ASSET PURCHASE AGREEMENT AMONG ROO GROUP, INC. ROO MEDIA CORPORATION RJM PRICE & COMPANY, INC. AND ROBERTSON PRICE DATED AS OF JANUARY 22, 2007
AMONG
ROO
GROUP, INC.
ROO
MEDIA CORPORATION
RJM
PRICE & COMPANY, INC.
AND
XXXXXXXXX
PRICE
DATED AS OF
JANUARY 22, 2007
TABLE
OF CONTENTS
|
ARTICLE
I.
|
PURCHASE
AND SALE OF ASSETS.
|
1
|
|
1.
|
Sale
of Assets
|
1
|
|
1.2.
|
Excluded
Assets
|
2
|
|
1.3.
|
Assumed
Liabilities; Excluded Liabilities; Employees.
|
2
|
|
1.4.
|
Purchase
Price; Adjustment; Payment.
|
2
|
|
1.5.
|
Purchase
Price Allocation
|
4
|
|
1.6.
|
Records
and Contracts
|
4
|
|
1.7.
|
Further
Assurances
|
4
|
|
1.8.
|
Sales
and Transfer Taxes
|
4
|
|
1.9.
|
Transfer
of Subject Assets
|
4
|
|
ARTICLE
II.
|
CLOSING
AND TERMINATION
|
4
|
|
2.1.
|
Closing
Date
|
4
|
|
2.
|
Termination
of Agreement
|
5
|
|
2.3.
|
Procedure
Upon Termination
|
5
|
|
2.4.
|
Effect
of Termination
|
5
|
|
ARTICLE
III.
|
REPRESENTATIONS
AND WARRANTIES OF THE SELLER AND THE OWNER
|
5
|
|
3.1.
|
Organization
and Good Standing
|
5
|
|
3.2.
|
Authorization
of Agreement
|
5
|
|
3.3.
|
Ownership
of Seller
|
6
|
|
3.4.
|
No
Subsidiaries
|
6
|
|
3.5.
|
Conflicts;
Consents of Third Parties.
|
6
|
|
3.6.
|
Ownership
and Transfer of Assets
|
6
|
|
3.7.
|
Financial
Statements
|
7
|
|
3.8.
|
No
Undisclosed Liabilities
|
7
|
|
3.9.
|
Absence
of Certain Developments
|
7
|
|
3.10.
|
Taxes.
|
8
|
|
3.11.
|
Real
Property.
|
10
|
|
3.12.
|
Tangible
Personal Property.
|
10
|
|
3.13.
|
Intangible
Property
|
11
|
|
3.14.
|
Material
Contracts
|
11
|
|
3.15.
|
Employee
Benefits.
|
12
|
|
3.16.
|
Labor.
|
12
|
|
3.17.
|
Litigation
|
13
|
|
3.18.
|
Compliance
with Laws; Permits.
|
13
|
|
3.19.
|
Environmental
Matters
|
13
|
|
3.20.
|
Insurance
|
14
|
|
3.21.
|
Inventories;
Receivables; Payables.
|
14
|
|
3.22.
|
Customers
and Suppliers
|
14
|
|
3.23.
|
Banks
|
14
|
-i-
|
3.24.
|
No
Misrepresentations
|
14
|
|
3.25.
|
Financial
Advisors
|
15
|
|
3.26.
|
Investment
Intention
|
15
|
|
3.27.
|
Accredited
Investor
|
15
|
|
3.28.
|
Patriot
Act
|
15
|
|
ARTICLE
IV.
|
REPRESENTATIONS
AND WARRANTIES OF PURCHASER AND PURCHASER
|
16
|
|
4.1.
|
Organization
and Good Standing.
|
16
|
|
4.2.
|
Authorization
of Agreement.
|
16
|
|
4.3.
|
Conflicts;
Consents of Third Parties.
|
17
|
|
4.
|
Litigation
|
17
|
|
4.9.
|
Financial
Advisors
|
17
|
|
4.10.
|
Patriot
Act
|
17
|
|
4.11.
|
No
Knowledge of Breaches
|
18
|
|
ARTICLE
V.
|
COVENANTS
|
18
|
|
5.1.
|
Access
to Information
|
18
|
|
5.2.
|
Conduct
of the Business Pending the Closing.
|
18
|
|
5.3.
|
Consents
|
20
|
|
5.4.
|
Other
Actions
|
20
|
|
5.5.
|
No
Solicitation
|
20
|
|
5.6.
|
Preservation
of Records
|
20
|
|
5.7.
|
Publicity
|
21
|
|
5.8.
|
Use
of Name
|
21
|
|
5.9.
|
Employment
Agreements
|
21
|
|
ARTICLE
VI.
|
CONDITIONS
TO CLOSING
|
22
|
|
6.1.
|
Conditions
Precedent to Obligations of Parent and Purchaser
|
22
|
|
6.2.
|
Conditions
Precedent to Obligations of the Seller and Owner
|
23
|
|
ARTICLE
VII.
|
||
|
DOCUMENTS
TO BE DELIVERED
|
24
|
|
|
7.1.
|
Documents
to be Delivered by the Seller
|
24
|
|
7.2.
|
Documents
to be Delivered by the Parent
|
24
|
|
ARTICLE
VIII.
|
||
|
INDEMNIFICATION
|
24
|
|
|
8.1.
|
Indemnification.
|
24
|
|
8.2.
|
Limitations
on Indemnification
|
25
|
|
8.3.
|
Indemnification
Procedures.
|
25
|
-ii-
|
ARTICLE
IX.
|
MISCELLANEOUS
|
26
|
|
9.1.
|
Payment
of Sales, Use or Similar Taxes
|
26
|
|
9.2.
|
Survival
of Representations and Warranties
|
27
|
|
9.3.
|
Expenses
|
27
|
|
9.4.
|
Specific
Performance
|
27
|
|
9.5.
|
Further
Assurances
|
27
|
|
9.6.
|
Submission
to Jurisdiction; Consent to Service of Process
|
27
|
|
9.7.
|
Entire
Agreement; Amendments and Waivers
|
28
|
|
9.8.
|
Table
of Contents and Headings
|
28
|
|
9.9.
|
Notices
|
28
|
|
9.10.
|
Severability
|
29
|
|
9.11.
|
Binding
Effect; Assignment
|
29
|
-iii-
ASSET
PURCHASE AGREEMENT, dated as of January 18, 2007 (the “Agreement”), between ROO
Group, Inc., a Delaware corporation (the “Parent”), ROO Media Corporation, a
Delaware corporation and a wholly owned subsidiary of Parent (“Purchaser”), RJM
Price & Company, Inc., a Delaware corporation, (the “Seller”), and Xxxxxxxxx
Price (the “Owner”).
W
I T N E S S E T H:
WHEREAS,
subject to the terms and conditions hereof, Seller desires to sell, transfer
and
assign to Purchaser, and Purchaser desires to purchase from Seller, all of
the
properties, rights and assets constituting the business of Seller, which is
engaged in the business of online broadcast video and operates under the name
“MyVideoDaily” (the “Business”); and
NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter contained, the parties hereby agree as
follows:
ARTICLE
I.
PURCHASE
AND SALE OF ASSETS.
1.1. Sale
of Assets.
Seller
agrees to sell, assign, transfer and deliver to Purchaser, and Purchaser agrees
to purchase from Seller, all of Seller’s right, title and interest in and to all
of the properties, assets and business of the Business, of every kind and
description, tangible and intangible, real, personal or mixed, and wherever
located, but excluding the Excluded Assets, including, without limitation,
the
following:
(a) Equipment.
All
assets of any kind or nature, including all inventory, software, supplies and
other tangible personal property of every kind and description owned by Seller
and used or held for use in connection with the Business, all as set forth
on
Schedule 1.1(a) attached hereto (“Equipment”);
(b) Contracts.
All of
the rights of Seller under, and interest of Seller in and to, all contracts
relating to the Business, a true, correct and complete list of which contracts
is attached hereto as Schedule 1.1(b) (“Contracts”);
(c) Intellectual
Property.
All of
Seller’s Intellectual Property relating to the Business, as set forth on
Schedule 1.1(c) attached hereto;
(d) Goodwill.
All of
the goodwill of Seller in, and the going concern value of, the Business, and
all
of the business and customer lists and accounts, proprietary information,
marketing materials and collateral and trade secrets related to the Business;
(e) Records.
All of
Seller’s customer logs, location files and records, and other business files and
records, in each case relating to the Business; and
The
assets, properties and business of Seller being sold to and purchased by Parent
under this Section 1.1 are referred to herein collectively as the
“Assets.”
1
1.2. Excluded
Assets.
There
shall be excluded from the Assets and retained by Seller, all assets identified
on Schedule 1.2 attached hereto, and all other assets of Seller which are not
used or held for use in connection with the Business or otherwise necessary
to
the operation of the Business (the “Excluded Assets”).
1.3. Liabilities;
Employees.
(a) Liabilities.
Except
as otherwise expressly agreed to herein, Purchaser shall not assume, pay or
be
liable for any liability or obligation of Seller of any kind or nature at any
time existing or asserted, whether, known, unknown, fixed, contingent or
otherwise, not specifically assumed herein by Parent or Purchaser or assumed
by
virtue of the acquisition of one or more Assets, and any liability or obligation
relating to, resulting from or arising out of (i) the Excluded Assets, (ii)
the
employees of the Business or (iii) any fact existing or event occurring prior
to, or relating to the operation of the Business prior to, the date
hereof.
(b) Employees,
Wages and Benefits.
(i) Seller’s
only employee is Xxxxxxxxx Price. Seller shall terminate Xxxxxxxxx Price as
an
employee effective as of the Closing Date and neither Parent nor Purchaser
shall
assume or have any obligations or liabilities with respect to such employee,
including, without limitation, any severance obligation.
(ii) Parent
shall enter into an employment agreement with Xxxxxxxxx Price, substantially
in
the form of Exhibit A hereto, (the “Employment Agreement”).
(iii) Seller
shall pay all wages, salaries, commissions, and the cost of all fringe benefits
provided to its employee which shall have become due for work performed as
of
and through the date hereof, and Seller shall collect and pay all Taxes in
respect of such wages, salaries, commissions and benefits.
(iv) Seller
acknowledges and agrees that neither Parent nor Purchaser shall acquire any
rights or interests of Seller in, or assume or have any obligations or
liabilities of Seller under, any benefit plans maintained by Seller, or for
the
benefit of the employee of Seller, including, without limitation, obligations
for severance.
1.4. Purchase
Price; Adjustments.
