STOCK
PURCHASE AGREEMENT
dated
as
of October 8, 2008
by
and
among
Mandalay
Media, Inc.,
Jonathan
Cresswell (a/k/a Jack Cresswell), Nathaniel MacLeitch and the shareholders
of
AMV signatories hereto
relating
to the purchase and sale
of
100%
of
the share capital
of
AMV
Holding Limited
and
80%
of
the share capital of Fierce Media Limited
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Page
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DEFINITIONS
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1
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1.1
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Definitions
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1
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1.2
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Interpretation
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10
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ARTICLE II
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PURCHASE
AND SALE
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11
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2.1
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Purchase
and Sale of the Shares
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11
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2.2
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Closing
Date
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12
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2.3
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Transactions
to be Effected at the Closing
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12
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2.4
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Earn-Out
Payments
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14
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2.5
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Sellers’
Representative
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17
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2.6
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Closing
Working Capital.
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19
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2.7
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Adjustment
of Purchase Price
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20
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2.8
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Working
Capital Following Closing
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21
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2.9
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Working
Capital Adjustment
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22
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ARTICLE III
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REPRESENTATIONS
AND WARRANTIES OF THE SELLERS
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3.1
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Authority
and Enforceability
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23
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3.2
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The
Shares.
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23
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3.3
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Receipt
of Stock Consideration for Seller’s Own Account
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23
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3.4
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Accredited
Investor
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23
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3.5
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Disclosure
of Information
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23
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3.6
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Restricted
Securities
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24
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3.7
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Legends
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24
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ARTICLE IV
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REPRESENTATIONS
AND WARRANTIES RELATING
TO THE ACQUIRED COMPANIES
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24
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4.1
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Organization
and Good Standing
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25
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4.2
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Capitalization
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25
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4.3
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Subsidiaries
of the Acquired Companies.
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26
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4.4
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No
Conflicts; Consents
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27
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TABLE
OF CONTENTS
(continued)
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Page
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4.5
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Financial
Statements
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27
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4.6
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No
Undisclosed Liabilities
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28
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4.7
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Inventory
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28
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4.8
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Accounts
Receivable
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28
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4.9
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Taxes
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29
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4.10
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Compliance
with Law
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34
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4.11
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Authorizations
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34
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4.12
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Title
to Personal Properties
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34
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4.13
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Condition
of Tangible Assets
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35
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4.14
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Real
Property
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35
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4.15
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Intellectual
Property.
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38
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4.16
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Absence
of Certain Changes or Events
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41
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4.17
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Contracts
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43
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4.18
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Litigation.
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45
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4.19
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Employee
Benefits.
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45
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4.20
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Labor
and Employment Matters
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46
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4.21
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Environmental.
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49
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4.22
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Insurance.
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49
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4.23
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Product
Warranty.
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50
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4.24
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Books
and Records
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51
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4.25
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Suppliers
and Customers
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51
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4.26
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Brokers
or Finders
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52
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4.27
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Bank
Accounts
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52
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4.28
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Powers
of Attorney
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52
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4.29
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Fierce
Sale
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52
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4.30
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Completeness
of Disclosure
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52
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ARTICLE V
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REPRESENTATIONS
AND WARRANTIES OF BUYER
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52
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5.1
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Organization
and Good Standing
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53
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5.2
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Authority
and Enforceability
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53
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TABLE
OF CONTENTS
(continued)
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Page
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5.3
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No
Conflicts; Consents
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53
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5.4
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Litigation
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54
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5.5
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Purchase
for Investment
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54
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5.6
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Availability
of Funds
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54
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5.7
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Brokers
or Finders
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54
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5.8
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Indebtedness
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55
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5.9
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Completeness
of Disclosure
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55
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ARTICLE VI
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COVENANTS
OF SELLERS
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55
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6.1
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Conduct
of Business
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55
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6.2
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Negative
Covenants
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56
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6.3
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Access
to Information
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58
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6.4
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Resignations
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58
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6.5
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Release
of Liens.
