This Asset Purchase Agreement (this
“ Agreement ”) is made and entered into
as of September 22, 2009 (the “ Agreement
Date ”), by and between ARRIS Group, Inc., a Delaware
corporation (“ Buyer ”), Digeo, Inc., a
Delaware corporation (“ Seller ”) and
Vulcan Ventures Inc., a Washington corporation (“
Vulcan ” and, together with Seller, the “
Seller Parties ”).
A. The Board of
Directors of Seller has determined that it would be advisable and
in the best interests of Seller and its stockholders that Buyer
purchase from Seller, and Seller sell, transfer and assign (or
cause to be sold, transferred and assigned) to Buyer, certain of
the assets of Seller, all on the terms set forth herein (the
“ Asset Purchase ”), and, in furtherance
thereof, has approved the Asset Purchase and the other transactions
contemplated by this Agreement.
B. Vulcan is
the majority stockholder of Seller and as of the date hereof is
entering into the Patent Purchase Agreement (as defined herein)
with Buyer for the sale by Vulcan to Buyer of certain patent
applications, patents, and/or related foreign patents and
applications.
C. The Seller
Parties and Buyer desire to make certain representations,
warranties, covenants and other agreements in connection with the
Asset Purchase as set forth herein.
NOW, THEREFORE, in
consideration of the representations, warranties, covenants and
other agreements contained 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
PURCHASE AND SALE
1.1 Certain
Definitions . As used in this Agreement, the following terms
shall have the meanings indicated below:
“
Action ” means any claim, action, suit,
litigation, arbitration or proceeding by or before any Governmental
Entity or arbitrator.
“
Adverse Consequence ” means all Orders,
damages, dues, penalties, fines, costs, amounts paid in settlement,
Liabilities, Taxes, interest, Encumbrances, losses, expenses and
fees, including all reasonable accounting, consultant and
attorneys’ fees and court costs, costs of expert witnesses
and other expenses of litigation.
“
Affiliate ” has the meaning set forth in
Rule 145 promulgated under the Securities Act.
“
Ancillary Agreements ” means all agreements and
documents executed in connection with this Agreement and the
transactions contemplated hereby, including the Patent Purchase
Agreement.
“
Assigned Patent Rights ” has the meaning set
forth in the Patent Purchase Agreement.
“
Authority ” means any governmental, regulatory
or administrative body, agency or authority, any court of judicial
authority, any arbitrator or any public, private or industry
regulatory authority, in each case, whether foreign, federal, state
or local.
“
Business ” means the business of Seller and the
Seller Subsidiaries relating to media center products, including
set-top boxes, interactive program guides and related features, and
services, including TV portal services and all design, manufacture,
commercialization and promotional efforts related
thereto.
“
Business Day ” means a day (a) other than
Saturday or Sunday and (b) on which commercial banks are open
for business in Seattle, Washington.
“
Code ” means the Internal Revenue Code of 1986,
as amended.
“
Contract ” means any written legally binding
contract, instrument, commitment, lease, sublease, arrangement,
undertaking or other agreement as of the date hereof or as may
hereafter be in effect.
“
Deferred Payment ” means $4,000,000 withheld
from the Patent Purchase Price (as defined in the Patent Purchase
Agreement).
“
Digeo Interactive ” means Digeo Interactive,
LLC, a Delaware limited liability company.
“
Employee Benefit Plan ” means any benefit or
compensation plan, policy, agreement or arrangement that is an
“employee benefit plan” within the meaning of
Section 3(3) of ERISA, and any other written or oral plan,
policy, agreement or arrangement (whether or not subject to ERISA)
involving direct or indirect compensation, including health,
dental, vision or life insurance coverage, vacation, loans, fringe
benefits, severance benefits, unemployment benefits, change in
control plans or agreements, disability benefits, retirement
income, deferred compensation, bonuses, stock options, stock
ownership or purchase, phantom stock, stock appreciation, stock
based or other forms of incentive compensation, bonus or
post-retirement compensation or benefits.
“
Employees ” means all employees of Seller and
the Seller Subsidiaries immediately before the Closing.
“
Encumbrance ” means any lien (statutory or
otherwise), pledge, mortgage, easement, encroachment, right of
possession, lease, security interest, encumbrance, preference,
priority or security agreement of any kind or nature whatsoever
(including the interest of a vendor or lessor under any conditional
sale, capitalized lease or other title retention agreement) or
other restriction on transfer, except for: (i) liens or other
imperfections of title that would not be reasonably likely to,
individually or in the aggregate, materially impair the value of,
or the ability to sell or license, the Purchased Assets;
(ii) liens and encumbrances for Taxes, assessments or other
government charges not yet due or which are being contested in good
faith; (iii) vendor’s liens related to the accounts
payable assumed by Buyer pursuant to Section 1.4(i) not
exceeding the unpaid purchase price of the encumbered asset; and
(iv) non-exclusive licenses and agreements entered into in the
ordinary course of business.
“
ERISA ” means the Employee Retirement Income
Security Act of 1974, as amended.
“
ERISA Affiliate ” means any other entity that,
together with Seller or any Seller Subsidiary, is treated as a
single employer under Section 414(b), (c), (m) or
(o) of the Code.
“
GAAP ” means generally accepted accounting
principles in the United States consistently applied.
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“
Governmental Entity ” means any national,
state, local or foreign government, any court, tribunal,
administrative agency, commission or other governmental official,
authority or instrumentality, in each case whether domestic or
foreign.
“
Indebtedness ” means all (a) indebtedness
for borrowed money or for the deferred purchase price of property
or services (including reimbursement and all other obligations with
respect to surety bonds, letters of credit and bankers’
acceptances, whether or not matured), including the current portion
of such indebtedness, (b) obligations evidenced by notes,
bonds, debentures or similar instruments or by letters of credit or
similar arrangements relating to Seller or the Seller Subsidiaries,
including purchase money obligations or other obligations relating
to the deferred purchase price of property (other than trade
payables incurred in the ordinary course of business),
(c) capital lease obligations, (d) obligations under
direct or indirect guaranties in respect of Liabilities of others,
(e) obligations in respect of outstanding or unpaid checks or
drafts or overdraft obligations and (f) accrued interest,
prepayment premiums or penalties related to any of the
foregoing.
