ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT

between

Instant Access Media, LLC,

a Colorado limited liability company

and

NTN Buzztime, Inc. ,

a Delaware corporation

___________________________

Dated as of May 11, 2009

____________________________

 

 

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement, dated May 11, 2009 (this " Agreement "), is entered into by and between Instant Access Media, LLC, a Colorado limited liability company (" Seller "), and NTN Buzztime, Inc., a Delaware corporation (" Buyer ").  Unless otherwise defined herein, capitalized terms shall have the meanings ascribed to them in Exhibit A .

RECITALS

A.           Seller has been engaged in the business of delivering programming and advertising to retail venues, such as sports and neighborhood bars and coliseums, over digital broadcast networks  (the " Business ").  During 2008, Seller decided to wind down the Business and since that time, the Business has been operated in a wind-down mode in anticipation of sale or liquidation of the assets used in connection with the Business without the investment of any additional capital.

ARTICLE I

 

PURCHASE AND SALE OF ASSETS

1.1       Purchase of Assets .  Upon the terms and subject to the conditions contained in this Agreement, at the Closing, Seller shall sell, assign, transfer and convey to Buyer, and Buyer shall purchase, acquire and accept from Seller, the assets of Seller specified in this Section 1.1 (the " Purchased Assets "), free and clear of all Liens, other than Permitted Liens.  The Purchased Assets, which  include those assets set forth on Schedule 1.1 , shall include only the following:

(a)      all of Seller's rights under all licenses, permits, authorizations, orders, registrations, certificates, approvals, consents and franchises required for the use of the Purchased Assets, or any pending applications for any of the foregoing;

(b)      all of the Seller IP Rights in the Intellectual Property set forth on Schedule 1.1(b) ;

(c)      any Contract set forth on Schedule 1.1(c) (together, the " Purchased Contracts ");

(d)      all of Seller's customer deposits, prepayments, prepaid expenses, refunds, causes of action, rights of recovery, rights of setoff and rights of recoupment existing as of the Closing Date relating to the Purchased Assets;

(e)      all of Seller's advertiser and customer and supplier lists and all other sales, marketing and supplier information that have been used in connection with the Purchased Assets;

(f)      all books and records which relate to the Purchased Assets, including books, records, ledgers, files, documents, correspondence, computer discs, computer files, diagrams, construction data, blueprints, instruction manuals, maintenance manuals, reports and similar documents used in connection with the Purchased Assets;

1.2       Excluded Assets .  Notwithstanding the foregoing, Seller is not selling, assigning, transferring or conveying to Buyer hereunder and Buyer is not purchasing hereunder any assets of Seller not set forth on Schedule 1.1 (collectively, the " Excluded Assets ").

1.3       Assumed Liabilities .  In connection with the purchase and sale of the Purchased Assets, Buyer shall only assume the Liabilities of Seller arising, or relating to periods, on and after the Closing Date under the executory portion of the Purchased Contracts specifically set forth on Schedule 1.3 (the " Assumed Liabilities "); provided , however , that the Assumed Liabilities shall not include any Liabilities arising out of any breach by Seller on or prior to the Closing of any provision of any such Purchased Contract, including Liabilities arising out of Seller's failure to perform under any such Purchased Contract in accordance with its terms prior to the Closing.  Notwithstanding anything to the contrary herein, the Assumed Liabilities do not and shall not include the Excluded Liabilities.

1.4       Excluded Liabilities .  Notwithstanding anything in this Agreement to the contrary, or any disclosure contained herein or made pursuant hereto, or anything otherwise known to Buyer, Buyer does not assume and will not become responsible for any Liability of Seller except the Assumed Liabilities.  Without limiting the generality of the foregoing, the following are included among the Liabilities of Seller which Buyer does not expressly or impliedly assume (collectively, the " Excluded Liabilities "):

(a)      all Liabilities of Seller that exist or may arise under any Contract (other than the Contracts that are Purchased Contracts or Assumed Liabilities), including those Contracts set forth on Schedule 1.4(a) ;

(d)      all Liabilities of Seller under any Environmental Law, including all Liabilities which are attributable to non-compliance with federal, state, and local statutes or regulations governing water discharges, air emissions, and to the disposal, release, generation, treatment, transport, recycling or storage of any Hazardous Materials at or from any property or facility owned, leased, used or occupied at any time by Seller or any predecessor, including any predecessor in ownership, or arising out of or attributable to arrangements for any of the foregoing by Seller or any predecessor, including any predecessor in ownership, and any environmental condition or violation of Environmental Law with respect to any real property leased by Seller;

(e)      all Liabilities of Seller with respect to all Taxes for all periods prior to the Closing Date;

