ASSET PURCHASE AGREEMENT

Exhibit 10.1

 

EXECUTION COPY

 

ASSET PURCHASE AGREEMENT

 

This AGREEMENT (the “ Agreement ”) is dated as of December 23, 2005 by and among JupiterImages Corporation, an Arizona corporation (“ Buyer ”), VA Software Corporation, a Delaware corporation (“ Parent ”), and Animation Factory, Inc., a Delaware corporation and wholly-owned subsidiary of Parent (“ Seller ”).

 

W I T N E S S E T H :

 

WHEREAS, Buyer desires to acquire, and Parent and Seller desire to sell, all of the assets, properties and rights of Seller and Parent, as the case may be, relating to Seller’s business, which provides royalty-free, three-dimensional clipart, animated graphics, video backgrounds, Microsoft PowerPoint templates, and e-mail and Web page backgrounds (the “ Content ”) for business and personal use directly and through affiliates on the Web site located at animationfactory.com and its affiliated Media Builder Network Web site, which provides free on-line graphics tools and is located at mediabuilder.com (animationfactory.com and mediabuilder.com hereafter collectively, the “ Web site ”) (the Web site, the Content and all of the foregoing, hereafter collectively, the “ Business ”), upon the terms and subject to the conditions set forth in this Agreement (the “ Acquisition ”); and

 

WHEREAS, the Board of Directors of Parent has determined that it is in the best interests of Parent and Seller to sell all of the Purchased Assets to Buyer, upon the terms and subject to the conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.01 Definitions .

 

The following terms, as used herein, have the following meanings:

 

“ Acquisition ” is defined in the first recital of the preamble to this Agreement.

 

“ Affiliate ” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such other Person.

 

“ Allocation Statement ” is defined in Section 2.06(b) of this Agreement.

 

“ Ancillary Agreements ” is defined in Section 7.01 of this Agreement.

“ Apportioned Obligations ” is defined in Section 5.07(b) of this Agreement.

 

“ Assignment and Assumption Agreement and Bill of Sale ” means that certain Assignment and Assumption Agreement and Bill of Sale among Parent, Seller and Buyer in substantially the form attached hereto as Exhibit A .

 

“ Assumed Contracts ” means all contracts, agreements, leases, licenses, commitments, sales, purchase orders and other instruments listed on Schedule 2.01 .

 

“ Assumed Liabilities ” is defined in Section 2.03 of this Agreement.

 

“ Balance Sheet ” is defined in Section 3.17 of this Agreement.

 

“ Basket ” is defined in Section 8.03(c) of this Agreement.

 

“ Benefit Arrangement ” means an employment, severance or similar contract, arrangement or policy and each plan or arrangement providing for severance pay, life insurance or health care coverage (including any self-insured arrangements), flexible spending accounts or cafeteria benefit programs under Code Section 125, workers’ compensation, disability benefits, dependent care benefits, supplemental unemployment benefits, vacation benefits, pension or retirement benefits or providing for deferred compensation, profit-sharing, cash or stock bonuses, stock options, stock appreciation rights, stock purchase or other forms of incentive compensation or post-retirement life insurance, health care or disability coverage that (i) is not an Employee Plan and (ii) is maintained or contributed to by Seller or any of its ERISA Affiliates.

 

“ Business ” is defined in the first recital of the preamble to this Agreement.

 

“ Buyer ” is defined in the preamble to this Agreement.

 

“ Buyer Indemnified Parties ” is defined in Section 8.02(a) of this Agreement.

 

“ Cap ” is defined in Section 8.03(c) of this Agreement.

 

“ Cash Purchase Price ” is defined in Section 2.06 of this Agreement.

 

“ Change of Control ” means either: (i) the acquisition of Parent by another entity by means of any transaction or series of related transactions (including, without limitation, any purchase of stock, reorganization, merger or consolidation or stock transfer, but excluding any such transaction effected primarily for the purpose of changing the domicile of Parent), unless Parent’s stockholders of record immediately prior to such transaction or series of related transactions hold, immediately after such transaction or series of related transactions, at least 50% of the voting power of the surviving or acquiring entity (provided that the sale by Parent of its securities for the purposes of raising additional funds shall not constitute a Change of Control hereunder); or (ii) a sale of all or substantially all of the assets of Parent.

 

“ Closing ” is defined in Section 2.07 of this Agreement.

 

“ Closing Date ” means the date of the Closing.