“
Intellectual Property Rights ” means worldwide
industrial and intellectual property rights and all rights
associated therewith, including: all patents and patent
applications and all reissues, divisions, renewals, reexaminations,
extensions, provisionals, continuations and continuations-in-part
thereof and similar or equivalent rights in inventions and
discoveries; all inventions (whether patentable or not),
discoveries, invention disclosures, improvements, trade secrets,
rights in proprietary information, and know how; all trade names,
corporate names, fictitious names, brand names, product names,
common law trademarks and service marks, trademark and service mark
registrations and applications therefor, trade dress, logos,
symbols, slogans, internet domain names, and all goodwill
associated therewith and/or symbolized thereby; all works of
authorship, copyrights, copyright registrations, renewals, and
applications therefor; all computer programs, systems,
applications, and software, including all source code, object code,
firmware, and development tools; all designs, schematics,
specifications, manufacturing and other processes, and rights in
prototypes and other products; all websites and all designs related
thereto; all databases and data collections, including customer and
supplier lists, and all rights therein; all moral and economic
rights of authors and inventors, however denominated; any similar
or equivalent rights to any of the foregoing; and the right to sue
for past, present, and future infringement of any or all of the
foregoing.
“
IRS ” means the Internal Revenue
Service.
“
knowledge ” means, with respect to any fact,
circumstance, event or other matter in question, the actual
knowledge of such fact, circumstance, event or other matter of the
executive officers of Seller and the Seller Subsidiaries (with
respect to Seller) set forth on Schedule 1.1 (i) hereto
and with respect to Vulcan, those individuals set forth on
Schedule 1.1(ii) hereto.
“
Legal Requirements ” means any federal, state,
foreign, local, municipal or other law, statute, constitution,
principle of common law, Order, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issued, enacted,
adopted, promulgated, implemented or otherwise put into effect by
or under the authority of any Governmental Entity, including any
Environmental, Health, and Safety Requirement.
“
Liability ” means any obligation or liability,
including any liability for Taxes.
“
Material Adverse Effect ” means an effect that
is or could reasonably be expected to (a) be materially
adverse to the assets, liabilities, condition (financial or
otherwise), results of operation or the Purchased Assets, taken as
a whole, or (b) materially impair or delay the consummation of
the transactions contemplated hereby, except to the extent
that any such effect results from: (i) changes in
3
general
economic conditions (provided that such changes do not affect
Seller in a substantially disproportionate manner),
(ii) changes affecting the industry generally in which Seller
operates (provided that such changes do not affect Seller in a
substantially disproportionate manner), (iii) acts of God, or
acts of war, terrorism, violence or other political events,
(iv) changes in applicable laws or accounting principles after
the date hereof, (v) any failure by Seller to meet internal
projections or forecasts or revenue or earnings predictions for any
period ending on or after the date hereof, (vi) the
announcement or pendency of the Asset Purchase (including any
cancellation of or delays in customer orders, any reduction in
sales, any disruption in supplier, distributor, partner or similar
relationships), (vii) continued incurred losses or
(viii) compliance with the terms of, or the taking of any
action required by, this Agreement.
“
Moxi ” means Moxi Digital, Inc., a California
corporation.
“
Order ” means any decree, order, judgment,
writ, award, injunction, stipulation or consent of or by any
Governmental Entity.
“
Permit ” means any franchise, grant,
authorization, license, certification, permit, easement, variance,
exception, consent, certificate, approval and order of any
Governmental Entity.
“
Person ” means any natural person, company,
corporation, limited liability company, general partnership,
limited partnership, trust, proprietorship, joint venture, business
organization or Governmental Entity.
“
Post-Closing Taxes ” means any Taxes (other
than Transfer Taxes) for any period (or portion thereof) beginning
on or after the Closing Date and any portion of a Straddle Tax
Period beginning after the Closing Date that relate to, or are
incurred with respect to, the Business, a Purchased Asset, an
Assumed Liability, or any employee of Buyer (including any
Transferred Employee).
“
Pre-Closing Taxes ” means any Taxes (other than
Transfer Taxes) for any period (or portion thereof) ending on or
before the Closing Date that relate to, or are incurred with
respect to, the Business, a Purchased Asset, an Assumed Liability,
or any employee of Seller or any Seller Subsidiary (including any
Transferred Employee), whether accrued on, before or after the
Closing Date.
“
Securities Act ” means the Securities Act of
1933, as amended.
“
Seller Plan ” means each Employee Benefit Plan
currently maintained or contributed to by Seller, any Seller
Subsidiary or any ERISA Affiliate, or in respect of which Seller,
any Seller Subsidiary or any ERISA Affiliate has or may have any
Liability, and covering current or former employees, independent
contractors, consultants, temporary employees and current or former
directors of Seller or any Seller Subsidiary.
“
Seller Subsidiary ” means each Subsidiary of
Seller.
“
Seller Net Working Capital ” means (A) the
sum of Seller’s (i) accounts receivable and (ii)
inventory less (B) the sum of (i) Seller’s
accounts payable (excluding up to $1,000,000 in accounts payable,
which Seller shall be permitted to retain) and (ii) accrued
expenses (each, as defined by and determined in accordance with
GAAP), in the form set forth on Schedule 1.1 (iii)
hereto.
“
Seller Net Working Capital Certificate ” means
a certificate executed by the Chief Executive Officer of the Seller
dated as of the Closing Date, certifying the amount of Seller Net
Working Capital as of the Closing Date (including (i) an
itemized list of each element of the Seller’s
accounts
4
receivable and
inventory, and (ii) an itemized list of each element of the
Seller’s accounts payable and accrued expenses).
