|
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
THIS
STOCK PURCHASE AGREEMENT (this “ Agreement
”), dated as of May 15, 2008, by and among (a) BOOKRAGS,
INC., a Delaware corporation (the “ Company
”), (b) DAVID LIEBERMAN, a stockholder of the Company
(“ David
”), (c) JAMES YAGMIN, a stockholder of the Company (“
James
”), (d) CHARLES LIEBERMAN, a stockholder of the Company
(“ Charles
”), (e) SUE A. IDLEMAN, in her capacity as Executrix of the
ESTATE OF LEE H. IDLEMAN, a stockholder of the Company (the “
Idleman
Estate ”), and (F) AMBASSADORS GROUP, INC., a Delaware
corporation, or its assigns (“ Purchaser
”). David, James, Charles and the Idleman Estate
are sometimes referred to herein individually as a “
Stockholder
,” and collectively as the “ Stockholders
.” The Company, the Stockholders and Purchaser are
sometimes referred to herein individually as a “ Party ,”
and collectively as the “ Parties
.”
WITNESSETH:
WHEREAS,
the Company is in the business of owning and operating a website
that provides educational materials and content (the “
Business
”).
WHEREAS,
each Stockholder owns the number of shares of common stock of the
Company, $0.001 par value per share (the “ Shares
”), as is set forth opposite such Stockholder’s name
below, which Shares in the aggregate represent all of the issued
and outstanding shares of capital stock of the
Company.
|
Stockholder
|
Number of Shares
|
Percentage
|
|
David
|
532,000
|
54.53%
|
|
James
|
354,666
|
36.36%
|
|
Charles
|
78,889
|
8.09%
|
|
Idleman
Estate
|
10,000
|
1.02%
|
WHEREAS,
upon the terms and subject to the conditions set forth herein, each
of the Stockholders desires to sell such Stockholder’s Shares
to Purchaser, and Purchaser desires to purchase the Shares from the
Stockholders.
WHEREAS,
the Parties intend that the transaction contemplated by this
Agreement be treated as an asset acquisition pursuant to Section
338(h)(10) of the Code.
NOW,
THEREFORE, in consideration of the foregoing recitals and the
premises and mutual terms, conditions and agreements set forth
herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties,
intending to be legally bound, hereby agree as
follows:
ARTICLE
I
DEFINITIONS
SECTION
1.1. Certain Defined
Terms . As used in this Agreement, the
following terms shall have the following
meanings:
“
Accounts
Receivable ” of a Person shall mean all accounts,
notes, accounts receivable, contract rights, drafts and other
forms of claims, demands, instruments, receivables and rights
to the payment of money or other forms of consideration,
whether for goods sold or leased, services performed or to be
performed, or otherwise, owned by that Person or in which that
Person has any interest, together with all guarantees,
security agreements and rights and interests securing the
same.
“
Action
” shall mean any claim, action, suit, arbitration,
inquiry, proceeding or investigation by or before any
Governmental Authority.
“
Affiliate
” shall mean, with respect to any specified Person, any
other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with, such specified Person.
“
Agreement
” shall mean this Stock Purchase Agreement by and among
the Company, the Stockholders and Purchaser (including the
Schedules and Exhibits hereto).
“
Alternative
Proposal ” shall mean a proposal or offer (other
than by Purchaser) for a stock purchase, asset acquisition,
merger, consolidation or other business combination involving
the Company or any proposal to acquire in any manner a direct
or indirect substantial equity interest in, or all or any
substantial part of the assets of, the Company.
“
Books and
Records ” of a Person shall mean all books and
records, ledgers, employee records, customer lists, files,
correspondence, computer data bases, accounting information
and other records of every kind, whether written, computerized
or maintained in any other medium, which are owned by that
Person or in which that Person has any interest.
“
Business
Day ” shall mean any day that is not a Saturday,
a Sunday or other day on which banks are required or
authorized by law to be closed in the city of Spokane,
Washington.
“
CERCLA
” shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
“
Change In
Control ” shall mean with respect to a Person,
when (a) such Person merges or consolidates with another
entity, unless (i) the other entity controls, is under common
control with or is controlled by such Person immediately prior
to the consolidation or merger whether or not such Person
shall be the surviving entity in such consolidation or merger,
or (ii) the equity holders of such Person immediately before
such merger or consolidation own, directly or indirectly,
immediately following such merger or consolidation, more than
fifty percent (50%) of the combined voting power of the
outstanding voting securities of the entity resulting from
such merger or consolidation (whether or not such Person is
the surviving entity); or (b) such Person consummates a sale
of all or substantially all of its assets; or (c) the equity
holders of such Person sell, exchange or transfer securities
in a tender offer or other transaction representing more than
fifty percent (50%) of the combined voting power of the
outstanding voting securities of such Person.
“
Code
” shall mean the Internal Revenue Code of 1986, as
amended.
“
Company
Documents ” shall mean this Agreement and all
other agreements, instruments and certificates to be executed
by the Company in connection with this Agreement.
“
EBITDA
” shall mean a dollar amount as is calculated in
accordance with the following formula: Revenue
– expenses (excluding income Taxes, interest,
depreciation and amortization), as applied by the Company and
in accordance with the methodology set forth on Appendix
1 . The Parties acknowledge and agree that,
in determining expenses, there shall be deducted reasonable
and customary corporate overhead charges and expenses to the
Company, subject to the requirements of Section
2.3(f).
“
Environmental
Laws and Orders ” shall mean, collectively, all
applicable Laws and Governmental Orders relating to the
protection of the environment, human health or occupational
health and safety, including without limitation, (a) all
requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions,
discharges, releases or threatened releases of Hazardous
Substances, chemical substances, pollutants, contaminants or
toxic substances, materials or wastes, whether solid, liquid
or gaseous in nature, into the air, surface water, groundwater
or land; (b) all requirements relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, chemical
substances, pollutants, contaminants or toxic substances,
materials or wastes, whether solid, liquid or gaseous in
nature; and (c) RCRA, CERCLA, the Clean Air Act, the Water
Pollution Control Act, the Safe Drinking Water Act, the Toxic
Substances Control Act, the Emergency Planning and Community
Right-to-Know Act, the Hazardous Materials Transportation Act,
the Occupational Safety and Health Act of 1970 and all
regulations promulgated pursuant to any of these or analogous
state or local statutes.
“
ERISA
” shall mean the Employee Retirement Income Security Act
of 1974.
“
Exchange
Act ” shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder.
“
Executives
” shall mean David and James.
“
GAAP
” shall mean United States generally accepted accounting
principles and practices as in effect from time to
time.
“
Governmental
Authority ” shall mean any federal, state or
local or any foreign government, political subdivision
thereof, governmental, regulatory or administrative authority,
agency or commission or any court, tribunal or judicial
body.
“
Governmental
Order ” shall mean any order, writ, injunction,
decree, stipulation, determination or award entered by or with
any Governmental Authority.
“
Hazardous
Substance ” shall mean any substance, waste or
material: (a) the presence of which requires investigation or
remediation under any Environmental Law or Order, (b) the
generation, storage, treatment, transportation, disposal,
remediation, removal, handling or management of which is
regulated by any Environmental Law or Order, (c) that is
defined as a “hazardous waste” or hazardous
substance” under any Environmental Law or Order, (d)
that is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic or mutagenic or otherwise hazardous
and is regulated by any Governmental Authority, (e) the
presence of which poses a hazard to the health or safety of
Persons, (f) the presence of which constitutes a nuisance,
trespass or other tortious condition for which the Company
could be or is alleged to be liable or (g) without limitation,
that contains gasoline, diesel fuel or other petroleum
hydrocarbons, polychlorinated biphenols (PCBs) or
asbestos.
“
Intellectual
Property ” of a Person shall mean all intangible
properties owned by that Person or in which that Person has
any interest (including the right to use by license or
otherwise), and all rights arising from or associated
therewith, whether protected, created or arising under the
laws of any jurisdiction and includes, without limitation: (a)
all registered and unregistered trademarks, service marks,
trade names, trade dress, logos, corporate names, slogans and
commercial symbols, all applications therefor, and all
associated goodwill; (b) all domain names and URL’s, and
all websites and the “look and feel” of all such
websites (including, without limitation, each such
website’s particular typefaces, color schemes,
programming code themes and the like); (c) all works of
authorship, derivative works thereof and statutory, common law
and registered copyrights therein, all applications therefor
and all associated goodwill; (d) all inventions, including all
related and associated patents and patent applications,
technical information, shop rights, know-how, trade secrets,
processes, operating, maintenance and other manuals, drawings
and specifications, process flow diagrams and related data,
and all associated goodwill; (e) all software developed for a
Person pursuant to an agreement between such Person and the
software designer designating the software a “work made for
hire” or assigning
ownership rights to such software to such Person, all software
developed by an employee or contractor of a Person, and all
documentation thereof, (including all electronic data
processing systems and program specifications, functional
specifications, source and object codes, algorithms,
architecture, input data, report layouts and format, record
file layouts, diagrams, narrative descriptions and flow
charts) (collectively, the “owned software,”) and
all “off the
shelf” software purchased in retail transactions
or used in connection with the Business (collectively the
“licensed software”); (f) all other mask works,
moral rights, inventions, discoveries, improvements,
processes, formulae (secret or otherwise), data, drawings,
specifications, trade secrets, confidential information,
financial, marketing and business data, pricing and cost
models and information, business and marketing plans,
operating procedures, customer and supplier lists, and
knowledge of customer preferences and buying practices; (g)
all drawings, records, books or other tangible media embodying
the foregoing; (h) all rights to obtain and rights to register
patents, trademarks and copyrights; (i) all content utilized
in the operation of the Company’s Business and displayed
on the Company’s websites; and (j) all rights to sue or
recover and retain damages and costs and attorneys fees for
present and past infringement of any of the
foregoing.