(a) Purchase
Price.
In
consideration of the sale by Seller to Purchaser of the Assets, Parent shall
pay
to Seller an amount up to One Million, Three Hundred and Fifty Dollars
($1,350,000).
(b) Payment
of Purchase Price.
The
Purchase Price will be paid as follows:
(i) $250,000
in cash upon execution of this Agreement (“Initial Payment”), which shall be
non-refundable absent a breach by the Seller of this Agreement; provided that
for purposes of this Section 1.4(b)(i), a breach of the Employment Agreement
shall not be deemed a breach of this Agreement;
2
(ii) $1,000,000
in shares of Parent’s common stock, par value $.0001 per share (the “Shares”),
payable in equal quarterly installments at a price per share which shall be
equal to the average closing price of the Parent’s common stock over the final
20 Trading Days of the quarterly period in which certain milestones (the
“Milestones”) set forth in the attached Schedule 1.4(b)(ii) are achieved;
provided however, that for purposes of calculating the number of shares under
this Section b(ii) the per share price shall not be less than $2.00; and
(iii) $100,000
payable on the second-year anniversary date of the Closing; provided that,
if
Xxxxxxxxx Price’s employment with the Company has been terminated (a) by
Xxxxxxxxx Price due to a breach by Parent or Purchaser of either the Employment
Agreement or this Agreement (and not cured within the permitted cure-period),
or
(b) by Parent for any reason other than for “Cause” (as defined in the
Employment Agreement), then the payment described in this Section 1.4(b)(iii)
shall become immediately due and payable on the date of such
termination.
For
purposes of this subsection (b) the term “Trading Day” shall mean any day on
which the Parent’s Common Stock is listed or quoted on any of the New York Stock
Exchange, the American Stock Exchange, Nasdaq Stock Market or the
Over-the-Counter Bulletin Board.
(c) Escrow.
The Initial Payment shall be deposited in escrow account of Seller’s Attorney,
Xxxxx X. Xxxxxxx, Esq. and shall be released on or about January 5, 2006
(“Release Date”). Absent a court order instructing him otherwise, Escrow Agent
shall automatically release this Initial Payment to Seller on or after the
Release Date.
(d) Adjustments.
If
Xxxxxxxxx Price shall have been terminated by ROO for “Cause” as defined in the
Employment Agreement within six (6) months of the Closing Date, Seller shall
return to Parent and Purchaser, 50% of the Shares that shall have been issued
to
Seller through such date.
(e) Shares.
If,
through or as a result of any merger, consolidation, sale of all or
substantially all of the assets of the Parent, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
similar transaction, (i) the outstanding shares of Common Stock are increased,
decreased or exchanged for a different number or kind of shares or other
securities of the Parent, or (ii) additional shares or new or different shares
or other securities of the Parent or other non-cash assets are distributed
with
respect to such shares of Common Stock, an appropriate and proportionate
adjustment shall be made in Section 1.4(b)(ii) with respect to (x) the
number and kind of shares or other securities subject to issuances of Shares,
and (y) the minimum price for each Share.
(f) Payment
Designee.
Seller
may designate one or more third parties to receive any payment described in
this
Section 1.4. Such designation shall be in writing and delivered as required
pursuant to Section 9.9. Parent agrees to deliver all subsequent payments to
such designee(s); provided however, such designee shall be required to execute
a
document satisfactory to counsel to Parent and/or Purchaser which shall include
the representations contained in Sections 3.26, 3.27, 3.28, 3.29, and 3.30
of
this Agreement.
3
1.5. Purchase
Price Allocation.
Parent,
Purchaser and Seller shall mutually agree on the allocation of the Purchase
Price. Such allocation shall be binding upon Parent, Purchaser and Seller for
all purposes (including financial accounting purposes, financial and regulatory
reporting purposes and tax purposes). Parent, Purchaser and Seller each further
agrees to file its Federal income tax returns and its other tax returns
reflecting such allocation, Form 8594 and any other reports required by Section
1060 of the Internal Revenue Code of 1986, as amended (the “Code”).
1.6. Records
and Contracts.
Seller
shall deliver to Parent and Purchaser all of the Contracts, with such
assignments thereof and consents to assignments as are necessary to assure
Parent and Purchaser of the full benefit of the same. Seller shall also deliver
to Parent and Purchaser all of Seller’s files and records constituting
Assets.
1.7. Further
Assurances.
Seller
shall, from time to time after the consummation of the transactions contemplated
herein, at the request of Parent or Purchaser and without further consideration,
execute and deliver further instruments of transfer and assignment and take
such
other action as Parent or Purchaser may reasonably require to more effectively
transfer and assign to, and vest in, Parent or Purchaser the Assets free and
clear of all Liens.
1.8. Sales
and Transfer Taxes.
All
sales, transfer, use, recordation, documentary, stamp, excise taxes, personal
property taxes, fees and duties (including any real estate transfer taxes)
under
applicable law incurred in connection with this Agreement or the transactions
contemplated hereby will be borne and paid by Parent.
1.9. Transfer
of Subject Assets.
Seller
shall deliver or cause to be delivered to Purchaser good and sufficient
instruments of transfer transferring to Purchaser title to all of the Assets,
together with all required consents. Such instruments of transfer (a) shall
contain appropriate warranties and covenants which are usual and customary
for
transferring the type of property involved under the laws of the jurisdictions
applicable to such transfers, (b) shall be in form and substance reasonably
satisfactory to Purchaser and its counsel, (c) shall effectively vest in
Purchaser good and marketable title to all of the Assets free and clear of
all
Liens (as hereafter defined), and (d) where applicable, shall be accompanied
by
evidence of the discharge of all Liens against the Assets.
ARTICLE
II.
CLOSING
AND TERMINATION
2.1. Closing
Date.
Subject
to the satisfaction of the conditions set forth in Sections 6.1 and 6.2 hereof
(or the waiver thereof by the party entitled to waive that condition), the
closing of the sale and purchase of the Assets provided for in Section 1.1
hereof (the “Closing”) shall take place at the offices of Sichenzia Xxxx
Xxxxxxxx Xxxxxxx LLP located at 0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx, Xxx
Xxxx, XX 00000 (or at such other place as the parties may mutually agree upon)
on or before January 31, 2007 (or on such other date as the parties may mutually
agree upon). The date on which the Closing shall be held is referred to in
this
Agreement as the “Closing Date”
4
2.2. Termination
of Agreement. This
Agreement may be terminated prior to the Closing as follows:
(a)
by
mutual written consent of the Seller and the Parent; or
(b) by
the
Seller or the Parent if there shall be in effect a final nonappealable order
of
a court, government or governmental agency or body of competent jurisdiction
(“Governmental Body”) of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated hereby;
it being agreed that the parties hereto shall promptly appeal any adverse
determination which is not nonappealable (and pursue such appeal with reasonable
diligence).
2.3. Procedure
Upon Termination.
In the
event of termination and abandonment by the Parent or the Seller, or both,
pursuant to Section 2.2 hereof, written notice thereof shall forthwith be given
to the other party or parties, and this Agreement shall terminate, and the
purchase of the Assets hereunder shall be abandoned, without further action
by
the Parent or the Seller. If this Agreement is terminated as provided herein
each party shall redeliver all documents, work papers and other material of
any
other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the
same.
2.4. Effect
of Termination.
In the
event that this Agreement is validly terminated as provided herein, then each
of
the parties shall be relieved of their duties and obligations arising under
this
Agreement after the date of such termination and such termination shall be
without liability to the Parent or the Seller; provided, however, that nothing
in this Section 2.4 shall relieve the Parent or the Seller of any liability
for
a breach of this Agreement.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES OF THE SELLER AND THE OWNER
The
Seller hereby represents and warrants to the Parent and Purchaser
that:
3.1. Organization
and Good Standing.
The
Seller is a Delaware corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation as set forth
above and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now conducted. The Seller is duly
qualified or authorized to do business as a foreign company and is in good
standing under the laws of each jurisdiction in which it owns or leases real
property and each other jurisdiction in which the conduct of its business or
the
ownership of its properties requires such qualification or authorization, except
where failure to be so qualified would not have a material adverse effect on
the
business, assets or financial condition of the Seller taken as a whole
(“Material Adverse Effect”).
3.2. Authorization
of Agreement.
The
Seller and the Owner have all requisite, power, authority and legal capacity
to
execute and deliver this Agreement, and each other agreement, document, or
instrument or certificate contemplated by this Agreement or to be executed
by
the Seller or the Owner in connection with the consummation of the transactions
contemplated by this Agreement (together with this Agreement, the “Seller
Documents”), and to consummate the transactions contemplated hereby and thereby.
This Agreement has been, and each of the Seller Documents will be at or prior
to
the Closing, duly and validly executed and delivered by the Seller or the Owner
and (assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each of the Seller Documents
when so executed and delivered will constitute, legal, valid and binding
obligations of the Seller, enforceable against the Seller or the Owner, as
applicable, in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in
a
proceeding at law or in equity).
5
3.3. Ownership
of Seller.
The
Owner owns 65% of the issued and outstanding shares of the Seller, free and
clear of any and all liens, charges or encumbrances or any kind or
nature.
3.4. No
Subsidiaries.
The
Seller has no subsidiaries.
3.5. Conflicts;
Consents of Third Parties.
(a) Except
as
set forth in Schedule 3.5(a), none of the execution and delivery by the Seller
or Owner of this Agreement and the Seller Documents, the consummation of the
transactions contemplated hereby or thereby, or compliance by the Seller with
any of the provisions hereof or thereof will (i) conflict with, or result in
the
breach of, any provision of the Certificate of Incorporation of the Seller,
as
amended to date or the Bylaws of the Seller, as amended to date; (ii) conflict
with, violate, result in the breach or termination of, or constitute a default
under any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which the Seller or any Owner is a party or by
which
any of them or any of their respective properties or assets is bound; (iii)
violate any statute, rule, regulation, order or decree of any governmental
body
or authority by which the Seller or any Owner is bound; or (iv) result in the
creation of any Lien upon the properties or assets of the Seller except, in
case
of clauses (ii), (iii) and (iv), for such violations, breaches or defaults
as
would not, individually or in the aggregate, have a Material Adverse
Effect.
(b) Except
as
set forth in Schedule 3.5(b), No consent, waiver, approval, order, permit or
authorization of, or declaration or filing with, or notification to, any person
or Governmental Body is required on the part of the Seller in connection with
the execution and delivery of this Agreement or the Seller Documents, or the
compliance by the Seller as the case may be, with any of the provisions hereof
or thereof.