 

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“ COBRA ” is defined in Section 2.04 of this Agreement.

 

“ Code ” means the Internal Revenue Code of 1986, as amended.

 

“ Confidentiality Agreement ” means the confidentiality agreement between Buyer and Parent, dated September 26, 2005.

 

“ Content ” is defined in the first recital of the preamble to this Agreement.

 

“ Contracts ” means all material contracts, agreements, leases, licenses, commitments, sales, purchase orders and other instruments primarily related to the Business or necessary for the operation of the Business as currently conducted by Parent and Seller or the ownership of the Purchased Assets.

 

“ Copyright ” is defined in Section 3.14(j) of this Agreement.

 

“ Copyright Assignment Agreement ” means that certain Copyright Assignment Agreement among Parent, Buyer and Seller in substantially the form attached hereto as Exhibit B .

 

“ Domain Name Assignment Agreement ” means that certain Copyright Assignment Agreement among Parent, Buyer and Seller in substantially the form attached hereto as Exhibit C .

 

“ Employee Plan ” means each “employee benefit plan” of Seller, as such term is defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA and (ii) is maintained or contributed to by either Seller or any of its ERISA Affiliates, as the case may be.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ ERISA Affiliate ” of any entity means any other entity that, together with such entity, would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code.

 

“ Escrow Agent ” means JPMorgan Chase Bank, N.A.

 

“ Escrow Agreement ” means the Escrow Agreement by and among Buyer, Parent, Seller and the Escrow Agent, dated as of the date hereof, in substantially the form attached hereto as Exhibit D .

 

“ Escrow Amount ” is defined in Section 2.06 of this Agreement.

 

“ Excluded Assets ” is defined in Section 2.02 of this Agreement.

 

“ Excluded Liabilities ” is defined in Section 2.04 of this Agreement.

 

“ Financial Statements ” is defined in Section 3.17 of this Agreement.

 

“ GAAP ” is defined in Section 3.17 of this Agreement.

 

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“ Indemnified Person ” is defined in Section 8.03 of this Agreement.

 

“ Indemnifying Person ” is defined in Section 8.03 of this Agreement.

 

“ Intellectual Property ” shall mean: (i) trademarks and service marks, logos, trade dress, product configurations, trade names and other indications of origin, applications or registrations in any jurisdiction pertaining to the foregoing and all goodwill associated therewith; (ii) inventions (whether or not patentable), discoveries, improvements, ideas, know-how, formula methodology, research and development, business methods, processes, technology, software (including password unprotected interpretive code or source code, object code, development documentation, programming tools, drawings, specifications and data) and applications or patents in any jurisdiction pertaining to the foregoing, including re-issues, continuations, divisions, continuations-in-part, renewals or extensions; (iii) trade secrets, including confidential information and the right in any jurisdiction to limit the use or disclosure thereof; (iv) copyrights in writings, designs, software, mask works or other works, applications or registrations in any jurisdiction for the foregoing and all moral rights related thereto; (v) database rights; (vi) Internet Web sites, Web pages, domain names and applications and registrations pertaining thereto and all intellectual property used in connection with or contained in all versions of the Company’s Web sites; (vii) all rights under agreements relating to the foregoing; (viii) books and records pertaining to the foregoing; and (ix) claims or causes of action arising out of or related to past, present or future infringement or misappropriation of the foregoing.

 

“ Intellectual Property Agreements ” means the Copyright Assignment Agreement, the Domain Name Assignment Agreement and the Trademark Assignment Agreement.

 

“ Knowledge ” means the knowledge of Ali Jenab, Kathleen R. McElwee, Jim Maloney and Art Holden.

 

“ Lien ” means, with respect to any asset, any mortgage, lien (including any tax lien), pledge, charge, security interest or encumbrance of any kind in respect of such asset.

 

“ Listed Intellectual Property ” is defined in Section 3.14(b) of this Agreement.

 

“ Losses ” is defined in Section 8.02 of this Agreement.