“
Knowledge
” shall mean (a) with respect to Purchaser, the actual
knowledge of each of Jeffrey D. Thomas and Chadwick J. Byrd,
Jody Gentemann and Kris Bliesner, and the knowledge that each
such person would have acquired upon reasonable inquiry, and
(b) with respect to the Company, the actual knowledge of each
of David and James, and the knowledge that each such person
would have acquired upon reasonable inquiry.
“
Labor
Agreements ” of a Person shall mean,
collectively: (a) all employment agreements, collective
bargaining agreements or other labor agreements to which that
Person is a party or by which any of its properties is bound;
(b) all pension, profit sharing, deferred compensation, bonus,
stock option, stock purchase, savings, retainer, consulting,
retirement, welfare or incentive plans or contracts
(including, in the case of the Company, Company Benefit Plans)
to which that Person is a party or by which any of its
properties is bound; and (c) all plans or agreements under
which “fringe benefits” (including, but not
limited to, hospitalization plans or programs, medical
insurance, vacation plans or programs, sick plans or programs
and related benefits) are afforded to any employees of that
Person.
“
Law
” shall mean any statute, law, ordinance, regulation or
rule of any Governmental Authority, including without
limitation, environmental laws.
“
Liabilities
” shall mean any and all liabilities and obligations,
whether accrued, absolute, known, unknown, contingent, matured
or unmatured.
“
Lien
” shall mean any security interest, easement, mortgage,
charge, lease, lien, claim, option, pledge, agreement,
limitation in voting rights, restriction on transfer (other
than as imposed by federal and state securities Laws), or
other encumbrance of any kind or nature
whatsoever.
“
Loss
” or “ Losses
” shall mean any and all losses, damages, claims, costs
and expenses, interest, awards, judgments, penalties and
amounts paid in settlement (including reasonable
attorneys’ fees and expenses) actually suffered or
incurred by a Party.
“
Material Adverse
Effect ” shall mean any material adverse effect
on the Business, results of operations or financial condition
of the Company taken as a whole.
“
Person
” shall mean any individual, partnership, firm,
corporation, association, trust, estate, unincorporated
organization, joint venture, limited liability company or
other entity.
“
RCRA
” shall mean the Resource Conservation and Recovery Act
of 1976.
“
Real
Property ” of a Person shall mean all real
properties owned by that Person or in which that Person has
any interest or estate (including the right to use or by way
of a lease), together with all buildings, fixtures, trade
fixtures, plant and all other equipment and improvements
located thereon or attached thereto; all of that
Person’s rights arising out of the ownership or use
thereof (including air, water, oil and mineral rights), and
all subleases, franchises, licenses, permits, easements and
rights-of-way which are appurtenant thereto.
“
Revenues
” shall mean the aggregate amount of revenues actually
received or credited to the Company, if any, as determined in
accordance with GAAP, as applied by the Company and in
accordance with the methodology set forth on Appendix
1 .
“
Stockholder
Documents ” shall mean this Agreement and all
other agreements, instruments and certificates to be executed
and delivered by the Stockholders in connection with this
Agreement.
“
Tangible
Personal Property ” of a Person shall mean all
machinery, equipment, furniture, trade fixtures, computers,
supplies, spare parts or tools and other tangible personal
property owned by that Person, leased by that Person or in
which that Person has any other interest (including the right
to use).
“
Tax
” shall mean any federal, state, county, local, foreign
and other tax, charge, fee, levy, deficiency or other
assessment of any nature or kind that is imposed by a Taxing
Authority (including any income, profits, premium, estimated,
excise, sales, use, occupancy, gross receipts, franchise, ad
valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment, payroll, property,
license, withholding, stamp, occupation, occupancy, recording,
minimum, environmental, built in gains and excess passive
income tax), whether directly, as transferee (including under
code Section 6901 or any similar provision under applicable
Law), as a result of being a member of a consolidated,
combined or unitary group (including under Treasury
Regulations Section 61502-6 or any similar provision of
applicable Law), as a result of a Tax sharing or similar
agreement, or otherwise, together with any interest, addition
to tax or penalty with respect thereto.
“
Taxing
Authority ” shall mean any Governmental Authority
exercising Tax regulatory authority.
“
Tax
Return ” shall mean any return, declaration,
report, claim for refund or credit, or information return,
with respect to Tax, or any other similar report, statement,
declaration, or document that is filed or required to be filed
under the Code or other Tax Law with any Taxiing Authority in
connection with the determination, reporting, assessment,
collection or payment of any Tax or the administration of any
Tax Law, including any attachments, exhibits, or other
materials submitted with any of the foregoing, and including
any amendments to any of the foregoing.
“
Transfer
Tax ” shall mean all Tax (other than Tax measured
on or by net income) incurred or imposed by reason of the
transfer and sale of the Shares to Purchaser pursuant to this
Agreement regardless of upon whom such Tax is levied or
imposed by law, including sales and use tax, real property
transfer tax, excise tax, and stamp, documentary, filing,
recording, permit, license, registration, or authorization
duties or fees (including penalties and interest in respect of
any of the foregoing).
“
WARN
Act ” shall mean the Worker Adjustment and
Retraining Notification Act, or any similar state statute or
local law, as the same may be amended, modified or
supplemented from time to time or any law that may come to
supersede the requirements thereof.
SECTION
1.2. Other Defined
Terms . In addition to those terms defined
above, the following terms shall have the respective meanings
given thereto in the Sections indicated below:
|
Term
|
|
Section
|
| |
|
|
|
Arbitrating
Accountants
|
|
2.3(d)
|
|
Assumed
Liabilities
|
|
3.6(a)
|
|
Broker’s
Fees
|
|
3.6(a)
|
|
Business
|
|
Recitals
|
|
California
Taxes
|
|
3.6(a)
|
|
Term
|
|
Section
|
| |
|
|
|
Carved
Out Company Representations and Warranties
|
|
6.10(a)
|
|
Carved
Out Stockholder Representations and Warranties
|
|
6.10(a)
|
|
Charles
|
|
Preamble
|
|
Closing
|
|
2.8
|
|
Closing
Date
|
|
2.8
|
|
Closing
Cash Payment
|
|
2.2(a)
|
|
Company
Benefit Plans
|
|
3.13
|
|
Closing
Date Amount
|
|
2.4(a)
|
|
Closing
Date Amount Schedule
|
|
2.4(a)
|
|
Closing
Date Balance Sheet
|
|
2.4(a)
|
|
Company’s
Disclosure Schedule
|
|
Article
III
|
|
Company
Software
|
|
3.17
|
|
Confidential
Information
|
|
5.18
|
|
Contract
|
|
3.9
|
|
David
|
|
Preamble
|
|
Disclosing
Party
|
|
5.18
|
|
Earn-out
Payments
|
|
2.3(b)
|
|
Elections
|
|
5.21(b)
|
|
Employment
Agreements
|
|
5.11
|
|
Financial
Statements
|
|
3.6
|
|
Foreign
Business Tax Liabilities
|
|
3.6(a)
|
|
Franchise
Taxes
|
|
2.6
|
|
Idleman
Estate
|
|
Preamble
|
|
Indemnified
Party
|
|
6.5
|
|
Indemnifying
Party
|
|
6.5
|
|
Independent
Tax Firm
|
|
5.20
|
|
Initial
Earn-out Payment
|
|
2.3(a)
|
|
Initial
Earn-out Period
|
|
2.3(a)
|
|
Inventions
Assignment Agreement
|
|
5.25
|
|
James
|
|
Preamble
|
|
Non-compete
Agreements
|
|
5.12
|
|
Open
Source Software
|
|
3.17(a)
|
|
Options
|
|
5.13
|
|
Party
|
|
Preamble
|
|
Parties
|
|
Preamble
|
|
Pre-Closing
Period
|
|
6.3(a)
|
|
Prepayments
|
|
3.9(a)
|
|
Purchase
Price
|
|
2.2
|
|
Purchaser
|
|
Preamble
|
|
Purchaser
SEC Documents
|
|
4.5
|
|
Receiving
Party
|
|
5.18
|
|
Reference
Balance Sheet
|
|
3.6
|
|
Term
|
|
Section
|
| |
|
|
|
Required
Consents
|
|
3.3
|
|
SEC
|
|
4.5
|
|
Second
Earn-out Payment
|
|
2.3(b)
|
|
Second
Earn-out Period
|
|
2.3(b)
|
|
Shares
|
|
Recitals
|
|
Stockholder(s)
|
|
Preamble
|
|
Stock
Consideration
|
|
2.2(b)
|
|
Tax
Liability
|
|
3.11(b)
|
|
Tax
Proceeding
|
|
3.11(b)
|
|
Threshold
Amount
|
|
2.4(a)
|
|
Transferred
Employees
|
|
5.9
|
|
338
Tax
|
|
5.20
|
SECTION
1.3. Other
Interpretive Provisions . The words
“hereof”, “herein” and
“hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and
Section, Schedule and Exhibit references are to this Agreement
unless otherwise specified, and reference to a given agreement
or instrument shall be a reference to that agreement or
instrument as modified, amended, supplemented and restated
through the date as of which such reference is
made. The words “include,”
“includes,” and “including” shall be
deemed to be followed by the phrase “without
limitation.” The meanings given to terms
defined herein shall be equally applicable to both the
singular and plural forms of such terms. Any
references to Laws, statutes or agreements shall mean such
Laws, statutes or agreements as amended, modified or
supplemented from time to time. If any action is
required to be taken or notice is required to be given on a
day that is not a Business Day, such action or notice shall be
considered timely if it is taken or given on or before the
next Business Day.