3.6. Ownership
and Transfer of Assets.
Seller
has good and marketable title to all of the Assets free and clear of all
mortgages, pledges, security interests, charges, liens, restrictions and
encumbrances of any kind (collectively, “Liens”) whatsoever. Upon the sale,
assignment, transfer and delivery of the Assets to the Purchaser hereunder
and
under the Seller Documents, there will be vested in the Purchaser good,
marketable and indefeasible title to the Assets, free and clear of all Liens.
The Assets include all of the assets and properties (i) held for use by Seller
to conduct the Business as presently conducted and (ii) necessary for Purchaser
to operate the Business in the same manner as such business is currently
operated by Seller. All of the tangible Assets are in good repair, have been
well maintained and are in good operating condition, do not require any material
modifications or repairs, and comply in all material respects with applicable
laws, ordinances and regulations, ordinary wear and tear excepted.
6
3.7. Financial
Statements.
The
Seller has delivered or caused to be delivered to the Parent such financial
documents as have been requested by Parent (such financial documents are
referred to herein as the “Seller Financial Statements”). Each of the Seller
Financial Statements is complete and correct in all material respects. For
the
purposes hereof, the date October 31, 2006, is referred to as the “Seller
Balance Sheet Date”.
3.8. No
Undisclosed Liabilities.
All of
Seller’s material indebtedness, obligations and liabilities of any kind (whether
accrued, absolute, contingent or otherwise, and whether due or to become due)
are listed in Schedule 3.8.
3.9. Absence
of Certain Developments.
Except
as expressly contemplated by this Agreement or as set forth on Schedule 3.9,
since the Seller Balance Sheet Date:
(i) there
has
not been an event which had a Material Adverse Effect nor has there occurred
any
event which is reasonably likely to result in a Material Adverse
Effect;
(ii) there
has
not been any damage, destruction or loss, whether or not covered by insurance,
with respect to the property and assets of the Seller having a replacement
cost
of more than $5,000 for any single loss or $10,000 for all such
losses;
(iii) there
has
not been any declaration, setting aside or payment of any distribution in
respect of any partnership interest of the Seller or any repurchase, redemption
or other acquisition by the Seller of any outstanding partnership, or other
ownership interest in, the Seller;
(iv) the
Seller has not awarded or paid any bonuses to employees of the Seller with
respect to the fiscal years ended 2005 and 2006 or entered into any employment,
deferred compensation, severance or similar agreement (nor amended any such
agreement) or agreed to increase the compensation payable or to become payable
by it to any of the Seller’s directors, officers, employees, agents or
representatives or agreed to increase the coverage or benefits available under
any severance pay, termination pay, vacation pay, company awards, salary
continuation for disability, sick leave, deferred compensation, bonus or other
incentive compensation, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with such directors, officers, employees,
agents or representatives (other than normal increases in the ordinary course
of
business consistent with past practice and that in the aggregate have not
resulted in a material increase in the benefits or compensation expense of
the
Seller);
(v) there
has
not been any change by the Seller in accounting or Tax reporting principles,
methods or policies;
(vi) the
Seller has not entered into any transaction or Contract or conducted its
business other than in the ordinary course consistent with past
practice;
7
(vii) the
Seller has not failed to promptly pay and discharge current liabilities except
where disputed in good faith by appropriate proceedings;
(viii) the
Seller has not made any loans, advances or capital contributions to, or
investments in, any Person or paid any fees or expenses to the Seller or any
Affiliate of the Seller;
(ix) the
Seller has not mortgaged, pledged or subjected to any Lien any of its assets,
or
acquired any assets or sold, assigned, transferred, conveyed, leased or
otherwise disposed of any assets of the Seller, except for assets acquired
or
sold, assigned, transferred, conveyed, leased or otherwise disposed of in the
ordinary course of business consistent with past practice;
(x) the
Seller has not discharged or satisfied any Lien, or paid any obligation or
liability (fixed or contingent), except in the ordinary course of business
consistent with past practice and which, in the aggregate, would not be material
to the Seller;
(xi) the
Seller has not canceled or compromised any debt or claim or amended, canceled,
terminated, relinquished, waived or released any Contract or right except in
the
ordinary course of business consistent with past practice and which, in the
aggregate, would not be material to the Seller;
(xii) the
Seller has not made or committed to make any capital expenditures or capital
additions or betterments in excess of $25,000 individually or $100,000 in the
aggregate;
(xiii) the
Seller has not instituted or settled any material legal proceeding;
and
(xiv) the
Seller has not agreed to do anything set forth in this Section 3.9.
3.10. Taxes.
(a) Except
as
set forth on Schedule 3.10, (A) all Tax returns required to be filed by or
on
behalf of the Seller have been properly prepared and duly and timely filed
with
the appropriate taxing authorities in all jurisdictions in which such Tax
returns are required to be filed (after giving effect to any valid extensions
of
time in which to make such filings), and all such Tax returns were true,
complete and correct in all material respects; (B) all Taxes payable by or
on
behalf of the Seller or in respect of its income, assets or operations have
been
fully and timely paid, and adequate reserves or accruals for Taxes have been
provided with respect to any period for which Tax Returns have not yet been
filed or for which Taxes are not yet due and owing; and (C) the Seller has
not
executed or filed with the Internal Revenue Service (the “IRS”) or any other
taxing authority any agreement, waiver or other document or arrangement
extending or having the effect of extending the period for assessment or
collection of Taxes (including, but not limited to, any applicable statute
of
limitation), and no power of attorney with respect to any Tax matter is
currently in force. “Tax or Taxes” means all federal, state, local or other
taxes or similar governmental charges, fees, levies or assessments.
(b) The
Seller has complied in all material respects with all applicable laws (as
defined in Section 3.18), rules and regulations relating to the payment and
withholding of Taxes and has duly and timely withheld from employee salaries,
wages and other compensation and has paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over for all periods
under all Laws.
8
(c) Parent
has received complete copies of (A) all federal, state, local and foreign income
or franchise Tax Returns of the Seller relating to the taxable periods since
inception of Seller (B) any audit report issued within the last three years
relating to any material Taxes due from or with respect to its income, assets
or
operations. All income and franchise Tax returns filed by or on behalf of the
Seller for the taxable years ended on the respective dates set forth on Schedule
3.10 have been examined by the relevant taxing authority or the statute of
limitations with respect to such Tax Returns has expired.
(d) Schedule
3.10 lists all material types of Taxes paid and material types of Tax returns
filed by or on behalf of the Seller. Except as set forth on Schedule 3.10,
no
claim has been made by a taxing authority in a jurisdiction where the Seller
does not file Tax Returns such that it is or may be subject to taxation by
that
jurisdiction.
(e) Except
as
set forth on Schedule 3.10, all deficiencies asserted or assessments made as
a
result of any examinations by the IRS or any other taxing authority of the
Tax
Returns of or covering or including the Seller that are owed by the Seller
have
been fully paid, and there are no other audits or investigations by any taxing
authority in progress, nor has the Seller received any written notice from
any
taxing authority that it intends to conduct such an audit or investigation.
No
issue has been raised in writing by a federal, state, local or foreign taxing
authority in any current or prior examination which, by application of the
same
or similar principles, could reasonably be expected to result in a proposed
deficiency for any subsequent taxable period.
(f) Except
as
set forth on Schedule 3.10, the Seller has not (A) agreed to or is not required
to make any adjustments pursuant to Section 481(a) of the Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Seller or has any knowledge that the IRS has proposed
any such adjustment or change in accounting method, or has any application
pending with any taxing authority requesting permission for any changes in
accounting methods that relate to the business or operations of the Seller,
(B)
executed or entered into a closing agreement pursuant to Section 7121 of the
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law with respect to the Seller, or (C) requested any extension
of time within which to file any Tax Return, which Tax Return has since not
been
filed within the period of limitations.
(g) No
property owned by the Seller is (i) property required to be treated as being
owned by another Person pursuant to the provisions of Section 168(f)(8) of
the
Internal Revenue Code of 1954, as amended and in effect immediately prior to
the
enactment of the Tax Reform Act of 1986, (ii) constitutes “tax-exempt use
property” within the meaning of Section 168(h)(1) of the Code or (iii) is
“tax-exempt bond financed property” within the meaning of Section 168(g) of the
Code.
(h) The
Seller is not a foreign person within the meaning of Section 1445 of the
Code.
9
(i) The
Seller is not a party to any tax sharing or similar agreement or arrangement
(whether or not written) pursuant to which it will have any obligation to make
any payments after the Closing.
(j) There
is
no contract, agreement, plan or arrangement covering any person that,
individually or collectively, could give rise to the payment of any amount
that
would not be deductible by the Parent, the Affiliates or their respective
affiliates by reason of Section 280G of the Code, or would constitute
compensation in excess of the limitation set forth in Section 162(m) of the
Code.
(k) The
Seller is not subject to any private letter ruling of the IRS or comparable
rulings of other taxing authorities.
(l) There
are
no liens as a result of any unpaid Taxes upon any of the assets of the
Seller.
(m) Except
as
set forth on Schedule 3.10, the Seller has no elections in effect for federal
income tax purposes under Sections 108, 168, 441, 463, 472, 1017, 1033 or 4977
of the Code.
(n) The
Seller has never owned any Subsidiaries and has never been a member of any
consolidated, combined or affiliated group of corporations for any Tax
purposes.
3.11. Real
Property.
(a) Seller
does not own any interest in any real property. Seller has no interests
(including leases) in real property.
(b) The
Seller does not own or hold, and is not obligated under or a party to, any
option, right of first refusal or other contractual right to purchase, acquire,
sell, assign or dispose of any real estate or any portion thereof or interest
therein.
3.12. Tangible
Personal Property.
(a) Schedule
3.12(a) sets forth all leases of personal property (“Personal Property Leases”)
involving annual payments in excess of $1,000 relating to personal property
used
in the business of the Seller or to which the Seller is a party or by which
the
properties or assets of the Seller is bound. The Seller has delivered or
otherwise made available to the Parent true, correct and complete copies of
the
Personal Property Leases, together with all amendments, modifications or
supplements thereto.
(b) The
Seller has a valid leasehold interest under each of the Personal Property Leases
under which it is a lessee, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles
of
equity (regardless of whether enforcement is sought in a proceeding at law
or in
equity), and there is no default under any Personal Property Lease by the Seller
or, to the best knowledge of the Seller, by any other party thereto, and no
event has occurred that with the lapse of time or the giving of notice or both
would constitute a default thereunder.