“
Straddle Tax Period ” shall mean any Tax period
which includes, but does not end on, the Closing Date.
“
Subsidiary ” of a specified entity means any
corporation, association, business entity, partnership, limited
liability company or other Person of which the specified entity,
either alone or together with one or more Subsidiaries or by one or
more other Subsidiaries directly or indirectly owns or controls
securities or other interests representing more than fifty percent
(50%) of the voting power of such Person.
“
Tax ” (and, with correlative meaning, “
Taxes ” and “ Taxable
”) means (i) all taxes, charges, fees, duties (including
custom duties), levies, or other assessments, including, any net
income, alternative or add-on minimum tax, gross income, estimated,
net or gross receipts, sales, use, ad valorem, value added,
transfer, franchise, capital stock, profits, license, registration,
withholding, payroll, social security (or equivalent), employment,
unemployment, disability, excise, severance, stamp, capital gains,
net or gross proceeds, real property, personal property (whether
tangible or intangible), gaming, capital, lease, occupational,
equalization, environmental, or other taxes, charges or fees
assessed by any Governmental Entity, including any interest,
penalties, or additions to tax attributable thereto; and
(ii) any liability for the payment of amounts with respect to
payments of a type described in clause (i) as a result of
being a member of an affiliated, consolidated, combined or unitary
group, or as a result of any obligation under any tax sharing
arrangement or tax indemnity agreement.
“
Tax Return ” means any return, statement,
report or form (including estimated Tax returns and reports,
withholding Tax returns and reports, any schedule or attachment,
and information returns and reports) required to be filed or
supplied to a third party with respect to Taxes.
“
Total Consideration ” means the Purchase Price
plus the Patent Purchase Price (as defined in the Patent
Purchase Agreement).
“
Transferred Employee ” means any Employee of
Seller or a Seller Subsidiary who accepts employment with Buyer and
commences such employment at Closing.
1.2 Purchase
and Sale . Upon the terms and subject to the conditions of this
Agreement, Buyer agrees to purchase from Seller and the Seller
Subsidiaries, and Seller agrees to, and to cause the Seller
Subsidiaries to, sell, transfer, convey, assign and deliver to
Buyer at the Closing (as defined in Section 1.8 ), free
and clear of all Encumbrances, the following assets, rights and
properties of Seller and the Seller Subsidiaries, whether tangible
or intangible, real, personal or mixed, wherever located, and
whether or not carried and reflected on the books of Seller and the
Seller Subsidiaries relating to, used or employed in connection
with the Business (collectively, the “ Purchased
Assets ”):
(ii) all
of the rights to and interest of Seller and each Seller Subsidiary
in Intellectual Property Rights, including the Seller Registered
Intellectual Property Rights;
(iii) all
rights of Seller and each Seller Subsidiary under those Contracts
set forth on Schedule 1.2(iii) (the “
Assigned Contracts ”);
5
(iv) all
computers, equipment, furniture and other tangible assets of Seller
and the Seller Subsidiaries;
(v) Seller’s
rights to and interest in those patents set forth on
Schedule 1.2(v) (the “ IPDN Patents
”);
(vi) all
accounts receivable;
(vii) except
as set forth in Section 1.3(i) and on
Schedule 1.3(iii) , all cash and cash equivalents on
hand, in banks or in transit and any and all marketable
securities;
(viii) all
inventory, consumable supplies, spare parts and repair materials
and any and all other inventories of Seller and the Seller
Subsidiaries (“ ¤!Inventories
”);
(ix) the
goodwill associated with the Purchased Assets;
(x) all
transferable Permits;
(xi) all
of the right, title and interest of Seller and each Seller
Subsidiary in choses in action, claims and causes of action or
rights of recovery or set-off of every kind and character, whether
mature, contingent or otherwise, whether in tort, contract or
otherwise, including under or pursuant to warranties,
representations and guarantees made by manufacturers, suppliers,
vendor or other Persons, in each case only to the extent they are
not related to the Excluded Assets or the Excluded Liabilities;
and
(xii) rights
to the names “Digeo” and “Moxi” and all
derivatives thereof and all trademarks related thereto.
1.3 Excluded
Assets . For the avoidance of doubt, Seller and the Seller
Subsidiaries shall retain and not sell, assign, transfer or
deliver, and Buyer shall not purchase, acquire, or have any
ownership claim of right in respect of the following assets
(collectively, the “ Excluded Assets ”)
of Seller and the Seller Subsidiaries:
(i) (A)
$1,000,000 in restricted cash related to the Letter of Credit,
dated as of December 5, 2007, as amended, between Digeo
Interactive and Unihan Corporation and (B) restricted cash
related to the letter of credit issued in connection with the lease
between Seller and University Ave. Real, LLC for the property
located at 151 University Avenue, Palo Alto, California;
(ii) all
Contracts other than the Assigned Contracts;
(iii) the
rights, assets and properties described in
Schedule 1.3(iii) under the heading “Excluded
Assets”;
(iv) Seller
and the Seller Subsidiaries’ seals, if any, minute books and
corporate record books, the general ledgers and books of original
entry, all income Tax Returns and other income Tax
records;
(v) All
refunds, rights of recovery and other rights relating to Taxes of
the Seller and the Seller Subsidiaries;
6
(vi) All
deferred Tax assets or Tax attributes of Seller and the Seller
Subsidiaries (including net operating losses);
(vii) Seller’s
rights under this Agreement; and
(viii) any
stock, partnership interest, joint venture interest or other equity
interest in any Person.