 

“ Material Adverse Effect ” means any change in or effect on the Business or the Purchased Assets that, individually or in the aggregate (taking into account all other such changes or effects), is materially adverse to the business, assets, condition (financial or otherwise) or results of operations of the Business or the Purchased Assets taken as a whole, in any such case, other than (i) effects resulting from adverse changes in the U.S. and applicable foreign economies generally and adverse changes in the industry in which Seller conducts the Business; (ii) effects resulting from the announcement or pendency of the transactions contemplated hereby; (iii) effects resulting from acts of war, terrorism, or other force majeure; (iv) effects resulting from Seller’s or Parent’s compliance with this Agreement (whether through affirmative acts or acts of omission); (v) changes in Parent’s stock price; (vi) Parent’s failure to meet published analyst’s expectations, estimates or projections, or Parent’s own internal financial expectations, estimates or projections; or (vii) stockholder litigation relating to the transactions contemplated hereby; provided , however , that with respect to (i) and (iii) such

 

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effects do not adversely affect the Business or the Purchased Assets, individually or in the aggregate, in a disproportionate manner relative to other persons or entities engaged in businesses similar to those of the Business.

 

“ Noncompetition Period ” is defined in Section 5.05 of this Agreement.

 

“ Parent ” is defined in the preamble to this Agreement.

 

“ Permits ” is defined in Section 3.11 of this Agreement.

 

“ Permitted Liens ” is defined in Section 3.06 of this Agreement.

 

“ Person ” means an individual, corporation, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

“ Post-Closing Tax Period ” is defined in Section 5.06(b) of this Agreement.

 

“ Pre-Closing Tax Period ” means (i) any Tax period ending on or before the Closing Date and (ii) with respect to a Tax period that commences before but ends after the Closing Date, the portion of such period up to and including the Closing Date.

 

“ Purchase Price ” is defined in Section 2.06 of this Agreement.

 

“ Purchased Assets ” means those assets, properties and rights defined in Section 2.01 of this Agreement.

 

“ Representatives ” means Parent’s, Seller’s or Buyer’s respective officers, directors, employees, accountants, counsel, consultants, advisors, agents and Affiliates.

 

“ Required Consent ” is defined in Section 3.04 of this Agreement.

 

“ Seller ” is defined in preamble to this Agreement.

 

“ Seller Indemnified Parties ” is defined in Section 8.02(b) of this Agreement.

 

“ Seller Intellectual Property ” is defined in Section 3.14 of this Agreement.

 

“ Software Programs ” is defined in Section 3.14 of this Agreement.

 

“ Tax ” means any federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, excise, natural resources, severance, stamp, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax, of any kind whatsoever, and including any interest, penalties or additions to tax.

 

“ Trademark ” is defined in Section 3.14(i) of this Agreement.

 

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“ Trademark Assignment Agreement ” means that certain Trademark Assignment Agreement among Parent, Buyer and Seller in substantially the form attached hereto as Exhibit E .

 

“ Transition Services Agreement ” means that certain Transition Services Agreement among Parent, Buyer and Seller in substantially the form attached hereto as Exhibit F .

 

“ Transferred Employees ” is defined in Section 6.01 of this Agreement.

 

“ Transfer Taxes ” is defined in Section 5.06(c) of this Agreement.

 

“ Web site ” is defined in the first recital of the preamble to this Agreement.

 

ARTICLE II

 

PURCHASE AND SALE

 

2.01 Purchase and Sale . On the terms and subject to the conditions of this Agreement, Seller and Parent, as the case may be, shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall purchase and accept from Seller and Parent, as the case may be, on the Closing Date, any and all right, title and interest of Seller or Parent, as the case may be, in and to any and all of the tangible and intangible assets of the Business (other than the Excluded Assets (as defined below)), including, without limitation, (a) the Intellectual Property, Content, Assumed Contracts and the Web site and (b) any images, customer lists, subscriber lists, prospect lists, e-mail lists, accounts receivable, traffic statistics and reports related primarily to the Business as of the Closing, including, without limitation, such items set forth on Schedule 2.01 (“ Purchased Assets ”), wherever such Purchased Assets may be located.

 

2.02 Excluded Assets . Buyer expressly understands and agrees that all assets, properties and rights of Seller or Parent not related primarily to the Business, including, but not limited to, those assets, properties and rights of Seller or Parent set forth on Schedule 2.02 (the “ Excluded Assets ”) shall be excluded from the Purchased Assets, including, without limitation, the following (to the extent not related primarily to the Business):

 

(i) all cash and cash equivalents (including all bank accounts), marketable securities and prepaid expenses;

 

(ii) all intercompany receivables, if any;

 

(iii) all corporate records (including minute books and stock ledgers), tax returns and financial records except to the extent related to the Business or Purchased Assets;

 

(iv) any Permits which may not be transferred without the consent, novation, waiver or approval of a third person or entity and for which such consent, novation, waiver or approval has not been obtained;

 

(v) all insurance policies;

 

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(vi) any refunds, credits, prepayments or overpayments with respect to Taxes paid or accrued by Seller or Parent; and

 

(vii) all assets of any Employee Plans and Benefit Arrangements.