10
(c) The
Seller has good and marketable title to all of the items of tangible personal
property utilized in the Business (except as sold or disposed of subsequent
to
the date thereof in the ordinary course of business consistent with past
practice), free and clear of any and all liens other than as set forth on
Schedule 3.12. All such items of tangible personal property which, individually
or in the aggregate, are material to the operation of the business of the Seller
are in good condition and in a state of good maintenance and repair (ordinary
wear and tear excepted) and are suitable for the purposes used.
(d) All
of
the items of tangible personal property used by the Seller under the Personal
Property Leases are in good condition and repair (ordinary wear and tear
excepted) and are suitable for the purposes used.
3.13. Intangible
Property.
Schedule
3.13 contains a complete and correct list of each patent, trademark, trade
name,
service xxxx and copyright owned or used by the Seller as well as all
registrations thereof and pending applications therefor, and each license or
other agreement relating thereto. Each of the foregoing is owned by the party
shown on such Schedule as owning the same, free and clear of all mortgages,
claims, liens, security interests, charges and encumbrances and is in good
standing and not the subject of any challenge. There have been no claims made
and the Seller has not received any notice or otherwise knows or has reason
to
believe that any of the foregoing is invalid or conflicts with the asserted
rights of others. The Seller possesses, owns or licenses all patents, patent
licenses, trade names, trademarks, service marks, brand marks, brand names,
copyrights, know-how, formulae, designs, logos and other proprietary and trade
rights necessary for the conduct of its business as now conducted, not subject
to any restrictions and without any known conflict with the rights of others
and
has not forfeited or otherwise relinquished any such patent, patent license,
trade name, trademark, service xxxx, brand xxxx, brand name, copyright,
know-how, formulate or other proprietary right necessary for the conduct of
its
business as conducted on the date hereof. The Seller is not under any obligation
to pay any royalties or similar payments in connection with any license to
any
Affiliate thereof. As used in this Agreement, “Affiliate” means, with respect to
any person, any other person directly or indirectly controlling, controlled
by
or under common control with such person and for purposes of individuals,
Affiliates would include an individual’s spouse and minor children.
3.14. Material
Contracts.
Schedule
3.14 sets forth all of the following Contracts to which the Seller is a party
or
by which it is bound (collectively, the “Material Contracts”): (i) Contracts
with any current officer or director of the Seller; (ii) Contracts with any
labor union or association representing any employee of the Seller; (iii)
Contracts pursuant to which any party is required to purchase or sell a stated
portion of its requirements or output from or to another party; (iv) Contracts
for the sale of any of the assets of the Seller other than in the ordinary
course of business or for the grant to any person of any preferential rights
to
purchase any of its assets; (v) joint venture agreements; (vi) material
Contracts containing covenants of the Seller not to compete in any line of
business or with any person in any geographical area or covenants of any other
person not to compete with the Seller in any line of business or in any
geographical area; (vii) Contracts relating to the acquisition by the Seller
of
any operating business or the capital stock of any other person; (viii)
Contracts relating to the borrowing of money; or (ix) any other Contracts,
other
than Real Property Leases. There have been made available to the Parent, its
affiliates and their representatives true and complete copies of all of the
Material Contracts. Except as set forth on Schedule 3.14, all of the Material
Contracts and other agreements are in full force and effect and are the legal,
valid and binding obligation of the Seller, enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity). Except
as
set forth on Schedule 3.14, the Seller is not in default in any material respect
under any Material Contracts, nor, to the knowledge of the Seller, is any other
party to any Material Contract in default thereunder in any material
respect.
11
3.15. Employee
Benefits.
(a) Schedule
3.15(a) sets forth a complete and correct list of (i) all “employee benefit
plans”, as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”), and any other pension plans or employee
benefit arrangements, programs or payroll practices (including, without
limitation, severance pay, vacation pay, company awards, salary continuation
for
disability, sick leave, retirement, deferred compensation, bonus or other
incentive compensation, stock purchase arrangements or policies,
hospitalization, medical insurance, life insurance and scholarship programs)
maintained by the Seller or to which the Seller contributes or is obligated
to
contribute thereunder with respect to such employee (“Employee Benefit Plans”)
and (ii) “employee pension plans”, as defined in Section 3(2) of ERISA (“Pension
Plans”).
3.16. Labor.
(a) Except
as
set forth on Schedule 3.16(a), the Seller is not party to any labor or
collective bargaining agreement and there are no labor or collective bargaining
agreements which pertain to employees of the Seller. The Seller has delivered
or
otherwise made available to the Parent true, correct and complete copies of the
labor or collective bargaining agreements listed on Schedule 3.16(a), together
with all amendments, modifications or supplements thereto.
(b) Except
as
set forth on Schedule 3.16(b), no employees of the Seller are represented by
any
labor organization. No labor organization or group of employees of the Seller
has made a pending demand for recognition, and there are no representation
proceedings or petitions seeking a representation proceeding presently pending
or, to the best knowledge of the Seller, threatened to be brought or filed,
with
the National Labor Relations Board or other labor relations tribunal. There
is
no organizing activity involving the Seller pending or, to the best knowledge
of
the Seller, threatened by any labor organization or group of employees of the
Seller.
(c) There
are
no (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or (ii)
material grievances or other labor disputes pending or, to the best knowledge
of
the Seller, threatened against or involving the Seller. There are no unfair
labor practice charges, grievances or complaints pending or, to the best
knowledge of the Seller, threatened by or on behalf of any employee or group
of
employees of the Seller.
12
3.17. Litigation.
Except
as set forth in Schedule 3.17, there is no suit, action, proceeding, or, to
the
knowledge of Seller, investigation, claim or order pending or threatened against
the Seller (or to the knowledge of the Seller pending or threatened, against
any
of the officers, directors or key employees of the Seller with respect to their
business activities on behalf of the Seller), or to which the Seller is
otherwise a party, which, if adversely determined, would have a Material Adverse
Effect, before any court, or before any governmental department, commission,
board, agency, or instrumentality; nor to the knowledge of the Seller is there
any reasonable basis for any such action, proceeding, or investigation. The
Seller is not subject to any judgment, order or decree of any court or
governmental agency except to the extent the same are not reasonably likely
to
have a Material Adverse Effect and is not engaged in any legal action to recover
monies due it or for damages sustained by it.
3.18. Compliance
with Laws; Permits.
The
Seller is in compliance with all federal, state and local statutes, laws, rules,
regulations, orders and ordinances (“Laws”) applicable to it or to the conduct
of its business or operations or the use of its properties (including any leased
properties) and assets, except for such non-compliances as would not,
individually or in the aggregate, have a Material Adverse Effect. The Seller
has
all governmental permits and approvals from state, federal or local authorities
which are required for it to operate its business, except for those the absence
of which would not, individually or in the aggregate, have a Material Adverse
Effect.
3.19. Environmental
Matters.
Except
as set forth on Schedule 3.19 hereto:
(a) the
operations of the Seller are in compliance with all applicable laws promulgated
by any governmental entity which prohibit, regulate or control any hazardous
material or hazardous material activity (“Environmental Laws”) and all permits
issued pursuant to Environmental Laws or otherwise;
(b) the
Seller has obtained all permits required under all applicable Environmental
Laws
necessary to operate its business;
(c) the
Seller is not the subject of any outstanding written order or Contract with
any
governmental authority or person respecting (i) Environmental Laws, (ii)
Remedial Action or (iii) any release or threatened release of a Hazardous
Material (“Release”);
(d) the
Seller has not received any written communication alleging either or both that
it may be in violation of any Environmental Law, or any permit issued pursuant
to Environmental Law, or may have any liability under any Environmental
Law;
(e) the
Seller does not have any current contingent liability in connection with any
Release into the indoor or outdoor environment (whether on-site or
off-site);
13
(f) there
are
no investigations of the business, operations, or currently or previously owned,
operated or leased property of the Seller pending or, to the Seller’s knowledge,
threatened which could lead to the imposition of any liability pursuant to
Environmental Law;
(g) to
the
Seller’s knowledge, there is not located at any of the properties of the Seller
any (i) underground storage tanks, (ii) asbestos-containing material or (iii)
equipment containing polychlorinated biphenyls; and,
(h) the
Seller has provided to the Parent all environmentally related audits, studies,
reports, analyses, and results of investigations that have been performed with
respect to the currently or previously owned, leased or operated properties
of
the Seller.
3.20. Insurance.
Schedule
3.20 sets forth a complete and accurate list of all policies of insurance of
any
kind or nature covering the Seller or any of its employees, properties or
assets, including, without limitation, policies of life, disability, fire,
theft, workers compensation, employee fidelity and other casualty and liability
insurance. All such policies are in full force and effect, and, to the Seller’s
knowledge, it is not in default of any provision thereof, except for such
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect.
3.21. Inventories;
Receivables; Payables.
(a) The
inventories of the Seller are in good and marketable condition, and are saleable
in the ordinary course of business.
(b) The
Seller’s accounts receivable through the date of this Agreement shall be the
responsibility of the Seller. Such account receivables have arisen from bona
fide transactions in the ordinary course of business consistent with past
practice.
(c) Any
accounts payable and/or any liability related to the inventory purchased by
Seller pursuant to this Agreement shall be the responsibility of the Purchaser.
Such accounts payable are the result of bona fide transactions in the ordinary
course of business.
3.22. Customers
and Suppliers.
Schedule
3.22 sets forth a list of all customers and suppliers of the Seller, showing
the
approximate total sales by the Seller to each such customer and the approximate
total purchases by the Seller from each such supplier, during the last one
year
period ended November 30, 2006.
Since
December 1, 2006, there has not been any material adverse change in the business
relationship of the Seller with any customer or supplier listed on Schedule
3.22.
3.23. Banks.
Schedule
3.23 contains a complete and correct list of the names and locations of all
banks in which the Seller has accounts or safe deposit boxes and the names
of
all persons authorized to draw thereon or to have access thereto. Except as
set
forth on Schedule 3.23, no person holds a power of attorney to act on behalf
of
the Seller.
3.24. No
Misrepresentations.
No
representation or warranty of the Seller and the Owner contained in this
Agreement or in any schedule hereto or in any certificate or other instrument
furnished by the Seller and the Owner to the Parent pursuant to the terms
hereof, taken as a whole, contains any untrue statement of a material fact
or
omits to state a material fact necessary to make the statements contained herein
or therein not misleading.
14
3.25. Financial
Advisors.
