STOCK AND INTEREST PURCHASE AGREEMENT

Exhibit 2.1

STOCK AND INTEREST PURCHASE AGREEMENT

among

COINSTAR ENTERTAINMENT SERVICES INC.,

ENTERTAINMENT VENDING MANAGEMENT, LLC,

SESAME HOLDINGS, INC.,

COINSTAR, INC.

and

NATIONAL ENTERTAINMENT NETWORK, INC.

Dated as of September 8, 2009

TABLE OF CONTENTS

 

 

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EXHIBITS TO

STOCK AND INTEREST PURCHASE AGREEMENT

 

 

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STOCK AND INTEREST PURCHASE AGREEMENT

This STOCK AND INTEREST PURCHASE AGREEMENT, dated as of September 8, 2009 (this “ Agreement ”), is entered into by and among COINSTAR ENTERTAINMENT SERVICES INC., a Delaware corporation (“ CES ”), ENTERTAINMENT VENDING MANAGEMENT, LLC, a Delaware limited liability company (“ EVM ”) (CES and EVM, each, a “ Company ” and, collectively, the “ Companies ”), SESAME HOLDINGS, INC., a Delaware corporation (“ Sesame ”), COINSTAR, INC., a Delaware corporation (“ Coinstar ”) and NATIONAL ENTERTAINMENT NETWORK, INC., a Delaware corporation (“ Buyer ”). Sesame and Coinstar are each sometimes referred to herein as a “ Seller ” and collectively as the “ Sellers .”

RECITALS

A. The Companies and the Company Subsidiaries comprise the Entertainment Business of Coinstar.

B. Sesame owns 100% of the issued and outstanding shares of capital stock of CES (the “ Shares ”) and Coinstar owns 100% of the outstanding limited liability company membership interests of EVM (the “ Interests ”). Sesame intends to sell 100% of the Shares to Buyer, and Coinstar intends to sell 100% of the Interests to Buyer, at the price and on the terms and subject to the conditions set forth below.

C. Simultaneously with the sale of the Interests to Buyer, Coinstar intends to sell, transfer and deliver to Buyer all of Coinstar’s right, title and interest in and to that certain revolving promissory note made by CES in favor of Coinstar (the “ Note ”), at the price and on the terms and subject to the conditions set forth below.

D. The boards of directors of Sesame, Coinstar, CES and Buyer and the managers of EVM each have determined that it is advisable and in the best interests of their respective companies that Buyer purchase the Shares from Sesame and the Interests and the Note from Coinstar at the price and on the terms and subject to the conditions set forth below.

E. Buyer desires and intends to purchase 100% of the Shares from Sesame, and desires and intends to purchase 100% of the Interests and the Note from Coinstar, at the price and on the terms and subject to the conditions set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Companies, Sellers and Buyer hereby agree as follows:

ARTICLE I - PURCHASE AND SALE OF SHARES, INTERESTS AND NOTE

1.1 Purchase and Sale of Shares, Interests and Note

Subject to the terms and conditions set forth in this Agreement, (a) Sesame hereby agrees to sell, transfer and deliver to Buyer as of the Closing, and Buyer agrees to purchase as of the Closing, the Shares, and (b) Coinstar hereby agrees to sell, transfer and deliver to Buyer as of the Closing, and Buyer agrees to purchase as of the Closing, the Interests and the Note.

1.2 Closing

Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to Article VI, the closing of the purchase and sale of the Shares, the Interests and the Note contemplated by this Agreement (the “ Closing ”) shall take place at 10:00 a.m. local time at the offices of Perkins Coie LLP, 1201 Third Avenue, Suite 4800, Seattle, Washington 98101, on the date on which all 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) shall have been satisfied or waived, or on such other date and at such other time and place as the Companies, Sellers and Buyer may hereafter mutually agree upon in writing. The date on which the Closing actually takes place is herein called the “ Closing Date .”

1.3 Purchase Price

(a) The purchase price payable by or on behalf of Buyer to (i) Sesame in exchange for 100% of the Shares shall consist of an amount equal to $1.00 (the “ Share Purchase Price ”), (ii) Coinstar in exchange for 100% of the Interests shall consist of an amount equal to $1.00 (the “ Interest Purchase Price ”), and (iii) Coinstar in exchange for the Note shall consist of an amount equal to $1.00 (the “ Note Purchase Price ”), each of which shall be payable at Closing in cash or by wire transfer of immediately available funds to an account designated by Sellers. The Share Purchase Price, the Interest Purchase Price and the Note Purchase Price shall collectively be referred to in this Agreement as the “ Purchase Price .”

(b) Buyer and Sesame acknowledge that the Shares have zero value and that Buyer has agreed to pay the Share Purchase Price to Sesame pursuant to the terms and conditions of this Agreement solely to effect the transfer of the Shares from Sesame to Buyer under applicable law. Sellers and Buyer agree that any other consideration paid or otherwise considered to be transferred by Buyer pursuant to the terms and conditions of this Agreement (other than the portion of such consideration allocable to Buyer’s purchase of the Interests) is allocable to and intended to be paid or otherwise transferred by Buyer to Coinstar for the Note.

1.4 Purchase Price Allocation

(a) Buyer and Sellers’ allocation of the Purchase Price between the Shares and the Note, on the one hand, and the Interests, on the other hand, purchased by Buyer pursuant to the terms and conditions of this Agreement is attached hereto as Exhibit 1.4(a) (the “ Purchase Price Allocation ”).