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58
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6.6
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Confidentiality
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58
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6.7
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Consents
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59
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6.8
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Notification
of Certain Matters
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59
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6.9
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[INTENTIONALLY
LEFT BLANK].
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59
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6.10
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Insurance.
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60
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6.11
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No
Solicitation of Other Proposals
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60
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6.12
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Change
inYear End.
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61
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6.13
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Financial
Statements
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61
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6.14
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Directors’
Accounts
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62
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ARTICLE VII
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COVENANTS
OF BUYER AND SELLERS
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62
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7.1
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Regulatory
Approvals.
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62
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7.2
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Public
Announcements
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62
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7.3
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Tax
Matters
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62
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7.4
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Further
Assurances
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63
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TABLE
OF CONTENTS
(continued)
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Page
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7.5
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Key
Man Life Insurance
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63
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7.6
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Board
Observer Rights
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63
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7.7
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Rule
144 Sales
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63
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7.8
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AMV
Options
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63
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7.9
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Drag-Along
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64
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ARTICLE VIII
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CONDITIONS
TO CLOSING
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64
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8.1
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Conditions
to Obligations of Buyer and Sellers
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64
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8.2
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Conditions
to Obligation of Buyer
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64
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8.3
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Conditions
to Obligation of Sellers
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67
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ARTICLE IX
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TERMINATION
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68
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9.1
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Termination
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68
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9.2
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Effect
of Termination
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69
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9.3
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Remedies
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69
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ARTICLE X
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INDEMNIFICATION
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70
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10.1
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Survival.
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70
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10.2
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Indemnification
by Sellers
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70
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10.3
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Indemnification
by Buyer
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72
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10.4
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Indemnification
Procedure for Third Party Claims
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72
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10.5
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Indemnification
Procedures for Non-Third Party Claims
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75
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10.6
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[INTENTIONALLY
LEFT BLANK]
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75
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10.7
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Contingent
Claims
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75
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10.8
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Effect
of Investigation; Waiver.
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75
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10.9
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Tax
Indemnification
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76
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10.10
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Procedures
Relating to Indemnification of Tax Claims
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79
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10.11
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Tax
Treatment of Indemnification Payments
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80
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10.12
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Other
Rights and Remedies Not Affected
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80
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TABLE
OF CONTENTS
(continued)
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Page
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ARTICLE XI
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MISCELLANEOUS
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80
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11.1
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Notices
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80
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11.2
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Amendments
and Waivers
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81
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11.3
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Expenses
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81
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11.4
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Successors
and Assigns
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81
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11.5
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Governing
Law
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82
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11.6
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Arbitration
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82
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11.7
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Counterparts
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82
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11.8
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Third
Party Beneficiaries
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82
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11.9
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Entire
Agreement
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83
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11.10
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Captions
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83
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Severability
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83
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11.12
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Specific
Performance
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STOCK
PURCHASE AGREEMENT
STOCK
PURCHASE AGREEMENT, dated as of October 8, 2008 (the "Agreement"),
by
and among Mandalay Media, Inc., a Delaware corporation ("Buyer"),
Jonathan Cresswell (a/k/a Jack Cresswell) (“Cresswell”),
Nathaniel MacLeitch (“MacLeitch”,
and
together with Cresswell, the " Founding
Sellers")
and
the shareholders of AMV signatories hereto (collectively, the “Non-Founding
Sellers”).