No
Person has acted, directly or indirectly, as a broker, finder or financial
advisor for the Seller in connection with the transactions contemplated by
this
Agreement and no Person is entitled to any fee or commission or like payment
in
respect thereof.
3.26. Information.
Seller
and
Owner have been furnished with or have had access at the XXXXX Website of the
Securities and Exchange Commission to all of Parent’s filings with the SEC. In
addition, the Seller has received in writing from Parent such other information
concerning its operations, financial condition and other matters as the Seller
and Owner have requested in writing and considered all factors the Sellers
deem
material in deciding on the advisability of investing in the Shares.
3.27. Investment
Intention.
The
Seller is acquiring the Shares for its own account, for investment purposes
only
and not with a view to the distribution (as such term is used in Section 2(11)
of the Securities Act of 1933, as amended (the “Securities Act”). The Seller
understands that the Shares have not been registered under the Securities Act
and cannot be sold unless subsequently registered under the Securities Act
or an
exemption from such registration is available.
3.28. Investment
Experience.
The
Seller is in a financial position to hold the Shares and is able to bear the
economic risk and withstand a complete loss of the Seller’s investment in the
Shares. The Seller recognizes that the Shares involve a high degree of risk.
The
Seller is a sophisticated investor, is able to fend for itself in the
transaction contemplated by this Agreement, and has such knowledge and
experience in financial and business matters that the Seller is capable of
evaluating the merits and risks of the prospective investment in the
Shares.
3.29. Restricted
Securities. The
Seller understands that the Shares have not been registered under the Securities
Act, and will not sell, offer to sell, assign, pledge, hypothecate or otherwise
transfer any of Shares unless (i) pursuant to an effective registration
statement under the Securities Act, (ii) such holder provides the Company with
an opinion of counsel, in form and substance reasonably acceptable to the
Company, to the effect that a sale, assignment or transfer of the Shares may
be
made without registration under the Securities Act and the transferee agrees
to
be bound by the terms and conditions of this Agreement, (iii) such holder
provides the Company with reasonable assurances (in the form of seller and
broker representation letters) that the Shares can be sold pursuant to Rule
144
promulgated under the Securities Act (“Rule
144”)
or
(iv) pursuant to Rule 144(k) promulgated under the Securities Act following
the applicable holding period.
3.30. Legend.
The
Seller agrees that the certificates for the Shares shall bear the following
legend and that the Seller will comply with the restrictions on transfer set
forth in such legend:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
15
3.31. Patriot
Act.
The
Seller certifies that, to the best of the Seller’s knowledge, the Seller has not
been designated, and is not owned or controlled, by a “suspected terrorist” as
defined in Executive Order 13224. The Seller hereby acknowledges that the Parent
seeks to comply with all applicable Laws concerning money laundering and related
activities. In furtherance of those efforts, the Seller hereby represents,
warrants and agrees that: (i) none of the cash or property owned by the Seller
has been or shall be derived from, or related to, any activity that is deemed
criminal under United States law; and (ii) no contribution or payment by the
Seller has, and this Agreement will not, cause the Seller to be in violation
of
the United States Bank Secrecy Act, the United States International Money
Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001.
ARTICLE
IV.
REPRESENTATIONS
AND WARRANTIES OF
PARENT
AND PURCHASER
The
Parent and the Purchaser jointly and severally represent and warrant
that:
4.1. Organization
and Good Standing.
(a) The
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware; and
(b) Purchaser
is a corporation duly incorporated and validly existing and in good standing
under the laws of the State of Delaware.
4.2. Authorization
of Agreement.
(a) The
Parent and the Purchaser have full corporate power and authority to execute
and
deliver this Agreement, the Employment Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement or to be
executed by the Parent in connection with the consummation of the transactions
contemplated hereby and thereby (together with the Employment Agreement, the
“Parent Documents”), and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by the Parent and Purchaser
of
this Agreement and each Parent Document have been duly authorized by all
necessary corporate action on behalf of the Parent and Purchaser. This Agreement
has been, and each Parent Document will be at or prior to the Closing, duly
executed and delivered by the Parent and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto) this Agreement
constitutes, and each Parent Document when so executed and delivered will
constitute, legal, valid and binding obligations of the Parent and Purchaser,
enforceable against the Parent and Purchaser in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors’ rights and remedies generally, and
subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in
equity).
16
(b) Purchaser
has the corporate power, capacity and authority to enter into and complete
this
Agreement.
4.3. Conflicts;
Consents of Third Parties.
(a) Except
as
set forth on Schedule 4.3 hereto, neither of the execution and delivery by
the
Parent or Purchaser of the Parent Documents, nor the compliance by the Parent
and Purchaser with any of the provisions hereof or thereof will (i) conflict
with, or result in the breach of, any provision of the certificate of
incorporation, or by-laws of the Parent or Purchaser, respectively, (ii)
conflict with, violate, result in the breach of, or constitute a default under
any note, bond, mortgage, indenture, license, agreement or other obligation
to
which the Parent or Purchaser is a party or by which the Parent, Purchaser
or
their respective properties or assets are bound or (iii) violate any statute,
rule, regulation, order or decree of any governmental body or authority by
which
the Parent or Purchaser is bound, except, in the case of clauses (ii) and (iii),
for such violations, breaches or defaults as would not, individually or in
the
aggregate, have a material adverse effect on the business, properties, results
of operations, prospects, conditions (financial or otherwise) of the Parent
and
its subsidiaries, taken as a whole.
(b) No
consent, waiver, approval, order, permit or authorization of, or declaration
or
filing with, or notification to, any Person or Governmental Body is required
on
the part of the Parent in connection with the execution and delivery of this
Agreement or the Parent Documents or the compliance by Parent with any of the
provisions hereof or thereof.
4.4. Litigation.
There
are no Legal Proceedings pending or, to the best knowledge of the Parent,
threatened that are reasonably likely to prohibit or restrain the ability of
the
Parent or Purchaser to enter into this Agreement or consummate the transactions
contemplated hereby.
4.5. Financial
Advisors.
No
person has acted, directly or indirectly, as a broker, finder or financial
advisor for the Parent in connection with the transactions contemplated by
this
Agreement and no person is entitled to any fee or commission or like payment
in
respect thereof.
4.6. Patriot
Act.
The
Parent certifies that, to the best of the Parent’s knowledge, the Parent has not
been designated, and is not owned or controlled, by a “suspected terrorist” as
defined in Executive Order 13224. The Parent hereby acknowledges that the Seller
seeks to comply with all applicable Laws concerning money laundering and related
activities. In furtherance of those efforts, the Parent hereby represents,
warrants and agrees that: (i) none of the cash or property owned by the Seller
has been or shall be derived from, or related to, any activity that is deemed
criminal under United States law; and (ii) no contribution or payment by the
Parent has, and this Agreement will not, cause the Parent to be in violation
of
the United States Bank Secrecy Act, the United States International Money
Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001.
17
4.7. No
Knowledge of Breaches.
Parent
does not have actual knowledge of any breach of any representation and warranty
made by Seller and the Owner hereunder.
ARTICLE
V.
COVENANTS
5.1. Access
to Information.
The
Seller and Owner agree that, prior to the Closing Date, the Parent shall be
entitled, through its officers, employees and representatives (including,
without limitation, its legal advisors and accountants), to make such
investigation of the properties, businesses and operations of the Seller and
such examination of the books, records and financial condition of the Seller
as
it reasonably requests and to make extracts and copies of such books and
records. Any such investigation and examination shall be conducted during
regular business hours and under reasonable circumstances, and the Seller shall
cooperate fully therein. No investigation by the Parent prior to or after the
date of this Agreement shall diminish or obviate any of the representations,
warranties, covenants or agreements of the Seller contained in the Seller
Documents. In
order
that the Parent may have full opportunity to make such physical, business,
accounting and legal review, examination or investigation as it may reasonably
request of the affairs of the Seller, Seller shall cause its officers,
employees, consultants, agents, accountants, attorneys and other representatives
to cooperate fully with such representatives in connection with such review
and
examination.
5.2. Conduct
of the Business Pending the Closing.
(a) Except
as
otherwise expressly contemplated by this Agreement or with the prior written
consent of the Parent, the Seller shall:
(i) conduct
its business only in the ordinary course consistent with past
practice;
(ii) use
its
best efforts to (A) preserve its present business operations, organization
and
goodwill and (B) preserve its present relationship with Persons having business
dealings with it;
(iii) maintain
(A) all of its assets and properties in their current condition, ordinary wear
and tear excepted and (B) insurance upon all of its properties and assets in
such amounts and of such kinds comparable to that in effect on the date of
this
Agreement;
(iv) (A)
maintain its books, accounts and records in the ordinary course of business
consistent with past practices, (B) continue to collect accounts receivable
and
pay accounts payable utilizing normal procedures and without discounting or
accelerating payment of such accounts, and (C) comply with all contractual
and
other obligations applicable to its operation; and
18
(v) comply
in
all material respects with applicable Laws.
(b) Except
as
otherwise expressly contemplated by this Agreement or with the prior written
consent of the Parent, the Seller shall not:
(i) except
for trade payables and for indebtedness for borrowed money incurred in the
ordinary course of business and consistent with past practice, borrow monies
for
any reason or draw down on any line of credit or debt obligation, or become
the
guarantor, surety, endorser or otherwise liable for any debt, obligation or
liability (contingent or otherwise) of any other Person;
(ii) place
a
Lien (except for liens that do not materially impair the use of the property
subject thereto in their respective businesses as presently conducted) on any
of
its properties or assets (whether tangible or intangible);
(iii) acquire
any material properties or assets or sell, assign, transfer, convey, lease
or
otherwise dispose of any of its material properties or assets (except for fair
consideration in the ordinary course of business consistent with past
practice);
(iv) cancel
or
compromise any debt or claim or waive or release any material right except
in
the ordinary course of business consistent with past practice;
(v) enter
into any commitment for capital expenditures in excess of $1,000 for any
individual commitment and $5,000 for all commitments in the
aggregate;
(vi) introduce
any material change with respect to its operation, including any material change
in the types, nature, composition or quality of its products or services,
experience any material change in any contribution of its product lines to
its
revenues or net income, or, other than in the ordinary course of business,
make
any change in product specifications or prices or terms of distributions of
such
products;
(vii) enter
into any transaction or make or enter into any Contract which by reason of
its
size or otherwise is not in the ordinary course of business consistent with
past
practice;
(viii) enter
into or agree to enter into any merger or consolidation with, any corporation
or
other entity, and not engage in any new business or invest in, make a loan,
advance or capital contribution to, or otherwise acquire the securities of
any
other Person;
(ix) except
for transfers of cash pursuant to normal cash management practices, make any
investments in or loans to, or pay any fees or expenses to, or enter into or
modify any Contract with any Affiliate; or
(x) agree
to
do anything prohibited by this Section 5.2 or anything which would make any
of
the representations and warranties of the Seller in this Agreement or the Seller
Documents untrue or incorrect in any material respect as of any time through
and
including the Effective Time.