 

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(b) Prior to the Closing, the consideration (within the meaning of Section 1060 of the Code) paid by Buyer hereunder for the Interests shall be allocated among EVM’s assets in accordance with a preliminary schedule to be prepared and agreed upon by Buyer and Coinstar in good faith and in a manner consistent with the Purchase Price Allocation (“ Preliminary EVM Allocation Schedule ”). The allocation set forth in the Preliminary EVM Allocation Schedule will be made in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder (and any corresponding or similar provision of state, local or foreign law, as applicable) and will be based on financial information as of July 31, 2009. During the sixty (60) day period following the Closing Date, Buyer and Coinstar agree to cooperate fully with each other in updating the Preliminary CES Allocation Schedule attached hereto as Exhibit 1.4(b) and the Preliminary EVM Allocation Schedule then in effect to reflect financial information as of the Closing Date (the “ Final CES Allocation Schedule ” and the “ Final EVM Allocation Schedule , ” respectively). Each of Coinstar and Buyer shall prepare and file IRS Form 8594 (and any corresponding or similar state, local or foreign form), as applicable, in a manner consistent with the Final EVM Allocation Schedule then in effect.

(c) The parties agree not to take or cause to be taken any position or other action inconsistent with the Purchase Price Allocation, the Preliminary EVM Allocation Schedule or the Final EVM Allocation Schedule for any Tax reporting purpose, upon examination of any Tax Return, in any refund claim, or in any litigation, investigation or otherwise, unless otherwise clearly required by a determination (within the meaning of Section 1313(a) of the Code or any comparable provision of law). If it is determined under Section 7.6 that an indemnity payment is to be treated as an adjustment to the Purchase Price, Sellers and Buyer shall cooperate with each other in good faith to make any necessary adjustments to the Purchase Price Allocation, the Preliminary EVM Allocation Schedule and the Final EVM Allocation Schedule, which adjustments shall be made in a manner consistent with the Purchase Price Allocation, the Preliminary EVM Allocation Schedule and the Final EVM Allocation Schedule then in effect.

ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANIES

Except as is otherwise set forth in the Disclosure Schedules attached hereto as Exhibit 2 (the “ Disclosure Schedules ”), in order to induce Buyer to enter into and perform this Agreement and the other agreements and certificates that are required to be executed pursuant to this Agreement (collectively, the “ Operative Documents ”), the Sellers and Companies, jointly and severally, represent and warrant to Buyer as of the date of this Agreement as follows in this Article II.

Any item disclosed by any of the Sellers or the Companies in any part of the Disclosure Schedules to this Agreement shall be deemed to have been disclosed with respect to such other part of the Disclosure Schedules for which relevance to such other part of the Disclosure Schedules is reasonably apparent. The fact that any item or information has been included on any part of the Disclosure Schedules to this Agreement shall not be construed to establish, in whole or in part, that disclosure is required pursuant to any threshold or standard (including any standard of materiality) for purposes of the Disclosure Schedules or this Agreement.

 

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2.1 Good Title

Sesame owns, beneficially and of record, 1,000 shares of common stock of CES, which constitutes 100% of the Shares. Coinstar owns 100% of the Interests. Such Shares and Interests are owned free and clear of any Encumbrance, adverse claim, restriction on sale, transfer or voting (other than restrictions imposed by applicable securities Laws), preemptive right, option or other right to acquire or purchase, and upon the consummation of the sale of such Shares and Interests as contemplated hereby, Buyer will have good title to such Shares and Interests, free and clear of any Encumbrance, adverse claim, restriction on sale, transfer or voting (other than restrictions imposed by applicable securities Laws), preemptive right, option or other right to acquire or purchase.

2.2 Authorization

Sellers and the Companies have all requisite corporate power and corporate authority, or all requisite limited liability company power and limited liability company authority, to enter into this Agreement and to perform their respective obligations hereunder and to consummate the transactions contemplated hereby. All necessary corporate acts or limited liability company acts (as applicable) and other proceedings required to be taken by Sellers and the Companies to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and properly taken and no other action on the part of Sellers or the Companies is necessary to authorize the execution and delivery of this Agreement by Sellers and the Companies, the performance by Sellers and the Companies of their obligations under this Agreement or the consummation by Sellers and the Companies of the transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by Sellers and the Companies and constitutes the legal, valid and binding obligation of Sellers and the Companies, enforceable against Sellers and the Companies in accordance with its terms; provided that (a) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or hereafter in effect relating to creditors’ rights and (b) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any Proceeding therefor may be brought.

2.3 Organization and Authority

CES is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. EVM is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of the Company Subsidiaries is the type of business entity set forth opposite such Company Subsidiary’s name in Section 2.3 of the Disclosure Schedules and is duly organized and validly existing under the laws of the state set forth opposite such Company Subsidiary’s name in Section 2.3 of the Disclosure Schedules . The Companies and the Company Subsidiaries have, as applicable, all requisite corporate power and authority or all requisite limited liability company power and authority to own, lease or otherwise hold their properties and assets as now owned, leased and used. Each of the Companies and the Company Subsidiaries is duly qualified to do business and is in good standing in each of the jurisdictions in which the character of the properties it occupies or leases or the nature of the business it conducts makes such qualification necessary, except where the failure to have such qualification or be in good standing would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