1.4 Assumed
Liabilities . As additional consideration for the Purchased
Assets, Buyer does hereby assume, agree to perform, and in due
course pay and discharge, only the following obligations and
liabilities of Seller and the Seller Subsidiaries and only to the
extent such obligations and liabilities are not overdue or
delinquent on the Closing Date without regard to any grace period
and without the incurrence of any increase in amounts due
(collectively, the “ Assumed Liabilities
”):
(i) except
as set forth in Section 1.5(i) , accounts payable as of
the Closing Date as set forth on the Seller Net Working Capital
Certificate;
(ii) accrued
expenses as of the Closing Date as set forth on the Seller Net
Working Capital Certificate;
(iii) the
liabilities of Seller and the Seller Subsidiaries as set forth on
Schedule 1.4(iii) , including accrued vacation of
Transferred Employees;
(iv) the
obligations and liabilities of Seller and the Seller Subsidiaries
under the Assigned Contracts (but only to the extent such
obligations and liabilities relate to contractual rights whose
benefits accrue to Buyer from and after the Closing and are not
attributable to any breach or default by Seller or any Seller
Subsidiary and excluding any liabilities thereunder arising prior
to the Closing Date and not expressly assumed
hereunder);
(v) the
liabilities identified in Section 1.6 for which Buyer
agrees therein to be responsible; and
(vi) any
Post-Closing Taxes or Taxes for which Buyer is liable pursuant to
Section 4.7 .
1.5 Excluded
Liabilities . Buyer shall not assume or pay and Seller and the
Seller Subsidiaries shall continue to be responsible for all
Liabilities of Seller and the Seller Subsidiaries, whether or not
relating to the Business, not expressly assumed by Buyer pursuant
to Section 1.4 (the “ Excluded
Liabilities ”). Specifically, without limiting the
foregoing, Buyer shall not assume:
(i) up
to $1,000,000 in accounts payable to be mutually agreed to between
Buyer and Seller as of the Closing Date, and to be set forth on the
Seller Net Working Capital Certificate;
(ii) any
claim, action, suit or proceeding pending or threatened against
Seller or any Seller Subsidiary as of the Closing Date,
notwithstanding the disclosure thereof in the Seller Disclosure
Letter or otherwise, or any subsequent claim, action, suit or
proceeding arising out of or relating to such pending matters, any
other similar event occurring on or prior to the Closing Date or
resulting from the conduct of the Business by Seller or any Seller
Subsidiary on or prior to the Closing Date;
(iii) any
Liability arising out of or relating to the Excluded
Assets;
7
(iv) any
Pre-Closing Taxes or Taxes for which Seller is liable pursuant to
Section 4.7 ;
(v) any
Liability arising from claims, proceedings or causes of action
resulting from property damage or personal injuries (including
death) caused by inventory sold, products manufactured or services
rendered by Seller, any Seller Subsidiary or the Business on or
prior to the Closing Date;
(vi) any
Liability arising from product liability claims, with respect to
products, materials or services manufactured, sold, performed or
shipped by Seller, any Seller Subsidiary or the Business on or
prior to the Closing Date;
(vii) any
Liability relating to the violation of or failure to comply with
any Legal Requirement in connection with the operation of the
Business, or the condition of the Purchased Assets, prior to the
Closing;
(viii) any
Liability with respect to deferred salary, salary, wages,
severance, bonus, compensation or any other labor or employment
Liability of Seller or any Seller Subsidiary, including any
Liability of Seller or any Seller Subsidiary with respect to any
Seller Plan or other Liability of Seller or any Seller Subsidiary
related to ERISA, but excluding any coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended (“
COBRA ”) or similar state law for qualified
“M&A qualified beneficiary,” as more fully set
forth in Section 4.10(c) ; and
(ix) any
Indebtedness of Seller or any Seller Subsidiary.
1.6 Proration
of Expenses and Prepaid Amounts.
(a) The
following items that relate to the Purchased Assets shall be
prorated as of the Closing Date, with Seller and the Seller
Subsidiaries paying and being responsible for and receiving the
benefit of such items to the extent they relate to the period
ending immediately prior to the Closing and Buyer paying and being
responsible for and receiving the benefits of such items to the
extent they relate to periods from and after the Closing
Date:
(i) payments
and other charges due under the Assigned Contracts;
(ii) personal
property taxes; and
(iii) periodically
recurring governmental fees for Permits transferred to
Buyer.
(b) Within
90 days after the Closing Date, Buyer and the Seller Parties
shall give notice to the other of the payment, receipt and
allocation of any of the items described in Section 1.6(a)
and the Seller Parties shall reimburse Buyer, or Buyer shall
reimburse the Seller Parties, as the case may be, the net amount
owed to the other. Seller, the Seller Subsidiaries and Buyer shall
cooperate and provide each other with all supporting documentation
reasonably requested by the other party with respect to the
proration required by this Section 1.6 .
(c) If
Buyer or any Seller Party objects in writing to the proration of
expenses and prepaid amounts set forth in any notice given pursuant
to Section 1.6(b) , the parties shall attempt to
resolve the dispute in good faith for twenty (20) Business
Days after the other party’s receipt of such
objection.
8
(d) If
no resolution is reached, the dispute shall be resolved in
accordance with the provisions of Section 8.9
.
1.7 Assignment
of Contracts and Rights .
(a) 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 or
waiver of a third party thereto or any third party (including any
Authority), would constitute a breach or other contravention
thereof, would constitute a violation of any Legal Requirement or
Order or in any way adversely affect the rights of Buyer, Seller,
or any Seller Subsidiary thereunder. Prior and subsequent to the
Closing, Seller and each Seller Subsidiary shall use their
commercially reasonable efforts (but without any payment of money
by Seller), and Buyer shall cooperate with Seller and each Seller
Subsidiary, to obtain any consents or waivers to the sale or
assignment of any such Purchased Asset or claim or right or any
benefit arising thereunder for the assignment thereof to Buyer.
With respect to any Assigned Contract that requires Buyer, as
assignee, to accept and agree to be bound by all of the existing
terms and conditions of such Assigned Contract, or contains a
similar requirement, Buyer shall so accept and agree as required by
such Assigned Contract.