ARTICLE
II
SALE
AND PURCHASE OF SHARES; PURCHASE PRICE; CLOSING
SECTION
2.1. Sale and
Purchase of the Shares . Upon the terms and
conditions set forth in this Agreement and in reliance upon
the representations and warranties of the Stockholders, the
Company and Purchaser herein set forth, as of the Closing,
each Stockholder shall sell, transfer, convey, assign and
deliver to Purchaser, and Purchaser shall purchase, acquire
and accept from each Stockholder, all of the Shares owned by
each such Stockholder, free and clear of any and all
Liens.
SECTION
2.2. Purchase
Price . In consideration for the Shares,
Purchaser shall pay to the Stockholders, on a pro-rata basis,
the aggregate purchase price (the “ Purchase
Price ”) of up to Eighteen Million Dollars
($18,000,000) subject to the terms and conditions of Section
2.3 and subject to the post-Closing adjustment in accordance
with the terms of Section 2.4, which Purchase Price shall be
payable as follows:
(a) On
the Closing Date, Purchaser shall pay to the Stockholders, on
a pro-rata basis, cash in the amount of Eight Million Five
Hundred Thousand Dollars ($8,500,000) (the “ Closing Cash
Payment ”), which shall be paid by wire transfer
of immediately available funds to one or more bank accounts
designated in writing by each of the Stockholders immediately
prior to the Closing.
(b) On
the Closing Date, Purchaser shall issue to and hold pending
release to the Stockholders pursuant to the terms of this
Section 2.2(b) and Article VI, 233,584 shares of
Purchaser’s common stock in the name of each of the
Stockholders (the number of such shares to be issued to the
Stockholders on a pro-rata basis), which shares have an agreed
upon aggregate fair market value of Four Million Five Hundred
Thousand Dollars ($4,500,000) (the “ Stock
Consideration ”). Subject to the
offset rights set forth in Section 6.12 and the terms of
Section 6.11, the Stock Consideration (i) shall be held in
escrow by Purchaser and shall be available to satisfy the
indemnification obligations of the Stockholders pursuant to
the terms of Article VI, and (ii) shall be released from
escrow to the Stockholders (on a pro rata basis) on the second
anniversary of the Closing Date. Each of the
Stockholders shall be entitled to vote such
Stockholder’s pro rata portion of the shares of Stock
Consideration and receive any dividends (to the extent
declared by Purchaser) with respect thereto during such
hold-back or escrow period to the extent such shares are not
forfeited in accordance with the terms of Article
VI.
SECTION
2.3. Earn-out
Payments and Adjustments .
(a) Subject
to the terms and conditions of Article VI to the extent that,
during the period commencing January 1, 2008 through and
including December 31, 2009 (the “ Initial Earn-out
Period ”), the EBITDA of the Company on a
stand-alone basis, computed in accordance with GAAP, as
applied by the Company and in accordance with the methodology
set forth on Appendix
1 , is between Four Million Six Hundred Thousand
Dollars ($4,600,000) and Seven Million Dollars ($7,000,000),
then Purchaser shall pay to the Stockholders, on a pro rata
basis, a pro rata cash amount of up to Two Million Dollars
($2,000,000) (the “ Initial Earn-out
Payment ”); provided
, however ,
that no Initial Earn-out Payment shall be paid until the
EBITDA of the Company on a stand-alone basis for the Initial
Earn-out Period is greater than Four Million Nine Hundred
Thousand Dollars ($4,900,000) in the aggregate. By
way of example, if the EBITDA of the Company on a stand-alone
basis for the Initial Earn-out Period is Six Million Dollars
($6,000,000), then the amount of the Initial Earn-out Payment
due shall be One Million One Hundred Sixty Six Thousand Six
Hundred Sixty Six Dollars ($1,166,666) or approximately 58.3%
of Two Million Dollars ($2,000,000).
(b) Subject
to the terms and conditions of Article VI, to the extent that,
during the period commencing January 1, 2008 through and
including December 31, 2010 (the “ Second Earn-out
Period ”), the EBITDA of the Company on a
stand-alone basis, computed in accordance with GAAP, as
applied by the Company and in accordance with the methodology
set forth on Appendix
1 , is between Seven Million Three Hundred Thousand
Dollars ($7,300,000) and Twelve Million Three Hundred Thousand
Dollars ($12,300,000), then Purchaser shall pay to the
Stockholders, on a pro rata basis, a pro rata cash amount of
up to Three Million Dollars ($3,000,000) (the “
Second Earn-out
Payment ” and together with the Initial Earn-out
Payment, the “ Earn-out
Payments ”); provided
, however ,
that no Second Earn-out Payment shall be paid until the EBITDA
of the Company on a stand-alone basis for the Second Earn-out
Period is greater than Eight Million Dollars ($8,000,000) in
the aggregate. By way of example, if the EBITDA of
the Company on a stand-alone basis for the Second Earn-out
Period is Ten Million Dollars ($10,000,000), then the amount
of the Second Earn-out Payment due shall be One Million Six
Hundred Twenty Thousand Dollars ($1,620,000) or approximately
54% of Three Million Dollars ($3,000,000).
(c) Within
ninety (90) days after the end of the Initial Earn-out Period
or the Second Earn-out Period, as applicable, Purchaser shall
deliver to the Executives a schedule setting forth (i)
Purchaser’s calculation of the EBITDA of the Company for
the applicable earn-out period together with a written
explanation and analysis in reasonable detail of each
component thereof and any adjustments thereto, and (2) the
resulting Earn-out Payments, if any, payable to the
Stockholders. The Executives shall have thirty (30)
days from receipt of any such schedule to accept or reject in
writing Purchaser’s calculation of the EBITDA of the
Company and the Earn-out Amounts, which acceptance or
rejection shall be furnished to Purchaser within such thirty
(30) day period. If Purchaser does not receive any
such written notice from the Executives within such thirty
(30) day period, the Executives and the other Stockholders
shall be deemed to have accepted Purchaser’s calculation
of the EBITDA of the Company and the Earn-out Payments and
such calculation shall be conclusive, final and binding upon
the Executives and the other Stockholders. If the
Executives’ reject such calculation, the Executives will
provide Purchaser, together with the Executives’ notice
of rejection, a written explanation of the basis of such
rejection, specifying in reasonable detail the particulars of
the Executives’ disagreement with Purchaser’s
calculation of the EBITDA of the Company and the Earn-out
Payments and the Executives’ proposed alternative
calculations. The Executives and Purchaser shall
use their respective reasonable best efforts for a period of
fifteen (15) days after the Executives deliver such rejection
notice to Purchaser to resolve such
disagreement. If the Executives and Purchaser fail
to resolve such disagreement within such fifteen (15) day
period, then the subject of such disagreement shall be
resolved in accordance with the procedures set forth in
Section 2.3(d).
(d) If
the Executives and Purchaser are unable to reach a resolution
within fifteen (15) days after delivery by the Executives of
the rejection notice, the Executives and Purchaser shall
submit such disagreement for final binding resolution to an
independent accounting firm mutually acceptable to the
Executives and Purchaser (the “ Arbitrating
Accountants ”), who shall be engaged to provide a
conclusive, final and binding resolution of the unresolved
dispute. The Executives and Purchaser shall each be
entitled to make a presentation to the Arbitrating Accountants
pursuant to procedures to be agreed to among the Executives,
Purchaser and the Arbitrating Accountants, advocating the
merits of the position espoused by such Party and the
Arbitrating Accountants shall be required to resolve the
dispute with respect to the EBITDA of the Company and the
Earn-out Payments within fifteen (15) days
thereafter. The determination of the Arbitrating
Accountants shall be final and binding upon the Parties,
absent fraud. The fees and expenses of the
Arbitrating Accountants shall be shared equally by and between
the Executives and the other Stockholders, on the one hand,
and Purchaser, on the other hand.
(e) Purchaser
shall pay to the Stockholders, on a pro rata basis, by wire
transfer of immediately available funds, the applicable
Earn-out Payment by no later than three (3) Business Days
after the final determination of the applicable Earn-out
Payment is made pursuant to Sections 2.3(c) and 2.3(d), as
applicable.
(f) The
earn-out thresholds set forth in Sections 2.3(a) and 2.3(b)
shall be adjusted to thresholds to be mutually agreed upon by
the Company and the Executives, if, between the Closing Date
and the date of the calculation of the Earn-Out Payments,
Purchaser: (i) assesses any unreasonable and non-customary
corporate overhead charges and expenses to the Company in
calculating the EBITDA of the Company that does not benefit
the Company and that is not otherwise agreed to by management
of the Company, which agreement shall not be unreasonably
withheld, delayed or conditioned; (ii) requires any material
adverse operational changes to the Company that are not agreed
upon by management of the Company, which agreement shall not
be unreasonably withheld, delayed or conditioned; (iii)
calculates the EBITDA of the Company other than in accordance
with the methodology set forth on Appendix
1 ; or (iv) to the extent the Purchaser derives
additional benefit from the Company, from which the Company
could have derived additional benefit if it had sold such
benefit to an outside third-party on an arm’s length
basis, such benefit will be credited to the EBITDA of the
Company as if such benefits were negotiated on an arms-length
basis with Purchaser (by way of example, banner advertisements
on behalf of Purchaser for which no payments are made to the
Company). Notwithstanding the foregoing, the
Parties acknowledge and agree that the provisions of Section
2.3(f)(iv) shall not apply Revenues attributable to the
business (excluding the Business of the Company) of Purchaser
(by way of example, Revenue generated by Purchaser from the
sale of its services derived from banner advertisements placed
on the Company’s website).
