TABLE OF CONTENTS

 

ARTICLE I		PURCHASE AND SALE OF ASSETS		1
1.1		Purchase and Sale of Assets		1
1.2		Excluded Assets		2
1.3		Assumption of Liabilities		3
1.4		Excluded Liabilities		3
1.5		Closing		5
1.6		Closing Deliveries		5
1.7		Consent of Third Parties		6
1.8		Further Assurances		7
1.9		Transfer Taxes		7
ARTICLE II		PURCHASE PRICE		8
2.1		Purchase Price		8
2.2		Offset		8
ARTICLE III		REPRESENTATIONS AND WARRANTIES OF THE SELLERS		8
3.1		Organization; Good Standing and Qualification		8
3.2		Ownership of MediaSentry		8
3.3		Authorization; Binding Obligation		8
3.4		Consents and Approvals		9
3.5		No Violation		9
3.6		Approvals and Orders		9
3.7		Title to and Condition of Properties; Sufficiency of Assets		10
3.8		Financial Statements		10
3.9		Absence of Undisclosed Liabilities		10
3.10		Absence of Certain Events		11
3.11		Tax Matters		11
3.12		Intellectual Property; Privacy		11
3.13		Contracts		14
3.14		Absence of Restrictions on Business Activities		14
3.15		Legal Proceedings		14
3.16		Accounts Receivable		15
3.17		Intentionally omitted		15
3.18		Compliance with Laws		15
3.19		Employee Matters		15
3.20		Brokers		16
3.21		Transactions with Affiliates		16
3.22		Certain Business Practices		16
3.23		Customers and Vendors		16
3.24		Disclosure		17
ARTICLE IV		REPRESENTATIONS AND WARRANTIES OF THE BUYER		17
4.1		Organization and Good Standing		17
4.2		Authorization; Enforceability; No Conflict		17
4.3		Consents		17
4.4		Litigation		18
4.5		No Brokers		18
4.6		Solvency		18
ARTICLE V		ADDITIONAL AGREEMENTS		18

 

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5.1		Public Announcements		18
5.2		Litigation Cooperation		18
5.3		Use of Names		18
5.4		Accounts Receivable/Collections		18
5.5		Employment Matters		19
5.6		Non-Solicitation		19
ARTICLE VI		SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION		20
6.1		Survival of Representations, Warranties and Covenants		20
6.2		Indemnification of the Sellers		20
6.3		Indemnification of the Buyer and ADI		20
6.4		Limitations on Indemnification		21
6.5		Indemnification Process		21
6.6		Fraud and Related Claims; Characterization of Payments		22
6.7		Additional Indemnification Provisions		23
6.8		Exclusive Remedy		23
ARTICLE VII		CERTAIN DEFINITIONS; INTERPRETATION		24
7.1		Certain Definitions		24
7.2		Interpretation		28
ARTICLE VIII		MISCELLANEOUS		29
8.1		Modification or Amendment		29
8.2		Governing Law; Waiver of Jury Trial		29
8.3		Consent to Jurisdiction		29
8.4		Notices		29
8.5		Entire Agreement		30
8.6		No Third Party Beneficiaries		31
8.7		Severability		31
8.8		Assignment		31
8.9		Legal Counsel		31
8.10		Expenses		31
8.11		Specific Performance		32
8.12		Counterparts		32
8.13		Joint and Several		32

 

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EXHIBITS AND SCHEDULES

 

EXHIBITS

 

Exhibit A                                                Form of Note

Exhibit B                                                  Form of Bill of Sale, Assignment and Assumption Agreement

Exhibit C                                                  Form of Patent and Trademark Assignment

Exhibit D                                                 Form of Sellers Non-Competition, Non-Solicitation and Confidentiality Agreement

Exhibit E                                                   Form of Transition Services Agreement

Exhibit F                                                   Form of Employee Non-Competition, Non-Solicitation and Confidentiality Agreement

Exhibit G                                                  Form of Escrow Agreement

 

SCHEDULES

 

Schedule 1.1(a)                                                                Assigned Contracts

Schedule 1.1(b)                                                               Approvals and Orders

Schedule 1.1(c)                                                                Credits, Refunds, Prepaid Expenses Etc.