(f)      all Liabilities of Seller with respect to any pending, threatened or unasserted Action including Liabilities relating to the Excluded Assets or to any leased real property and Liabilities relating to any Tax owed, alleged to be owed, or that may become owed to any Governmental Entity with respect to matters which occurred prior to the Closing Date;

(g)      all product liability or product warranty obligations of Seller with respect to matters which occurred prior to, or result from, arise out of or relate to any period prior to the Closing Date;

(h)      any Liability of Seller incurred in connection with the execution, delivery or performance of this Agreement;

(i)      all Liabilities of Seller which are attributable to non-compliance with applicable Laws;

(k)      all Liabilities that relate in any manner to any and all actions of Seller on or after the Closing Date, including any actions relating to the remaining portion of the Business and/or the wind down thereof.

(a)      The aggregate consideration payable for the Purchased Assets consists of (i) 1,500,000 unregistered shares of Common Stock (the " Closing Shares "), (ii) the Closing Warrants and (iii) the assumption by Buyer of the Assumed Liabilities (collectively, the " Closing Purchase Price "). At the Closing:

 

(b)      Following placement of the Closing Shares in the Holdback Account and delivery by Buyer to Seller of each of the Closing Warrants, as set forth above, Seller shall in all events be solely responsible for any and all further distribution of proceeds to its creditors and members, as appropriate, and Buyer shall in no way be liable or responsible for distribution of any portion of the Closing Purchase Price directly to any of Seller's creditors or members.

(a)       Earnout Consideration .  Subject to the terms and conditions of this Agreement, in addition to the Closing Purchase Price, Seller shall receive additional consideration (the " Earnout Consideration ") as set forth below:

(b)       Earnout Payments .  Subject to the terms and conditions in this Agreement, Buyer shall pay any payments due to Seller under this Section 1.6 (each, an " Earnout Payment ") no later than 90 days after the end of each of FY 2010, FY 2011 and FY 2012, as the case may be, or in the event there is a dispute, any undisputed portion of any such payment due will be paid no later than 90 days after the end of each of FY 2010, FY 2011 and FY 2012, as the case may be, and any disputed portion of any such payment will be paid within 30 days after such dispute is finally resolved, whichever is later. Any Earnout Payment due shall be paid by Buyer to Seller in immediately available funds by wire transfer to an account designated by Seller.  Following payment by Buyer to Seller of an Earnout Payment, Seller shall in all events be solely responsible for any and all further distribution of such Earnout Payment to its creditors and its members, as appropriate, and Buyer shall in no way be liable or responsible for distribution, or lack thereof, of any portion of any Earnout Payment directly to any of Seller's creditors or its members.  

 

 

(c)       Mechanics .  Within 75 days after the end of each of FY 2010, FY 2011 and FY 2012, Buyer shall deliver to Seller a statement that reflects Buyer's Net Advertising Revenues for such year, as the case may be (each, a " Revenue Statement " and the date on which the Revenue Statement is delivered by Buyer to Seller, the " Revenue Statement Date "), together with a calculation of the Earnout Payment due pursuant to Section 1.6, if any. The Revenue Statement shall be based upon the books and records of Buyer and Buyer's financial statements, which shall have been prepared in accordance with GAAP. The Revenue Statement shall be final and binding for purposes of this Agreement unless, within 20 Business Days from the Revenue Statement Date (during which 20-Business Day period Seller and its representatives shall have access during reasonable business hours and subject to customary confidentiality provisions to the book and records of Buyer and its Affiliates in order to verify the amounts set forth in the Revenue Statement), Seller delivers written notice to Buyer of any dispute or disagreement with the Revenue Statement (" Dispute Notice "). The Dispute Notice shall specify, in reasonable detail, the nature and extent of such dispute or disagreement. If Seller timely delivers a Dispute Notice to Buyer, Seller and Buyer shall promptly attempt to resolve such dispute or disagreement in good faith. If Seller and Buyer are unable to resolve such dispute or disagreement within 15 days after receipt by Buyer of the relevant Dispute Notice, either Seller or Buyer may submit such dispute or disagreement for final determination to a mutually acceptable independent registered public accounting firm for final determination, provided that such accounting firm shall not have performed accounting or audit services for Buyer or Seller in the past year prior to such appointment (the " Determining Accountants "). The Determining Accountants shall act as an arbitrator to determine and resolve such dispute or disagreement based on the presentations by Seller, Buyer and their respective representatives and in accordance with the terms of this Agreement. The Determining Accountants shall make its determination regarding such dispute or disagreement within 30 days after the date upon which Seller or Buyer submits the dispute or disagreement to the Determining Accountants, and in that undertaking shall not be required to follow any particular procedure but shall proceed in a manner designed to achieve a speedy and economic resolution of the dispute. The Determining Accountants shall set forth its determination, which shall be final, binding and conclusive in a written statement delivered to Buyer and Seller, stating its reason therefor. The Determining Accountants shall be instructed to render its decision in accordance with the terms hereof, including GAAP. The costs and expenses of the Determining Accountants shall be borne equally by Buyer and Seller, unless the Net Advertising Revenues determined in accordance with the decision of the Determining Accountants are greater than 110% of the Net Advertising Revenues set forth in the Revenue Statement, in which case such costs shall be borne solely by Buyer. The Determining Accountants' engagement pursuant to this Section 1.6(c) shall be limited solely to the issues set forth in the Dispute Notice.