(g) The
Earn-out Payments shall become immediately due and payable in
full (subject to the internal projections of EBITDA of the
Company) in the event of (x) a Change In Control of the
Company in which Purchaser actually receives consideration in
excess of the Purchase Price, or (y) a Change in Control of
Purchaser.
SECTION
2.4. Post-Closing
Adjustment; Resolution Procedure .
(a) As
soon as practicable after the Closing Date, but in no event
more than fifteen (15) Business Days thereafter, the
Executives shall prepare and deliver to Purchaser a balance
sheet of the Company as of the Closing Date, using the form,
policies, methodologies and procedures used by the Company in
preparing the Reference Balance Sheet (the “ Closing Date
Balance Sheet ”), along with a schedule setting
forth the Closing Date Amount of the Company as of the Closing
Date (the “ Closing Date
Amount Schedule ”). Subject to the terms and
conditions of Section 2.4(b) below, (i) if the agreed upon
Closing Date Amount is in excess of the Threshold Amount, the
Stockholders shall make a cash payment to Purchaser, on a
dollar-for-dollar and pro rata basis, in the amount of such
excess, and (ii) if the agreed upon Closing Date Amount is
less than the Threshold Amount, Purchaser shall make a cash
payment to the Stockholders, on a dollar-for-dollar and pro
rata basis, in an amount equal to such difference. The
“ Closing Date
Amount ” shall be an amount as determined in
accordance with the following formula: [(the
aggregate dollar value of the Accounts Receivable of the
Company listed on the Reference Balance Sheet) – (the
aggregate dollar value of the accounts payable of the Company
listed on the Reference Balance Sheet)] – [(the
aggregate dollar value of the Accounts Receivable of the
Company listed on the Closing Date Balance Sheet) – (the
aggregate dollar value of the accounts payable of the Company
listed on the Closing Date Balance Sheet)]; provided that the
deferred revenue has been recognized or accrued in the
ordinary course of business. The “ Threshold
Amount ” shall be Fifty Thousand Dollars
($50,000).
(b) Purchaser
shall have forty five (45) Business Days from receipt of the
Closing Date Balance Sheet and the Closing Amount Schedule to
accept or reject in writing the Executives’ calculation
of the Closing Date Amount, which acceptance or rejection
shall be furnished to the Executives within such forty five
(45) Business Day period. If the Executives do not
receive any such written notice from Purchaser within such
forty five (45) Business Day period, Purchaser shall be deemed
to have accepted the Executives’ calculation of the
Closing Date Amount and such calculation shall be conclusive,
final and binding upon Purchaser and the
Stockholders. If Purchaser rejects such
calculation, Purchaser will provide the Executives, together
with Purchaser’s notice of rejection, a written
explanation of the basis of such rejection, specifying in
reasonable detail the particulars of Purchaser’s
disagreement with the Executives’ calculation of the
Closing Date Amount and Purchaser’s proposed alternative
calculation. The Executives and Purchaser shall use
their respective reasonable best efforts for a period of ten
(10) days after Purchaser delivers such rejection notice to
the Executives to resolve such disagreement. If the
Executives and Purchaser fail to resolve such disagreement
within such ten (10) day period, then the subject of such
disagreement shall be resolved in accordance with the
resolution procedures set forth in Section
2.3(d). Any payment made pursuant to the terms of
this Section 2.5 shall be made within five (5) Business Days
of the final determination of any post-closing
adjustment.
SECTION
2.5. Purchase Price
– Allocation Among the Stockholders
. The Purchase Price shall be allocated and paid to
each Stockholder based upon, and the phrase “on a pro
rata basis” when used in this Agreement with respect to
each Stockholder shall mean, the percentage set forth below
following such Stockholder’s name:
|
Name
|
Percentage
|
|
David
|
54.53%
|
|
James
|
36.36%
|
|
Charles
|
8.09%
|
|
Idleman
Estate
|
1.02%
|
SECTION
2.6. Franchise
Taxes . When due and payable, the
Stockholders shall pay to Purchaser, all corporate franchise
Taxes imposed by any Tax Authority (whether or not
such Taxes are due and payable as of the Closing Date with
respect to the operation of the Company (“ Franchise
Taxes ”) for any period through and including the
Closing Date.
SECTION
2.7. Transfer
Taxes . All Transfer Taxes imposed by any
Tax Authority with respect to any transaction contemplated by
this Agreement (if any) shall be duly and timely paid by the
Stockholders, who shall also duly and timely file all Tax
Returns in connection with such Transfer Taxes. The
Stockholders shall give a copy of each such Tax Return to
Purchaser for its review with sufficient time for comments
prior to filing, and shall give Purchaser a copy of such Tax
Return as filed, together with proof of payment of the
Transfer Tax shown thereon, promptly after
filing.
SECTION
2.8. Closing
. Upon the terms and subject to the conditions
hereof, the closing of the transactions contemplated by this
Article II (the “ Closing
”) shall be held at the offices of Loeb & Loeb LLP,
10100 Santa Monica Boulevard, Suite 2200, Los Angeles,
California, at 10:00 a.m. (P.S.T) on the second (2nd) Business
Day following the satisfaction or waiver of all conditions to
the obligations of the Parties set forth in Article VII (other
than conditions which are not capable of being satisfied until
the Closing Date), or at such other place or at such other
time as the Executives and Purchaser may mutually agree upon
in writing (the date on which the Closing takes place being
the “ Closing
Date ”). The Closing shall be deemed effective as
of 11:59 p.m. (P.S.T) on the Closing Date.
SECTION
2.9. Transactions at
Closing . At or immediately prior to the
Closing, the following shall occur:
(a) Purchaser
shall pay the Closing Cash Payment to the Stockholders (on a
pro rata basis) by wire transfer in immediately available
funds;
(b) Purchaser
shall have delivered to the Executives the certificate
required to be delivered pursuant to Section 7.1(a)
hereof;
(c) The
Stockholders shall deliver to Purchaser the certificates
representing the Shares, endorsed in blank or accompanied by
executed blank stock powers;
(d) Each
of the Executives shall deliver executed Employment Agreements
and Non-compete Agreements;
(e) The
Company shall deliver to Purchaser a certificate of the
Secretary of the Company certifying as to (i) the consent of
the Company’s Board of Directors and the Stockholders
authorizing this Agreement and the transactions contemplated
hereby, (ii) the Company’s Certificate of Incorporation,
and (iii) the Company’s bylaws, as amended (the “
Secretary’s
Certificate ”)
(f)
The Company shall provide Purchaser with a
certificate of good standing with respect to the Company (as
to the Company’s corporate existence and its payment of
Franchise Taxes) issued by the Secretary of State of the State
of Delaware;
(g) The
Company shall have terminated the Company’s 2000 Stock
Option Plan (the “ Stock Option
Plan ”);
(h) The
Company and the Executives shall have terminated that certain
Shareholders Agreement of the Company, entered into during the
2000 calendar year ,
by and among the Company and the Stockholders (the “
Stockholders’
Agreement ”);
(i)
The Company shall have terminated all of the
Company Benefit Plans, if any;
(j)
The Company shall deliver to the Purchaser all of
the Books and Records of the Company;
(k) Each
of David, James and Charles shall have delivered to Purchaser
a resignation letter, in form and substance satisfactory to
Purchaser, pursuant to which each of David, James and Charles
shall have resigned as directors of the Company effective as
of the Closing;
(l)
Each of David and James shall have
delivered to Purchaser a resignation letter, in form and
substance satisfactory to Purchaser, pursuant to which David
shall have resigned as President and Treasurer of the Company
and James shall have resigned a Secretary of the Company
effective as of the Closing;
(m) The
Company, the Stockholders and the Company’s Board of
Directors shall have taken all action necessary on the part of
the Company, the Stockholders and the Company’s Board of
Directors to appoint John Ueberroth and Jeffrey D. Thomas as
directors of the Company effective as of the
Closing;
(n) The
Company, the Stockholders and the Company’s Board of
Directors shall have taken all action necessary on the part of
the Company, the Stockholders and the Company’s Board of
Directors to amend the Company’s bylaws to the
reasonable satisfaction of Purchaser;
(o) The
Company and the Executives shall deliver to Purchaser the
certificates required to be delivered pursuant to Section
7.2(a) and Section 7.2(b) hereof;
(p) David
and the Company shall have taken all action necessary on the
part of David and the Company to assign all of David’s
ownership rights in and to the domain names and URLs listed in
Section 3.19 of the Company’s
Disclosure Schedule to the Company;
(q) The
Company shall have taken all action necessary to qualify the
Company to conduct business as a foreign corporation in the
State of California; and
(r)
The Stockholders shall deliver, or
cause the Company to deliver, to Purchaser any and all other
assignments, documents, instruments and conveyances requested
by Purchaser to effect the consummation of the transactions
contemplated by this Agreement.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
OF
THE COMPANY AND THE EXECUTIVES
Except
as disclosed in a document referring specifically to the
representations and warranties in this Agreement which identifies
by section number the section and subsection to which such
disclosure relates ( provided ,
however , that
the Company shall be deemed to have adequately disclosed with
respect to any section or subsection matters that are clearly
described elsewhere in such document if a reasonably prudent reader
can understand the applicability of such disclosure to such
non-referenced sections or subsections and the Company has not
intentionally omitted any required cross references) and is
delivered by the Company to Purchaser prior to or simultaneous with
the execution of this Agreement (the “ Company’s
Disclosure Schedule ”), the Company and each of the
Executives, jointly and severally, hereby represents and warrants
to Purchaser as follows:
SECTION
3.1. Organization and
Good Standing . The Company is a corporation
duly organized, validly existing and in good standing under
the laws of the State of Delaware, has all requisite power to
own, lease and operate its assets, properties and business and
to carry on its business as conducted during the twelve (12)
month period prior to the date hereof, as now conducted and as
proposed to be conducted; and is duly qualified or licensed to
conduct business as a foreign corporation and is in good
standing in every jurisdiction in which the nature of the
Business or the location of its properties requires such
qualification or licensing, except for such jurisdictions
where the failure to so qualify or be licensed would not have
any adverse effect on the enforceability of any of the
Company’s Contracts or the Company’s ability to
bring or defend lawsuits, or a Material Adverse
Effect. The Company’s
Disclosure Schedule
sets forth all jurisdictions in which the Company is
qualified or licensed to conduct business as a foreign
corporation.