Schedule 1.1(h)                                                               Telephone and Facsimile Numbers

Schedule 1.1(j)                                                                   Tangible Personal Property

Schedule 1.2(g)                                                               Certain Excluded Assets

 

Disclosure Schedule

 

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ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”), dated as of March 30, 2009, is made by and among MEDIASENTRY, INC., a Georgia corporation (“ MediaSentry ”), and SAFENET, INC., a Delaware corporation (“ SafeNet ” and together with MediaSentry, the “ Sellers ”), on the one hand; and ARTISTDIRECT INC., a Delaware corporation (“ ADI ”), and MEDIADEFENDER, INC., a Delaware corporation and a wholly-owned subsidiary of ADI (the “ Buyer ” and together with ADI, the “ Buyer Parties ”), on the other hand.

 

WHEREAS, SafeNet, operating using the name MediaSentry, is engaged in providing hosted application services for digital media measurement (the “ Business ”);

 

WHEREAS, subject to the terms and conditions set forth in this Agreement, the Sellers wish to sell to the Buyer, and the Buyer wishes to purchase from the Sellers, all of the assets described in this Agreement owned, used or held for use primarily in connection with the operation of the Businesses.

 

NOW, THEREFORE, in consideration of the mutual benefits to be derived from this Agreement and the representations, warranties, covenants, agreements, conditions and promises contained herein, the parties hereby agree as follows:

 

ARTICLE I

 

PURCHASE AND SALE OF ASSETS

 

1.1                                  Purchase and Sale of Assets .  Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Sellers shall sell, transfer, assign and deliver to the Buyer, and relinquish to the Buyer (together with its successors and assigns) in perpetuity, free and clear of all Liens, all right, title and interest in and to all of the Acquired Assets.  As used in this Agreement, the term “ Acquired Assets ” means all of the assets, properties, rights, interests and goodwill of Sellers of every kind and nature whatsoever, whether real, personal or mixed, tangible or intangible, wherever located, owned, used or held for use by Sellers primarily in connection with the operation of the Business, including the following, but excluding the Excluded Assets:

 

(a)           all right, title and interest in, to and under the Contracts listed on Schedule 1.1(a) attached hereto (the “ Assigned Contracts ”);

 

(b)           all rights, to the extent transferable, under all Approvals and Orders of Governmental Authorities required for the operation of the Business, including those listed on Schedule 1.1(b) attached hereto;

 

(c)           all rights with respect to all credits, refunds, prepaid expenses, advance payments, security deposits and other prepaid items arising from the operation of the Business, including those listed on Schedule 1.1(c) attached hereto;

 

(d)           all accounts receivable or notes receivable of, and other rights to payment payable or otherwise owed to, the Sellers arising from the operation of the Business;

 

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(e)           all Intellectual Property of the Business (“ Business Intellectual Property ”), and all goodwill associated therewith, licenses and sublicenses granted in respect thereto and rights thereunder, together with all claims against third parties for profits and all costs, losses, claims, liabilities, fines, penalties, damages and expenses (including interest which may be imposed in connection therewith), court costs and reasonable fees and disbursements of counsel, consultants and expert witnesses incurred by reason of the past infringement, alleged infringement, unauthorized use or disclosure or alleged unauthorized use or disclosure of the Business Intellectual Property, together with the right to sue for, and collect the same, or to sue for injunctive relief, for the Buyer’s own use and benefit, and for the use and benefit of its successors, assigns or other legal representatives;

 

(f)            all books, records, information, files, manuals, databases and other materials maintained by or on behalf of the Sellers in any medium (including, where available, digital media) that exclusively relate to the Business, including all customer, user, subscriber, mailing and vendor lists and databases, advertising materials, research files and correspondence, market research studies and surveys, operating data and plans, production data, technical documentation (design specifications, functional requirements, operating instructions, logic manuals, flow charts, etc.), user documentation (installation guides, user manuals, training materials, release notes, working papers, etc.), equipment repair, maintenance and service records, sales and promotional materials and records, purchasing and billing records, research and development files, data, intellectual property disclosures, media materials, accounting files and records, sales order files, personnel files for Transferred Employees (but only to the extent permitted under applicable law) and all lists of and all rights in and to the information contained therein (collectively, the “ Books and Records ”);

 

(g)           the domain name MediaSentry.com;

 

(h)           all telephone numbers and facsimile numbers exclusively used by the Business, including those listed on Schedule 1.1(h) attached hereto;

 

(i)            all claims, demands, causes of action, rights of recovery, rights of set-off, rights of recoupment, guaranties, warranties, indemnities and similar rights to the extent arising  from the operation of the Business and all rights to proceeds under insurance policies and indemnity agreements to the extent arising from the operation of the Business;

 

(j)            all tangible personal property set forth on Schedule 1.1(j) attached hereto; and

 

(k)           all goodwill and going concern value of the Business.