19
5.3. Consents.
The
Seller shall use its best efforts, and the Parent shall cooperate with the
Seller, to obtain at the earliest practicable date all consents and approvals
required to consummate the transactions contemplated by this Agreement,
including, without limitation, the consents and approvals referred to in Section
3.5(b) hereof; provided, however, that neither the Seller nor the Parent shall
be obligated to pay any consideration therefor to any third party from whom
consent or approval is requested.
5.4. Other
Actions.
Each of
the Seller, Owner, Parent and Purchaser shall use its best efforts to (i) take
all actions necessary or appropriate to consummate the transactions contemplated
by this Agreement and (ii) cause the fulfillment at the earliest practicable
date of all of the conditions to their respective obligations to consummate
the
transactions contemplated by this Agreement.
5.5. No
Solicitation.
The
Seller will not, and will not cause or permit any of its partners, officers,
employees, representatives or agents (collectively, the “Representatives”) to,
directly or indirectly, (i) discuss, negotiate, undertake, authorize, recommend,
propose or enter into, either as the proposed surviving, merged, acquiring
or
acquired corporation, any transaction involving a merger, consolidation,
business combination, purchase or disposition of any amount of the assets or
capital stock or other equity interest in it other than the transactions
contemplated by this Agreement (an “Acquisition Transaction”), (ii) facilitate,
encourage, solicit or initiate discussions, negotiations or submissions of
proposals or offers in respect of an Acquisition Transaction, (iii) furnish
or
cause to be furnished, to any Person, any information concerning its business,
operations, properties or assets in connection with an Acquisition Transaction,
or (iv) otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other Person to do or
seek
any of the foregoing. The Seller will inform the Parent in writing immediately
following the receipt by the Seller or any Representative of any proposal or
inquiry in respect of any Acquisition Transaction.
5.6. Preservation
of Records.
The
Seller, Owner, the Parent and Purchaser agree that each of them shall preserve
and keep the records held by it relating to the business of the Seller for
a
period of three years from the Closing Date (six years with respect to tax
related records) and shall make such records and personnel available to the
other as may be reasonably required by such party in connection with, among
other things, preparation of financial statements, disclosure of information
to
the Securities and Exchange Commission, stock exchange or similar entity, any
insurance claims by, legal proceedings against or governmental investigations
of
the Seller, the Parent or Purchaser or any of their Affiliates or in order
to
enable the Seller, the Parent or Purchaser to comply with their respective
obligations under this Agreement, the Employment Agreement and each other
agreement, document or instrument contemplated hereby or thereby. In the event
the Seller, the Parent or Purchaser wishes to destroy such records after that
time, such party shall first give ninety (90) days prior written notice to
the
other and such other party shall have the right at its option and expense,
upon
prior written notice given to such party within that ninety (90) day period,
to
take possession of the records within one hundred and eighty (180) days after
the date of such notice.
20
5.7. Publicity.
Neither
the Seller, the Parent nor the Purchaser shall issue any press release or public
announcement concerning this Agreement or the transactions contemplated hereby
without obtaining the prior written approval of the other party hereto, which
approval will not be unreasonably withheld or delayed, unless, in the sole
judgment of the Parent or the Seller, disclosure is otherwise required by
applicable Law or by the applicable rules of any stock exchange on which the
Parent or the Seller lists securities, provided that, to the extent required
by
applicable Law, the party intending to make such release shall use its best
efforts consistent with such applicable Law to consult with the other party
with
respect to the text thereof.
5.8. Use
of Name.
The
Seller hereby agrees that upon the consummation of the transactions contemplated
hereby, the Parent and Purchaser shall have the sole right to the use of the
name “My Video Daily” and variations thereof and the Seller shall not, and shall
not cause or permit any Affiliate to use such name or any variation or
simulation thereof.
5.9. Piggyback
Registration.
(i) If
the Company proposes to register any of its Common Stock under the Securities
Act, whether as a result of an offering for its own account or the account
of
others (but excluding any registrations to be effected for Forms S-4 or S-8
or
other applicable successor Forms) on a Registration Statement, the Company
shall, each such time, give to the Seller twenty (20) days’ prior written notice
of its intent to do so, and such notice shall describe the proposed registration
and shall offer the Seller the opportunity to include in such Registration
Statement such number of the Shares as the Seller may request. Upon the written
request of the Seller given to the Company within fifteen (15) days after the
receipt of any such notice by the Company, the Company shall include in such
Registration Statement all or part of the Shares, to the extent requested to
be
registered, subject to clause (ii) below.
(ii)
If
a
registration pursuant to this Section 5.9 involves an underwritten offering
and
the managing underwriter shall advise the Company in writing that, in its
opinion, the number of shares of Common Stock requested by the Seller to be
included in such registration is likely to materially and adversely affect
the
success of the offering or the price that would be received for any shares
of
Common Stock included in such offering, then, notwithstanding anything in this
Section 5.9 to the contrary, the Company shall only be required to include
in
such registration, to the extent of the number of shares of Common Stock which
the Company is so advised can be sold in such offering, (A) first, any shares
of
Common Stock proposed to be included in such registration for the account of
the
Company, and (B) second, the number of shares of Common Stock requested to
be
included in such registration for the account of any stockholders of the Company
(including the Seller), pro rata among such stockholders on the basis of the
number of shares of Common Stock that each of them has requested to be included
in such registration.
(iii)
In
connection with any offering involving an underwriting of shares, the Company
shall not be required under this Section 5.9 or otherwise to include the Shares
of the Seller therein unless the Seller accepts and agrees to the terms of
the
underwriting, which shall be reasonable and customary, as agreed upon between
the Company and the underwriters selected by the Company.
21
5.10. Employment
Agreement.
The
Owner hereby agrees that, on or prior to the Closing Date, Xxxxxxxxx Price
shall
execute and deliver to Parent and Purchaser an employment agreement,
substantially in the form of Exhibit A hereto (the “Employment
Agreement”).
ARTICLE
VI.
CONDITIONS
TO CLOSING
6.1. Conditions
Precedent to Obligations of Parent and Purchaser.
The
obligation of the Parent and Purchaser to consummate the transactions
contemplated by this Agreement is subject to the fulfillment, on or prior to
the
Closing Date, of each of the following conditions (any or all of which may
be
waived by the Parent in whole or in part to the extent permitted by applicable
Law):
(a) all
representations and warranties of the Seller and Owner contained herein shall
be
true and correct as of the date hereof;
(b) all
representations and warranties of the Seller contained herein qualified as
to
materiality shall be true and correct, and the representations and warranties
of
the Seller contained herein not qualified as to materiality shall be true and
correct in all material respects, at and as of the Closing Date with the same
effect as though those representations and warranties had been made again at
and
as of that time;
(c) the
Seller shall have performed and complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by it on or prior to the Closing Date;
(d) the
Parent shall have been furnished with certificates (dated the Closing date
and
in form and substance reasonably satisfactory to the Parent) executed by the
Seller certifying as to the fulfillment of the conditions specified in Sections
6.1(a), 6.1(b) and 6.1(c) hereof;
(e) the
Parent shall have obtained all consents and waivers referred to in Section
4.3
hereof with respect to the transactions contemplated by this Agreement and
the
Parent Documents;
(f) there
shall not have been or occurred any event which will have a Material Adverse
Effect;
(g) the
Seller shall have obtained all consents and waivers referred to in Section
3.5
hereof, in a form reasonably satisfactory to the Parent, with respect to the
transactions contemplated by this Agreement and the Seller
Documents;
(h) no
Legal
Proceedings shall have been instituted or threatened or claim or demand made
against the Seller or the Parent seeking to restrain or prohibit or to obtain
substantial damages with respect to the consummation of the transactions
contemplated hereby, and there shall not be in effect any order by a
Governmental Body of competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated
hereby;
22
(i) the
Seller shall have delivered a Certificate of Incumbency executed by the
Company’s Secretary;
(j) the
Seller shall have delivered a certificate of the Company executed by the
Company’s Secretary attaching and certifying to the truth and correctness of (i)
the Certificate of Incorporation, (ii) the Bylaws and (iii) the resolutions
adopted by the Company’s Board of Directors and Shareholders in connection with
the transactions contemplated by this Agreement.
(k) the
Owner
shall have entered into the Employment Agreement with the Purchaser,
substantially in the form of Exhibit A hereto;
(l) the
Parent shall have received disclosure schedules required pursuant to Article
3
hereof, which shall be reasonably satisfactory to the Parent.
6.2. Conditions
Precedent to Obligations of the Seller and Owner.
The
obligations of the Seller and Owner to consummate the transactions contemplated
by this Agreement are subject to the fulfillment, prior to or on the Closing
Date, of each of the following conditions (any or all of which may be waived
by
the Seller in whole or in part to the extent permitted by applicable
law):
(a) all
representations and warranties of the Parent and Purchaser contained herein
shall be true and correct as of the date hereof;
(b) all
representations and warranties of the Parent and Purchaser contained herein
qualified as to materiality shall be true and correct, and all representations
and warranties of the Parent and Purchaser contained herein not qualified as
to
materiality shall be true and correct in all material respects, at and as of
the
Closing Date with the same effect as though those representations and warranties
had been made again at and as of that date;
(c) the
Parent and Purchaser shall have performed and complied in all material respects
with all obligations and covenants required by this Agreement to be performed
or
complied with by Parent and Purchaser on or prior to the Closing
Date;
(d) the
Seller shall have been furnished with certificates (dated the Closing Date
and
in form and substance reasonably satisfactory to the Seller) executed by the
Chief Executive Officer and Chief Financial Officer of the Parent and the
Purchaser certifying as to the fulfillment of the conditions specified in
Sections 6.2(a), 6.2(b) and 6.2(c), and resolutions of the Board of Directors
of
the Parent and Purchaser authorizing the acquisition of the Seller;
(e) there
shall not be in effect any order by a Governmental Body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation
of
the transactions contemplated hereby; and
(f) the
Parent and Purchaser shall have entered into the Employment Agreement,
substantially in the form of Exhibit A hereto.
23
ARTICLE
VII.