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2.4 No Conflict

The execution, delivery and performance by Sellers and the Companies of this Agreement and the other Operative Documents and the consummation by Sellers and the Companies of the transactions contemplated hereby will not, except as disclosed in Section 2.4 of the Disclosure Schedules , (a) violate or conflict with the Charters or Governing Documents of Sellers, the Companies or the Company Subsidiaries, (b) assuming satisfaction of any requirements imposed by the HSR Act, violate any provision of Law, rule or regulation to which Sellers, the Companies or the Company Subsidiaries are subject or violate or conflict with any Order, judgment, injunction or decree applicable to Sellers, the Companies or the Company Subsidiaries, (c) require any consent, approval or authorization of, or declaration, filing or registration with, any Person (except for the filing of any required report under the HSR Act and the expiration of the applicable waiting period thereunder, and except for consents and filings that, if not obtained or made, would not, individually or in the aggregate, have a Company Material Adverse Effect or a material adverse effect on the ability of the parties hereto to consummate the transactions contemplated hereby), (d) violate, breach or constitute a default (or be determined to be an event which with the giving of notice or lapse of time, or both, would become a default) under or give rise to a right of termination, cancellation or acceleration of any right or obligation of any of the Companies or the Company Subsidiaries under, or result in the payment of any fee or penalty or result in the creation of an Encumbrance on any of the properties or assets of any of the Companies or the Company Subsidiaries pursuant to, any provision of any agreement, contract, note, bond, mortgage, deed of trust, indenture, lease or other instrument binding on any of the Companies or the Company Subsidiaries or any license, franchise, permit or other similar authorization held by any of the Companies or the Company Subsidiaries, except in the case of this clause (d), for any such violation, conflict, default, right or Encumbrance that would not, individually or in the aggregate, have a Company Material Adverse Effect, or (e) (i) result in a default (with or without the giving of notice or lapse of time, or both) under, acceleration or termination of, or the creation in any party of the right to accelerate, terminate, modify or cancel, any agreement, lease, note or other restriction, Encumbrance, obligation or liability to which either Seller is a party or by which it is bound or to which any assets of either Seller is subject, or (ii) result in the creation of any Encumbrance upon the assets of either Seller, or upon any Shares or Interests or other securities of the Companies, except, in the case of this clause (e), for any such consent, approval, authorization, declaration, filing or registration that if not made or obtained would not, or for such default, acceleration, termination, modification or cancellation that would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the ability of either Seller to consummate the transactions contemplated by this Agreement. Section 2.4 of the Disclosure Schedules sets forth an accurate and complete list of Material Contracts pursuant to which consents or waivers are required prior to the consummation of the transactions contemplated by this Agreement (whether or not subject to the exceptions set forth with respect to clauses (d) and (e)).

 

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2.5 Capitalization

The authorized capital stock of CES consists of 1,000 shares of common stock, $0.01 par value per share, of which 1,000 shares are validly issued and outstanding, fully paid and nonassessable. The outstanding limited liability company membership interests of EVM are duly authorized and validly issued, fully paid and nonassessable. There are no outstanding warrants, options, agreements, subscriptions, convertible or exchangeable securities or other commitments pursuant to which Sellers or the Companies are or may become obligated to issue any shares of capital stock or limited liability company interests, as applicable, of the Companies or any other securities convertible, exchangeable or exercisable for any such shares of capital stock or limited liability company interests, as applicable, and no equity securities of the Companies are reserved for issuance for any purpose.

2.6 Company Subsidiaries and Equity Interest

Section 2.6 of the Disclosure Schedules sets forth an accurate and complete list of the Subsidiaries of the Companies (each, a “ Company Subsidiary ” and, collectively, the “ Company Subsidiaries ”), setting forth for each Company Subsidiary the percentage of such Company Subsidiary owned by each of the Companies and whether such ownership is direct or indirect (and if indirect, the entity through which the respective Company owns such Company Subsidiary). Except for the Company Subsidiaries set forth in Section 2.6 of the Disclosure Schedules , the Companies do not have any subsidiaries and do not, directly or indirectly, own, beneficially or of record, any stock of, or any other direct or indirect equity interest in, any other corporation or business entity or any right (contingent or otherwise) to acquire an equity interest in any other corporation or business entity. Except as set forth in Section 2.6 of the Disclosure Schedules , the Companies are not members of any partnership or limited liability company, nor are they participants in any joint venture or similar arrangement constituting a valid legal entity.

2.7 Financial Statements

(a) Section 2.7 of the Disclosure Schedules sets forth the pro forma unaudited consolidated balance sheet of the Companies and the Company Subsidiaries as of December 31, 2008, and the related consolidated statement of income and retained earnings of the Companies and the Company Subsidiaries for the year then ended, together with the notes to such financial statements (collectively, the “ Year End Financial Statements ”). Section 2.7 of the Disclosure Schedules also sets forth the pro forma unaudited consolidated balance sheet of the Companies and the Company Subsidiaries as of June 30, 2009 (the “ Balance Sheet Date ”), and the related consolidated statement of income and retained earnings of the Companies and the Company Subsidiaries for the six-month period then ended (the “ Interim Financial Statements ” and, together with the Year-End Financial Statements, the “ Financial Statements ”). The Financial Statements have been prepared based upon the books and records of Coinstar and the financial statements of Coinstar relating to the Companies and the Company Subsidiaries and in accordance with the accounting policies and practices set forth on Section 2.7 of the Disclosure Schedules (the “ Agreed Accounting Policies ”). The Year-End Financial Statements (i) present fairly, in all material respects, the financial position of the Companies and the Company Subsidiaries as of December 31, 2008 and the results of operations of the Companies and the Company Subsidiaries for the year then ended, in conformity with generally accepted accounting

 