 

1.2                                  Excluded Assets .  Notwithstanding anything to the contrary in Section 1.1 above, the following assets and property of the Sellers are to be retained by the Sellers and shall not constitute Acquired Assets (collectively, the “ Excluded Assets ”):

 

(a)           all rights in and to the trademark “SafeNet” and the name “SafeNet;”

 

(b)           all cash, cash equivalents, short term investments and bank accounts;

 

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(c)           all claims, demands, causes of action, rights of recovery, rights of set-off, rights of recoupment, guaranties, warranties, indemnities and similar rights and all rights to proceeds under insurance policies and indemnity agreements, to the extent the foregoing relate to the Excluded Assets and the Excluded Liabilities;

 

(d)           all Contracts to which either Seller is a party or by which either Seller or any of its assets or properties are bound, other than the Assigned Contracts;

 

(e)           all rights of the Sellers under this Agreement and the Transaction Documents;

 

(f)            all minute books and stock records of the Sellers;

 

(g)           all capital stock or other equity interest in any Subsidiary or Affiliate of either Seller or in any other Person, and all options, warrants or other rights to acquire such capital stock or other equity interest;

 

(h)           subject to the provisions of Section 1.1(i), all insurance policies of the Sellers;

 

(i)            all Employee Benefit Plans of the Sellers and all assets related thereto;

 

(j)            those assets specifically set forth in Schedule 1.2(j) attached hereto; and

 

(k)           all other assets, properties, rights and interests of Sellers of every kind and nature whatsoever, whether real, personal or mixed, tangible or intangible, that are not owned, used or held for use by the Sellers primarily in connection with the operation of the Business.

 

1.3                                  Assumption of Liabilities .  Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, the Buyer Parties shall assume from the Sellers only the following Liabilities (the “ Assumed Liabilities ”):

 

(a)           all Liabilities, obligations and commitments related to the ownership or use of the Acquired Assets and the operation of the Business from and after the Closing Date, including, without limitation, up to $1000 for interdiction services; and

 

(b)           all Liabilities of the Sellers for performance after the Closing under the Assigned Contracts, provided, that, the Buyer shall not assume, and does not hereby agree to pay, discharge or perform, any Losses to the extent arising from any breach or default of either Seller of any Assigned Contract prior to the Closing Date regardless of whether the Sellers disclose such breach or default pursuant to this Agreement.

 

1.4                                  Excluded Liabilities .  Except as expressly assumed pursuant to Section 1.3, the Buyer is not assuming and shall not have any liability or obligation for any Liabilities of either Seller or any of its predecessors or Affiliates (the “ Excluded Liabilities ”).  Without limiting the generality of the foregoing, the Buyer shall not be deemed to assume any of the following Liabilities, all of which shall constitute Excluded Liabilities:

 

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(a)           Liabilities arising under any written or oral Contract to which either Seller is a party or by which either Seller or its assets or properties are otherwise subject or bound, other than Liabilities arising under the Assigned Contracts or otherwise constituting Assumed Liabilities;

 

(b)           Liabilities of a Seller or any of its predecessors or Affiliates in respect of any indebtedness for money borrowed, or Transaction Expenses of either Seller;

 

(c)           Liabilities of a Seller or any of its predecessors or Affiliates to any Affiliate or current or former stockholder or option holder of the Seller or any of its predecessors or Affiliates;

 

(d)           Liabilities of a Seller or any of its predecessors or Affiliates for or in respect of Taxes, except for Taxes arising from and after the Closing Date from the operation of the Business and except as provided in Section 1.9 and Section 8.10;

 

(e)           Liabilities of a Seller or any of its predecessors or Affiliates to any present or former director, officer, employee, consultant or independent contractor of such Seller or any of its predecessors or Affiliates, including Liabilities arising under any federal, state, local or foreign Laws, Approvals or Orders;

 

(f)            Liabilities of a Seller or any of its predecessors or Affiliates for any Actions against a Seller or any of its predecessors or Affiliates, except any Action in respect to any Assumed Liability;

 

(g)           Liabilities of a Seller or any of its predecessors or Affiliates arising out of or resulting from any violation of or non-compliance by a Seller or any of its predecessors or Affiliates with any federal, state, local or foreign Laws, Approvals or Orders, including any environmental laws;

 

(h)           Liabilities of a Seller or any of its predecessors or Affiliates arising from any obligation of a Seller or any of its predecessors or Affiliates to indemnify any Person (other than pursuant to an Assigned Contract to the extent assumed pursuant to Section 1.3(a) or pursuant to any other Assumed Liability);

 

(i)            Liabilities of a Seller arising under this Agreement or any of the Transaction Documents;

 

(j)            Liabilities arising under any Employee Benefit Plan of a Seller or any of its predecessors or Affiliates;

 

(k)           Liabilities resulting from any breach or default by Seller in respect to products sold or services performed by a Seller or any of its predecessors or Affiliates prior to Closing; and

 

(l)            Liabilities attributable in any manner to the Excluded Assets.