WHEREAS,
the Sellers, at Closing, shall collectively be the registered and beneficial
owners of 100% of the issued and outstanding share capital, £0.001 par value per
share (the “AMV Shares”),
of
AMV Holding Limited (registered in England and Wales under company number
05811953), whose registered office is at 65 High Street, Marlow, SL7 1AB
("AMV");
and
WHEREAS,
the Founding Sellers are collectively the registered and beneficial owners
of
80% of the issued and outstanding share capital, £0.001 par value per share (the
“Fierce Shares”,
and
together with the AMV Shares, the “Shares”),
of
Fierce Media Limited (registered in England and Wales under company number
06467675), whose registered office is at 65 High Street, Marlow, SL7 1AB
("Fierce",
and
together with AMV, the “Acquired
Companies”);
and
WHEREAS,
Founding Sellers and the Non-Founding Sellers desire to sell the Shares, each
in
the amounts set forth opposite his name on Schedule
A,
to
Buyer, and Buyer desires to purchase the Shares from each of the Founding
Sellers and Non-Founding Sellers as set forth on Schedule
A,
upon
the terms and subject to the conditions set forth in this Agreement;
and
WHEREAS,
at Closing, the Option Holder Sellers and Tim Parsons shall sell the shares
of
capital stock of AMV that each will own at the time of Closing, each in the
amounts set forth opposite his name on Schedule
A,
to
Buyer, and Buyer desires to purchase such shares of capital stock of AMV from
each of the Option Holder Sellers as set forth on Schedule
A,
upon
the terms and subject to the conditions set forth in this
Agreement.
NOW,
THEREFORE, in consideration of the foregoing premises and the respective
representations and warranties, covenants and agreements contained herein,
the
parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions.
When
used in this Agreement, the following terms shall have the meanings assigned
to
them in this Section 1.1,
or in
the applicable Section of this Agreement to which reference is made in this
Section 1.1.
“AAA”
has
the
meaning set forth in Section 11.6 hereof.
"Acquired
Companies"
has the
meaning set forth in the recitals hereto.
"Acquired
Company Owned Intellectual Property"
has the
meaning set forth in Section 4.15(b) hereof.
"Acquired
Company Registered Items"
has the
meaning set forth in Section 4.15(f) hereof.
"Acquisition"
has the
meaning set forth in Section 2.1 hereof.
“Acquisition
Proposal”
has
the
meaning set forth in Section 6.11 hereof
"Action"
has the
meaning set forth in Section 4.18(a) hereof.
"Actual
Tax Liability"
means
any liability of any of the Seller Companies to make a payment of or in respect
of Tax whether or not presently payable, whether satisfied or unsatisfied at
Closing, whether or not the same is primarily payable by any of the Acquired
Companies or the Buyer and whether or not any of the Acquired Companies or
the
Buyer has, or may have, any right of reimbursement against any other person
or
persons.
"Affiliate"
means,
with respect to any specified Person, any other Person directly or indirectly
controlling, controlled by or under common control with such specified
Person.
"Agreement"
has the
meaning set forth in the preamble above.
“AMV”
has
the
meaning set forth in the preamble above.
“AMV
Shares”
has
the
meaning set forth in the preamble above.
"Applicable
Survival Period"
has the
meaning set forth in Section 10.1(d) hereof.
"ASB"
means
the Accounting Standards Board Limited, a company registered in England and
Wales (registered number 2526824), or such other body prescribed by the
Secretary of State from time to time pursuant to the Companies
Acts.
“A
Shares”
has
the
meaning set forth in Section 4.2 hereof.
"Audited
Financial Statements"
has the
meaning set forth in Section 4.5 hereof.
"Authorization"
means
any franchise, license, approval, consent, permit or registration of any
Governmental Entity or pursuant to any Law.
"Balance
Sheet"
has the
meaning set forth in Section 4.5 hereof.
"Balance
Sheet Date"
has the
meaning set forth in Section 4.5 hereof.
"Business
Day"
means a
day other than a Saturday, Sunday or other day on which banks located in New
York City are authorized or required by Law to close.
"Buyer"
has the
meaning set forth above.
“Buyer
Common Stock”
has
the
meaning set forth in Section 2.1(b)
"Buyer
Disclosure Schedule"
has the
meaning set forth in the preamble to Article V hereof.
"Buyer
Indemnitees"
has the
meaning set forth in Section 10.2(a) hereof.
“Buyer
SEC Reports”
has
the
meaning set forth in Section 5.6(a) hereof.