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principles (“ GAAP ”) (subject to the Agreed Accounting Policies), (ii) are accurate and complete (subject to the Agreed Accounting Policies), (iii) have been based on reasonable assumptions, accruals and allocations (as set forth in the Agreed Accounting Policies) and (iv) are derived from the books and records of Coinstar and the financial statements of Coinstar prepared in accordance with GAAP included in Coinstar’s filings under the Exchange Act. The Interim Financial Statements (i) present fairly, in all material respects, the financial position of the Companies and the Company Subsidiaries as of the Balance Sheet Date and the results of operations of the Companies and the Company Subsidiaries for the six-month period then ended, in conformity with GAAP (subject to the Agreed Accounting Policies) except for (A) normal year-end adjustments, and (B) the omission of footnote disclosures required by GAAP, (ii) are accurate and complete (subject to the Agreed Accounting Policies), (iii) have been based on reasonable assumptions, accruals and allocations (as set forth in the Agreed Accounting Policies) and (iv) are derived from the books and records of Coinstar and the financial statements of Coinstar prepared in accordance with GAAP included in Coinstar’s filings under the Exchange Act.

(b) As of August 31, 2009, the cash and cash equivalents on the unaudited consolidated balance sheet of the Companies and the Company Subsidiaries, prepared on a basis consistent with the cash and cash equivalents listed on the unaudited consolidated balance sheet of the Companies and the Company Subsidiaries in the Interim Financial Statements as of the Balance Sheet Date, were equal to at least the amount set forth in Section 2.7(b) of the Disclosure Schedules . To the Knowledge of the Sellers, the cash and cash equivalents of the Companies and the Company Subsidiaries have not materially changed since August 31, 2009 except for changes in connection with (i) the ordinary course operations of the Companies and the Company Subsidiaries since August 31, 2009, (ii) the cash contributions to be made by Coinstar to CES in connection with Closing as documented by a letter agreement with Buyer of even date herewith, and (iii) the cash deposits to be made by CES pursuant to the agreements contemplated by Sections 5.1.13 and 5.1.14 of this Agreement and the letter agreement with Buyer of even date herewith.

2.8 Absence of Changes or Events

Since the Balance Sheet Date, and except as set forth in Section 2.8 of the Disclosure Schedules , the Companies and the Company Subsidiaries have conducted their respective businesses and operations only in the ordinary course; neither the Companies nor the Company Subsidiaries have experienced a Company Material Adverse Effect; and neither the Companies nor the Company Subsidiaries have taken any action that would have required the consent of Buyer pursuant to Section 4.1.

2.9 Undisclosed Liabilities

To the Knowledge of the Sellers and the Companies, neither the Companies nor the Company Subsidiaries have any liabilities or obligations of a nature required by GAAP to be reflected on or disclosed in the footnotes to a consolidated balance sheet of the Companies and the Company Subsidiaries except for (a) liabilities disclosed, reflected or reserved against in the Financial Statements, (b) liabilities not required to be reflected on or disclosed in the footnotes to a consolidated balance sheet of the Companies and the Company Subsidiaries under the Agreed

 

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Accounting Policies, (c) liabilities incurred after the date of such Financial Statements in the ordinary course of business, (d) the matters disclosed in or arising out of matters disclosed in Section 2.9 of the Disclosure Schedules or which are the subject of other representations and warranties set forth herein, (e) liabilities and obligations incurred in connection with this Agreement and the transactions contemplated hereby, and (f) liabilities or obligations which do not have a Company Material Adverse Effect.

2.10 Taxes

(a) Each of the Companies and the Company Subsidiaries has (i) filed or caused to be filed with the appropriate Governmental Entity all material Tax Returns required to be filed by it (taking into account all applicable extensions), and all such Tax Returns were at the time they were filed correct and complete in all material respects, and (ii) paid or accrued (in accordance with GAAP) all material Taxes for which it is liable. There are no liens for Taxes on the assets of any of the Companies or the Company Subsidiaries, other than Permitted Encumbrances.

(b) There are no unexpired written waivers to extend the statute of limitations applicable to the assessment of any material Taxes for which any of the Companies or the Company Subsidiaries may be liable. No material audit or examination by any Governmental Entity is pending or, to the Companies’ Knowledge, threatened with respect to any Tax Return filed or required to be filed by any of the Companies or the Company Subsidiaries. No assessment or any deficiency for any Tax has been proposed in writing or, to the Companies’ Knowledge, threatened against any of the Companies or the Company Subsidiaries.

(c) Except as set forth in Section 2.10(c) of the Disclosure Schedules , none of the Companies or the Company Subsidiaries (i) is a party to any Tax allocation, sharing or similar agreement, other than customary agreements with customers, vendors, lessors and other third parties entered into in the ordinary course of business, (ii) has been a member of an affiliated group filing consolidated income Tax Returns under Section 1501 of the Code or any similar provision of state, local or foreign Law (other than the group the common parent of which was Coinstar), or (iii) has any present liability for Taxes of any Person (other than its own) under Treasury Regulations Section 1.1502-6 or any similar provision of state, local or foreign Law.

(d) Neither EVM nor any Company Subsidiary that is wholly owned by EVM has filed an election pursuant to Treasury Regulations Section 301.7701-3 to be classified as an association taxable as a corporation.