 

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1.5                                  Closing .  The closing of the transactions contemplated by this Agreement (the “ Closing ”) will take place simultaneously with the execution of this Agreement on the date of this Agreement (the “ Closing Date ”) by email or fax, or at such place as the parties may designate.  The consummation of the transactions contemplated by this Agreement shall be deemed to occur at 11:59 p.m. Eastern Time on the Closing Date.

 

1.6                                  Closing Deliveries .  At the Closing, the parties shall execute and deliver, or cause to be executed and delivered, the following documents and take, or cause to be taken, the following actions:

 

(a)           the Sellers and the Buyer Parties shall execute and deliver to one another a bill of sale, assignment and assumption agreement in the form of Exhibit B attached hereto (the “ Bill of Sale ”) pursuant to which the Sellers will transfer and assign to the Buyer the Acquired Assets and the Buyer Parties will assume from the Sellers the Assumed Liabilities;

 

(b)           the Sellers shall execute and deliver to the Buyer one or more trademark and domain name assignments in substantially the form of Exhibit C attached hereto (the “ Trademark Assignments ”) pursuant to which the Sellers will transfer and assign to the Buyer the trademarks and domain names being acquired by the Buyer pursuant to this Agreement;

 

(c)           the Sellers shall execute and deliver to the Buyer a non-competition, non-solicitation and confidentiality agreement in the form of Exhibit D attached hereto (the “ Sellers Non-Competition Agreement ”);

 

(d)           the Sellers and the Buyer Parties shall execute and deliver to one another a transition services agreement in the form of Exhibit E attached hereto (the “ Transition Services Agreement ”);

 

(e)           each Transferred Employee shall execute and deliver to the Buyer a non-competition, non-solicitation and confidentiality agreement in substantially the form of Exhibit F attached hereto (each, an “ Employee Non-Competition Agreement ”);

 

(f)            each Transferred Employee shall execute and deliver to the Buyer an employment offer letter in a form acceptable to the Buyer and such Transferred Employee;

 

(g)           each Seller will deliver to the Buyer a certificate of an officer of such Seller, dated as of the Closing Date, certifying as to and attaching (if applicable): (i) true and correct copies of the corporate charter of such Seller as in effect on the Closing Date; (ii) the incumbency of the officers executing this Agreement and the Transaction Documents to which such Seller is a party on behalf of such Seller; (iii) and true and correct copies of resolutions of the Board of Directors of such Seller authorizing and approving the execution, delivery and performance of this Agreement and the Transactions Documents to which such Seller is a party, as applicable, and the transactions contemplated hereby and thereby, and the acts of the officers of such Seller in carrying out the terms and provisions hereof; and each Seller shall deliver to the Buyer certificates of corporate good standing with respect to such Seller from the Secretary of the State of the state of incorporation or organization of such Seller and any jurisdiction where such Seller is qualified to do business in connection with the operation of the Business, and each Seller shall deliver to the Buyer which certificates shall be dated within a reasonable period prior to the Closing Date as determined by the Buyer;

 

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(h)           each Buyer Party will deliver to the Seller a certificate of an officer of such Buyer Party, dated as of the Closing Date, certifying as to and attaching (if applicable): (i) true and correct copies of the corporate charter of such Buyer Party as in effect on the Closing Date; (ii) the incumbency of the officers executing this Agreement and the Transaction Documents to which such Buyer Party is a party on behalf of such Buyer Party; (iii) and true and correct copies of resolutions of the Board of Directors of such Buyer Party authorizing and approving the execution, delivery and performance of this Agreement and the Transactions Documents to which such Buyer Party is a party, as applicable, and the transactions contemplated hereby and thereby, and the acts of the officers of such Buyer Party in carrying out the terms and provisions hereof; and each Buyer Party shall deliver to the Sellers certificates of corporate good standing with respect to such Buyer Party from the Secretary of the State of the state of incorporation or organization of such Buyer Party and any jurisdiction where such Buyer Party is qualified to do business, and each Buyer Party shall deliver to the Seller, which certificates shall be dated within a reasonable period prior to the Closing Date as determined by the Seller;