(b) To
the extent, and for so long as, any such consents and waivers are
not obtained with respect to any Purchased Asset or any claim or
right or any benefit arising thereunder or resulting therefrom,
this Agreement, to the extent permitted by applicable Legal
Requirement, shall constitute an equitable assignment by Seller or
a Seller Subsidiary, as the case may be, to Buyer of all of
Seller’s or such Seller Subsidiaries’, as the case may
be, rights, benefits, title and interest in, to and under such
Purchased Asset or any claim or right or any benefit arising
thereunder or resulting therefrom and Buyer shall be deemed to be
Seller’s or such Seller Subsidiaries’, as the case may
be, agent for the purpose of completing, fulfilling and discharging
all of Seller’s or such Seller Subsidiaries’, as the
case may be, rights and liabilities under such Purchased Asset or
any claim or right or any benefit arising thereunder or resulting
therefrom arising after the Closing, and Seller or such Seller
Subsidiary, as the case may be, shall take all actions necessary to
provide to Buyer the benefits of such Purchased Asset or any claim
or right or any benefit arising thereunder or resulting therefrom.
The Seller Parties shall hold all Buyer Indemnitees harmless from
any Adverse Consequences that directly result from Seller’s
or such Seller Subsidiaries’ failure to obtain any required
consent to assignment of a Purchased Asset or any claim or right or
any benefit arising thereunder or resulting therefrom.
(c) Nothing
in this Section 1.7 shall be deemed a waiver by Buyer
of its right to have received on or before the Closing an effective
assignment of all of the Purchased Assets, nor shall this
Section 1.7 be deemed to constitute an agreement to
exclude from the Purchased Assets any assets described in the
definition of Purchased Assets in Section 1.2
.
1.8 Closing
. The Closing of the transactions contemplated hereby (the “
Closing ”) shall take place at a time and date
to be specified by the parties as soon as practicable after the
satisfaction or waiver of each of the conditions set forth in
Article V (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions), via exchange of
signatures by nationally recognized overnight courier, facsimile
and/or .pdf. The date on which the Closing actually occurs is
herein sometimes referred to as the “ Closing
Date .”
(a)
Purchase Price . In addition to the payment in the amount of
$1,500,000 (the “ Deposit Amount ”) made
by Buyer to Seller pursuant to that certain Letter of Intent, dated
September 4,
9
2009, between
Buyer and Seller, which Deposit Amount Buyer shall forfeit if the
Asset Purchase is not consummated on or before October 19,
2009, on the terms and subject to the conditions set forth in this
Agreement, in consideration for the Purchased Assets, Buyer shall
pay to Seller by check or wire transfer of immediately available
funds an amount equal to $5,000,000 plus the sum of
(A) the amount, if any, by which the Seller Net Working
Capital as of the Closing Date exceeds the Seller Net Working
Capital as of June 30, 2009 as set forth on Schedule
1.1(iii) hereto and (B) the aggregate amount of additional
funding provided by Vulcan to Seller between October 1, 2009
and the Closing Date (collectively, the “ Closing
Payment ”) (the Closing Payment, together with the
Deposit Amount are hereinafter referred to collectively as the
“ Purchase Price ”).
(b)
Allocation of Purchase Price . Within 90 days of the
Closing Date, Buyer and Seller shall in good faith mutually agree
upon a schedule allocating the Purchase Price (and Assumed
Liabilities and other relevant items) among the Purchased Assets
(the “ Purchase Price Allocation Schedule
”). The Purchase Price Allocation Schedule will be prepared
in accordance with the applicable provisions of the Code. Buyer and
Seller agree for all Tax reporting purposes to report the
transactions in accordance with the Purchase Price Allocation
Schedule and to not take any position during the course of any
audit or other proceeding inconsistent with such schedule unless
required by a determination of the applicable Governmental Entity
that is final. Buyer and Seller shall make appropriate adjustments
to the Purchase Price Allocation Schedule to reflect changes in the
Purchase Price.
1.10 Title
Passage; Delivery of Purchased Assets .
(a)
Title Passage . Upon the Closing, all of the right, title
and interest of Seller and the Seller Subsidiaries in and to all of
the Purchased Assets shall pass to Buyer; provided ,
however , that Buyer may elect (by written notice to Seller)
to require Seller and the Seller Subsidiaries to convey any of the
Purchased Assets to a Subsidiary or Affiliate of Buyer rather than
to Buyer, and Seller and the Seller Subsidiaries shall comply with
any such election by delivering to Buyer or a Subsidiary or
Affiliate of Buyer, as applicable, (i) possession of the Purchased
Assets and (ii) proper assignments, conveyances and bills of
sale sufficient to convey to Buyer or a Subsidiary or Affiliate of
Buyer, as applicable, good and marketable title to all of the
Purchased Assets (excluding the IPDN Patents and subject to any
underlying Third Party Intellectual Property Rights), free and
clear of all Encumbrances.
(b)
Method of Delivery of Assets; Transfer Taxes . The Purchased
Assets shall be delivered to Buyer or a Subsidiary or Affiliate of
Buyer, as applicable, in the form and to the location to be
mutually determined by Seller and Buyer before the Closing Date at
Buyer’s cost and expense; provided , that, to the
extent practicable, Seller and the Seller Subsidiaries shall
deliver all of the Purchased Assets through electronic delivery or
in another manner reasonably calculated and legally permitted to
minimize or avoid the incurrence of transfer and sales Taxes if
such method of delivery does not adversely affect the condition,
operability or usefulness of any Purchased Asset. Buyer and Seller
will share equally in the payment of all sales, transfer, bulk
sales, stamp, income, capital gains, use, purchase, value added,
excise, real and personal property or other Taxes associated with
the transactions contemplated by this Agreement (collectively,
“ Transfer Taxes ”), including those
Transfer Taxes imposed on or with respect to Buyer or the Purchased
Assets. Buyer and Seller shall share equally in any expenses
associated with the filing of all necessary Tax Returns and other
documentation with respect to all such Taxes, fees and charges,
and, if required by applicable Legal Requirements, Buyer will join
Seller in the execution of any such Tax Returns and other
documentation.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES
Subject to the
disclosures set forth in the disclosure letter of the Seller
Parties delivered to Buyer concurrently with the parties’
execution of this Agreement (the “ Seller Disclosure
Letter ”), the Seller Parties jointly and severally
represent and warrant to Buyer as follows:
2.1
Organization, Standing and Power . Seller is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware. Digeo Interactive is a limited
liability company duly formed, validly existing and in good
standing under the laws of the State of Delaware. Moxi is a
corporation duly organized, validly existing and in good standing
under the laws of the State of California. Vulcan is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Washington. Seller and each Seller Subsidiary
has all corporate or limited liability company, as applicable,
power and authority and all necessary governmental approvals to
own, operate and lease their respective properties and to conduct
their respective business as currently being conducted and are duly
qualified to do business and in good standing in each jurisdiction
where the failure to be so qualified or in good standing,
individually or in the aggregate with any such other failures,
would reasonably be expected to have a Material Adverse
Effect.