2.11 Property

(a) The Companies and Company Subsidiaries have title to, or a valid, binding and enforceable leasehold interest in, all of their properties and assets (including valid leasehold interests in the Real Property described below and those properties or assets reflected on the Financial Statements or acquired by the Companies or the Company Subsidiaries since the Balance Sheet Date, except property sold or otherwise disposed of since the Balance Sheet Date in the ordinary course of business), free and clear of all Encumbrances to which the Companies or the Company Subsidiaries are a party or of which the Sellers or Companies have Knowledge,

 

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of any nature whatsoever, except (i) those disclosed in the Financial Statements or Section 2.11(a) of the Disclosure Schedules , (ii) leasehold interests and licenses granted by the Companies or the Company Subsidiaries to third parties as disclosed in Section 2.11(a) of the Disclosure Schedules , and (iii) Permitted Encumbrances, none of which items referred to in clauses (i) through (iii) impair or detract from the continued use of the property to which they relate in the business of the Companies and the Company Subsidiaries as presently conducted, except for any of the foregoing that would not, individually or in the aggregate, have a Company Material Adverse Effect.

(b) Neither the Companies nor the Company Subsidiaries own any fee simple interest in any Real Property.

(c) Set forth in Section 2.11(c) of the Disclosure Schedules is an accurate and complete list of leases of all Real Property leased by the Companies and the Company Subsidiaries as of the date hereof (the “ Real Property Leases ”). The Companies have made available to Buyer or its counsel accurate and complete copies of all written Real Property Leases and written summaries of the terms of any oral Real Property Leases. With respect to each Real Property Lease, (i) such lease is valid, binding and enforceable in accordance with its terms against the parties thereto and, to the Companies’ Knowledge, against any other Person with an interest in the Real Property that is the subject of such lease, (ii) the respective Company or Company Subsidiary has performed in all material respects all obligations imposed on it thereunder, and (iii) neither the respective Company or Company Subsidiary nor, to the Knowledge of the Sellers and the Companies, any other party thereto is in default thereunder, nor is there any event that with the giving of notice or lapse of time, or both, would constitute a material default thereunder by the respective Company or Company Subsidiary or, to the Knowledge of the Sellers and the Companies, by any other party. The Companies’ and the Company Subsidiaries’ offices and other structures and their personal property are of a quality consistent with industry standards, are in good operating condition and repair, normal wear and tear excepted, are adequate for the uses to which they are being put, and, to the Knowledge of the Sellers and the Companies, comply in all material respects with applicable safety and other Laws and regulations, except for such inconsistency, lack of good operating condition, inadequacy or noncompliance as would not, individually or in the aggregate, have a Company Material Adverse Effect.

(d) There are no eminent domain, condemnation or other similar Proceedings pending or, to the Knowledge of the Sellers and the Companies, threatened against the Companies or the Company Subsidiaries or otherwise affecting any portion of the Real Property that would have a Company Material Adverse Effect, nor have the Sellers or the Companies received any notice of the same.

2.12 Intellectual Property

(a) Section 2.12(a) of the Disclosure Schedules sets forth an accurate and complete list of patents and patent applications, trademark and service mark registrations and applications for registration, copyright registrations and applications for registration and domain name registrations owned by the Companies and the Company Subsidiaries that are material to the business of the Companies. All issued trademark, service mark registrations, patents, copyright

 

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registrations and all domain name registrations set forth in Section 2.12(a) of the Disclosure Schedules are valid and subsisting and in full force and effect, and all renewals therefor and affidavits of continuing use have been filed on a timely basis.

(b) Except as described in Section 2.12(b) of the Disclosure Schedules , neither the Companies nor the Company Subsidiaries have any obligation to pay any royalties, license fees or other forms of compensation or consideration to any Person for the use of any of the material Intellectual Property used by Companies or Company Subsidiaries in connection with the conduct of their business and operations as currently conducted, except for software license fees. Neither the Companies nor the Company Subsidiaries have (i) entered into any agreement limiting their right to use any of their material Intellectual Property or (ii) granted any license to any Person for the use of any of their material Intellectual Property.

(c) Other than inbound “shrink-wrap,” “click-wrap” and similar generally available commercial binary code end-user licenses, Section 2.12(c) of the Disclosure Schedules lists all licenses to which any of the Companies or the Company Subsidiaries is a party with respect to any third party intellectual property rights. All such licenses are in full force and effect, and none of the Companies or the Company Subsidiaries is in breach of, nor has any Company or Company Subsidiary failed to perform under, any of the foregoing licenses, except for such breach or failure to perform that would not, individually or in the aggregate, have a Company Material Adverse Effect. The consummation of the transactions contemplated by this Agreement will neither violate nor result in the breach, modification, cancellation, termination or suspension of any such license, except for such violations, breaches, modifications, cancellations, terminations or suspensions that would not, individually or in the aggregate, have a Company Material Adverse Effect.

(d) Except as set forth in Section 2.12(d) of the Disclosure Schedules , neither of the Companies has any Knowledge of any Claim being asserted by any third party that the operations of the Companies or the Company Subsidiaries infringe the intellectual property rights of such third party, except for any Claims that would not, individually or in the aggregate, have a Company Material Adverse Effect. Neither the Companies nor the Company Subsidiaries have any pending Claim that a third party has infringed any material Intellectual Property owned by the Companies or the Company Subsidiaries.