 

(i)            each party will deliver other consents and approvals contemplated by this Agreement, or that, in the reasonable discretion of such party, are reasonably necessary for the consummation of the transactions contemplated hereby, in form and substance satisfactory to the parties;

 

(j)            all Liens on any of the Acquired Assets shall have been fully released and discharged pursuant to such documents in form and substance reasonably satisfactory to the Buyer, and the Sellers shall have made all necessary filings and taken all other action necessary to effect such releases and discharges including, without limitation, filing all necessary UCC termination statements in all applicable jurisdictions;

 

(k)           each party will execute and deliver all such other bills of sale, assignments, endorsements, intellectual property right assignments, trade name assignments, domain name assignments, certificates of title, consents and other necessary instruments and documents of conveyance and transfer in a form reasonably satisfactory to the parties; and

 

(l)            the Buyer shall make or cause to be made the payment required by Section 2.1 and ADI shall deliver the Note (as defined in such Section).

 

1.7                                  Consent of Third Parties .

 

(a)           Notwithstanding anything in this Agreement or in any Transaction Document to the contrary, neither this Agreement nor any such Transaction Document shall constitute an agreement to assign or otherwise transfer, or require the Buyer to assume any obligations under, any Assigned Contract if an attempted assignment or transfer thereof would, without the consent of a third party to such assignment or transfer, constitute a breach thereof, would be ineffective, would affect adversely the rights of the Buyer thereunder or would violate any applicable Law.

 

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If any such consent has not been obtained as of the Closing Date and the Buyer nevertheless determines to proceed with the Closing, the Sellers shall use their reasonable best efforts to obtain such consent following the Closing, and the Buyer will provide reasonable cooperation to the Sellers in seeking to obtain any such consent.

 

(b)            If any Assigned Contract is not transferred to the Buyer for lack of consent as described above at the Closing pursuant to this Agreement (a “ Post-Closing Assigned Contract ”), the Sellers shall cooperate with the Buyer in any reasonable arrangement designed to provide for the Buyer all of the benefits of, and to have the Buyer assume the burdens, liabilities, obligations and expenses with respect to, such Post-Closing Assigned Contract.  In such event, until such consent has been obtained, (i) the Buyer shall use commercially reasonable efforts to perform in the applicable Seller’s name, all of the applicable Seller’s obligations with respect to each Post-Closing Assigned Contract, and (ii) the Sellers shall take all actions reasonably requested by the Buyer to enforce for the benefit of the Buyer any and all rights of the Sellers with respect to any such Post-Closing Assigned Contract.

 

(c)            The Sellers hereby authorize the Buyer to perform all of their respective obligations after the Closing with respect to all Post-Closing Assigned Contracts and the Sellers hereby grant to the Buyer a power of attorney to act in the name of the Sellers with respect thereto.  Such power of attorney shall be coupled with an interest and shall be irrevocable.  The power of attorney granted to the Buyer pursuant to this Section will expire upon the actual assignment of the Post-Closing Assigned Contracts to the Buyer, at which time such Post-Closing Assigned Contracts will constitute an Assigned Contract and an Acquired Asset of the Buyer as described in Section 1.1(a). The Sellers agree to remit promptly to the Buyer all collections or payments received by either Seller in respect of all such Post-Closing Assigned Contracts pursuant to this Section, and shall hold all such collections or payments in trust for the benefit of, and promptly pay the same over to, the Buyer; provided, however, that nothing herein shall create or provide any rights or benefits in or to third parties.

 

(d)            Nothing in this Section 1.7 shall be deemed to modify in any respect any of the Sellers’ representations or warranties set forth herein or be deemed to constitute an agreement to exclude from the Acquired Assets any assets described under Section 1.1.

 

1.8            Further Assurances .  At any time and from time to time after the Closing, at the request of a party and without further consideration, the parties will execute and deliver such other instruments of sale, transfer, conveyance, assignment and confirmation, and will take such further action, as may be reasonably requested in order to more effectively transfer, convey and assign to the Buyer, and to confirm the Buyer’s title in and to, the Acquired Assets and the Buyer Parties’ assumption of the Assumed Liabilities, and each of the parties shall execute such other documents and take such further action as may be reasonably required or desirable to carry out the provisions of this Agreement and the transactions contemplated hereby.