DOCUMENTS
TO BE DELIVERED
7.1. Documents
to be Delivered by the Seller.
At the
Closing, the Seller shall deliver, or cause to be delivered, to the Parent
and
Purchaser the following:
(a) copies
of
all consents and waivers referred to in Section 6.1(g) hereof;
(b) the
certificates and resolutions referred to in Sections 6.1 (d), (i) and (j)
hereof;
(c) Employment
Agreement, substantially in the form of Exhibit A hereto, duly executed;
and
(d) such
other documents as the Parent and Purchaser shall reasonably
request.
7.2. Documents
to be Delivered by the Parent.
At the
Closing, the Parent and Purchaser shall deliver to the Seller the
following:
(a) the
certificates and resolutions referred to in Section 6.2(d) hereof;
and
(b) such
other documents as the Seller shall reasonably request.
ARTICLE
VIII. INDEMNIFICATION
8.1. Indemnification.
(a) Subject
to Section 8.2 hereof, the Seller hereby agrees to indemnify and hold the
Parent, Purchaser and their respective directors, officers, employees,
Affiliates, agents, successors and assigns (collectively, the “Parent
Indemnified Parties”) harmless from and against:
(i) any
and
all liabilities of the Seller of every kind, nature and description, absolute
or
contingent, existing as against the Seller prior to and including the Closing
Date or thereafter coming into being or arising by reason of any state of facts
existing, or any transaction entered into, on or prior to the Closing Date,
except to the extent that the same have been fully provided for (and accrued
and
applied as a liability) in the Parent Balance Sheet or were incurred in the
ordinary course of business between the Parent Balance Sheet Date and the
Closing Date;
(ii) subject
to Section 9.3, any and all losses, liabilities, obligations, damages, costs
and
expenses based upon, attributable to or resulting from the failure of any
representation or warranty of the Seller set forth in Section 3 hereof, or
any
representation or warranty contained in any certificate delivered by or on
behalf of the Seller pursuant to this Agreement, to be true and correct in
all
respects as of the date made;
24
(iii) any
and
all losses, liabilities, obligations, damages, costs and expenses based upon,
attributable to or resulting from the breach of any covenant or other agreement
on the part of the Seller under this Agreement;
(iv) any
and
all notices, actions, suits, proceedings, claims, demands, assessments,
judgments, costs, penalties and expenses, including attorneys’ and other
professionals’ fees and disbursements (collectively, “Expenses”) incident to any
and all losses, liabilities, obligations, damages, costs and expenses with
respect to which indemnification is provided hereunder (collectively,
“Losses”).
(b) Subject
to Section 8.2, Parent and Purchaser hereby agree to indemnify and hold the
Seller, the Owner and their Affiliates, agents, successors and assigns
(collectively, the “Seller Indemnified Parties”) harmless from and
against:
(i) subject
to Section 9.3, any and all Losses based upon, attributable to or resulting
from
the failure of any representation or warranty of the Parent and Purchaser set
forth in Section 4 hereof, or any representation or warranty contained in any
certificate delivered by or on behalf of the Parent pursuant to this Agreement,
to be true and correct as of the date made;
(ii) any
and
all Losses based upon, attributable to or resulting from the breach of any
covenant or other agreement on the part of the Parent and Purchaser under this
Agreement;
(iii) any
and
all Losses of the Parent or Purchaser of every kind, nature and description,
absolute or contingent, existing as against the Parent or Purchaser after the
Closing Date coming into being or arising by reason of any state of facts
existing, or any transaction entered into, after the Closing Date, except for
(A) such Losses for which Seller and the Owner have an obligation to indemnify
the Parent Indemnified Parties pursuant to Section 8.1 and (B) such Losses
that
affect all shareholders of Parent or Purchaser by virtue of their status as
shareholders; and
(iv) any
and
all Expenses incident to the foregoing.
8.2. Limitations
on Indemnification.
An
indemnifying party shall not have any liability under this Section 8 unless
the
aggregate amount of Losses and Expenses to the indemnified parties finally
determined to arise thereunder based upon, attributable to or resulting from
the
failure of any representation or warranty to be true and correct, exceeds
$100,000 (the “Basket”) and, in such event, the indemnifying party shall be
required to pay the entire amount of such Losses and Expenses in excess of
$100,000 (the “Deductible”).
8.3. Indemnification
Procedures.
(a) In
the
event that any Legal Proceedings shall be instituted or that any claim or demand
(“Claim”) shall be asserted by any Person in respect of which payment may be
sought under Section 8.1 hereof (regardless of the Basket or the Deductible
referred to above), the indemnified party shall reasonably and promptly cause
written notice of the assertion of any Claim of which it has knowledge which
is
covered by this indemnity to be forwarded to the indemnifying party. The
indemnifying party shall have the right, at its sole option and expense,
25
to
be
represented by counsel of its choice, which must be reasonably satisfactory
to
the indemnified party, and to defend against, negotiate, settle or otherwise
deal with any Claim which relates to any Losses indemnified against hereunder.
If the indemnifying party elects to defend against, negotiate, settle or
otherwise deal with any Claim which relates to any Losses indemnified against
hereunder, it shall within five (5) days (or sooner, if the nature of the Claim
so requires) notify the indemnified party of its intent to do so. If the
indemnifying party elects not to defend against, negotiate, settle or otherwise
deal with any Claim which relates to any Losses indemnified against hereunder,
fails to notify the indemnified party of its election as herein provided or
contests its obligation to indemnify the indemnified party for such Losses
under
this Agreement, the indemnified party may defend against, negotiate, settle
or
otherwise deal with such Claim. If the indemnified party defends any Claim,
then
the indemnifying party shall reimburse the indemnified party for the Expenses
of
defending such Claim upon submission of periodic bills. If the indemnifying
party shall assume the defense of any Claim, the indemnified party may
participate, at his or its own expense, in the defense of such Claim; provided,
however, that such indemnified party shall be entitled to participate in any
such defense with separate counsel at the expense of the indemnifying party
if,
(i) so requested by the indemnifying party to participate or (ii) in the
reasonable opinion of counsel to the indemnified party, a conflict or potential
conflict exists between the indemnified party and the indemnifying party that
would make such separate representation advisable; and provided, further, that
the indemnifying party shall not be required to pay for more than one such
counsel for all indemnified parties in connection with any Claim. The parties
hereto agree to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such Claim.
(b) After
any
final judgment or award shall have been rendered by a court, arbitration board
or administrative agency of competent jurisdiction and the expiration of the
time in which to appeal therefrom, or a settlement shall have been consummated,
or the indemnified party and the indemnifying party shall have arrived at a
mutually binding agreement with respect to a Claim hereunder, the indemnified
party shall forward to the indemnifying party notice of any sums due and owing
by the indemnifying party pursuant to this Agreement with respect to such matter
and the indemnifying party shall be required to pay all of the sums so due
and
owing to the indemnified party by wire transfer of immediately available funds
within 10 business days after the date of such notice.
(c) The
failure of the indemnified party to give reasonably prompt notice of any Claim
shall not release, waive or otherwise affect the indemnifying party’s
obligations with respect thereto except to the extent that the indemnifying
party can demonstrate actual loss and prejudice as a result of such
failure.
ARTICLE
IX.
MISCELLANEOUS
9.1. Payment
of Sales, Use or Similar Taxes.
All
sales, use, transfer, intangible, recordation, documentary stamp or similar
Taxes or charges, of any nature whatsoever, applicable to, or resulting from,
the transactions contemplated by this Agreement shall be borne by the
Parent.
26
9.2. Survival
of Representations and Warranties.
The
parties hereto hereby agree that the representations and warranties contained
in
this Agreement or in any certificate, document or instrument delivered in
connection herewith, shall survive the execution and delivery of this Agreement,
and the Closing hereunder, regardless of any investigation made by the parties
hereto; provided, however, that any claims or actions with respect thereto
(other than claims for indemnifications with respect to the representation
and
warranties contained in Sections 3.7, 3.10, 3.17, 3.19, 4.4 and 4.5 which shall
survive for periods coterminous with any applicable statutes of limitation)
shall terminate unless within twelve (12) months after the Closing Date written
notice of such claims is given to the Seller or such actions are
commenced.
9.3. Expenses.
Except
as otherwise provided in this Agreement, the Seller, the Parent and Purchaser
shall each bear its own expenses incurred in connection with the negotiation
and
execution of this Agreement and each other agreement, document and instrument
contemplated by this Agreement and the consummation of the transactions
contemplated hereby and thereby.
9.4. Specific
Performance.
The
Seller and Owner acknowledge and agree that the breach of this Agreement would
cause irreparable damage to the Parent and Purchaser and that the Parent and
Purchaser will not have an adequate remedy at law. Therefore, unless validly
terminated pursuant to Section 2.2 above, the obligations of the Seller under
this Agreement, including, without limitation, the Seller’s obligation to sell
the Assets to the Parent and Purchaser, shall be enforceable by a decree of
specific performance issued by any court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies shall, however, be cumulative and not exclusive and
shall be in addition to any other remedies which any party may have under this
Agreement or otherwise.
9.5. Further
Assurances.
The
Seller, the Parent and Purchaser each agrees to execute and deliver such other
documents or agreements and to take such other action as may be reasonably
necessary or desirable for the implementation of this Agreement and the
consummation of the transactions contemplated hereby.
9.6. Submission
to Jurisdiction; Consent to Service of Process
(a) The
parties hereto hereby irrevocably submit to the non-exclusive jurisdiction
of
any federal or state court located within the State of New York over any dispute
arising out of or relating to this Agreement or any of the transactions
contemplated hereby and each party hereby irrevocably agrees that all claims
in
respect of such dispute or any suit, action proceeding related thereto may
be
heard and determined in such courts. The parties hereby irrevocably waive,
to
the fullest extent permitted by applicable Law, any objection which they may
now
or hereafter have to the laying of venue of any such dispute brought in such
court or any defense of inconvenient forum for the maintenance of such dispute.
Each of the parties hereto agrees that a judgment in any such dispute may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(b) Each
of
the parties hereto hereby consents to process being served by any party to
this
Agreement in any suit, action or proceeding by the mailing of a copy thereof
in
accordance with the provisions of Section 9.9.
27
9.7. Entire
Agreement; Amendments and Waivers.
This
Agreement (including the schedules and exhibits hereto) represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the party against whom enforcement of
any
such amendment, supplement, modification or waiver is sought. No action taken
pursuant to this Agreement, including without limitation, any investigation
by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty, covenant
or
agreement contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a further
or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. No failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise
of
any other right, power or remedy. All remedies hereunder are cumulative and
are
not exclusive of any other remedies provided by law.