 

(d)       Management of Buyer's Business .  The parties hereto acknowledge and agree that, from and after the Closing, Buyer shall have the complete right, power and authority to operate and control its business and operations, including the business that relates to the Purchased Assets, in any manner as it shall determine in its sole and absolute discretion.

 

(e)       Offset . Notwithstanding anything to the contrary herein, Buyer shall have a right to offset against the Earnout Consideration in order to secure Seller's indemnification obligations under ARTICLE VII.

 

(f)       Assumption of Buyer's Obligation . Simultaneous with or prior to the effective date of any Change in Control Transaction, Buyer shall cause the Person surviving the Change in Control Transaction to agree to assume Buyer's obligations under this Section 1.6, such that Seller's right to receive the Earnout Consideration that would become due and payable to Seller in the absence of such change in Control Transaction is not, in the reasonable judgment of Seller, impaired by such Change in Control Transaction.

1.7       Sales, Use and Transfer Taxes .  Seller shall be responsible for paying, shall promptly discharge when due, and shall reimburse, indemnify and hold harmless Buyer from, any sales or use, transfer, value added, real property gains, excise, stamp, stamp duty, stamp duty reserve tax, or other Taxes imposed by reason of the transfer of the Purchased Assets provided hereunder, and any deficiency, interest or penalty asserted with respect thereto. Seller shall bear sole responsibility for any Tax in the nature of an income, franchise or occupation tax imposed on Seller as a result of the transfer of the Purchased Assets to Buyer as provided herein.

1.8       Allocation .  The Closing Purchase Price and any other consideration for the Purchased Assets, as determined for U.S. federal income tax purposes pursuant to Treasury Regulation Section 1.1060-1(c) (the " Tax Purchase Price "), shall be allocated as set forth on Schedule 1.8, in accordance with the provisions of Treasury Regulations Section 1.1060-1(c) and the Treasury Regulations referred to therein.  Buyer and Seller shall execute and file all U.S. federal and applicable state income Tax Returns in a manner consistent with any allocations agreed or determined pursuant hereto and shall not take any position in any other Tax Return, before any Governmental Entity, or in any tax proceeding that is inconsistent with any such allocation, except pursuant to a final "determination" (as defined in Code Section 1313(a) or corresponding provision of state, local or foreign law).  Buyer and  Seller shall timely file any IRS Forms 8594, and any other U.S. federal and applicable state income Tax Returns prepared in a manner consistent with the allocations agreed or determined pursuant hereto and shall file any other Tax Return with any state, local or foreign Governmental Entity in a manner that is not inconsistent therewith.  Any redetermination of the Tax Purchase Price within the meaning of Treasury Regulations Section 1.338-7 shall be made as required thereby and shall be taken into account by Buyer and Seller in carrying out the provisions hereof and the preparation and filing of Tax Returns referred to above to the extent applicable.

1.9       Closing .   Subject to the satisfaction or waiver of the conditions set forth in this Agreement, the closing of the transactions contemplated by this Agreement, including the purchase and sale of the Purchased Assets (the " Closing "), shall take place on: (a) May 11, 2009, or (b) such date, time and place as the parties may agree (the " Closing Date ").  Notwithstanding the foregoing, the parties agree that the Closing shall be deemed effective as of 12:01 a.m. on the Closing Date. All documents that are to be delivered by one party to the other at the Closing, shall be delivered by electronic means.

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES OF SELLER

2.1       Organization .  Seller is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Colorado.  Seller has all requisite power and authority to own and lease its assets and to operate its business as the same are now being owned, leased and operated.  Seller is duly qualified or licensed to do business as a foreign corporation or foreign entity in, and is in good corporate standing in, each jurisdiction in which the nature of its business or its ownership of its properties requires it to be so qualified or licensed.   Schedule 2.1 sets forth a true and complete list of (a) all jurisdictions in which Seller is qualified or licensed to do business as a foreign corporation or foreign entity, and (b) all powers of attorney granted by Seller to any third party that are currently in effect and that may affect in any manner any of the Purchased Assets on or after the Closing.  All necessary action on the part of Seller with respect to the consummation of the transactions contemplated hereby has been taken.  Seller has provided Buyer with a true, complete and correct copy of its articles of organization and operating agreement, each as currently in effect and reflecting any and all amendments thereto (collectively, the " Organizational Documents ").  Each of the Organizational Documents is in full force and effect, and Seller is not in violation of any provision thereof.