 

1.9            Transfer Taxes .  All sales (including, without limitation, bulk sales), transfer and similar Taxes, if any, payable in connection with the transactions contemplated hereby shall be split by Buyer and the Sellers.

 

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ARTICLE II

PURCHASE PRICE

 

2.1            Purchase Price .  The purchase price for the Acquired Assets (the “ Purchase Price ”) shall be $1,400,000, subject to adjustment as set forth below in this Section.  At the Closing, the Buyer shall pay or cause to be paid to the Sellers $600,000 by wire transfer of immediately available funds to a United States bank account designated by the Sellers to the Buyer in writing and deliver to the Sellers a one-year promissory note of the Buyer Parties with interest at the rate of 6% per annum (the “ Note ”) in the principal amount of $800,000.  The Note shall be in the form set forth on Exhibit A attached hereto.  The portion of the Purchase Price payable at Closing shall be reduced by the amount by which the Buyer and the Sellers agree that that the accounts receivable as of the Closing that are included in the Acquired Assets are less than $800,000.  The accounts receivable as of the Closing shall be computed net of accounts receivables from the Recording Industry Association of America and the Motion Picture Association of America that are more than 90 days old.

 

2.2            Offset .  Any payment to which the Sellers become entitled to pursuant to this Agreement shall be subject to offset only as provided in Section 6.5(c).

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 

The Sellers, jointly and severally, hereby represent and warrant to the Buyer Parties that, except as disclosed in the disclosure schedule (the “ Disclosure Schedule ”) attached hereto and dated the date hereof:

 

3.1            Organization; Good Standing and Qualification .  Each Seller is duly incorporated or organized and validly existing and in good standing under the Laws of its jurisdiction of incorporation or organization, and is duly qualified or licensed as a foreign corporation to do business and is in corporate and tax good standing in each jurisdiction where the character of the Acquired Assets or the nature of the Business makes such qualification or licensing necessary, all of which are listed in Section 3.1 of the Disclosure Schedule.  Each Seller has all requisite corporate power and authority, and is in possession of all Approvals necessary, to own, lease and operate the Acquired Assets and to carry on the Business as it is now being conducted.

 

3.2            Ownership of MediaSentry .  All outstanding shares of capital stock of MediaSentry are owned solely by SafeNet.

 

3.3            Authorization; Binding Obligation .  Each Seller has all necessary corporate power and authority to execute and deliver this Agreement, each Transaction Document to which it is a party and each other instrument or document required to be executed and delivered by it pursuant to this Agreement or any such Transaction Document, and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution and delivery by each Seller of this Agreement and each Transaction Document to which it is a party, the performance of its respective obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary action on the part of such Seller and no other proceedings on the part of such Seller are necessary to authorize this Agreement or any Transaction Document to which it is a party or to consummate the transactions so contemplated herein and therein.

 

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This Agreement has been, and each of the Transaction Documents to which either Seller is a party, when executed and delivered by such Seller, will be, duly and validly executed and delivered by such Seller, and this Agreement constitutes, and each Transaction Document to which either Seller is a party, when executed and delivered by such Seller, will constitute, a legal, valid and binding obligation of such Seller enforceable against such Seller in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the rights of creditors generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

3.4            Consents and Approvals .  The execution and delivery by each Seller of this Agreement, the Transaction Documents to which either Seller is a party or any other instrument or document required by this Agreement or any Transaction Document to be executed and delivered by either Seller do not, and the performance of this Agreement, the Transaction Documents to which either Seller is a party and any other instrument or document required by this Agreement or any Transaction Document to be executed and delivered by either Seller shall not, require either Seller to obtain any Approval of any Person or Approval of, observe any waiting period imposed by, or make any filing with or notification to, any Governmental Authority.

 

3.5            No Violation .  The execution and delivery by each Seller of this Agreement, the Transaction Documents to which either Seller is a party or any other instrument or document required by this Agreement or any Transaction Document to be executed and delivered by either Seller do not, and the performance of this Agreement, the Transaction Documents to which either Seller is a party or any other instrument or document required by this Agreement or any Transaction Document to be executed and delivered by either Seller, will not, (a) conflict with or violate the Organizational Documents of either Seller, (b) conflict with or violate any Law or Order applicable to either Seller or by which either Seller or any of their respective properties are bound or affected, or (c) result in any breach or violation of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or impair either Seller’s rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the Acquired Assets pursuant to, any Contract to which either Seller is a party or is otherwise bound, or any Approval to which either Seller is a party or by which either Seller or it or any of its properties are bound or affected.