(a) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York.
9.8. Table
of Contents and Headings.
The
table of contents and section headings of this Agreement are for reference
purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
9.9. Notices.
All
notices and other communications under this Agreement shall be in writing and
shall be deemed given when delivered personally or mailed by certified mail,
return receipt requested, to the parties (and shall also be transmitted by
facsimile to the Persons receiving copies thereof) at the following addresses
(or to such other address as a party may have specified by notice given to
the
other party pursuant to this provision):
If
to
Parent or Purchaser:
ROO
Group, Inc.
000
Xxxx
00xx
Xxxxxx,
0xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxx Xxxxx, CEO
Phone:
(000) 000-0000
Fax:
(000) 000-0000
With
a
copy to:
Xxxxxxx
Xxxxxxxx, Esq.
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Phone:
000-000-0000
Fax:
000-000-0000
28
If
to
Seller or Owner:
RJM
Price
& Company, Inc.
000
Xxxxxx Xx. Xxxxx X.
Xxx
Xxxx,
XX., 00000
Attn:
Xxxxxxxxx Price
Phone:
_______________
Fax:
_________________
With
a
copy to:
Xxxxx
X.
Xxxxxxx, Esq.
000
Xxxx
00xx
Xxxxxx,
Xxxxx 0000
Xxx
Xxxx,
XX 00000
Attn:
Xxxxx X. Xxxxxxx, Esq.
Phone:
000-000-0000
Fax:
000-000-0000
9.10. Acknowledgment
of Representation of Counsel. Parent,
Purchaser, Seller and the Owner each acknowledges that each party has been
represented by counsel in connection with this Agreement and the subject matter
hereof and has not relied upon any tax advice, legal counsel or business advice
provided by the other party
9.11. Severability.
If any
provision of this Agreement is invalid or unenforceable, the balance of this
Agreement shall remain in effect.
9.12. Binding
Effect; Assignment.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. Nothing in this Agreement
shall create or be deemed to create any third party beneficiary rights in any
person or entity not a party to this Agreement. No assignment of this Agreement
or of any rights or obligations hereunder may be made by either the Seller
or
the Parent (by operation of law or otherwise) without the prior written consent
of the other parties hereto and any attempted assignment without the required
consents shall be void.
29
ROO
Group, Inc.
By: __/s/
Rob Petty___________________
Name:
Xxx
Xxxxx
Title: Chief
Executive Officer
ROO
Media
Corporation
By: _/s/
Rob Petty_____________________
Name: Xxx
Xxxxx
Title: Chief
Executive Officer
RJM
Price
& Company, Inc.
By: __/s/
Xxxxxxxxx J. Price____________
Name: Xxxxxxxxx
Price
Title: President
/s/ Xxxxxxxxx
Price
Xxxxxxxxx
Price
30
Schedule
1.1(b)
List
of Seller’s Contracts
1.
Ask
Jeeves Contract, by and between R.J.M. Price & Company, Inc., and IAC Search
& Media, Inc., dated 7/13/2006.
Schedule
1.1(c)
Intellectual
Property
|
1. Domain Names:
|
| i. |
XxXxxxxXxxxx.xxx
|
| ii. |
XxXxxxxXxx.xxx
|
| iii. |
XxXxxxxXxxxxXxxxx.xxx
|
| iv. |
XxxxxXxxxxXxxxx.xxx
|
| v. |
XxXxxxxXxxxx.xxx
|
| vi. |
XxxXxxxXxxxx.xxx
|
| vii. |
XxxxxXxxxXxxxxxx.xxx
|
| viii. |
XxxxxXxxxXxx.xxx
|
| ix. |
XxxxxXxxxXxxxxx.xxx
|
| x. |
xXxxxXxxxxxxx.xxx
|
| xi. |
xXxxxxxxXxxxx.xxx
|
| xii. |
XXXxxxXxxxx.xxx
|
| xiii. |
XxXxxx.xxx
|
| xiv. |
XxXXx.xxx
|
| xv. |
XxxXX.xxx
|
| xvi. |
XxXXxx.xxx
|
| xvii. |
Xxxxxx.xxx
|
| xviii. |
Xxxxxx.xxx
|
| 2. |
Code:
|
| i. |
All code associated with:
|
| 1. |
XxXxxxxXxxxx.xxx
|
| 2. |
MyVideoDaily
administration console/reporting
|
| 3. |
MyVideoDaily Software Applications including the MVD miniplayer and
MVD
screensaver
|
Schedule
1.2
Excluded
Assets
None
Schedule
1.4(b)(ii)
Milestones
SCHEDULE
1
The
achievement of any one Milestone shall require the issuance by Purchaser of
$166,667 in Shares to Seller.
1.
Full
integration into the Parent of MVD’s keyword generation and search marketing
engine. With the understanding that this effort must be ongoing.
2.
Xxxxxxxxx
Price to utilize his best efforts to increase organic traffic to the Parent’s
properties by 50%, recognizing the Parent needs to support those efforts. The
determination as to the achievement of this milestone shall be made by the
Parent in its sole and absolute discretion.
3.
Using
MyVideoDaily in the best interests of the Parent, which. The determination
as to
the achievement of this milestone shall be made by the Parent in its sole and
absolute discretion.
4.
Lead
and deliver product development initiative to provide most profitable customer
/
consumer / traffic driven feature set for ROO's 2007 product offering. These
improvements should include Community and User Generated Content modules. The
determination as to the achievement of this milestone shall be made by the
Parent in its sole and absolute discretion
5.
Assist
in traffic driving recommendations initiatives for key clients leading to
increased revenues over and above original customer projections,
recognizing the Parent needs to support those efforts. The determination as
to
the achievement of this milestone shall be made by the Parent in its sole and
absolute discretion
6.
Xxxxxxxxx Price employed for a full year; provided that if his employment is
terminated by (a) Xxxxxxxxx Price due to a breach by Parent or the Purchaser
of
this Agreement or the Employment Agreement, which breach is not cured within
the
permitted cure-period, or (b) Parent or the Purchaser for any reason other
than
for “Cause” (as defined in the Employment Agreement), then Xxxxxxxxx Price will,
as of the date of termination, automatically be deemed to have been employed
for
a full year (as required in this Section 6 of Schedule 1).
The
Parties agree:
(a) there
is
no particular order for when these Milestones are to be completed. The Parent
may, at its discretion, determine the focus of Xxxxxxxxx Price in achieving
these Milestones. However, the achievement of any Milestone in any order shall
require the issuance of Shares described above.
(b)
These
Milestones are intended to be completed in one year.
Schedule
3.5(a)
No
Conflicts; Consents of Third Parties
None
Schedule
3.5(b)
Contract
Assignments
R.
J. M.
Price & Company, Inc., must seek consent to assign the “Ask Jeeves” contract
to ROO. The governing provision of this contract is inserted below:
Assignment.
This
Agreement is not assignable by either party without the prior written approval
of the other party. Notwithstanding the foregoing, either party may assign
this
Agreement without consent to a successor in interest, any affiliated entity
or
in connection with any merger, consolidation, any sale of all or substantially
all of such party's assets or any other transaction in which more than fifty
(50%) percent of its voting securities are transferred; provided that the
assignment is not to a competitor of the non-assigning party, as reasonably
determined by the non-assigning party, in such case either party can terminate
this Agreement.
Schedule
3.8
Liabilities
None
Schedule
3.9
Absence
of Certain Developments
None
Schedule
3.10
Taxes
All
Seller taxes will be paid in full by seller
Schedule
3.12
Personal
Property Leases
None
Schedule
3.13
Intangible
Property
| I. |
Trade
Names:
|
| i. |
XxXxxxxXxxxx.xxx
|
| ii. |
XxXxxxxXxx.xxx
|
| iii. |
XxXxxxxXxxxxXxxxx.xxx
|
| iv. |
XxxxxXxxxxXxxxx.xxx
|
| v. |
XxXxxxxXxxxx.xxx
|
| vi. |
XxxXxxxXxxxx.xxx
|
| vii. |
XxxxxXxxxXxxxxxx.xxx
|
| viii. |
XxxxxXxxxXxx.xxx
|
| ix. |
XxxxxXxxxXxxxxx.xxx
|
| x. |
xXxxxXxxxxxxx.xxx
|
| xi. |
xXxxxxxxXxxxx.xxx
|
| xii. |
XXXxxxXxxxx.xxx
|
| xiii. |
XxXxxx.xxx
|
| xiv. |
XxXXx.xxx
|
| xv. |
XxxXX.xxx
|
| xvi. |
XxXXxx.xxx
|
| xvii. |
Xxxxxx.xxx
|
| xviii. |
Xxxxxx.xxx
|
| II. |
Patents:
None
|
| III. |
Service
Marks: None
|
| IV. |
Copyrights:
None
|
None
Schedule
3.14
Material
Contracts
| I. |
Shareholder
Agreements. All Shareholders were required to enter into a standard
shareholder agreement in exchange for their
equity.
|
| a. |
Xxxxxxx
Xxxxxxxxxx (5/16/06)
|
| b. |
Xxx
Xxxxxxx (3/10/2006)
|
| c. |
Xxxxxxx
Xxxxx (2/21/2006)
|
| d. |
Phil
Koblence (2/21/2006)
|
| II. |
Advisor
Agreements, All Shareholders were also required to enter into advisor
agreements in exchange for their
equity.
|
| a. |
Xxxxxxx
Xxxxxxxxxx (5/16/06)
|
| b. |
Xxx
Xxxxxxx (3/10/2006)
|
| c. |
Xxxxxxx
Xxxxx (2/21/2006)
|
| d. |
Phil
Koblence (2/21/2006)
|
| III. |
All
contracts listed in Schedule
1.1(b)
|
Schedule
3.15
Employee
Benefits
None
Schedule
3.16
Labor
Matters
None
Schedule
3.17
Litigation
None
Schedule
3.19
Environmental
Matters
None
Schedule
3.20
Insurance
None
Schedule
3.22
Customers
and Suppliers
I.
Customers:
1.
ROO (No Revenue)
2.
Amazon (No Revenue)
3.
Ask Jeeves ($20,096.32 in Revenue)
4.
Google ($642.45 in Revenue)
II.
Suppliers:
1.
ROO (No Cost)
2.
XXX.xxx (Hosting Services at $79.00 Cost per month)
Schedule
3.23
Banks
1.
Citibank
Schedule
4.3
Conflicts;
Consents of Third Parties
None.
