”).
3.2.
Authorization of Agreement. The
Seller and the Owner have all requisite, power, authority and legal
capacity to execute and deliver this Agreement, and each other
agreement, document, or instrument or certificate contemplated by
this Agreement or to be executed by the Seller or the Owner in
connection with the consummation of the transactions contemplated
by this Agreement (together with this Agreement, the “Seller
Documents”), and to consummate the transactions contemplated
hereby and thereby. This Agreement has been, and each of the Seller
Documents will be at or prior to the Closing, duly and validly
executed and delivered by the Seller or the Owner and (assuming the
due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each of the
Seller Documents when so executed and delivered will constitute,
legal, valid and binding obligations of the Seller, enforceable
against the Seller or the Owner, as applicable, in accordance with
their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
3.3.
Ownership of Seller. The
Owner owns 65% of the issued and outstanding shares of the Seller,
free and clear of any and all liens, charges or encumbrances or any
kind or nature.
3.4.
No Subsidiaries. The
Seller has no subsidiaries .
3.5.
Conflicts; Consents of Third Parties.
(a)
Except as set forth in Schedule 3.5(a), none of the execution and
delivery by the Seller or Owner of this Agreement and the Seller
Documents, the consummation of the transactions contemplated hereby
or thereby, or compliance by the Seller with any of the provisions
hereof or thereof will (i) conflict with, or result in the breach
of, any provision of the Certificate of Incorporation of the
Seller, as amended to date or the Bylaws of the Seller, as amended
to date; (ii) conflict with, violate, result in the breach or
termination of, or constitute a default under any note, bond,
mortgage, indenture, license, agreement or other instrument or
obligation to which the Seller or any Owner is a party or by which
any of them or any of their respective properties or assets is
bound; (iii) violate any statute, rule, regulation, order or decree
of any governmental body or authority by which the Seller or any
Owner is bound; or (iv) result in the creation of any Lien upon the
properties or assets of the Seller except, in case of clauses (ii),
(iii) and (iv), for such violations, breaches or defaults as would
not, individually or in the aggregate, have a Material Adverse
Effect.
(b)
Except as set forth in Schedule 3.5(b), No consent, waiver,
approval, order, permit or authorization of, or declaration or
filing with, or notification to, any person or Governmental Body is
required on the part of the Seller in connection with the execution
and delivery of this Agreement or the Seller Documents, or the
compliance by the Seller as the case may be, with any of the
provisions hereof or thereof.
3.6.
Ownership and Transfer of Assets.
Seller
has good and marketable title to all of the Assets free and clear
of all mortgages, pledges, security interests, charges, liens,
restrictions and encumbrances of any kind (collectively,
“Liens”) whatsoever. Upon the sale, assignment,
transfer and delivery of the Assets to the Purchaser hereunder and
under the Seller Documents, there will be vested in the Purchaser
good, marketable and indefeasible title to the Assets, free and
clear of all Liens. The Assets include all of the assets and
properties (i) held for use by Seller to conduct the Business as
presently conducted and (ii) necessary for Purchaser to operate the
Business in the same manner as such business is currently operated
by Seller. All of the tangible Assets are in good repair, have been
well maintained and are in good operating condition, do not require
any material modifications or repairs, and comply in all material
respects with applicable laws, ordinances and regulations, ordinary
wear and tear excepted.
3.7.
Financial Statements. The
Seller has delivered or caused to be delivered to the Parent such
financial documents as have been requested by Parent (such
financial documents are referred to herein as the “Seller
Financial Statements”). Each of the Seller Financial
Statements is complete and correct in all material respects. For
the purposes hereof, the date October 31, 2006, is referred to as
the “Seller Balance Sheet Date”.
3.8.
No Undisclosed Liabilities. All
of Seller’s material indebtedness, obligations and
liabilities of any kind (whether accrued, absolute, contingent or
otherwise, and whether due or to become due) are listed in Schedule
3.8.
3.9.
Absence of Certain Developments.