“Buyer’s
Tax Relief”
means
(a) any Relief arising to the Buyer, (b) any Relief arising as a consequence
of,
or by reference to, an Event occurring (or deemed to have occurred) or income
earned after the Balance Sheet Date, and (c) any Relief the availability of
which was taken into account in the Balance Sheet.
"Capital
Stock"
means
(a) in the case of a corporation, its share capital, (b) in the case
of a partnership or limited liability company, its partnership or membership
interests or units (whether general or limited), and (c) any other interest
that confers on a Person the right to receive a share of the profits and losses
of, or distribution of assets, of the issuing entity.
“Cash
Consideration”
has
the
meaning set forth in Section 2.1(a).
"Charter
Documents"
means,
with respect to any entity, the certificate of incorporation, articles of
association, the articles of incorporation, by-laws, articles of organization,
limited liability company agreement, partnership agreement, formation agreement,
joint venture agreement or other similar organizational documents of such entity
(in each case, as amended).
"Closing"
has the
meaning set forth in Section 2.2 hereof.
"Closing
Date"
has the
meaning set forth in Section 2.2 hereof.
"Closing
Working Capital"
has the
meaning set forth in Section 2.6(a) hereof.
"Closing
Working Capital Statement"
has the
meaning set forth in Section 2.6(a) hereof.
"Companies
Act"
means
the applicable provisions of the Companies Act 1985 and the Companies Act 2006
from time to time in force and as they are supplemented and
amended.
“Company
Representatives”
has
the
meaning set forth in Section 6.11(a) hereof.
"Consents"
has the
meaning set forth in Section 6.7.
"Contract"
means
any agreement, contract, commitment, arrangement or understanding, written
or
oral.
"Copyrights"
has the
meaning set forth in Section 4.15(a) hereof.
"Deficit
Amount"
has the
meaning set forth in Section 2.7(a) hereof.
“Drag-Along”
has
the
meaning set forth in Section 7.9 hereof.
“Earn-Out
Payment”
has
the
meaning set forth in Section 2.4(c) hereof.
“Earn-Out
Period”
has
the
meaning set forth in Section 2.4(c) hereof.
“Earn-Out
Term”
has
the
meaning set forth in Section 2.4(c) hereof.
“Earn-Out
Worksheet”
has
the
meaning set forth in Section 2.4(a) hereof.
“EBITDA”
has
the
meaning set forth in Section 2.4(a) hereof.
“Effective
Tax Liability”
means
(a) the Non-availability in whole or in part of any Relief which has been taken
into account in preparing the Balance Sheet (in which case the value of the
Effective Tax Liability shall be the amount of the repayment which is not
available if the relevant Relief is a right to repayment of Tax and, in any
other case, the amount of Tax which would not have been payable but for the
Non-availability of the Relief), and (b) the utilisation or set-off of any
Buyer's Tax Relief against any Tax or against income, profits or gains in
circumstances where but for such utilisation or set-off an Actual Tax Liability
would have arisen in respect of which the Sellers would have been liable to
the
Buyer under Section 10.9 (in which case the value of the Effective Tax Liability
shall be the amount of Tax saved by such utilisation or set-off).
"Employment
Agreements"
has the
meaning set forth in Section 4.20(a) hereof.
“English
Law”
means
the laws of England and Wales.
"Equity
Securities"
means
(a) shares of Capital Stock, and (b) options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights or other
Contracts that, directly or indirectly, could require the issuer thereof to
issue, sell or otherwise cause to become outstanding shares of Capital Stock.
“Excess
Amount”
has
the
meaning set forth in Section 2.7(a) hereof.
“Fierce”
has
the
meaning set forth in the preamble above.
“Fierce
Sale”
has
the
meaning set forth in Section 4.29 hereof.
“Fierce Shares”
has
the
meaning set forth in the preamble above.
"Final
Closing Working Capital"
has the
meaning set forth in Section 2.7(a) hereof.