2.2 Authority;
Noncontravention .
(a) Each
of the Seller Parties and the Seller Subsidiaries has all requisite
corporate or limited liability company, as applicable, power and
authority to enter into this Agreement or the Ancillary Agreements
to which it is a party and to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements, to
perform its obligations hereunder and thereunder and to consummate
the transactions contemplated herein and therein to be consummated
by it. The execution and delivery of this Agreement and the
Ancillary Agreements and the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements to
which a Seller Party or a Seller Subsidiary is a party have been
duly authorized and approved by all necessary action on the part of
the appropriate Seller Parties and Seller Subsidiaries, and their
respective Board of Directors or Managers, as applicable, and
stockholders or members, as applicable, and no other action on the
part of the Seller Parties, the Seller Subsidiaries or their
respective Board of Directors, as applicable, or stockholders or
members, as applicable, is required to authorize this Agreement and
the Ancillary Agreements to which each is a party or to consummate
the transactions contemplated hereby and thereby. This Agreement
and the Ancillary Agreements to which the Seller Parties and the
Seller Subsidiaries are a party have been or will be validly
executed and delivered by the Seller Parties and the Seller
Subsidiaries. This Agreement and the Ancillary Agreements to which
the Seller Parties and the Seller Subsidiaries are (or will be) a
party constitute (or will constitute) valid and binding obligations
of the Seller Parties and the Seller Subsidiaries enforceable
against the Seller Parties and the Seller Subsidiaries in
accordance with their respective terms, subject only to the effect,
if any, of (i) applicable bankruptcy and other similar Legal
Requirements affecting the rights of creditors generally and
(ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
(b) The
execution and delivery by the Seller Parties and the Seller
Subsidiaries of this Agreement and the Ancillary Agreements to
which each is a party do not, and the consummation of the
transactions contemplated hereby and thereby will not, result in
the creation of any Encumbrance on any of the Purchased Assets or
Assigned Patent Rights. Except as set forth on Schedule
2.2(b) of the Seller Disclosure Letter, the execution and
delivery by the Seller Parties and the Seller Subsidiaries of this
Agreement and the Ancillary Agreements to which they are a party do
not, and the consummation of the transactions contemplated hereby
and thereby will not, conflict with, result in any default under or
violate, (A) any provision of the Certificate of Incorporation
or Bylaws or other governing document of the Seller
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Parties and the
Seller Subsidiaries, (B) any material Legal Requirements
applicable to the Seller Parties, any Seller Subsidiary or any of
the Purchased Assets or Assigned Patent Rights, or (C) require
any consent, notice or approval under, result in any breach of, any
loss of any benefit under or constitute a default (or an event
which with notice or lapse of time or both would become a default)
under, or give to the other party any right of termination,
vesting, amendment, acceleration or cancellation, or result in the
creation of an Encumbrance on any property or asset of Seller or
any Seller Subsidiary pursuant to, any Assigned Contract, except,
with respect to clauses (B) and (C) only, that would not
reasonably be expected to result in a Material Adverse
Effect.
(c) Except
as set forth on Schedule 2.2(c) of the Seller
Disclosure Letter, no consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental
Entity or any other Person is required by the Seller Parties or any
Seller Subsidiary in connection with the execution and delivery of
this Agreement or the Ancillary Agreements or the consummation of
the transactions contemplated hereby and thereby.
(a) Except
as set forth on Schedule 2.3(a) of the Seller
Disclosure Letter, there is no private or governmental action,
suit, proceeding, claim, arbitration, mediation, investigation,
litigation, or inquiry pending or, to the knowledge of Seller,
threatened before, with or by any Governmental Entity or other
Person against Seller, any Seller Subsidiary or any of the
Purchased Assets or Assigned Patent Rights. There is no judgment,
decree, injunction, rule, settlement, order or similar written
agreement to which Seller, any Seller Subsidiary or any of the
Purchased Assets are subject.
(b) Neither
Seller nor any Seller Subsidiary has any present action, suit,
proceeding, claim, arbitration, mediation, investigation,
litigation, or inquiry against it giving rise to any Liability
arising out of any injury to individuals or property as a result of
the license, possession or use of any Seller Product.
(c) There
are no actions, suits, arbitrations, mediations, proceedings or
claims pending or, to the knowledge of Seller or Vulcan, threatened
against Seller, the Seller Subsidiaries or Vulcan that seek to
restrain or enjoin the consummation of the transactions
contemplated hereby or by the Ancillary Agreements.
(d) Neither
Seller, Vulcan nor any Seller Subsidiary has any action, suit,
proceeding, claim, arbitration, mediation, investigation,
litigation, or inquiry pending against any other Person with
respect to the Purchased Assets or Assigned Patent
Rights.
2.4 Compliance
with Laws; Governmental Permits .
(a) Seller
and each Seller Subsidiary has complied with, and is not in
violation of, any Legal Requirement with respect to the ownership
or operation of the Purchased Assets, except as would not result in
a material liability with respect to the Purchased
Assets.