SECTION
3.2. Authority and
Enforceability . The Company has all
requisite corporate power and authority to execute and deliver
this Agreement and the other Company Documents and perform its
obligations hereunder and thereunder. The execution
and delivery by the Company of this Agreement and the other
Company Documents and the performance by the Company of the
Company’s obligations hereunder and thereunder have been
duly authorized by all requisite corporate action on the part
of the Company. This Agreement and the other
Company Documents have been duly executed and delivered by the
Company and, assuming due authorization, execution and
delivery by Purchaser, constitute the legal, valid and binding
agreements of the Company, enforceable against the Company in
accordance with their respective terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar Laws relating to
or affecting creditors’ rights generally and general
equitable principles (whether considered in a proceeding in
equity or at law).
SECTION
3.3. Non-Contravention;
Third Party Consents . Except as set forth
in the Company’s
Disclosure Schedule , the execution, delivery and
performance by the Company of this Agreement and the other
Company Documents do not and will not (a) violate, conflict
with or result in the breach of any provision of the
Certificate of Incorporation, bylaws or other charter
documents of the Company, (b) conflict with or violate any Law
or Governmental Order applicable to the Company, the
Stockholders or any of their assets, (c) conflict with, result
in any breach of, constitute a default (or event which with
the giving of notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination,
amendment or acceleration of, or result in the creation of any
Lien or other encumbrance on the Shares or the assets of the
Company pursuant to, any note, bond, mortgage or indenture,
contract, agreement, lease, license, permit or franchise to
which the Company is a party or by which any of its assets is
bound or affected, or (d) require the consent or notification
of any third party under any note, bond, mortgage or
indenture, contract, license, permit or franchise to which the
Company or any of the Stockholders is a party or by which any
of the Company’s assets is bound or affected (any such
notices and consents being referred to collectively as the
“ Required
Consents ”).
SECTION
3.4. Subsidiaries
. The Company does not own, directly or indirectly,
any interest or investment (whether equity or debt) in any
Person.
SECTION
3.5. Capitalization
. The authorized capital stock of the Company
consists of 10,000,000 shares of common stock, $0.001 par
value per share, of which 975,555 shares of common stock are
issued and outstanding, and 1,000,000 shares of preferred
stock, $0.001 par value per share, of which no shares of
preferred stock are issued and outstanding.
All such issued and outstanding shares are duly authorized,
validly issued and outstanding, are fully paid and
nonassessable, are not subject to any right or rescission or
preemptive rights and have been offered and sold by the
Company in full compliance with all registration or
qualification requirements (or applicable exceptions
therefrom) of applicable federal and state securities
laws. A list of all holders of outstanding
securities of the Company and the number of shares held
by each as of the date of this Agreement, is set forth in the
Company
’s
Disclosure
Schedule , and except for such issued and outstanding
shares, there are no shares of capital stock or other
securities or other equity interests of the Company issued or
outstanding. The Stockholders own all of the issued
and outstanding capital stock of the Company. There
are no issued and outstanding warrants and options (under the
Stock Option Plan or otherwise) to purchase or acquire any of
the Company’s securities. Except as indicated
in the Company
’s
Disclosure
Schedule :
(a) there
are no outstanding subscriptions, warrants, options, calls,
agreements or commitments of any character relating to or
entitling any Person to purchase or otherwise acquire any
capital stock (including the Shares) or other securities or
other equity interests of the Company;
(b) the
Company is not a party or subject to any agreement or
understanding, and there is no agreement or understanding
between any Persons that affects or related to the voting or
giving of written consents with respect to an security or
voting by a director of the Company;
(c) there
are no outstanding obligations or securities convertible into
or exchangeable for shares of any capital stock (including the
Shares) or other securities or other equity interests of the
Company or any commitments of any character relating to or
entitling any person to purchase or otherwise acquire any such
obligations or securities; and
(d) there
are no other commitments of any kind or type for the issuance
of any capital stock (including the Shares) or other
securities or other equity interests of the
Company.
SECTION
3.6. Financial
Statements and Condition . The Company’s
Disclosure Schedule sets forth (a) the unaudited
balance sheet of the Company as of December 31, 2007, and the
related statements of income and retained earnings and changes
of financial position for the fiscal year then ended, (b) the
unaudited balance sheet of the Company as of December 31,
2006, and the related statements of income and retained
earnings and changes of financial position for the fiscal year
then ended, and (c) the unaudited balance sheet as of February
29, 2008 (“ Reference
Balance Sheet ”), and statements of income of the
Company for the three (3) months ended March 31, 2008
(collectively, the “ Financial
Statements ”). Except as set forth on
the Company’s
Disclosure Schedule , the Financial Statements: (i)
were prepared in accordance with the Books and Records of the
Company and, to the Company’s Knowledge, in accordance
with GAAP; (ii) fairly present the Company’s financial
condition and the results of its operations as of the relevant
dates thereof and for the periods covered thereby; (iii)
contain and reflect all necessary adjustments and accruals for
a fair presentation of the Company’s financial condition
and the results of operations covered by the Financial
Statements; (iv) contain and reflect adequate provisions for
all reasonably anticipate liabilities for applicable Taxes;
and (v) with respect to contracts and commitments for the sale
of goods or the provision of services by the Company, contain
and reflect adequate reserves for all reasonably anticipated
material losses and costs and expenses in excess of expected
receipts.
(a)
No
Undisclosed Liabilities . Except for (i)
those Liabilities specifically reflected or reserved against
on the Reference Balance Sheet, (ii) those Liabilities
otherwise disclosed in the Company’s
Disclosure Schedule , and (iii) those Liabilities
reflected on the Closing Balance Sheet, all of which were
incurred by the Company since the date of the Reference
Balance Sheet in the ordinary course of business and
consistent with past practices in an amount not to exceed
Twenty-Five Thousand Dollars ($25,000) in the aggregate (all
such Liabilities other than: (w) all Taxes and fees payable
for the period through and including the Closing Date with
respect the Company’s failure to be qualified to conduct
business in the States of California and Connecticut, as well
as all penalties and interest with respect thereto
(collectively, “ Foreign Business
Tax Liabilities ”), (x) those Liabilities for
Taxes payable for the Pre-Closing, including without
limitation, Liabilities for Taxes (and any penalties or
interest in connection therewith) in the States of California,
New Jersey, Connecticut, Massachusetts and Missouri, (y) Tax
withholding and any other Taxes and any penalties and interest
payable in connection therewith payable to the State of
California for the period through and including the Closing
Date (“ California
Taxes ”), and (z) all brokerage, finder’s,
commitments or other fees or commissions in connection with
this Agreement or the transactions contemplated hereby
(“ Broker’s
Fees ”); the foregoing being referred to
collectively as the “ Assumed
Liabilities ”), the Company does not have, as of
the date hereof, any direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or
responsibility, known or unknown, liquidated or unliquidated,
accrued, absolute, contingent or otherwise, and whether or not
of a kind required by GAAP to be set forth on a financial
statement.
(b)
Accounts
Receivable . The Company’s
Disclosure Schedule sets forth a complete and accurate
schedule of the Accounts Receivable of the Company as of the
date of the Reference Balance Sheet. All Accounts
Receivable of the Company accrued on the Reference Balance
Sheet and all Accounts Receivable of the Company existing as
of the date hereof resulted from valid sales in the ordinary
course of business and were, and are, subject to no valid
offsets or counterclaims. Except as set forth in
the Company’s
Disclosure Schedule , all such Accounts Receivable
were, and are, owned by the Company free and clear of any
Liens.
(c)
Accounts
Payable . The
Company’s Disclosure Schedule sets forth a true
and correct aged list of all accounts payable of the Company
as of the date of the Reference Balance Sheet in excess
of Five Thousand Dollars ($5,000) to any one (1)
payee. Since the date of the Reference Balance
Sheet all accounts payable of the Company have been incurred
in the ordinary course of business and consistent with past
practices.
(d)
Books of
Account . The books of account of the
Company are stated in reasonable detail and accurately reflect
in all material respects the transactions of the Company as
required by GAAP.
SECTION
3.7. Governmental
Consents . The execution, delivery and
performance by the Company of this Agreement and the Company
Documents do not and will not require any consent, approval,
authorization or other order of, action by, filing with or
notification to any Governmental Authority.