 

3.6            Approvals and Orders .  Section 3.6 of the Disclosure Schedule contains a true, correct and complete list of all Approvals and Orders that have been issued, granted or otherwise made available by any Governmental Authority to either Seller in connection with the operation of the Business (the “ Acquired Business Licenses ”).  Each Acquired Business License is valid and in full force and effect, no Acquired Business License is subject to any Lien, or except as provided therein or constituting a part thereof, any limitation, restriction, probation or other qualification and there is no material default under any Acquired Business License or, to the knowledge of the Sellers, any basis for the assertion of any material default thereunder.

 

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There is no Action pending or, to the knowledge of the Sellers, threatened that could reasonably be expected to result in the termination, revocation, limitation, suspension, restriction or impairment of any Acquired Business License or the imposition of any fine, penalty or other sanctions for violation of any legal or regulatory requirements relating to any Acquired Business License or, to the knowledge of the Sellers, any basis therefor. The Sellers have all Approvals of Governmental Authorities that are or were necessary in order to enable the Sellers to own and operate the Acquired Assets and to conduct the Acquired Businesses.   All Acquired Business Licenses are validly held by the Sellers, and each Seller has complied in all material respects with the terms and conditions of each Acquired Business License held by it.

 

3.7            Title to and Condition of Properties; Sufficiency of Assets .  Each Seller is the sole and exclusive legal and equitable owner of all right, title and interest in, and has good, clear, indefeasible and marketable title to, all of the Acquired Assets purported to be owned by such Seller and has the valid, enforceable and sufficient right to use all of the other Acquired Assets used or held by such Seller, free and clear of all Liens.  All tangible assets and properties included in the Acquired Assets have been maintained in accordance with normal industry practice and are in operating condition, subject to ordinary wear and tear and there has not been any material interruption of the operations of the Acquired Businesses due to the condition of any such assets or properties. The Acquired Assets comprise all material assets, properties and rights necessary for the operation of the Business in the manner in which the Business is currently operated, it being understood by the Buyer Parties, however, that certain assets and services used in the operation of the Business such as, but not limited to, accounting functions and services and internet access capability, have been provided by Sellers and are not part of the Acquired Assets (“ Sellers’ Assets ”).

 

3.8            Financial Statements .  Attached hereto as Section 3.8(a) of the Disclosure Schedule are the unaudited schedule of Acquired Assets and Assumed Liabilities as of December 31, 2008 and the related statements of income for the twelve-month periods ended December 31, 2008 (collectively, the “ Financial Statements ”). The Financial Statements are complete and correct in all material respects, and have been prepared in accordance with sound business and accounting practices, and fairly present in all material respects the results of operations and the financial position of the Business as at and for the twelve-month period ended December 31, 2008.  Also, included as part of Section 3.8 of the Disclosure Schedule, for Buyer’s information (but without representation by the Sellers) are statements of income for each quarterly period in 2008.

 

3.9            Absence of Undisclosed Liabilities .  Except as and to the amounts specifically accrued or disclosed in the Financial Statements or in the Disclosure Schedule, neither Seller has any Liabilities arising from the operation of the Business, except for Liabilities of the nature that are required by GAAP to be disclosed that were incurred in the ordinary course of business and consistent with past practice since December 31, 2008 and except for Liabilities as would not reasonably be expected to have an adverse effect on the condition (financial or otherwise), properties, assets, liabilities, operations, results of operations or prospects of the Business or either of the Sellers’ ability to perform its obligations as contemplated in this Agreement.

 

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3.10          Absence of Certain Events .  Since January 1, 2009, the Sellers have conducted the Business only in the ordinary and usual course and in a manner consistent with past practices and there has not been any change, event, development, damage or circumstance affecting the Acquired Assets or the Business which, individually or in the aggregate, has had or could reasonably be expected to have, a Material Adverse Effect.

 

3.11          Tax Matters .  All Taxes arising from the operation of the Business have been timely paid or are fully accrued in the Financial Statements or in the financial records of the Sellers.   All Taxes that either Seller is or was required by Law to have withheld or collected in connection with the operation of the Business have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Authority.  Neither Seller has been informed by any jurisdiction that such jurisdiction believes that such Seller was required to file any Tax Return in connection with the ownership or operation of the Acquired Assets or the Business that was not filed.  Neither Seller has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code, and no withholding pursuant to Section 1445 of the Code will be required in connection with this Agreement or the transactions contemplated hereby. There are no Liens with respect to Taxes upon any of the Acquired Assets.