2.2       Authorization .  The execution, delivery and performance by Seller of this Agreement, the other Transaction Documents and each of the transactions contemplated hereby or thereby have been duly and validly authorized by Seller, and no other act or proceeding on the part of Seller, its board of directors, managers or members is necessary to authorize the execution, delivery or performance by Seller of this Agreement or any Transaction Document or the consummation of any of the transactions contemplated hereby or thereby.  This Agreement has been duly executed and delivered by Seller and this Agreement constitutes, and the Transaction Documents upon execution and delivery by Seller, will each constitute, a valid and binding obligation of Seller, enforceable against Seller in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect, relating to or limiting creditors' rights generally and (ii) general principles of equity (whether considered in an action in equity or at law).  This Agreement and the transactions contemplated hereby have been (y) unanimously approved by the board of directors (which includes all managers of Seller) of Seller and (z) approved by the holders of at least two-thirds of the outstanding shares of each of the Series A preferred stock, Series B preferred stock and Series C preferred stock of Seller.

2.3       No Conflict .  The execution, delivery and performance by Seller of this Agreement and the Transaction Documents and the consummation of each of the transactions contemplated hereby or thereby will not (i) violate or conflict with the Organizational Documents, (ii) violate, conflict with, result in any material breach of, constitute a default under, result in the termination of, result in the acceleration of any obligations under, result in a material change in terms of, create in any party the right to accelerate, terminate, modify or cancel, or require any consent or notice under, or create an event that, with the giving of notice or the lapse of time, or both, would be a default under or material breach of, any (A) Contract to which Seller is a party or by which it is bound or affected or to which any of its assets is bound or affected; or (B) judgment, order, writ, injunction, decree or demand of any Governmental Entity which materially affects the ability of Seller to perform its obligations under this Agreement; (iii) result in the creation or imposition of any Lien upon any assets or any of the equity of Seller, or which affects the ability of Seller to perform its obligations under this Agreement; (iv) except as set forth on Schedule 2.3 , require any declaration, filing or registration with, or authorization, consent or approval of, exemption or other action by or notice to, any Governmental Entity or other Person under the provisions of any Law or any Contract to which Seller is subject, or by which Seller is bound or affected or by which Seller or any of its assets are bound or affected. Notwithstanding the preceding sentence, no representation is given as to the assignability of Restricted Contracts.

 

2.4       Capitalization .  As of date of this Agreement, the outstanding membership interests of Seller, all of which are duly authorized, consist of 1,223 Series A Shares, 1,370 Series B Shares and 6,978 Series C Shares.   Schedule 2.4 accurately sets forth the authorized and outstanding securities of Seller and the number of membership interests held by each member of Seller.  Seller has no outstanding securities which would entitle the holder thereof to acquire at any time membership interests of Seller, including any debt, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, membership interests of Seller, and the number of membership interests of Seller issuable upon conversion, exercise or exchange of such securities.  All of the issued and outstanding membership interests of Seller are owned of record and beneficially by the members of Seller as set forth on Schedule 2.4 .

2.5       Legal Proceedings .  Except as set forth on Schedule 2.5 , there are no, and since January 1, 2006, there have been no (a) outstanding judgments, orders, decrees, awards, stipulations or injunctions of any kind against Seller that affect the Purchased Assets or (b) Actions pending or, to Seller's Knowledge, threatened against Seller that  affect the Purchased Assets.  There is no action, claim suit or proceeding pending or, to Seller's Knowledge, threatened, by or against Seller that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with the execution and delivery by Seller of this Agreement or any of the Transaction Documents or the performance of Seller hereunder or thereunder.

(a)       Schedule 2.6(a) lists all Intellectual Property owned, licensed to or used by Seller with respect to the operation or use of the Purchased Assets in the conduct of Seller's business in the ordinary course.

(b)      None of the Seller IP Rights interfere with, infringe upon, misappropriate or violate any Intellectual Property rights of any Person, and Seller (and management level employees with direct responsibility for Intellectual Property matters) has never received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that Seller must license or refrain from using any Intellectual Property rights of any Person).  To Seller's Knowledge, no Person has interfered with, infringed upon or misappropriated any of Seller IP Rights.