"Final
Determination"
means
(a) a decision, judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has become final
after all allowable appeals by either party to the action have been exhausted
or
the time for filing such appeals has expired and is not subject to further
review or modification, (b) a closing agreement entered into under Section
7121
of the Code or any other settlement or other agreement entered into in
connection with an administrative or judicial proceeding, (c) execution of
an Internal Revenue Service Form 870-AD, or (d) the expiration of the time
for
instituting suit with respect to a claimed deficiency.
"Final
Working Capital"
has the
meaning set forth in Section 2.9(a) hereof.
"Financial
Statements"
has the
meaning set forth in Section 4.5 hereof.
“Financing”
has
the
meaning set forth in Section 8.2(i) hereof.
“Founding
Sellers”
has
the
meaning set forth in the preamble above.
"Governmental
Entity"
means
any entity or body exercising executive, legislative, judicial, regulatory
or
administrative functions of or pertaining to United Kingdom or United States
federal, state, local, or municipal government or foreign, international,
multinational or other government, including any department, commission, board,
agency, bureau, official or other regulatory, administrative or judicial
authority thereof.
“Health
Plan”
means
the Acquired Companies’ HSBC Health Cash Plan.
"Indebtedness"
means
any of the following: (a) any indebtedness for borrowed money, (b) any
obligations evidenced by bonds, debentures, notes or other similar instruments,
(c) any obligations to pay the deferred purchase price of property or services,
except trade accounts payable and other current liabilities arising in the
Ordinary Course of Business, (d) any obligations as lessee under capitalized
leases, (e) any indebtedness created or arising under any conditional sale
or
other title retention agreement with respect to acquired property, (f) any
obligations, contingent or otherwise, under bankers acceptance, letters of
credit or similar facilities, and (g) any guaranty of any of the
foregoing.
"Indemnitee"
means
any Person which is seeking indemnification from an Indemnitor pursuant to
the
provisions of this Agreement.
"Indemnitor"
means
any party hereto from which any Indemnitee is seeking indemnification pursuant
to the provisions of this Agreement.
"Independent
Expert"
has the
meaning set forth in Section 2.6(c) hereof.
"Intellectual
Property"
has the
meaning set forth in Section 4.15(a) hereof.
"Intellectual
Property Rights"
has the
meaning set forth in Section 4.15(a) hereof.
"Interim
Balance Sheet"
has the
meaning set forth in Section 4.5 hereof.
"Interim
Balance Sheet Date"
has the
meaning set forth in Section 4.5 hereof.
"Interim
Financial Statements"
has the
meaning set forth in Section 4.5 hereof.
"Knowledge"
of
Sellers or any similar phrase means, with respect to any fact or matter, the
actual knowledge of Cresswell, MacLeitch and Marcus King, together with such
knowledge that such persons could be expected to discover after reasonable
investigation concerning the existence of the fact or matter in
question.
"Law"
means
any statute, law (including common law), constitution, treaty, ordinance, code,
order, decree, judgment, rule, regulation and any other binding requirement
or
determination of any Governmental Entity.
"Leased
Real Property"
has the
meaning set forth in Section 4.14(a) hereof.
"Letter
of Intent"
has the
meaning set forth in Section 6.3 hereof.
"Liabilities"
has the
meaning set forth in Section 4.7 hereof.
"Lien"
means,
with respect to any property or asset, any mortgage, lien, pledge, debenture,
charge, rent charge, security interest or other encumbrance securing the
repayment of monies or other obligation or liability of the Acquired Companies
or any of their Subsidiaries in respect of such property or asset.
"Losses"
has the
meaning set forth in Section 10.2(a) hereof.
"Marks"
has the
meaning set forth in Section 4.15(a) hereof.
"Material
Contracts"
has the
meaning set forth in Section 4.17(b) hereof.
"Minor
Contracts"
has the
meaning set forth in Section 4.17(f) hereof.
“Nine-Month
Closing Working Capital Statement”
has
the
meaning set forth in Section 2.8(a) hereof.