2.13 Contracts

2.13.1 Material Contracts

Section 2.13.1 of the Disclosure Schedules contains an accurate and complete list of, and the Companies have made available to Buyer accurate and complete copies of, every agreement in each of the following categories to which any of the Companies or the Company Subsidiaries are parties to or bound by (each, a “ Material Contract ”):

(a) employment or consulting agreements (excluding unwritten at-will employment arrangements and excluding any such contracts or arrangements (i) for which the total compensation for the following year is expected to be less than $150,000 per person and (ii) which are terminable by a Company or Company Subsidiary at will without liability to such

 

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Company or Company Subsidiary, subject to the notice and severance policies of such Company or Company Subsidiary) or any severance agreements or “change of control,” “golden parachute,” or bonus or incentive compensation agreements with any employees, former employees, officers or directors or managers (as applicable) of the Companies and the Company Subsidiaries;

(b) employee collective bargaining agreements or other contracts with any labor union;

(c) leases, rentals, occupancy, installment and conditional sale agreements or similar agreements not made in the ordinary course of business under which a Company or Company Subsidiary is a lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by a third party at an annual payment in excess of $250,000 and which are not terminable by a Company or Company Subsidiary on ninety (90) days’ notice without penalty or premium;

(d) contracts not made in the ordinary course of business that involve the obligation of a Company or Company Subsidiary to purchase materials, supplies, equipment or services from others for payment of more than $250,000 and which are not terminable by a Company or Company Subsidiary on ninety (90) days’ notice without penalty or premium;

(e) contracts (excluding purchase orders, sales orders or invoices) not made in the ordinary course of business that involve the sale of assets or properties of a Company or Company Subsidiary for more than $250,000 or the obligation of a Company or Company Subsidiary to deliver products or services to third parties for annual payment of more than $250,000 and which are not terminable by a Company or Company Subsidiary on ninety (90) days’ notice without penalty or premium;

(f) contracts pursuant to which a Company or Company Subsidiary has acquired or agreed to acquire an equity interest in or all or substantially all of the assets or business of any other entity or Person;

(g) agreements, credit or financing instruments or contracts not made in the ordinary course of business under which a Company or Company Subsidiary has borrowed any money or issued any note, bond, indenture or other similar evidence of indebtedness or guaranteed indebtedness, liabilities or obligations of others, in each case for an amount in excess of $250,000 (other than endorsements for the purpose of collection in the ordinary course of business);

(h) mortgages, pledges, security agreements, deeds of trust or other documents, in each case granting a lien (including liens upon properties acquired under conditional sales, capital leases or other title retention or security devices) securing obligations in excess of $250,000;

(i) agreements that contain express restrictions that materially limit the ability of a Company or Company Subsidiary to conduct its business in the ordinary course and which are not terminable by a Company or Company Subsidiary on ninety (90) days’ notice without penalty or premium;

 

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(j) agreements between a Company or Company Subsidiary and any officer or director or manager (as applicable) of a Company or Company Subsidiary or any Affiliate of any such officer or director or manager (as applicable), except for employment arrangements in the ordinary course of business;

(k) partnership or joint venture agreements;

(l) contracts that require individual capital expenditures after the date hereof in an amount in excess of $250,000 (or $500,000 in the aggregate) and which are not terminable by the Company or Company Subsidiary on ninety (90) days’ notice without penalty or premium; or

(m) other contracts, including customer contracts, that involve aggregate annual payments of more than $500,000.

2.13.2 No Breach of Material Contracts

None of the Companies or the Company Subsidiaries has breached, violated or defaulted under any of the terms or conditions of any Material Contract to which such Company or Company Subsidiary is a party, except for such breaches, violations or defaults that would not, individually or in the aggregate, have a Company Material Adverse Effect. Each Material Contract is in full force and effect and, to the Knowledge of the Sellers and the Companies, is not subject to any default thereunder by any party obligated to any of the Companies or Company Subsidiaries pursuant thereto that would have a Company Material Adverse Effect.

2.14 Litigation

Section 2.14 of the Disclosure Schedules sets forth an accurate and complete list of each lawsuit, Claim, Proceeding or investigation instituted and served upon any of the Companies and the Company Subsidiaries or, to the Knowledge of the Sellers and the Companies, filed or threatened against any of the Companies or the Company Subsidiaries or any of their properties, assets, operations or businesses in the last three (3) years in which the damages claimed against the respective Company or Company Subsidiary exceed $250,000, or which challenge the legality of this Agreement or any action to be taken in connection herewith, other than ordinary course workers’ compensation Proceedings and other than any such lawsuits, Claims, Proceedings or investigations which are covered (subject to deductibles, co-payments, retentions, policy limits and the like) by insurance. Except as disclosed in Section 2.14 of the Disclosure Schedules , there are no judgments, Orders, decrees or injunctions of any Governmental Entity against or affecting any of the Companies or the Company Subsidiaries or any of their respective properties, assets, operations or businesses that have not been satisfied or resolved or for which any obligation of any of the Companies or the Company Subsidiaries remains to be fulfilled, including, but not limited to, payment of monetary damages, fines or penalties, or completion of any remedial corrective measures, that would, individually or in the aggregate, have a Company Material Adverse Effect. To the Knowledge of the Sellers and the Companies, none of the Companies or the Company Subsidiaries is in default under any judgment, Order or decree, except for such defaults that would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

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2.15 Insurance

Set forth in Section 2.15 of the Disclosure Schedules hereto is an accurate and complete list of all policies of insurance held by, or the premiums on which are paid (in whole or in part) by, any of the Companies and the Company Subsidiaries. Except as set forth in Section 2.15 of the Disclosure Schedules , all such policies are in full force and effect, all premiums due and payable by the Companies or the Company Subsidiaries thereon have been paid in full or accrued on the Financial Statements and the respective Company or Company Subsidiary has not received any written notice of cancellation, amendment or dispute as to coverage with respect to any such policies.