SECTION
3.8. Brokers
. Except as described in the Company’s
Disclosure Schedule , no Person is entitled to any
brokerage, finder’s, commitment or other fee or
commission in connection with this Agreement or the
transactions contemplated hereby based upon any agreements or
arrangements or commitments, written or oral, made by or on
behalf of the Company or any of its Affiliates.
SECTION
3.9. Properties,
Contracts and Other Data . The Company’s
Disclosure Schedule contains a true and complete
statement, listing and description of the
following:
(a) A
schedule for the current fiscal quarter of all prepayments,
prepaid expenses, advances to employees, credits from
suppliers, deposits and the like (the “ Prepayments
”) as generated by the Company’s internal
information systems in the ordinary course of business, as of
the date set forth thereon, and showing each of the
Prepayments having any book value on the Books and Records of
the Company as of such date;
(b) All
material written or oral consulting, work for hire and
independent contractor agreements with, or similar commitments
to, authors, consultants and independent contractors of the
Company to which the Company is a party or to which any of the
Company’s assets may be subject;
(c) All
other existing written or oral agreements, contracts,
certificates, licenses, leases, purchase orders, options,
notes, guarantees, letters of credit, or other commitments to
which the Company is a party, or to which any of the
Company’s assets are subject, except (i) contracts or
commitments otherwise listed in the Company’s
Disclosure Schedule , (ii) other than work for hire
agreements, contracts or commitments, or any related group of
contracts or commitments, involving a liability, whether
actual or contingent, of or to the Company of less than Seven
Thousand Five Hundred Dollars ($7,500), and (iii) contracts
for the purchase or sale of merchandise, goods or services
entered into in the ordinary course of business consistent
with its past practices the performance of which by the
Company will extend either over a period of less than one (1)
year from the date of such contract or are cancellable or
terminable within one (1) year from the date of such contract
without penalty;
(d) All
written or oral contracts or arrangements (unless the
particular provision described below is expressly contained in
another document otherwise identified in the Schedules hereto)
to which the Company is a party or to which any of the
Company’s assets are subject, which (i) contains any
covenant not to compete, covenant of non-solicitation or
similar restrictive covenant or otherwise significantly
restricts the nature of the business activities in which the
Company may engage or the customers, vendors or employees it
may have, (ii) with respect to existing Accounts Receivable in
excess of Five Thousand Dollars ($5,000), provides for the
extension of credit on terms other than payment within ninety
(90) days of invoice, (iii) provides for a guaranty by the
Company, or (iv) contains a right of first refusal in favor of
another Person;
(e) The
top ten (10) vendors and content providers of the Company
ranked by aggregate purchases or revenue share during fiscal
year ended December 31, 2007, together with the aggregate
amounts spent with each such vendor during such fiscal
year;
(f) Any
governmental permit, license or registration held by the
Company; and
(g) All
insurance policies held by the Company.
Except
as otherwise set forth in the Company’s
Disclosure Schedule , no breach of, or default by the
Company under any item referred to in the Company’s
Disclosure Schedule in response to clauses (b), (c) and
(d) above or under any Labor Agreement (each, a “
Contract
”) (or event which would, with the passage of time,
notice or both, constitute a breach or default) has occurred,
and each such Contract remains in full force and
effect.
SECTION
3.10. Absence of
Differences from Schedules . Except as is
contemplated by this Agreement or as otherwise disclosed in
the Company’s
Disclosure Schedule:
(a)
No
Material Adverse Change . Since the date of
the Reference Balance Sheet, except for (i) changes in the
general economic climate in which the Company operates the
Business, including without limitation the possible economic
recession into which the United States may be entering and the
current credit market disruptions), and (ii) changes
contemplated or permitted by this Agreement or that relate to
the execution of this Agreement or the transactions
contemplated herein, including, without limitation, the fact
that Purchaser will own and operate the Company following the
Closing, there has not been:
(i)
any material event out of the
ordinary course of business affecting the operations or
financial condition of the Company;
(ii)
any material entry into,
modification or termination by the Company of any Contract,
other than in the ordinary course of business;
(iii) any
material casualty, damage, destruction or loss;
(iv) any
default or breach by the Company under any
Contract;
(v) any
sale or other disposition of any asset of the Company having a
net book value in excess of Five Thousand Dollars ($5,000), or
any mortgage, pledge or imposition of any encumbrances on any
asset of the Company, other than in the ordinary course of
business and consistent with past practices;
(vi) declaration
or payment of dividends or other distribution to the
Company’s stockholders or upon or in respect of any
shares of its capital stock, or purchase, retirement or
redemption any of the Company’s shares of capital stock
or other securities;
(vii) any
material change made in executive compensation levels or in
the manner in which the Company’s employees are
compensated or in benefits provided to such
employees;
(viii) any
change in the Company’s accounting methods, procedures
or practices (including, without limitation, any change in
depreciation or amortization policies or rates) or any
revaluation of any of the Company’s assets;
(ix) any
entry by the Company into any transaction, contract or
commitment other than in the ordinary course of its business
and consistent with past practices;
(x)
any loss by the Company of
one (1) or more clients that generated revenue in the 2007
and/or 2008 to the Company of more than Fifteen Thousand
Dollars ($15,000), in the aggregate, or received notice of any
impending loss; or
(xi) any
express or deemed Tax election by the Company, filing by the
Company of any amended Tax Return, agreement to an extension
or waiver of the statute of limitations with respect to the
assessment or determination of Taxes owed by the Company,
entry by the Company into any closing agreement with respect
to any Tax, any surrender by the Company of any right to claim
a Tax refund, or any settlement or compromise by the Company
regarding any liability with respect to Taxes.
(b)
Litigation
. The Company’s
Disclosure Schedule sets forth an accurate and complete
description of every pending or, to the Company’s
Knowledge threatened, adverse claim, audit, dispute,
governmental investigation, suit, action (including, without
limitation, any non-judicial real or personal property
foreclosure action), arbitration, legal, administrative or
other proceeding of any nature, domestic or foreign, criminal
or civil, at law or in equity, by or against or otherwise
affecting the Company, the Business,
or the Company’s operations, properties, financial
conditions or prospects. The Company has delivered
to Purchaser copies of all relevant court papers and other
documents relating to the matters referred to in the
Company’s
Disclosure Schedule , and the Company’s
Disclosure Schedule also sets forth a description of
the current status of each such matter. Except as
disclosed in the Company’s
Disclosure Schedule :
(i)
no such matter or matters, if decided
adversely to the Company, individually or in the aggregate,
would or could reasonably be expected to have a Material
Adverse Effect;
(ii)
the Company is not in default
with respect to any Governmental Order by which it is bound or
to which its property is subject and there exists no
Governmental Order enjoining or requiring the Company to take
any action of any kind with respect to the
Business;
(iii) neither
the Company, nor any officer, director, stockholder or
employee of the Company, has been permanently or temporarily
enjoined by any Governmental Order from engaging in or
continuing any conduct or practice in connection with the
Company; and
(iv) to
the Company’s Knowledge, no basis exists for any claim,
audit, investigation, suit or proceeding which, if decided
adversely to the Company would or could reasonably be expected
to have a Material Adverse Effect.
In
addition, the Company’s
Disclosure Schedule sets forth a description of any and
all audits that were commenced or threatened against the
Company, and resolved, settled or compromised during the
period January 1, 2006 through the date of this Agreement, and
the terms and conditions of such resolution, settlement or
compromise.
(c)
Compliance with
Laws . The Company (i) has received no
notice as yet unremedied of any violation of any Laws
applicable to the Company or its operations or with respect to
which compliance is a condition of engaging in the Business,
(ii) is in compliance with all Laws, including without
limitation, all Environmental Laws and Orders, and (iii) has
all permits, licenses and other governmental authorizations
necessary to conduct the Business as presently conducted and
proposed to be conducted.
(d)
Title
. The Company at the Closing will have good and
marketable title in and to all of the Company’s assets,
free and clear of any and all Liens.
SECTION
3.11. Taxes
.
(a) Except
as set forth in the Company’s
Disclosure Schedule , the Company has (i) duly and
timely filed all Tax Returns required to be filed by the
Company on or prior to the date hereof, which Tax Returns are
true, correct and complete, and (ii) duly and timely paid all
Taxes due and payable in respect of all periods up to and
including the date hereof, and has made adequate provision on
its Books and Records (including the Reference Balance Sheet)
in accordance with GAAP for any such Tax which is not yet
due. Prior to the Closing Date, the Company shall
provide Purchaser with a schedule which sets forth each Taxing
jurisdiction in which the Company has filed or is required to
file Tax Returns and a copy of such Tax Returns as have been
requested by Purchaser. Any Tax Returns filed
subsequent thereto were consistent with the Tax Returns
furnished to the Purchaser and did not make, amend or
terminate any election with respect to any Tax or change any
accounting method, practice or procedure. The
Company has complied with all applicable Laws relating to the
reporting, payment, collection and withholding of Taxes and
has duly and timely withheld or collected, paid over and
reported all Taxes required to be withheld or collected by the
Company on or before the date hereof.