“Nine-Month
Working Capital”
has
the
meaning set forth in Section 2.8(a) hereof.
"Non-availability"
means
loss, reduction, modification, cancellation, non-availability or
non-existence.
"Noncompetition
Period"
has the
meaning set forth in Section 6.9(a) hereof.
"Nondisclosure
Agreements"
has the
meaning set forth in Section 4.15(i) hereof.
“Note”
has
the
meaning set forth in Section 2.1(c) hereof.
"Notice
of Claim"
has the
meaning set forth in Section 10.4(a) hereof.
"Notice
of Objection"
has the
meaning set forth in Section 2.6(b) hereof.
“Observer”
has
the
meaning set forth in Section 7.6 hereof.
“Option
Holder Sellers”
means
the Option Holders of AMV who have delivered their shares of capital stock
of
AMV to Buyer at Closing pursuant to the provisiosn of Sections 7.8, 7.9, 8.2(s)
and 8.2(t).
“Ordinary
Course of Business” means
an
action taken by a Person only if that action is consistent in the nature, scope
and magnitude with the past practices of such Person and is taken in the
ordinary course of the normal, day-to-day operations of such person.
“Other
Interests in Real Property”
has
the
meaning set forth in Section 4.14(a) hereof.
"Owned
Real Property"
has the
meaning set forth in Section 4.14(a) hereof.
"Patents"
has the
meaning set forth in Section 4.15(a) hereof.
“Permit”
means
any permit, licenses, registrations or other authorization by any Governmental
Entity.
"Person"
means
an individual, a corporation, a partnership, a limited liability company, a
trust, an unincorporated association, a Governmental Entity or any agency,
instrumentality or political subdivision of a Governmental Entity, or any other
entity or body.
"Policies"
has the
meaning set forth in Section 4.22(a) hereof.
"Products"
has the
meaning set forth in Section 4.23(a) hereof.
"Proprietary
Information
" has
the meaning set forth in Section 4.15(a) hereof.
"Purchase
Price"
has the
meaning set forth in Section 2.1 hereof.
"Real
Property"
has the
meaning set forth in Section 4.14(a) hereof.
"Relevant
Group"
means
any affiliated, combined, consolidated, unitary or similar group of which any
Seller Company is or was a member.
"Relief"
means
any loss, allowance, credit, relief, deduction, exemption or set-off from or
against or in respect of Tax or any right to a repayment of Tax.
"Representatives"
has the
meaning set forth in Section 6.3 hereof.
"Review
Period"
has the
meaning set forth in Section 2.6(b) hereof.
“SEC”
has
the
meaning set forth in Section 5.4(a) hereof.
“Second
Notice of Objection”
has
the
meaning set forth in Section 2.8(b) hereof.
“Second
Review Period”
has
the
meaning set forth in Section 2.8(b) hereof.
“Section
2.4(b) Accountants”
has
the
meaning set forth in Section 2.4(b) hereof.
“Section
2.4(b) Notice”
has
the
meaning set forth in Section 2.4(b) hereof.
“Securities
Act”
has
the
meaning set forth in Section 3.4 hereof.
"Seller
Company"
means
the Acquired Companies and each of the Subsidiaries of the Acquired Companies,
and "Seller
Companies"
means,
collectively, the Acquired Companies and all such Subsidiaries.
"Seller
Disclosure Schedule"
has the
meaning set forth in the preamble to Article IV hereof.
"Seller
Indemnitees"
has the
meaning set forth in Section 10.3(a) hereof.
“Sellers”
means,
collectively, the Founding Sellers, the Non-Founding Sellers and the Option
Holder Sellers.
“Sellers’
Representative”
has
the
meaning set forth in Section 2.5(a) hereof.
"Shares"
has the
meaning set forth in the recitals hereto.
“Stock
Consideration”
has
the
meaning set forth in Section 2.1(b) hereof.
“Stub
Period Adjustment”
has
the
meaning set forth in Section 2.6(a) hereof.