 

2.03 Assumption of Liabilities . On the Closing Date, Buyer shall assume and agree to perform all the obligations of Seller or Parent, as the case may be, pursuant to the Assumed Contracts (other than liabilities or obligations attributable to any failure by Seller or Parent to comply with the terms thereof) or arising from the operation of the Business after the Closing (except for any Excluded Liabilities), including, without limitation, the deferred subscription liability set forth on Schedule 2.03 , but only to the extent such obligations pursuant to the Assumed Contracts relate to periods after the Closing Date (the “ Assumed Liabilities ”).

 

2.04 Excluded Liabilities . Buyer shall not assume any liabilities, other than the Assumed Liabilities including, without limitation, the following:

 

(i) any obligation or liability for Tax of Parent or Seller or any member of any consolidated, affiliated, combined or unitary group of which Seller is or has been a member, including any Taxes arising from the operation of the Business or ownership of Purchased Assets on or prior to the Closing Date; provided, however that Apportioned Obligations shall be paid in the manner set forth in Section 5.06;

 

(ii) any liabilities or obligations under any Employee Plans or Benefit Arrangements including, without limitation, bonus and accrued vacation for the Transferred Employees;

 

(iii) any liabilities arising prior to the Closing Date under Assumed Contracts included in the Purchased Assets except the deferred subscription liability set forth on Schedule 2.03 , which shall be an Assumed Liability;

 

(iv) any liabilities or obligations for continued health care coverage for any employees or other qualified beneficiaries under Code Section 4980B (“ COBRA ”) who have a qualifying COBRA event on or prior to the Closing Date;

 

(v) any liability or obligation relating to any action, suit, arbitration, investigation or proceeding pending against the Business or with respect to the Purchased Assets on or prior to the Closing Date; and

 

(vi) any liability or obligation relating to an Excluded Asset.

 

(collectively, the “ Excluded Assets ”)

 

2.05 Assignment of Assumed Contracts and Rights . Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Purchased Asset or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without consent of a third party thereto, would constitute a breach or other contravention thereof or in any way adversely affect the rights of Buyer, Parent or Seller thereunder. Parent and Seller will use their commercially reasonable

 

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efforts (but without any payment of money by Parent, Seller or Buyer) to obtain the consent of the other parties to the assignment of any such Purchased Asset or claim or right or any benefit arising thereunder for the assignment thereof to Buyer as Buyer may request. If such consent is not obtained, or if an attempted assignment thereof would be ineffective or would materially and adversely affect the rights of Buyer thereunder so that Buyer would not in fact receive all such rights, Parent, Seller and Buyer will cooperate in a mutually agreeable arrangement under which Buyer would obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including, without limitation, subcontracting, sub-licensing, or subleasing to Buyer, or under which Parent or Seller would enforce for the benefit of Buyer, with Buyer assuming either Parent’s or Seller’s obligations, any and all rights of Parent or Seller against a third party thereto. Parent or Seller, as the case may be, will promptly pay to Buyer when received all monies received by Parent or Seller under any Purchased Asset or any claim or right or any benefit arising thereunder, except to the extent the same represents an Excluded Asset. Notwithstanding the foregoing, to the extent that such rights and benefits have not been provided to Buyer by alternate arrangements satisfactory to Buyer, in its sole discretion, Buyer, Parent and Seller shall negotiate in good faith for a downward adjustment to the Purchase Price paid by Buyer for the Purchased Assets.

 

2.06 Purchase Price; Allocation of Purchase Price .

 

(a) The purchase price for the Purchased Assets (the “ Purchase Price ”) shall be nine million three hundred and fifty thousand dollars ($9,350,000) (“ Cash Purchase Price ”) and the assumption of the Assumed Liabilities. The Cash Purchase Price shall be paid as follows: (i) eight million four hundred and fifteen thousand dollars ($8,415,000) upon Closing; and (ii) nine hundred and thirty-five thousand ($935,000) (“ Escrow Amount ”) shall be paid to the Escrow Agent on Closing and held in escrow in accordance with the Escrow Agreement.