Except
as set forth in the Company’s
Disclosure Schedule , (i) no Taxing Authority has
asserted any adjustment that could result in an additional Tax
for which the Company is or may be liable or that could result
in a Lien on any of its assets which has not been fully paid
or adequately provided for on the Reference Balance Sheet
(collectively, “ Tax
Liability ”), or which adjustment, if asserted
with respect to another period, would result in any Tax
Liability, (ii) there is no pending audit, examination,
investigation, dispute, proceeding or claim (collectively,
“ Tax
Proceeding ”) relating to any Tax Liability and
to the Company’s Knowledge, no Taxing Authority is
contemplating such a Tax Proceeding and there is no basis for
any such Tax Proceeding, (iii) no statute of limitations with
respect to any Tax has been waived or extended (unless the
period to which it has been waived or extended has expired),
(iv) there is no outstanding power of attorney authorizing
anyone to act on behalf of the Company in connection with any
Tax Liability, Tax Return or Tax Proceeding relating to any
Tax, (v) there is no outstanding closing agreement, ruling
request, request to consent to change a method of accounting,
subpoena or request for information with or by any Taxing
Authority with respect to the Company, its income, assets or
business, or any Tax Liability, (vi) the Company is not
required to include any adjustment under Section 481 of the
Code (or any corresponding provision of applicable Law) in
income for any period ending after the date of the Reference
Balance Sheet Date, (vii) the Company is not and
has never been a party to any Tax sharing or Tax allocation
agreement, arrangement or understanding, (viii) the Company is
not and has never been included in any consolidated, combined
or unitary Tax Return, (ix) all taxable periods for the
assessment or collection of any Tax Liability are closed by
agreement or by operation of the normal statute of limitations
(without extension) or will close by operation of the normal
statute of limitations for such Taxes (in each case determined
without regard to any omission, fraud or other special
circumstance other than the timely filing of the Tax Return),
(x) the Company will not be required to include any item of
income, or exclude any item of deduction, for any taxable
period (or portion thereof) ending after the Closing Date as a
result of any: (A) inter-company transactions or excess loss
accounts described in Treasury regulations under Section 1502
of the Code (or any similar provision of applicable Law), (B)
installment sale, open transaction or use of a completed
contract method of accounting with respect to any transaction
that occurred on or prior to the Closing Date, or (C) prepaid
amount received on or prior to the Closing Date, and (xi) no
Taxing Authority has ever asserted that the Company should
file a Tax Return in a jurisdiction where it does not
file.
(b) The
Company is not a party to any agreement, contract or
arrangement for services that would result, individually or in
the aggregate, in the payment of any amount that would not be
deductible by the Company by reason of Section 162, 280G or
404 of the Code. The Company is not a
“consenting corporation” within the meaning of
Section 341(f) of the Code (as in effect prior to the repeal
of such provision). The Company does not have any
plan, arrangement or agreement providing for deferred
compensation that is
subject to Section 409A(a) of the Code or any asset, plan,
arrangement or agreement that is subject to Section 409A(b) of
the Code. The Company does not have any
“tax-exempt bond financed property” or
“tax-exempt use property” within the meaning of
Section 168(g) or (h), respectively, of the
Code. None of the assets of the Company is required
to be treated as being owned by any other Person pursuant to
the “safe harbor” leasing provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as in effect
prior to the repeal of said leasing provisions. The
Company has never made or been required to make an election
under Section 338 of the Code (except as required by this
Agreement). During the last two (2) years, the
Company has not engaged in any exchange under which gain
realized on the exchanged was not recognized under Section
1031 of the Code. The Company has not constituted a
“distributing corporation” or a “controlled
corporation” under Section 355 of the Code in any
distribution in the last two (2) years or pursuant to a plan
or series of related transactions (within the meaning of Code
Section 355(e)) with the transactions contemplated by this
Agreement. The Company is not and has never been a
“personal holding company” (within the meaning of
Code Section 542), a shareholder in a “controlled
foreign corporation” (within the meaning of Code Section
957), in a “foreign personal holding company”
(within the meaning of Code Section 552), or in a
“passive foreign investment company” (within the
meaning of Code Section 1297), or an owner in any entity
treated as a partnership or disregarded entity for federal
income Tax purposes. The Company does not have and
has never had a fixed place of business or permanent
establishment in any foreign country. None of the
outstanding indebtedness of the Company constitutes
indebtedness to which any interest deduction may be disallowed
under Section 163(i), 163(l), 265 or 279 of the Code or under
any other provision of applicable Law. The Company
has not been a “United States real property holding
corporation” (within the meaning of Code Section
897(c)(2)) at any time during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code. The
Company has not entered into any “reportable
transaction” (within the meaning of Code Section 6707A
or Treasury Regulations Section 1.6011-4 or any predecessor
thereof). In the case of any transaction that could
result in a “substantial understatement of income
tax” (within the meaning of Code Section 6662(d)) if the
claimed Tax treatment were disallowed, the Company has
“substantial authority” (within the meaning of
Code Section 6662(d)) for the claimed treatment, or in the
case of a transaction other than a “tax shelter”
(within the meaning of Code Section 6662(d)(2)(C)(ii)), has
“adequately disclosed” (within the meaning of Code
Section 6662(d)) the relevant facts affecting the tax
treatment on its income Tax Return.
(c) The
Company elected to be treated as an S corporation for federal
income Tax purposes as of January 1, 2006 and such election is
effective for such Tax year and each Tax year thereafter up to
and including the Closing Date. The Company’s
Disclosure Schedule sets forth each other jurisdiction
for which the Company has an S election (or similar election)
in effect, including the jurisdiction, the effective date of
the election, the date of any termination of such election and
the cause of such termination, and whether such election is
still in effect. Except as set forth in the
Company’s
Disclosure Schedule , there is no Tax Liability under
Section 1363(d), 1374 or 1375 of the Code or any similar
provision of applicable Law. Prior to the effective
time of the Closing, none of the Stockholders nor the Company
shall take any action or fail to take any action which could
result in the termination or revocation of any S election (or
similar election).
SECTION
3.12. Labor and
Employment Matters .
(a)
Labor
Matters . There are, and during the past
three (3) years there have been, no unfair labor practice
complaints, labor strikes, arbitrations, disputes, work
slowdowns or work stoppages pending or, to the Company’s
Knowledge, threatened, between the Company and any of its
employees, current or former. Each employee of the
Company is an “at-will” employee, and the
employment of each such employee may be terminated immediately
by the Company without liability, notice or severance, except
as otherwise provided by statute or decisional
authority.
(b)
Labor
Agreements . The Company
’s
Disclosure
Schedule sets forth a true and current list of all of
the Labor Agreements of the Company, other than Company
Benefit Plans. The Company
’s
Disclosure
Schedule also includes a true and complete schedule
listing the names, total annual compensation, total accrued
vacation and other fringe benefits of each person employed by
the Company presently receiving compensation aggregating in
excess of Twenty Five Thousand Dollars ($25,000) per
year. Except as set forth in the Company’s
Disclosure Schedule :
(i)
the Company does not have any employees;
and
(ii)
the Company does not have any material labor
relations problems.
(c)
Compliance with
Labor Laws and Agreements . Except as
disclosed in the Company
’s
Disclosure
Schedule , the Company has complied in all material
respects with all of its Labor Agreements and all applicable
Laws and Governmental Orders relating to the employment of
labor, including those related to wages, hours, collective
bargaining and the payment and withholding of Taxes and other
sums as required by appropriate Governmental Authorities and
has withheld and paid to the appropriate Governmental
Authorities, or is holding for payment not yet due to such
Governmental Authorities, all amounts required to be withheld
from such employees of the Company and is not liable for any
arrears of wages, Taxes, penalties or other sums for failure
to comply with any of the foregoing. Without limiting the
generality of the foregoing, the Company has complied in all
material respects with the continuation coverage requirements
of Section 4980B of the Code and the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, Sections 601
through 608 of ERISA, the American Civil Disabilities Act of
1990, as amended, and the Family Medical Leave Act of 1993, as
amended, and the regulations thereunder, and no material Tax
payable on account of Section 4980B of the Code has been
incurred with respect to any current or former employees (or
their beneficiaries) of the Company. No present or former
employee, officer or director of the Company has, or will have
at the date hereof, any claim against the Company for any
matter, including but not limited to (i) overtime pay for work
done through the date hereof; (ii) wages or salary for the
work done through the date hereof; (iii) vacation time off or
pay in lieu of vacation time off for the period through the
date hereof; (iv) any violation of any statute, ordinance or
regulation relating to minimum wages or maximum hours,
workplace conditions, or any other matter; or (v) injuries or
other damages which are not fully covered by the
Company’s insurance policies. Except as
disclosed in the Company
’s
Disclosure
Schedule , there is no:
(i)
unfair labor practice complaint against the
Company pending before the National Labor Relations Board or
any state or local agency;
(ii)
labor grievance pending against the
Company;
(iii) pending
representation question respecting the employees of the
Company; or
(iv) pending
arbitration proceedings arising out of or under any collective
bargaining agreement to which the Company is a
party.
SECTION
3.13. Employee
Benefits . Except as disclosed in the
Company
’s
Disclosure
Schedule , the Company does not currently have and has
never had any employee benefit plans within the meaning of
Section 3(3) of ERISA, any deferred compensation, bonus, stock
option, restricted stock, incentive, profit sharing,
retirement, savings, medical, health, life insurance,
disability, sick leave, cafeteria or flexible spending,
vacation, unemployment compensation, severance or change in
control agreements, arrangements, programs, policies or plans
and any other benefit arrangements or payroll practices
(collectively, the “ Company Benefit
Plans ”). Except as disclosed in
the Company
’s
Disclosure
Schedule , the Company does not have and has never had
any obligation to contribute or any other liability with
respect to any Company Benefit Plans.
SECTION
3.14. Real
Property . The Company has no ownership,
leasehold and/or other interest in any Real Property and has
never had an ownership, leasehold and/or other interest in any
Real Property.