"Subsidiary"
or
"Subsidiaries"
means,
with respect to any party, any corporation or other organization, of which
(a)
such party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party
or
any Subsidiary of such party do not have a majority of the voting interest
in
such partnership), or (b) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the
board of directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party and/or by any one or more of their Subsidiaries.
"Subsidiary
Shares"
has the
meaning set forth in Section 4.3(b) hereof.
"Tax"
or
"Taxes"
means
any and all local or foreign net or gross income, gross receipts, net proceeds,
sales, use, ad valorem, value added, franchise, bank shares, withholding,
payroll, employment, excise, property, deed, stamp, alternative or add-on
minimum, environmental, profits, windfall profits, transaction, license, lease,
service, service use, occupation, severance, energy, unemployment, social
security, worker's compensation, capital, premium, and other taxes, assessments,
customs, duties, fees, levies, or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax, or additional amounts with respect thereto,
whether
of the United States of America, the United Kingdom or elsewhere.
"Taxes
Act"
means
the Income and Corporation Taxes Act 1988.
"Taxing
Authority"
means
HM
Revenue & Customs
and any
other Governmental Entity responsible for the administration
or
collection of any Tax.
"Tax
Claim"
means
any written claim with respect to Taxes made by any Taxing Authority or other
Person that, if pursued successfully, could serve as the basis for a claim
in
respect of Tax by the Buyer under this Agreement.
"Tax
Returns"
means
any return, computation, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
1.1 “Tax
Statute”
means
any primary or secondary statute, instrument, enactment, order, law, by-law,
or
regulation making any provision for or in relation to Tax whether of the United
States of America, the United Kingdom or elsewhere.
1.2 “Tax Withholding”
has
the
meaning set forth in Section 2.1(a) hereof.
"Third
Party Claim"
has the
meaning set forth in Section 10.4(a) hereof.
"Third
Party Defense"
has the
meaning set forth in Section 10.4(b) hereof.
"Transfer
Taxes"
means
sales, use, transfer, real property transfer, recording, documentary, stamp,
registration and stock transfer taxes and fees.
"TUPE"
means
the Transfer of Undertakings (Protection of Employment) Regulations
2006.
"UK
GAAP"
shall
mean generally accepted accounting practices, principles and standards in
compliance with all applicable laws in the United Kingdom including without
limitation the legal principles set out in the Companies Acts, rulings and
abstracts of the ASB and guidelines, conventions, rules and procedures of
accounting practice in the United Kingdom which are regarded as permissible
by
the ASB.
"US
GAAP"
shall
mean generally accepted accounting practices, principles and standards in
compliance with all applicable laws in the United States.
“ValueAct”
has
the
meaning set forth in Section 5.8 hereof.
“ValueAct
Note”
has
the
meaning set forth in Section 5.8 hereof.
“VAT”
means
value added tax.
“VATA”
means
the Value Added Tax Act 1994.
"Work
Product Agreements"
has the
meaning set forth in Section 4.15(j) hereof.
"Working
Capital"
shall
mean current assets (including any amounts received by AMV from Option Holder
Sellers in connection with the exercise of their options subsequent to September
30, 2008) less current liabilities as defined under UK GAAP, including without
limitation amounts to be paid in connection with corporation tax on the profit
for the period and unpaid amounts from prior periods, any bank borrowings and
any other liabilities which are payable within one year from the date of
Closing.
"$"
means
United States dollars.
“£”
means
English pounds.
1.2 Interpretation.
(a) The
meaning assigned to each term defined herein shall be equally applicable to
both
the singular and the plural forms of such term and vice versa, and words
denoting either gender shall include both genders as the context requires.
Where
a word or phrase is defined herein, each of its other grammatical forms shall
have a corresponding meaning.
(b) The
terms
"hereof", "herein" and "herewith" and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole and not
to
any particular provision of this Agreement.