(c)      No approval or consent of or payment of any consideration to any Person is required so that the interest of Buyer in the Seller IP Rights shall continue to be in full force and effect following the transactions contemplated by this Agreement.

(d)      No licensing fees, royalties or payments are due or payable by Seller in connection with the Seller IP Rights.   Schedule 2.6(d) lists all actions that must be taken within one year from the date hereof, including the payment of any registration, maintenance, renewal fee, annuity fee and Tax or the filing of any document, application or certificate for the purposes of maintaining, perfecting or preserving or renewing any Seller IP Rights.

(e)      Seller does not have any obligation to compensate any Person for the development, use, sale or exploitation of any of the Seller IP Rights nor has Seller granted to any other Person or entity any license, option or other rights to develop, use, sell or exploit in any manner any of the Seller IP Rights whether requiring the payment of royalties or not.

(f)      All of the Seller IP Rights for which confidentiality is appropriate has been maintained in confidence in accordance with protection procedures believed by Seller to be adequate for protection customarily used in the industry to protect rights of like importance.  None of the former or current managers, employees, agents, consultants or independent contractors of Seller have authored, co-authored or otherwise contributed to or participated in the conception and development of any of the Seller IP Rights.

2.7       Employees and Independent Contractors .  Seller will pay or otherwise satisfy all obligations due to its employees in respect of their employment with Seller, including if applicable, any wages, salaries, bonuses (including any bonuses that arise out of the completion of the transactions contemplated hereby), accrued vacation pay, and severance pay, and all payroll taxes payable with respect to such employees, which will be discharged by Seller in accordance with their terms.  Buyer shall have no obligations or liabilities to any employees or independent contractors of Seller whatsoever (other than as specifically set forth in the Consulting Agreement), including but not limited to any wages, salaries, bonuses (including any bonuses that arise out of the completion of the transactions contemplated hereby or any Earnout Consideration, if any), accrued vacation pay and severance pay, if any, owing to any employee or independent contractors as a result of such Person's employment with Seller.

2.9       Financial Statements .   Schedule 2.9 sets forth true and complete copies of the following (collectively, the " Financial Statements ") (a) unaudited consolidated balance sheets of Seller as of December 31, 2007 and December 31, 2008, and the related unaudited statement of operations for the twelve-month period ended December 31, 2008, and (b) the unaudited consolidated balance sheet of Seller as of March 31, 2009 (" Acquisition Balance Sheet "), and the related unaudited statement of operations for the three-month period then ended, in each case prepared in a manner consistent with Seller's historical accounting methods.  Each of the Financial Statements has been prepared from, and accurately reflects in all material respects, the books, records and accounts maintained by Seller which, in reasonable detail, accurately and reflect the material transactions and material dispositions of the assets of Seller relating to the Business.

(a)       Schedule 2.11(a) lists all of the following Contracts to which Seller is a party or by which Seller is bound and which are currently in effect and that relate to the Purchased Assets (including the subsection(s) below to which each such item is responsive) (each a " Material Contract "):

 

(b)      Except as disclosed on Schedule 2.11(b) : (i) Seller has not breached any Purchased Contract in any material respect that has not been duly cured or reinstated; (ii) to the Knowledge of Seller, no other Person that is a party to any Purchased Contract has breached any Purchased Contract in any material respect that has not been duly cured or reinstated; (iii) Seller is not in receipt of any claim of default under any Purchased Contract or other item; and (iv) no event has occurred which with the passage of time or the giving of notice or both would result in a material breach or default under any Purchased Contract.  Each Purchased Contract is valid, in full force and effect, binding and enforceable against Seller, and, to Seller's Knowledge, against any other Person that is a party thereto.  The consummation of the transactions contemplated by this Agreement will not (and will not give any Person a right to) terminate or modify any rights of, or accelerate or augment any obligation of, Seller under any Purchased Contract, other than Restricted Contracts, and as to Restricted Contracts, Schedule 2.11(b) sets forth the assignment provision of each Restricted Contract and any provision that provides for the termination or modification of any right, or acceleration or augmentation of any obligation, that may result from the consummation of the transactions contemplated by this Agreement or any of the Transaction Documents.

2.12       Compliance with Laws .  Seller is not in violation of or in default in any material respect under any foreign or domestic (federal, state or local) law, statute, treaty, rule, regulation, ordinance, franchise, permit, concession, license, order, decree, consent decree or similar instrument or determination or award applicable to it by which the ownership or use of any of the Purchased Assets is bound or affected (including any labor, environmental, occupational health, zoning or other law, regulation or ordinance).  Except as set forth on Schedule 2.12 , Seller has not committed, been charged with, or, to Seller's Knowledge, been under investigation with respect to, nor does there exist, any material violation of any provision of any federal, state or local law or administrative regulation in respect of Seller or the Purchased Assets that relates to the ownership or use of the Purchased Assets.