 

(b) As soon as practicable after the Closing, Buyer shall deliver to Seller a statement (the “ Allocation Statement ”), allocating the Purchase Price (less those Assumed Liabilities not required to be taken into account under Section 1060 of the Code) among the Purchased Assets in accordance with Section 1060 of the Code. If within ten days after the delivery of the Allocation Statement Seller notifies Buyer in writing that Seller objects to the allocation set forth in the Allocation Statement, Buyer and Seller shall use commercially reasonable efforts to resolve such dispute within twenty days. In the event that Buyer and Seller are unable to resolve such dispute within twenty days, Buyer and Seller shall jointly retain a nationally recognized accounting firm (the “ Accounting Referee ”) to resolve the disputed items. Upon resolution of the disputed items, the allocation reflected on the Allocation Statement shall be adjusted to reflect such resolution. The costs, fees and expenses of the Accounting Referee shall be borne equally by Buyer and Seller.

 

(c) Seller and Buyer agree to (i) be bound by the Allocation Statement and (ii) act in accordance with the Allocation Statement in the preparation, filing and audit of any Tax return (including filing Form 8594 with its federal income Tax return for the taxable year that includes the date of the Closing).

 

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2.07 Closing . The closing (the “ Closing ”) of the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities hereunder shall take place at the offices of Buyer, 23 Old Kings Highway South, Darien, CT 06820 on the date hereof (the “ Closing Date ”).

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER

 

Parent and Seller hereby jointly, and severally, represent and warrant to Buyer, subject to the exceptions specifically disclosed in writing in the corresponding sections or subsections of Seller’s disclosure schedules or in any other section or subsection of Seller’s disclosure schedules if it is reasonably apparent that such disclosure applies, that as of the date hereof:

 

3.01 Organization and Qualification . Each of Parent and Seller has been duly organized and is validly existing and in good standing under the laws of its respective jurisdiction of incorporation and has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted.

 

3.02 Corporate Authorization . The execution, delivery and performance by Parent or Seller of this Agreement and each of the Ancillary Agreements to which it is a party, and the consummation by Parent and Seller of the transactions contemplated hereby and thereby are within Parent’s or Seller’s respective corporate powers and have been duly authorized by all necessary corporate action on the part of Seller or Parent, as the case may be. This Agreement and each of the Ancillary Agreements to which either Parent or Seller is a party have been duly executed and delivered by Parent or Seller, as the case may be, and constitute valid and binding agreements of Seller and Parent, as the case may be, enforceable against Seller or Parent, as the case may be, in accordance with their respective terms.

 

3.03 Non-Contravention . The execution, delivery and performance by Parent or Seller of this Agreement and each of the Ancillary Agreements to which Seller or Parent is a party do not and will not: (i) contravene or conflict with the corporate charter or bylaws of Parent or Seller; (ii) contravene or conflict with or constitute a violation of any provision of any law or regulation, judgment, injunction, order or decree binding upon or applicable to Parent, Seller, the Business or the Purchased Assets; or (iii) result in the creation or imposition of any Lien on any Purchased Asset, other than Permitted Liens.

 

3.04 Required Consents . Schedule 3.04 sets forth each Assumed Contract or Permit requiring a consent, waiver, authorization or approval as a result of the execution, delivery and performance of this Agreement or the Ancillary Agreements or the consummation of the transactions contemplated hereby and thereby (each such consent, a “ Required Consent ”).

 

3.05 Absence of Certain Changes . Since July 31, 2005, Seller and Parent have conducted the Business in the ordinary course consistent with past practices, and, except as set forth on Schedule 3.05 hereto:

 

(a) neither Parent nor Seller has entered into any material transaction or incurred any material liability or obligation with respect to the Business or the Purchased Assets other than in the ordinary course of business consistent with past practice; and

 

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(b) there has not been any material adverse change in the Purchased Assets or the condition (financial or otherwise) of the Business.

 

3.06 Personal Property .

 

(a) As of the date hereof, the Purchased Assets include, but are not limited to, all of the personal property used primarily in the Business, including, without limitation, any machinery, equipment, furniture, inventory, servers, computers, software, spare and replacement parts, trade fixtures and fixed assets.

 

(b) As of the date hereof, the equipment included in the Purchased Assets has no material defects, is in good operating condition and repair, has been reasonably maintained consistent with standards generally followed in the industry (giving due account to the age and length of use of same, ordinary wear and tear excepted) and is suitable for its present uses in connection with the Business.