2.16 Employee Benefit Plans

2.16.1 Employee Benefit Plan Listing and Documents

Section 2.16.1 of the Disclosure Schedules contains a complete and accurate list of all material employee benefit plans, policies and arrangements sponsored by any of the Companies or the Company Subsidiaries for the benefit of any current or former employee of any of the Companies or the Company Subsidiaries (the “ Employee Benefit Plans ”). The Companies have delivered or made available to Buyer, with respect to each Employee Benefit Plan (to the extent applicable thereto), true, correct and complete copies of (i) the plan document, as currently in effect, or, if such Employee Benefit Plan is not in writing, a written description of such Employee Benefit Plan; (ii) the most recent annual report (Form 5500 series and all schedules thereto) filed with respect to such Employee Benefit Plan; (iii) the most recent summary plan description, and all summaries of material modifications related thereto, distributed with respect to such Employee Benefit Plan; and (iv) the most recent determination letter issued by the IRS with respect to such Employee Benefit Plan.

2.16.2 Compliance

Each Employee Benefit Plan has been maintained and administered in accordance with its terms and in compliance with applicable Law, including, without limitation, the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), and the Code, except for such noncompliance as would not result in a Company Material Adverse Effect. To the Knowledge of the Sellers and the Companies, the Companies have not engaged in a prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, with respect to which they are reasonably likely to incur a material liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA. All contributions required to be made by the Companies to the Employee Benefit Plans have been made or provided for.

2.16.3 Qualification

Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code (i) is the subject of an unrevoked favorable determination letter from the IRS, (ii) has remaining a period of time under the Code or applicable Treasury Regulations or IRS pronouncements in which to request, and make any amendments necessary to obtain, such a letter from the IRS, or (iii) is a prototype plan or volume submitter plan entitled, under applicable IRS guidance, to rely on the favorable opinion or advisory letter issued by the IRS to the sponsor

 

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of such prototype or volume submitter plan. To the Knowledge of the Sellers and the Companies, nothing has occurred that would reasonably be expected to adversely affect the tax-qualified status of any such Employee Benefit Plan.

2.16.4 Pension Plans

Neither the Companies nor any ERISA Affiliate sponsors or contributes to or, at any time during the last six (6) years, has sponsored or contributed to, (i) a “multiemployer plan,” as defined in Section 4001(a)(3) of ERISA, (ii) a multiple employer plan within the meaning of Section 4063 or 4064 of ERISA, or (iii) an employee benefit plan that is subject to Section 302 of ERISA, Title IV of ERISA or Section 412 of the Code.

2.16.5 Post-Termination Welfare Benefits

None of the Employee Benefit Plans provides life insurance, medical or other welfare benefits (within the meaning of Section 3(1) of ERISA) to any employee or former employee after his or her retirement or other termination of employment, and the Companies have never represented, promised or contracted (whether in written or oral form) to any employee or former employee that such benefits would be provided, except (i) to the extent required by applicable Law, including, without limitation, Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA, (ii) severance benefits, and (iii) conversion rights.

2.16.6 Suits, Claims and Investigations

There are no actions, suits or Claims (other than routine claims for benefits) pending or, to the Knowledge of the Sellers and the Companies, threatened with respect to (or against the assets of) any Employee Benefit Plan. No Employee Benefit Plan is currently under investigation, audit or review, directly or indirectly, by any Governmental Entity and, to the Knowledge of the Sellers and the Companies, no such action is contemplated or under consideration by any Governmental Entity.

2.16.7 No Liability for Parent Plans

There exists no condition or set of circumstances under which the Companies and the Company Subsidiaries could incur any material liability with respect to any employee benefit plan sponsored by the Sellers (other than for contributions due to such plan for periods ending on or before the Closing Date).

2.17 Compliance With Applicable Laws

The Companies, the Company Subsidiaries and their properties and assets are in compliance with all applicable statutes, Laws, ordinances, rules and regulations of any Governmental Entity, except for noncompliance that would not, individually or in the aggregate, have a Company Material Adverse Effect. To the Knowledge of the Sellers and the Companies and except as set forth in Section 2.17 of the Disclosure Schedules , none of the Companies or the Company Subsidiaries has received any written communication from any Governmental Entity that alleges that any of the Companies or the Company Subsidiaries are in violation of any applicable Law, rule or regulation, the substance of which communication has not been resolved, except for communications regarding violations that would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

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2.18 Licenses; Permits

To the Knowledge of the Sellers and the Companies and except as set forth in Section 2.18 of the Disclosure Schedules , all governmental licenses, permits or authorizations of the Companies and the Company Subsidiaries are validly held by or issued to the Companies and the Company Subsidiaries and are in full force and effect, and the Companies and the Company Subsidiaries have complied with all requirements in connection therewith, except where the failure to hold such licenses, permits or authorizations or to comply with such requirements would not, individually or in the aggregate, have a Company Material Adverse Effect. To the Knowledge of the Sellers and the Companies, there are no pending or threatened Proceedings seeking to limit, modify or rescind any material licenses, permits or other authorizations, and the same will not be subject to suspension, modification or revocation or require the transfer or reissuance by any Governmental Entity as a result of this Agreement or the consummation of the transactions contemplated hereby, except where any such failures to hold or comply or any such suspensions would not, individually or in the aggregate, have a Company Material Adverse Effect. To the Knowledge of the Sellers and the Companies, the Companies and the Company Subsidiaries have all of the governmental licenses, permits or authorizations that are required to carry on the Entertainment Business as now conducted, except where the failure to obtain such licenses, permits or authorizations would not, individually or in the aggregate, have a Company Material Adverse Effect.

2.19 Entertainment Business

Except as set forth in Section 2.19 of the Disclosure Schedules , the Companies and the Company Subsidiaries own the assets and hold the legal rights necessary to carry on the Entertainment Business as now conducted by the Companies and the Company Subsidiaries.