Except
as expressly contemplated by this Agreement or as set forth on
Schedule 3.9, since the Seller Balance Sheet Date:
(i)
there has not been an event which had a Material Adverse Effect nor
has there occurred any event which is reasonably likely to result
in a Material Adverse Effect;
(ii)
there has not been any damage, destruction or loss, whether or not
covered by insurance, with respect to the property and assets of
the Seller having a replacement cost of more than $5,000 for any
single loss or $10,000 for all such losses;
(iii)
there has not been any declaration, setting aside or payment of any
distribution in respect of any partnership interest of the Seller
or any repurchase, redemption or other acquisition by the Seller of
any outstanding partnership, or other ownership interest in, the
Seller;
(iv)
the Seller has not awarded or paid any bonuses to employees of the
Seller with respect to the fiscal years ended 2005 and 2006 or
entered into any employment, deferred compensation, severance or
similar agreement (nor amended any such agreement) or agreed to
increase the compensation payable or to become payable by it to any
of the Seller’s directors, officers, employees, agents or
representatives or agreed to increase the coverage or benefits
available under any severance pay, termination pay, vacation pay,
company awards, salary continuation for disability, sick leave,
deferred compensation, bonus or other incentive compensation,
insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with such directors, officers,
employees, agents or representatives (other than normal increases
in the ordinary course of business consistent with past practice
and that in the aggregate have not resulted in a material increase
in the benefits or compensation expense of the
Seller);
(v)
there has not been any change by the Seller in accounting or Tax
reporting principles, methods or policies;
(vi)
the Seller has not entered into any transaction or Contract or
conducted its business other than in the ordinary course consistent
with past practice;
(vii)
the Seller has not failed to promptly pay and discharge current
liabilities except where disputed in good faith by appropriate
proceedings;
(viii)
the Seller has not made any loans, advances or capital
contributions to, or investments in, any Person or paid any fees or
expenses to the Seller or any Affiliate of the Seller;
(ix)
the Seller has not mortgaged, pledged or subjected to any Lien any
of its assets, or acquired any assets or sold, assigned,
transferred, conveyed, leased or otherwise disposed of any assets
of the Seller, except for assets acquired or sold, assigned,
transferred, conveyed, leased or otherwise disposed of in the
ordinary course of business consistent with past
practice;
(x)
the Seller has not discharged or satisfied any Lien, or paid any
obligation or liability (fixed or contingent), except in the
ordinary course of business consistent with past practice and
which, in the aggregate, would not be material to the
Seller;
(xi)
the Seller has not canceled or compromised any debt or claim or
amended, canceled, terminated, relinquished, waived or released any
Contract or right except in the ordinary course of business
consistent with past practice and which, in the aggregate, would
not be material to the Seller;
(xii)
the Seller has not made or committed to make any capital
expenditures or capital additions or betterments in excess of
$25,000 individually or $100,000 in the aggregate;
(xiii)
the Seller has not instituted or settled any material legal
proceeding; and
(xiv)
the Seller has not agreed to do anything set forth in this Section
3.9.
3.10.
Taxes.
(a)
Except as set forth on Schedule 3.10, (A) all Tax returns required
to be filed by or on behalf of the Seller have been properly
prepared and duly and timely filed with the appropriate taxing
authorities in all jurisdictions in which such Tax returns are
required to be filed (after giving effect to any valid extensions
of time in which to make such filings), and all such Tax returns
were true, complete and correct in all material respects; (B) all
Taxes payable by or on behalf of the Seller or in respect of its
income, assets or operations have been fully and timely paid, and
adequate reserves or accruals for Taxes have been provided with
respect to any period for which Tax Returns have not yet been filed
or for which Taxes are not yet due and owing; and (C) the Seller
has not executed or filed with the Internal Revenue Service (the
“IRS”) or any other taxing authority any agreement,
waiver or other document or arrangement extending or having the
effect of extending the period for assessment or collection of
Taxes (including, but not limited to, any applicable statute of
limitation), and no power of attorney with respect to any Tax
matter is currently in force. “Tax or Taxes” means all
federal, state, local or other taxes or similar governmental
charges, fees, levies or assessments.
(b)
The Seller has complied in all material respects with all
applicable laws (as defined in Section 3.18), rules and regulations
relating to the payment and withholding of Taxes and has duly and
timely withheld from employee salaries, wages and other
compensation and has paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over
for all periods under all Laws.