(b) Seller
and each Seller Subsidiary has obtained each federal, state,
county, local or foreign governmental consent, license, permit,
grant, franchise, certification, easement, variance, exception,
approval or other authorization of a Governmental Entity pursuant
to which Seller and each Seller Subsidiary currently operates any
of the Purchased Assets, except as would not result in a material
liability with respect to the Purchased Assets (all of the
foregoing consents, licenses, permits, grants, franchises,
certifications, easements, variances, exceptions, approvals or
other authorizations, collectively, the “ Seller
Authorizations ”), and all of the Seller
Authorizations are valid and in full force and effect.
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Neither Seller
nor any Seller Subsidiary has received any written notice from any
Governmental Entity regarding any (i) actual or possible
material violation of a Legal Requirement or any Seller
Authorization or any failure to comply with any term or requirement
of any Seller Authorization or (ii) actual or possible
revocation, withdrawal, suspension, cancellation, termination or
modification of any Seller Authorization. To the knowledge of
Seller, there is no threatened revocation, withdrawal, suspension,
cancellation, termination or modification of any Seller
Authorization.
(a) Seller
and each Seller Subsidiary have complied in all material respects
with all Legal Requirements relating to Taxes with respect to the
Purchased Assets, have properly completed and timely filed all Tax
Returns required to be filed by them prior to the Closing Date and
have timely paid all Taxes required to be paid by them for which
payment is due or for which they could be liable as a result of
transferee liability, joint and several liability, contractual
liability, or otherwise. All such Tax Returns are true, correct and
complete in all material respects. To the extent that the Buyer
would have successor liability or a lien would be placed on any of
the Purchased Assets, neither Seller nor any Seller Subsidiary has
any liability for Taxes in excess of the amount so paid or accruals
or reserves so established, in each case, with respect to the
Purchased Assets.
(b) There
are no existing Encumbrances for Taxes on any of the Purchased
Assets (except for Encumbrances for Taxes that are not yet due and
payable).
(c) Seller
and each Seller Subsidiary have (i) withheld all required
amounts from payments to their respective employees, agents,
contractors, nonresidents, and other third parties and timely
remitted such amounts to the proper Governmental Entity in
accordance with applicable Legal Requirements; (ii) timely
paid all employment Taxes with respect to their respective
employees (including all Transferred Employees); and
(iii) timely filed all Tax Returns relating to withholding,
employment and unemployment Taxes with the appropriate Governmental
Entity in accordance with applicable Legal Requirements.
(d) No
portion of the cost of any of the Purchased Assets was financed
directly or indirectly from the proceeds of any tax exempt state or
local government obligation described in Section 103(a) of the
Code. None of the Purchased Assets is tax exempt use property under
Section 168(h) of the Code. None of the Purchased Assets
constitutes an interest in any arrangement taxed as a corporation
or partnership for any income tax purposes.
(e) Neither
Seller nor any Seller Subsidiary has extended any statute of
limitations relating to any Taxes for which Buyer could be liable
under this Agreement or pursuant to applicable Legal Requirements.
With respect to any Taxes relating to the Purchased Assets for
which Buyer could be liable under this Agreement or pursuant to
applicable Legal Requirements, no audits or other proceedings are
ongoing or, to the knowledge of Seller, threatened with respect to
any Taxes of Seller or any Seller Subsidiary (including any
Pre-Closing Taxes).
2.6
Intellectual Property .
(a) As
used in this Agreement, the following terms shall have the meanings
indicated below:
(i) “
Seller IP Rights ” means (A) the
Intellectual Property Rights included in the Purchased Assets and
(B) the Assigned Patent Rights.
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(ii) “
Seller-Owned IP Rights ” means Seller IP Rights
that are owned by a Seller Party, including the Assigned Patent
Rights.
(iii) “
Seller Registered Intellectual Property Rights
” means (A) the United States, international and
foreign: (w) patents and patent applications (including
provisional applications) (“ Patents ”);
(x) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or
applications related to trademarks (“
Trademarks ”); (y) registered Internet domain
names; and (z) registered copyrights and applications for
copyright registration; registered or filed in the name of, a
Seller Party or any Seller Subsidiary and listed in
Schedule 2.6(a)(iii) of the Seller Disclosure Letter,
and (B) the Assigned Patent Rights.
(iv) “
Third Party Intellectual Property Rights ”
means any Intellectual Property Rights owned by a third
party.
(v) “
Seller Products ” means all software, products
or services that are, as of the Closing Date, designed, produced,
marketed, licensed, sold, used, distributed or performed by or on
behalf of Seller or any Seller Subsidiary.
(vi) “
Seller Software ” means all computer software,
databases and data collections and all rights thereto, including
all enhancements, versions, releases and updates of the foregoing,
developed by or for Seller or any Seller Subsidiary as of the
Closing. Seller Software includes all source code, object code,
firmware, development tools, files, records and data, and all media
on which any of the foregoing is recorded.
(vii) “
Seller Source Code ” means, collectively, any
software source code or confidential manufacturing specifications
or designs, any material portion or aspect of software source code
or confidential manufacturing specifications or designs, or
algorithm contained in any software source code or confidential
manufacturing specifications or designs, of any Seller-Owned IP
Rights or Seller Products.
(b) Either
a Seller Party or a Seller Subsidiary owns and has good and
exclusive title to each item of Seller-Owned IP Rights that is
material to the Business and each item of Seller Registered
Intellectual Property Rights, free and clear of any Encumbrances,
that would in the aggregate constitute a Material Adverse Effect.
Except as set forth on Schedule 2.6(b) of the Seller
Disclosure Schedule, no other royalties or other consideration are
payable by either Seller Party or any Seller Subsidiary in
connection with its use and enjoyment of Seller-Owned IP
Rights.