2.13       Permits, Licenses, Etc .   Schedule 2.13(a) contains a complete listing of all Government Licenses used by Seller in the conduct of the Business in the ordinary course.  Seller owns or possesses all right, title and interest in and to all of the Government Licenses that are necessary to own and use the Purchased Assets in connection with operation of the Business in the ordinary course.  Seller is in compliance with the terms and conditions of such Government Licenses and has not received any notice that it is in violation of any of the terms or conditions of any such Government Licenses.  Except as set forth on Schedule 2.13(b) , all of such Government Licenses are currently effective and valid, and will remain so upon consummation of the transactions contemplated by this Agreement.  To Seller's Knowledge, no event has occurred or circumstances exist which would currently or upon notice or lapse of time constitute a default under any of such Government Licenses.  To Seller's Knowledge, there is no threatened suspension, cancellation or invalidation of any such Government License.

(a)      All Tax Returns required to be filed by or on behalf of Seller, on or before the date hereof were materially true, correct and complete as of the date filed, or if amended on or before the date hereof, were materially true, correct and complete after giving effect to such amendment.  All such Tax Returns that were required to be filed were duly and timely filed (taking into account any extension of time to file granted or obtained) and all Taxes (including, Taxes withheld from employees' salaries and all other withholding Taxes and obligations and deposits required to be made by or with respect to Seller) due have been timely paid, or to the extent not due and payable as of the date hereof, adequate provision for the payment thereof has been made on the Acquisition Balance Sheet.

(b)      Except as set forth on Schedule 2.14(b) , no Tax Return of Seller has been examined by or settled with any tax authority during the last seven years.  During the last seven years, no deficiency, delinquency or default for any Taxes relating to Seller or its receipts, income, sales, transactions or other business activities has been claimed, proposed or assessed against Seller, nor has Seller received written notice of any such deficiency, delinquency or default; and there is no audit, examination, investigation, claim, assessment, action, suit, or proceeding, pending or, to Seller's Knowledge, proposed by any tax authority, with respect to any Tax or with respect to any Tax Return of Seller.

(c)      There are no Liens on the Purchased Assets relating to or attributable to Taxes, other than for Taxes not yet due and payable.  To Seller's Knowledge, no Governmental Entity has asserted any claim relating to or attributable to Taxes, which, if adversely determined, would result in any Lien on the Purchased Assets.

(d)      No extension or waiver of any statute of limitations has been requested of or granted by Seller with respect to any Tax for any period.  No extension or waiver of time within which to file any Tax Return has been requested by or granted to Seller with respect to any Tax Return that has not been filed.  No power of attorney with respect to Taxes has been executed by Seller or filed with any tax authority with respect to Seller during the last three years.

(e)      To Seller's Knowledge, no claim has ever been made by an authority in a jurisdiction where Seller does not file Tax Returns that Seller is or may be subject to taxation by that jurisdiction.

(f)      Seller is not a party to, bound by, or obligated under any tax sharing or allocation agreements, tax indemnification agreement or similar Contract whether written or unwritten.

(g)      Seller is, and has at all times been, an entity classified as a partnership for U.S. federal and relevant state income tax purposes.

(h)      There is no tax ruling, request for ruling or settlement, compromise, closing or Tax collection agreement in effect or pending which does or could reasonably be expected to affect the liability of Seller for Taxes for any period after the Closing Date.

(i)      Seller is not required to document a transfer pricing methodology in compliance with Code Section 482 and any related provisions, the Treasury Regulations thereunder, and any comparable provisions of state, local or foreign Tax law.  Seller has not agreed to, and is not required to include in income, any adjustment pursuant to Code Section 482 (or similar provision of other law or regulations), nor has any Tax authority proposed in writing, or, to Seller's Knowledge, is any Tax authority considering, such adjustment.

(j)      Seller has never incurred any liability for the Taxes of any Person as a transferee or successor, by Contract, or otherwise.

(k)     Seller has no interest in and is not subject to any joint venture, partnership, or other Contract which is treated as a partnership for U.S. federal Tax purposes.

(m)     Seller has not made any payments, is not obligated to make any payment(s), and is not a party to any agreement that could obligate Seller to make any payment(s) that would not be deductible under either Code Sections 280G or 162(m).

(n)      No property owned by Seller is treated as "tax-exempt use property" within the meaning of Code Section 168(h).

(o)     Seller has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662.

(p)     Seller has not been a party to a transaction that constitutes a "reportable transaction" within the meaning of Treasury Regulation Section 1.6011-4(b) (or a similar provision of state law).