2.20 Environmental Matters

To the Knowledge of the Sellers and the Companies, the Companies and the Company Subsidiaries have complied with and are in compliance in all material respects with all federal, state and local statutes, laws, ordinances, regulations, rules, permits, judgments, orders and decrees applicable to them or any of their properties, assets, operations or business relating to environmental protection, including, without limitation, standards relating to air, water, land and the generation, storage, transportation, treatment or disposal of solid waste and hazardous waste (“ Environmental Laws ”), except for noncompliance that would not, individually or in the aggregate, have a Company Material Adverse Effect. To the Knowledge of the Sellers and the Companies and except as set forth in Section 2.20 of the Disclosure Schedules , none of the Sellers, the Companies or the Company Subsidiaries has received any written or oral notice, report or other information regarding any actual or alleged violation of any Environmental Laws with respect to the Companies, the Company Subsidiaries or the Entertainment Business. None of the Companies or the Company Subsidiaries has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled or released any substance in a manner that could give rise or could reasonably be foreseen to give rise to liabilities, including any liability for

 

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response costs, corrective action costs, personal injuries, natural resource damages or attorneys’ fees or any investigative, corrective action or remedial obligations pursuant to any Environmental Law, except for liabilities that would not, individually or in the aggregate, have a Company Material Adverse Effect. To the Knowledge of the Sellers and the Companies, none of the following exists at any of the Real Property: (a) underground storage tanks; (b) friable asbestos-containing material; (c) materials or equipment containing polychlorinated biphenyls; or (d) landfills or open dumps, surface impoundments or hazardous waste disposal areas.

2.21 Employee and Labor Matters

Except as set forth in Section 2.21 of the Disclosure Schedules , none of the Companies or the Company Subsidiaries is a party to or otherwise bound by any collective bargaining agreement or other labor union contract applicable to Persons employed by the Companies and the Company Subsidiaries, and no collective bargaining agreement is being negotiated by the Companies or the Company Subsidiaries. Except as set forth in Section 2.21 of the Disclosure Schedules , there is no labor strike, or organized labor dispute, or material work stoppage or lockout actually pending or, to the Knowledge of the Sellers and the Companies, threatened against or affecting the Companies or the Company Subsidiaries. To the Knowledge of the Sellers and the Companies, (a) the Companies and the Company Subsidiaries are in compliance with all applicable laws relating to employment and employment practices, wages, hours, and terms and conditions of employment, occupational safety, discrimination, immigration, and the payment of social security and payroll-related taxes; (b) there are no charges against the Companies or the Company Subsidiaries pending before the Equal Employment Opportunity Commission or any state, local or foreign agency responsible for the prevention of unlawful employment practices; and (c) there is no unfair labor practice charge or complaint against the Companies or the Company Subsidiaries pending or, to the Knowledge of the Sellers and the Companies, threatened before the National Labor Relations Board or any comparable state agency, except where any such noncompliance, charge or complaint would not, individually or in the aggregate, have a Company Material Adverse Effect.

2.22 Transactions With Certain Persons

Except as set forth in Section 2.22 of the Disclosure Schedules , no officer or director or manager (as applicable) of the Companies or the Company Subsidiaries nor any Affiliate of any such Person nor any member of any such Person’s immediate family is a party to any contract, agreement, transaction or other arrangement with the Companies or the Company Subsidiaries (a) providing for the furnishing of services (except in such Person’s capacity as an officer, director, manager or employee), (b) providing for the rental of real or personal property to or from any such Person, (c) providing for a loan or advance of funds to or from any such Person, or (d) otherwise requiring payments (other than for services as an officer, director, manager or employee) to or from any such Person.

2.23 Company Books and Records

The Companies have furnished to Buyer for examination accurate and complete copies of (a) the Charter and Governing Document of each of the Companies and the Company Subsidiaries as currently in effect, including all amendments thereto, (b) the minute books of each of the Companies and the Company Subsidiaries, and (c) the stock and interest transfer books (as applicable) of the Companies and the Company Subsidiaries.

 

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2.24 No Broker or Finder

Except as set forth in Section 2.24 of the Disclosure Schedules , none of the Sellers, the Companies or the Company Subsidiaries has any liability or obligation to pay any fees or commissions to any investment banker, broker, finder or financial advisor with respect to the transactions contemplated by this Agreement.

2.25 Current Assets and Liabilities

Neither the Companies nor the Company Subsidiaries have distributed or caused to be distributed to Sellers or any Affiliate of any Seller, whether by dividend, distribution, payment of principal, payment of interest or otherwise, any cash or cash equivalent since the Balance Sheet Date.

2.26 Bank Accounts

Section 2.26 of the Disclosure Schedules sets forth a true, correct and complete list of the names and locations of each bank or other financial institution at which the Companies or the Company Subsidiaries have an account (including the account numbers for each account) or safe deposit box (the “ Bank Accounts ”), contact information for the banking representative for such Bank Accounts, and the names of all authorized signatories for each Bank Account.

2.27 No Other Representations and Warranties

Except for the representations and warranties contained in this Article II, none of the Sellers, Companies or the Company Subsidiaries makes any other representations or warranties, written or oral, statutory, express or implied. Buyer acknowledges that, except as expressly provided in this Agreement, none of the Sellers, Companies or the Company Subsidiaries has made, and each of the Sellers, Companies and Company Subsidiaries hereby expressly disclaims and negates, and Buyer hereby expressly waives, any representation or warranty, express or implied, at common law, by statute