(c)
Parent has received complete copies of (A) all federal, state,
local and foreign income or franchise Tax Returns of the Seller
relating to the taxable periods since inception of Seller (B) any
audit report issued within the last three years relating to any
material Taxes due from or with respect to its income, assets or
operations. All income and franchise Tax returns filed by or on
behalf of the Seller for the taxable years ended on the respective
dates set forth on Schedule 3.10 have been examined by the relevant
taxing authority or the statute of limitations with respect to such
Tax Returns has expired.
(d)
Schedule 3.10 lists all material types of Taxes paid and material
types of Tax returns filed by or on behalf of the Seller. Except as
set forth on Schedule 3.10, no claim has been made by a taxing
authority in a jurisdiction where the Seller does not file Tax
Returns such that it is or may be subject to taxation by that
jurisdiction.
(e)
Except as set forth on Schedule 3.10, all deficiencies asserted or
assessments made as a result of any examinations by the IRS or any
other taxing authority of the Tax Returns of or covering or
including the Seller that are owed by the Seller have been fully
paid, and there are no other audits or investigations by any taxing
authority in progress, nor has the Seller received any written
notice from any taxing authority that it intends to conduct such an
audit or investigation. No issue has been raised in writing by a
federal, state, local or foreign taxing authority in any current or
prior examination which, by application of the same or similar
principles, could reasonably be expected to result in a proposed
deficiency for any subsequent taxable period.
(f)
Except as set forth on Schedule 3.10, the Seller has not (A) agreed
to or is not required to make any adjustments pursuant to Section
481(a) of the Code or any similar provision of state, local or
foreign law by reason of a change in accounting method initiated by
the Seller or has any knowledge that the IRS has proposed any such
adjustment or change in accounting method, or has any application
pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or
operations of the Seller, (B) executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor
provision thereof or any similar provision of state, local or
foreign law with respect to the Seller, or (C) requested any
extension of time within which to file any Tax Return, which Tax
Return has since not been filed within the period of
limitations.
(g)
No property owned by the Seller is (i) property required to be
treated as being owned by another Person pursuant to the provisions
of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of the Tax
Reform Act of 1986, (ii) constitutes “tax-exempt use
property” within the meaning of Section 168(h)(1) of the Code
or (iii) is “tax-exempt bond financed property” within
the meaning of Section 168(g) of the Code.
(h)
The Seller is not a foreign person within the meaning of Section
1445 of the Code.
(i)
The Seller is not a party to any tax sharing or similar agreement
or arrangement (whether or not written) pursuant to which it will
have any obligation to make any payments after the
Closing.
(j)
There is no contract, agreement, plan or arrangement covering any
person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by the Parent,
the Affiliates or their respective affiliates by reason of Section
280G of the Code, or would constitute compensation in excess of the
limitation set forth in Section 162(m) of the Code.
(k)
The Seller is not subject to any private letter ruling of the IRS
or comparable rulings of other taxing authorities.
(l)
There are no liens as a result of any unpaid Taxes upon any of the
assets of the Seller.
(m)
Except as set forth on Schedule 3.10, the Seller has no elections
in effect for federal income tax purposes under Sections 108, 168,
441, 463, 472, 1017, 1033 or 4977 of the Code.
(n)
The Seller has never owned any Subsidiaries and has never been a
member of any consolidated, combined or affiliated group of
corporations for any Tax purposes.
3.11.
Real Property.
(a)
Seller does not own any interest in any real property. Seller has
no interests (including leases) in real property.
(b)
The Seller does not own or hold, and is not obligated under or a
party to, any option, right of first refusal or other contractual
right to purchase, acquire, sell, assign or dispose of any real
estate or any portion thereof or interest therein.
3.12.
Tangible Personal Property.
(a)
Schedule 3.12(a) sets forth all leases of personal property
(“Personal Property Leases”) involving annual payments
in excess of $1,000 relating to personal property used in the
business of the Seller or to which the Seller is a party or by
which the properties or assets of the Seller is bound. The Seller
has delivered or otherwise made available to the Parent true,
correct and complete copies of the Personal Property Leases,
together with all amendments, modifications or supplements
thereto.