(q)      Seller does not have and has never had any obligation to register a tax shelter under Code Section 6111 or to file any disclosure or maintain any list pursuant to Code Section 6112 and regulations promulgated thereunder.

(r)      Seller has previously provided Buyer with the following information with respect to Seller as of the most recent practicable date: each state, county, local municipal, domestic or foreign jurisdiction in which Seller (i) files, or is or has been required to file, a Tax Return relating to Taxes of any kind, (ii) is required to register for Tax purposes, (iii) is or has been liable for any Taxes on a "nexus" basis at any time, (iv) is qualified to do business, (v) owns or regularly uses property, (vi) has any employee or in which any employee of Seller is regularly present, or (vii) has any agent, representative or distributor.

2.15     Brokers .  Except as set forth on Schedule 2.15 , there are no claims or rights to brokerage commissions, finders fees or similar compensation in connection with the transactions contemplated by this Agreement based on any Contract made or alleged to have been made by or on behalf of Seller or any of its Affiliates, officers, employees or directors.  All fees and expenses related to the items set forth on Schedule 2.15 will be paid by Seller at or prior to the Closing, and neither Buyer nor any of its Affiliates shall have any liability of any kind with respect thereto.

(c)      Seller has good title to, a valid leasehold interest in, or valid rights to use, all the Purchased Assets free and clear of all Liens other than Permitted Liens. To the Knowledge of Seller, each tangible asset included in the Purchased Assets is free from material defects (patent and latent), has been maintained substantially in accordance with normal industry practice, and is in good operating condition and repair (subject to normal wear and tear).

(d)      Seller has the full right to contribute, convey, transfer, assign and deliver the Purchased Assets (subject to Section 4.6 in the case of Restricted Contracts) without the need to obtain the consent or approval of or pay any consideration to any Person.

(e)      At and as of the Closing, Seller will convey the Purchased Assets to Buyer by bills of sale, certificates of title and other instruments of assignment and transfer effective in each case to vest in Buyer, and Buyer will have, good and valid record and marketable title to all of the Purchased Assets, free and clear of all Liens other than Permitted Liens.  

2.17      [Intentionally Omitted.]

2.20       Warranty Liability .   Schedule 2.20(a) contains a true, correct and complete description of the service warranties provided by Seller.  To the Knowledge of Seller, there have not been any material deviations from such warranties, and neither Seller nor any of its salespeople, employees, distributors or agents is authorized to undertake obligations to any customer or to other third parties in excess of such warranties.  Seller has not, to Seller's Knowledge, made any oral warranty with respect to any of its products or services.  Seller has provided Buyer with a true, correct and complete schedule of all warranty claims against Seller since January 1, 2006.   Except as set forth on Schedule 2.20(b) , all third party manufacturers' warranties relevant to the Purchased Assets are assignable, without requiring the consent of or the payment of any consideration to any Person.

2.21       Inventory .   Schedule 2.21 sets forth a true, accurate and complete list of inventory of Seller as of the date of this Agreement.

2.22      [Intentionally Omitted.]

 

2.23       No Undisclosed Liabilities .  There is no Liability to which any of the Purchased Assets is subject, or by which any of the Purchased Assets is bound or affected, except for Liabilities set forth in the Acquisition Balance Sheet and Liabilities that are not material that have arisen after the date of the Acquisition Balance Sheet in the ordinary course of business consistent with past practice.

2.24      [Intentionally Omitted.]

2.25       Indebtedness .  Except for Indebtedness described on Schedule 2.25(a)  hereto, Seller has no Indebtedness outstanding at the date hereof that affects or is secured by any Purchased Asset.  Except as disclosed on Schedule 2.25(b) hereto, Seller is not in default with respect to any such outstanding Indebtedness or any instrument relating thereto. No Indebtedness of Seller or any instrument or agreement relating thereto purports to limit the operation or use of the Purchased Assets.  Seller has furnished to Buyer complete and correct copies of all Contracts (including all amendments, supplements, waivers and consents) relating to (a) any Indebtedness of Seller that affects or is secured by any Purchased Asset, (b) any conditional sale or other title retention agreement with respect to any Purchased Asset, (c) any purchase money mortgage or other agreement securing all or part of the purchase price of any Purchased Asset, and (d) any capital leases of any Purchased Asset.

(b)       Investment Representations . Seller represents, warrants and covenants to Buyer that Seller is acquiring the Securities for its own account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act. Seller is either (i) an "accredited investor(s)" as such term is defined in Rule 501(a) under the Securities Act, or (ii) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of acquiring the Securities.