 

3.12          Intellectual Property; Privacy .

 

(a)            Section 3.12(a) of the Disclosure Schedule sets forth, with respect to all Business Intellectual Property, a complete and accurate list of all United States and foreign Patents, Trademarks (including Internet domain name registrations and registered and applied for Trademarks) and registered Copyrights, indicating for each, the applicable jurisdiction, registration number (or application number) and date issued (or date filed).  All registered and applied for Trademarks, Patents and Copyrights of each Seller are currently in compliance with all legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications with respect to Trademarks, and the payment of filing, examination and maintenance fees and proof of working or use with respect to Patents), are valid and enforceable, and are not subject to any maintenance fees or actions falling due within one hundred eighty (180) days after the Closing Date.  No Trademark included in the Business Intellectual Property (“ Acquired Trademarks ”) has been or is now involved in any cancellation proceeding and, to the knowledge of the Sellers, no such Action is threatened with respect to any of such Acquired Trademarks.  All Acquired Trademarks have been in continuous use by the Sellers since they were first used by the Sellers.  To the knowledge of the Sellers, there has been no prior use of such Acquired Trademarks by any Person which would confer upon such Person superior rights in such Trademarks; and the registered Acquired Trademarks have been continuously used in the form appearing in, and in connection with the goods and services listed in, their respective registration certificates or identified in their respective pending applications.  No Patent included in the Business Intellectual Property has been or is now involved in any litigation, interference, reissue, re-examination or opposing proceeding.  No Copyright registration or Copyrightable work included in the Business Intellectual Property has been or is now involved in any Action.  To the knowledge of the Sellers, there are no potentially conflicting Trademarks or potentially interfering Patents of any third party.

 

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(b)            Section 3.12(b) of the Disclosure Schedule sets forth a complete and accurate list of all license agreements granting any right to use or practice any rights under any Business Intellectual Property (“ Licensed Intellectual Property ”), whether a Seller is the licensee or licensor thereunder, and any assignments, consents, forbearances to sue, judgments, orders, settlements, indemnification or similar obligations relating to any Licensed Intellectual Property to which a Seller is a party or otherwise bound (collectively, the “ License Agreements ”), indicating for each the title, the parties, date executed, whether or not it is exclusive and the Licensed Intellectual Property covered thereby.  The License Agreements are valid and binding obligations of the applicable Seller party thereto and, to the knowledge of the Sellers, of each other party thereto enforceable in accordance with their respective terms, and neither such Seller nor, to the knowledge of the Sellers, the other party or parties thereto is or are in default thereunder and there exists no event, condition or occurrence which (with or without due notice or lapse of time, or both) would constitute such a default by the Sellers or, to the knowledge of the Sellers, the other party or parties thereto of any of the foregoing.  No consent of, or notice to, any Person is required under any License Agreement as a result of or in connection with, and the terms or enforceability of any License Agreement will not be affected in any manner by, the execution, delivery and performance of this Agreement or any Transaction Document, or the transactions contemplated hereby or thereby.

 

(c)            The Business Intellectual Property constitutes all of the Intellectual Property (other than the Intellectual Property that constitute Sellers’ Assets) used in the conduct of the Business as currently conducted.

 

(d)            No royalties, honoraria or other fees are payable to any third parties for the use of or right to use any Business Intellectual Property except pursuant to the License Agreements set forth in Section 3.12(d) of the Disclosure Schedule.  All inventions, discoveries, trade secrets, ideas and works, whether or not patented or patentable or otherwise protectable under Law, created, prepared, developed or conceived by employees or independent contractors of a Seller in connection with the operation of the Business and material to the operation of the Business are the sole property of such Seller and were either created, prepared, developed or conceived by (i) employees of such Seller within the scope of their employment or (ii) by independent contractors who have duly assigned their rights to such Seller pursuant to enforceable written agreements.

 

(e)            Each Seller owns all Business Intellectual Property purported to be owned by such Seller, and has a valid, enforceable, transferable and sufficient right to use for the purposes such Seller has previously used, the Business Intellectual Property licensed or otherwise used by such Seller, free and clear of all Liens.

 

(f)             The use of the Business Intellectual Property by Sellers as currently used in the Business does not infringe upon, violate, misappropriate or make unlawful use of any Intellectual