(b)
The Seller has a valid leasehold interest under each of the
Personal Property Leases under which it is a lessee, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies
generally and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and there is no default under any
Personal Property Lease by the Seller or, to the best knowledge of
the Seller, by any other party thereto, and no event has occurred
that with the lapse of time or the giving of notice or both would
constitute a default thereunder.
(c)
The Seller has good and marketable title to all of the items of
tangible personal property utilized in the Business (except as sold
or disposed of subsequent to the date thereof in the ordinary
course of business consistent with past practice), free and clear
of any and all liens other than as set forth on Schedule 3.12. All
such items of tangible personal property which, individually or in
the aggregate, are material to the operation of the business of the
Seller are in good condition and in a state of good maintenance and
repair (ordinary wear and tear excepted) and are suitable for the
purposes used.
(d)
All of the items of tangible personal property used by the Seller
under the Personal Property Leases are in good condition and repair
(ordinary wear and tear excepted) and are suitable for the purposes
used.
3.13.
Intangible Property. Schedule
3.13 contains a complete and correct list of each patent,
trademark, trade name, service mark and copyright owned or used by
the Seller as well as all registrations thereof and pending
applications therefor, and each license or other agreement relating
thereto. Each of the foregoing is owned by the party shown on such
Schedule as owning the same, free and clear of all mortgages,
claims, liens, security interests, charges and encumbrances and is
in good standing and not the subject of any challenge. There have
been no claims made and the Seller has not received any notice or
otherwise knows or has reason to believe that any of the foregoing
is invalid or conflicts with the asserted rights of others. The
Seller possesses, owns or licenses all patents, patent licenses,
trade names, trademarks, service marks, brand marks, brand names,
copyrights, know-how, formulae, designs, logos and other
proprietary and trade rights necessary for the conduct of its
business as now conducted, not subject to any restrictions and
without any known conflict with the rights of others and has not
forfeited or otherwise relinquished any such patent, patent
license, trade name, trademark, service mark, brand mark, brand
name, copyright, know-how, formulate or other proprietary right
necessary for the conduct of its business as conducted on the date
hereof. The Seller is not under any obligation to pay any royalties
or similar payments in connection with any license to any Affiliate
thereof. As used in this Agreement, “Affiliate” means,
with respect to any person, any other person directly or indirectly
controlling, controlled by or under common control with such person
and for purposes of individuals, Affiliates would include an
individual’s spouse and minor children.
3.14.
Material Contracts. Schedule
3.14 sets forth all of the following Contracts to which the Seller
is a party or by which it is bound (collectively, the
“Material Contracts”): (i) Contracts with any current
officer or director of the Seller; (ii) Contracts with any labor
union or association representing any employee of the Seller; (iii)
Contracts pursuant to which any party is required to purchase or
sell a stated portion of its requirements or output from or to
another party; (iv) Contracts for the sale of any of the assets of
the Seller other than in the ordinary course of business or for the
grant to any person of any preferential rights to purchase any of
its assets; (v) joint venture agreements; (vi) material Contracts
containing covenants of the Seller not to compete in any line of
business or with any person in any geographical area or covenants
of any other person not to compete with the Seller in any line of
business or in any geographical area; (vii) Contracts relating to
the acquisition by the Seller of any operating business or the
capital stock of any other person; (viii) Contracts relating to the
borrowing of money; or (ix) any other Contracts, other than Real
Property Leases. There have been made available to the Parent, its
affiliates and their representatives true and complete copies of
all of the Material Contracts. Except as set forth on Schedule
3.14, all of the Material Contracts and other agreements are in
full force and effect and are the legal, valid and binding
obligation of the Seller, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
Except as set forth on Schedule 3.14, the Seller is not in default
in any material respect under any Material Contracts, nor, to the
knowledge of the Seller, is any other party to any Material
Contract in default thereunder in any material
respect.
3.15.
Employee Benefits.
(a)
Schedule 3.15(a) sets forth a complete and correct list of (i) all
“employee benefit plans”, as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), and any other pension plans or employee
benefit arrangements, programs or payroll practices (including,
without limitation, severance pay, vacation pay, company awards,
salary continuation for disability, sick leave, retirement,
deferred compe
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