(c) Each
license, sublicense or other Contract to which a Seller Party or
any Seller Subsidiary is a party or by which a Seller Party or any
Seller Subsidiary is bound under which any right, title or interest
in and/or ownership of any Seller IP Rights, or any prior version
thereof (“ Seller License ”), was
acquired, is granted by a Seller Party or a Seller Subsidiary to
another Person, or is granted by another Person to a Seller Party
or a Seller Subsidiary, is a valid and binding obligation of such
Seller Party or such Seller Subsidiary and, to the knowledge of
Seller and Vulcan, of each other party thereto. To the knowledge of
Seller, neither Seller, any Seller Subsidiary nor, any other
Person, is in breach or violation of, or default under, any Seller
License, and no event has occurred, is pending or is threatened,
which, after the giving of notice, with lapse of time, or
otherwise, would constitute a breach or default by Seller, any
Seller Subsidiary or any other Person under any Seller License that
is material to the Business. Except as set forth in
Schedule 2.6(c) of the Seller Disclosure Letter, the
consummation of the transactions contemplated by this Agreement
will neither violate nor result in the breach, modification,
cancellation, termination, or suspension of a Seller
License.
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(d) Neither
the execution and delivery or effectiveness of this Agreement, nor
the Ancillary Agreements, nor the performance of Seller’s
obligations hereunder or thereunder, will conflict with or cause,
or give rise to a right of, the forfeiture, termination,
cancellation, diminution or unenforceability of any Seller IP
Rights (that are not Seller-Owned IP Rights) that would have a
Material Adverse Effect.
(e) To
the knowledge of the Seller, all Seller-Owned IP Rights are valid,
subsisting, and enforceable. There are no claims pending or
threatened that challenged the validity or enforceability of any
Seller-Owned IP Rights. With respect to Seller Registered
Intellectual Property Rights, all registration, maintenance and
renewal fees currently due in connection with such Seller
Registered Intellectual Property Rights have been paid and all
documents, recordations and certificates in connection with such
Seller Registered Intellectual Property Rights currently required
to be filed have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of prosecuting,
maintaining and perfecting such Seller Registered Intellectual
Property Rights and recording the applicable Seller Party’s
or Seller Subsidiary’s ownership interests therein. With
respect to the Patents, Seller Parties and the Seller Subsidiaries
have complied with their duty of candor to the United States Patent
and Trademark Office and patent offices in all jurisdictions
outside the United States in which such Patents have been filed or
prosecuted. Seller Registered Intellectual Property Rights have not
been obtained through any fraudulent activity or
misrepresentation.
(f) To
the knowledge of the Seller, no Intellectual Property Rights of any
third party that are material to the Business as currently
conducted that is not included in Seller IP Rights are used to
make, market, offer for sale, sell, license, or otherwise dispose
of Seller Products.
(g) Other
than the Assigned Patent Rights, Vulcan owns no Intellectual
Property Rights that are necessary to be used in the Business as
currently conducted.
(h) Within
the last year from the Agreement Date, neither the Seller Parties
nor any Seller Subsidiary has brought any action, suit or
proceeding for infringement, violation, misappropriation, or
dilution of any Intellectual Property Rights or breach of any
agreement involving Seller IP Rights that would have a Material
Adverse Effect.
(i) Except
as set forth in Schedule 2.6(i) of the Seller
Disclosure Letter, to the knowledge of Seller, the development,
marketing, sale, leasing, licensing or delivery of the Purchased
Assets (including Seller Products) as such activities are currently
conducted by Seller and the Seller Subsidiaries do not infringe or
misappropriate any Third Party Intellectual Property Rights that
would have a Material Adverse Effect. Within the last year from the
Agreement Date, neither Seller nor any Seller Subsidiary has
received any written offer to license (or any other form of written
notice of) any Third Party Intellectual Property Rights.
(j) Except
as set forth in Schedule 2.6(j) of the Seller
Disclosure Letter, none of the Seller-Owned IP Rights is subject to
any proceeding or outstanding order, settlement, agreement or
stipulation restricting in any manner the use, transfer, or
licensing by Seller, any Seller Subsidiary or Vulcan of any
Seller-Owned IP Right.
(k) Seller
and each Seller Subsidiary have taken commercially reasonable steps
to protect and preserve the confidentiality of all confidential or
non-public information included in the Purchased Assets that are
material to the Business as currently conducted, to the extent that
Seller or such Seller Subsidiary has elected to maintain such
information as a trade secret.
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(l) All
Seller-Owned IP Rights were created by employees or by consultants
and contractors of Seller or a Seller Subsidiary, who have created
such Seller-Owned IP Rights within the scope of their employment or
who have executed confidentiality and assignment of inventions
agreement(s), or each author, inventor or developer of such
Seller-Owned IP Rights has irrevocably assigned to Seller or a
Seller Subsidiary in writing all proprietary rights in such
Person’s work with respect to such Seller-Owned IP Rights. No
other Person has made any claims to authorship or ownership of any
part thereof. None of Seller-Owned IP Rights has been claimed to
have been misappropriated from any third party. No current or
former employee, independent contractor or consultant of Seller has
asserted any continued interest in any Seller-Owned IP
Rights.
(m) No
Patents within Seller-Owned IP Rights is currently involved in any
interference, reissue, reexamination or opposition proceeding and,
to the knowledge of Seller and Vulcan, no such action has been
threatened with respect to any such Patents.
(n) All
material Trademarks within Seller-Owned IP Rights that are
currently used in the operation of the business of Seller and the
Seller Subsidiaries have been in use by Seller or a Seller
Subsidiary since the date of their initial use in commerce. To the
knowledge of Seller, there has been no prior use of any registered
Trademarks owned by Seller or any Seller Subsidiary or other action
taken by any third party that would confer upon such third party
superior rights in such Trademarks. Seller and the Seller
Subsidiaries have taken reasonable steps to prevent infringement of
the Trademarks referenced in the first sentence of this
Section 2.6(n) . No Trademark within Seller-Owned IP
Rights is currently involved in any opposition or cancellation
proceeding and no such action has been threatened with respect to
any of the Trademarks.
(o) No
registration or use of the domain names included in Seller
Registered Intellectual Property Rights has been disturbed or
placed “on hold” and neither Sel
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