SECTION
3.15. Contracts
. Except as disclosed in the Company’s
Disclosure Schedule :
(a) each
Contract is the legal, valid and binding obligation of the
other contracting party, enforceable against the other
contracting party in accordance with terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar Laws relating to
or affecting creditors’ rights generally and general
equitable principles (whether considered in a proceeding in
equity or at law);
(b) the
Company has fulfilled all material obligations required
pursuant to each Contract to have been performed by it prior
to the date hereof, and to the Company’s Knowledge, the
Company has the resources, capability and capacity to fulfill,
when due, all its obligations under each Contract which remain
to be performed after the date hereof; and
(c) To
the Company’s Knowledge, no other contracting party to
any Contract has breached such Contract in any material
respect within the twelve (12) month period prior to the date
hereof.
SECTION
3.16. Insurance
. The Company is not in default, nor has it ever
been in default, with respect to any provision contained in
any insurance policy of the Company or has failed to give any
notice or present any claim under any such policy in due and
timely fashion. There are no outstanding unpaid
claims under any such policy. The Company has not
received any notice of cancellation or non-renewal of any such
policy. No such policy is terminable or cancelable
by the insurer by virtue of the consummation of the
transactions contemplated herein.
SECTION
3.17. Software
. Except as listed in the Company’s
Disclosure Schedule , all software designs, programs,
object code and source code that is not Open Source Software
and that constitutes a part of or used in the operations of
the Company or the development of the Intellectual Property of
the Company (the “ Company
Software ”) are owned solely by the Company or
the Company has obtained a license of all rights necessary for
such use. Except for customer licenses for the
Company Software listed in the Company’s
Disclosure Schedule , no other Person has any right,
title or interest in or to the Company Software, or in or to
any part of the software designs, programs, object code or
source code constituting a part of or used in the development
of the Company Software. Without limiting the
generality of the foregoing:
(a) Except
as listed on the Company’s
Disclosure Schedule , the Company does not use and has
not used any open source, shareware or freeware code or any
other freely available software (“ Open Source
Software ”). The Company is in full
compliance with all licenses applicable to any Open Source
Software that it uses or has used in the development of the
Company Software. Except as listed on the
Company’s
Disclosure Schedule , no Open Source Software is or has
been used in, incorporated into, integrated or bundled with
any the Company Software, or used in the development of the
Company Software, and the Company has not made any derivative
works, improvements, enhancements or modifications of or to
any Open Source Software.
(b) Neither
the sale nor licensing of the Company Software is governed, in
whole or in part, by the terms of any third party license
(whether or not considered a license for Open Source
Software). No source code included in the assets of
the Company has been contributed by the Company to open source
development or is dedicated to the public domain or is
required to be so contributed or dedicated.
(c) The
Company is not subject to any obligation (i) to dedicate to
general public use, or to provide any form of public
disclosure, with respect to any part of the source code
underlying or related to the Company Software; (ii) to
disclose or acknowledge or provide any attribution notice with
respect to the use of any other Person’s Intellectual
Property in connection with the Company Software; or (iii) to
comply with any restriction on the commercial use, licensing
or the sale of services using the Company Software, or any
portion thereof.
(d) All
copyrights in and to the original works constituting the
Company Software are solely and exclusively owned by the
Company. No person has any moral or legal rights, title or
interest in or to the Intellectual Property created by such
Person for the benefit of the Company.
SECTION
3.18. Tangible
Personal Property . The Company’s
Disclosure Schedule sets forth (a) a description of
each item of Tangible Personal Property owned by the Company
having on the date hereof either a depreciated book value or
estimated fair market value per unit in excess of Five
Thousand Dollars ($5,000), or not owned by the Company but in
the possession of or used by the Company and having rental
payments therefor in excess of One Thousand Dollars ($1,000)
per month or Twelve Thousand Dollars ($12,000) per year; and
(b) a description of the owner of, and any Contract of the
Company relating to the use of, each such item of Tangible
Personal Property not owned by the Company and the
circumstances under which such property is
used. Except as indicated in the Company’s
Disclosure Schedule :
(i)
the Company has good and marketable
title to each item of its Tangible Personal Property, free and
clear of all Liens;
(ii)
no officer, director, stockholder or
employee of the Company, nor Affiliate thereof, owns directly
or indirectly, in whole or in part, any item of the Tangible
Personal Property of the Company or has any other interest
therein; and
(iii) each
item of Tangible Personal Property owned or used by the
Company is in good operating condition and repair, usable in
the ordinary course of business (ordinary wear and tear
excepted).
SECTION
3.19. Intellectual
Property . The Company’s
Disclosure Schedule sets forth: (a) a true and accurate
identification of each item comprising Company Intellectual
Property, including each registered and unregistered
fictitious business name, trademark, copyright, service mark,
trade name, domain name, URL, web site and slogan, and each
registration and application for any of the foregoing,
constituting a part of the Intellectual Property of the
Company; (b) a true and complete schedule of each statutory,
common law and registered copyright, and each registration and
application for any of the foregoing, constituting a part of
such Intellectual Property; (c) a true and complete schedule
of each patent and associated invention, industrial model,
process and design, technical information, know-how and
operating maintenance or other manual and each registration
and application for any of the foregoing, constituting a part
of such Intellectual Property; (d) each item of the Open
Source Software and Company Software and associated
documentation used in the business and operations of the
Company other than “shrink wrap” software; (e) a
true and complete list of all Contracts with respect to which
the Company is a party either as licensee, licensor or owner
of work made for hire relating to any item of such
Intellectual Property; and (f) a true and complete list of all
of persons with whom the Company has a contract for
advertisements as of the date of this
Agreement. The Company has provided Purchaser with
a current list of the Company’s
subscribers. The consummation of the transactions
contemplated herein will not have a Material Adverse Effect on
the usefulness of any item of such Intellectual
Property. Except as indicated in the Company’s
Disclosure Schedule :
(a) the
Company is the owner of all right, title and interest in and
to each item of its Intellectual Property, free and clear of
all Liens;
(b) all
trademarks, service marks, patents, copyrights and other
state, federal and foreign registrations and all applications
therefor listed in the Company’s
Disclosure Schedule are valid and in full force and
effect and are not subject to any Taxes, maintenance fees or
actions falling due within ninety (90) days after the date
hereof
(c) all
the Open Source Software and Company Software used in the
operation of the Business performs in reasonable compliance
with the specifications therefor (including, without
limitation, functional specifications) set forth in user
manuals, promotional materials or license
agreements;
(d) accurate
and complete copies of each trade secret constituting a part
of the Company’s Intellectual Property, including
without limitation, each related process or item of know-how
or other technical data, and including as to each such trade
secret, the specific location of each writing, computer
program or other tangible medium contain its complete
description, specifications, source codes, charts, procedures,
manuals and other descriptive material relating to all
versions of each item of the Company Software exist and have
been made available to Purchaser;
(e)
there are no pending claims,
actions, judicial or other adversary proceedings, disputes or
disagreements involving the Company concerning any item of its
Intellectual Property, and, to the Company’s Knowledge,
no such action, proceeding, dispute or disagreement is
threatened;
(f)
all current officers, authors and
consultants of the Company (other than employees and
consultants who have not been involved in developing any
Intellectual Property of the Company and who have no
managerial responsibilities) have executed and delivered to
the Company agreements regarding the protection of proprietary
information and the assignment to the Company of all
Intellectual Property rights arising from the services
performed for the Company by such Persons, and the Company has
made available to Purchaser or its counsel copies of all such
agreements;
(g)
to the Company’s
Knowledge, no contractor or consultant of the Company is in
violation of any term of any contractor or consultant
Contract, patent disclosure agreement, non-competition
agreement or any other Contract or restrictive covenant
relating to the right of such Person to be employed or engaged
by the Company or to use the Intellectual Property rights of
others;
(h)
the Company has
complied with all Contracts and licenses pursuant to which the
Company is a licensee or distributor of Intellectual
Property;
(i)
the Company has not modified or
altered any of the content provided to the Company pursuant to
any Contract or license related to Intellectual
Property;
(j)
the Company has
properly complied with all credit and formatting requirements
with respect to the content provided to the Company pursuant
to any Contract or license related to Intellectual Property;
and
(k)
the Company owns all right,
title and interest in and to, or has valid licenses pursuant
to which the Company has the rights to display and
disseminate, the content disseminated on the Company’s
website.
SECTION
3.20. Necessary
Properties . The Tangible Personal Property
and Intellectual Property of the Company include all of the
tangible personal properties and intangible personal
properties necessary for the conduct of the Business as
conducted during the twelve (12) month period prior to the
date hereof, as presently conducted and as proposed to be
conducted and include substantially all of those properties
actually used in the conduct of such business during the
twelve (12) month period prior to the date
hereof.
SECTION
3.21. Certain
Interests . No officer, employee, director
or stockholder of the Company and no relative or spouse (or
relative of such spouse) who resides with, or is a dependent
of, any such officer, employee, director or stockholder and no
Affiliates of the foregoing:
(a)
has any direct or indirect financial
interest in any competitor, supplier or customer of the
Company (other than record and beneficial ownership of not
more than 5% of the outstanding capital stock of any such
Person subject to the periodic and other reporting
requirements of Section 13 or Section 15(d) of the Exchange
Act);
(b) holds
any beneficial interest in any Contract of the
Company;
(c) owns,
directly or indirectly, in whole or in part, or has any other
interest in any tangible or intangible property which is
necessary for the conduct of the Business; or
(d) has
any outstanding indebtedness for borrowed money to the
Company.
SECTION
3.22. Books and
Records . The Company has made all of its
Books and R
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