(c)       Investment Risks . Seller acknowledges and is aware that: (i) there are substantial restrictions on the transferability of the Securities, (ii) the Securities will not be, and Seller does not have the right to require that the Securities be, registered under the Securities Act; (iii) the certificates representing the Securities shall bear a legend similar to the legend set out below and (iv) such legend shall not be removed from any such certificates unless either (A) such Securities are sold under an effective registration statement under the Securities Act, or (B) Seller delivers to Buyer a written opinion of counsel, in form and substance satisfactory to Buyer, that no such registration is required and that the transfer will not otherwise violate the Securities Act, the Exchange Act or applicable state securities laws.

(d)       Opportunity to Ask Questions . During the course of the transaction contemplated by this Agreement, and before acquiring the Securities, Seller has had the opportunity (i) to be provided with financial and other written information about Buyer included in all documents Buyer has publicly filed with the SEC, and (ii) to ask questions and receive answers concerning the business of Buyer and its finances. Seller has, to the extent it has availed itself of this opportunity, received satisfactory information and answers.

(e)       Sophistication . Seller represents that by reason of its business or financial experience or the business or financial experience of Seller's professional advisors who are unaffiliated with and who are not compensated by Buyer or any Affiliate or selling agent of Buyer, directly or indirectly, Seller has the capacity to protect its own interests in connection with the transactions contemplated by this Agreement.

(f)       Reliance by Buyer .  Seller understands that the foregoing representations and warranties are to be relied upon by Buyer as a basis for exemption of the sale of the Securities under the Securities Act and under the securities laws of all applicable states and for other purposes.

(g)       Permitted Transfer . Seller may Transfer some or all of the Securities to a Permitted Transferee if all of the following conditions are met (any such transfer, a " Permitted Transfer "):

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF BUYER

3.1       Organization and Qualification .  Buyer is an entity duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to perform its obligations under this Agreement. Buyer is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary.

3.2       Authorization .  The execution, delivery and performance by Buyer of this Agreement and each other Transaction Document to which it is a party and each of the transactions contemplated hereby or thereby have been duly and validly authorized by Buyer, and no other corporate act or proceeding on the part of Buyer, its board of directors or its shareholders is necessary to authorize the execution, delivery or performance by Buyer of this Agreement or any Transaction Document to which it is a party or the consummation of any of the transactions contemplated hereby or thereby.  This Agreement has been duly executed and delivered by Buyer and this Agreement constitutes, and the Transaction Documents upon execution and delivery by Buyer, will each constitute, a valid and binding obligation of Buyer, enforceable against Buyer in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect, relating to or limiting creditors' rights generally and (ii) general principles of equity (whether considered in an action in equity or at law).

3.3       No Conflict .  The execution, delivery and performance by Buyer of this Agreement and the Transaction Documents to which it is a party and the consummation of each of the transactions contemplated hereby or thereby will not (i) violate or conflict with the certificate of incorporation, bylaws or other organizational documents of Buyer, (ii) violate, conflict with, result in any material breach of, constitute a default under, result in the termination of, result in the acceleration of any obligations under, result in a material change in terms of, create in any party the right to accelerate, terminate, modify or cancel, or require any consent or notice under, or create an event that, with the giving of notice or the lapse of time, or both, would be a default under or material breach of, any (A) Contract to which Buyer is a party or by which it is bound or affected or to which any of its assets is bound or affected; or (B) judgment, order, writ, injunction, decree or demand of any Governmental Entity which materially affects the ability of Buyer to perform its obligations under this Agreement; (iii) result in the creation or imposition of any Lien upon any assets or any of the equity of Buyer, or which affects the ability to conduct its business as conducted prior to the date of this Agreement or perform its obligations under this Agreement; (iv) require any declaration, filing or registration with, or authorization, consent or approval of, exemption or other action by or notice to, any Governmental Entity or other Person under the provisions of any Law or any Contract to which Buyer is subject, or by which Buyer is bound or affected or by which Buyer or any of its assets are bound or affected other than (y) the notice and/or application to NYSE Amex for the issuance and sale of the Securities and the listing of the Underlying Shares for trading thereon in the time and manner required thereby and (z) the filing of Form D with the SEC and such filings as are required to be made under applicable state securities laws.

3.4       Legal Proceedings .  There is no action, claim, suit or proceeding pending or, to the Knowledge of Buyer, threatened, by or against Buyer that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with the execution and delivery by Buyer of this Agreement or any of the Transaction Documents to which it is a party or the performance of Buyer hereunder or thereunder or which would, if such action, claim, suit or proceeding were adversely determined, have or reasonably be expected to result in a Buyer Material Adverse Effect.

3.5       Issuance of Securities .  The Closing Securities are duly authorized and, when issued for the consideration as set forth in this