 

(c) No Purchased Asset is subject to any Lien, except for the following (collectively, the “ Permitted Liens ”):

 

(i) liens for Taxes not yet due and payable or being contested in good faith;

 

(ii) liens for inchoate mechanics’ and materialmen’s liens for construction in progress and workmen’s, repairmen’s, warehousemen’s and carriers’ liens arising in the ordinary course of the Business; or

 

(iii) liens and imperfections of title the existence of which would not materially adversely affect the use of the property subject thereto.

 

3.07 Sufficiency of Purchased Assets; Operation of Business . The Purchased Assets, together with the rights provided under the Ancillary Agreements, constitute, and on the Closing Date will constitute, all of the assets, properties and rights necessary, and are sufficient, to conduct the Business in all material respects as currently conducted by Seller or Parent.

 

3.08 Title to Purchased Assets . Upon consummation of the transactions contemplated hereby, Buyer will have acquired good and marketable title in and to, or a valid leasehold interest in (to the extent not owned by Parent or Seller prior to the Closing Date), each of the Purchased Assets, free and clear of all Liens, except for Permitted Liens.

 

3.09 Litigation . There is no action, suit, arbitration, investigation or proceeding pending against or, to Seller’s or Parent’s Knowledge, threatened against or affecting the Business or any Purchased Asset before any court or arbitrator or any governmental body, agency or official.

 

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3.10 Contracts .

 

(a) Except for the Contracts disclosed in Schedule 3.10 , neither Parent nor Seller is a party to or subject to any of the following Contracts:

 

(i) any real property lease;

 

(ii) any contract for the purchase of materials, supplies, goods, services, equipment or other assets providing for annual payments by Parent or Seller or pursuant to which in the last year Parent or Seller paid in the aggregate $15,000 or more;

 

(iii) any sales, distribution or other similar agreement providing for the sale by Parent or Seller of materials, supplies, goods, services, equipment or other assets that provides for annual payments to Parent or Seller of, or pursuant to which in the last year either Parent or Seller or any Affiliate thereof received in the aggregate, $15,000 or more;

 

(iv) any partnership, joint venture or other similar contract arrangement or agreement;

 

(v) any contract relating to indebtedness for borrowed money or the deferred purchase price of property (whether incurred, assumed, guaranteed or secured by an asset) entered into other than in the ordinary course of business consistent with past practices;

 

(vi) any material license agreement, franchise agreement or agreement in respect of similar rights granted to or held by Parent or Seller;

 

(vii) any agency, dealer, sales representative or other similar agreement;

 

(viii) any agreement, contract or commitment that substantially limits the freedom of Parent or Seller to compete in any line of business including, without limitation, the Business, or with any Person or in any area or to own, operate, sell, transfer, pledge or otherwise dispose of or encumber any Purchased Asset or that would so limit the freedom of Buyer after the Closing Date;

 

(ix) any image production, work for hire or similar image or content production agreement; or

 

(x) any other contract not made in the ordinary course of business consistent with past practice which is material to the Business and relates primarily to the Purchased Assets.

 

(b) Each Contract required to be disclosed pursuant to Section 3.10 is a valid and binding agreement of Seller or Parent, as the case may be, and is in full force and effect, and neither Seller nor Parent, nor to the Knowledge of Seller or Parent, is any other party thereto in default in any material respect under the terms of any such Contract, nor, to the Knowledge of Seller or Parent, has any event or circumstance occurred that, with notice or lapse of time or both, would constitute any material event of default thereunder.

 

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3.11 Licenses and Permits . Seller possesses all material permits, licenses and approvals necessary or used primarily in order to carry on the Business or own the Purchased Assets (the “ Permits ”). Schedule 3.11 hereto sets forth all Permits. Except as set forth on Schedule 3.11 hereto, Seller is in compliance in all material respects with all Permits; there are no proceedings pending or, to the Knowledge of Seller and Parent, threatened, to revoke, suspend, cancel or modify any Permit and all such Permits may be assigned to Buyer as contemplated hereby without the consent of the issuing authority.

 

3.12 Compliance with Laws . Seller is not in violation in any respect of any material applicable law, regulation, ordinance, order or any other requirement of any governmental body or court (including, without limitation, matters relating to securities, loans, employment and improper payments), and no notice has been received by Parent or Seller or any of their respective officers or directors alleging any such violation.

 

3.13 Receivables . All accounts, notes receivable and other receivables included in the Purchased Assets are, and