(c) When
a
reference is made in this Agreement to an Article, Section, paragraph, Exhibit
or Schedule, such reference is to an Article, Section, paragraph, Exhibit or
Schedule to this Agreement unless otherwise specified.
(d) The
word
"include", "includes", and "including" when used in this Agreement shall be
deemed to by the words "without limitation", unless otherwise
specified.
(e) A
reference to any party to this Agreement or any other agreement or document
shall include such party's predecessors, successors and permitted
assigns.
(f) Reference
to any Law means such Law as amended, modified, codified, replaced or reenacted,
and all rules and regulations promulgated thereunder.
(g) The
parties have participated jointly in the negotiation and drafting of this
Agreement. Any rule of construction or interpretation otherwise requiring this
Agreement to be construed or interpreted against any party by virtue of the
authorship of this Agreement shall not apply to the construction and
interpretation hereof.
ARTICLE
II
PURCHASE
AND SALE
2.1 Purchase
and Sale of the Shares.
At the
Closing, upon the terms and subject to the conditions of this Agreement, each
of
the Sellers shall sell to Buyer in the amounts set forth opposite his name
on
Schedule
A,
which
Schedule shall be delivered to Buyer prior to Closing, and Buyer agrees to
purchase from Sellers, the Shares free and clear of all Liens. The aggregate
purchase price to be paid to the Sellers’ Representative on behalf of the
Sellers by Buyer hereunder (the "Purchase
Price"),
shall
consist of the following:
(a) $5,375,000
in cash, subject to adjustment as provided herein (the “Cash
Consideration”),
of
which (i) the exercise price of the AMV Options being exercised by the Option
Holder Sellers pursuant to Sections 7.8 and 8.2(s) shall be paid to AMV as
consideration for such Option Holder Seller’s exercise of such options, and
shall be deducted from the amount of Cash Consideration otherwise payable to
such Option Holder Seller, and be treated for all purposes under this Agreement
as having been paid to the person to whom such amounts would otherwise have
been
paid; and (ii) an amount equal to the maximum taxation liability that would
be
incurred with respect to the payment of the Cash Consideration to any Option
Holder Sellers under applicable Tax laws (the “Tax Withholding”)
(in
the amounts set forth next to such Option Holder Sellers’ names, as set forth on
Schedule
2.1(a)(ii)),
shall
be delivered to AMV and held by AMV in a separate account. The amount of the
Tax
Withholding shall be deducted from the amount of the Cash Consideration
otherwise payable to the applicable Seller, and treated for all purposes under
this Agreement as having been paid to the person to whom such amounts would
otherwise have been paid. Such amounts shall be held by AMV and subsequently
delivered by AMV to the applicable taxing authority or Seller, as applicable,
upon clarification or resolution of any potential tax liability or,
alternatively, upon receipt of a definitive opinion from a recognized United
Kingdom taxation expert that the time period during which the valuation of the
AMV EMI share option plan could be disputed has elapsed.
(b) 4,500,000
fully paid non-assessable shares of common stock of Buyer (the “Buyer
Common Stock”),
par
value $0.0001 per share (the “Stock
Consideration”);
(c) a
secured
promissory note in the aggregate original principal amount of $5,375,000,
substantially in the form attached hereto as Exhibit
A
and
issued to the Sellers’ Representative (the “Note”),
the
repayment of which with respect to the payments otherwise payable to Marcus
King
and Dan Boss shall be reduced by the amount of Tax Withholding to be withheld
with respect to each of Marcus King and Dan Boss (except to the extent already
so withheld), as required to satisfy the taxation liability of such persons
(as
set forth on Schedule
2.1(c)),
pursuant to Section 2.1(a)(ii). The Sellers’ Representative shall be responsible
for directing the distribution of the Note proceeds to the Sellers (pro-rata
in
proportion to each Seller’s interest after giving effect to the Tax Withholding)
and the Buyer shall be entitled to fully rely on such directions;
and
(d) subject
to the limitations set forth herein, the earn-out amounts, if any, as determined
in accordance with the provisions of Section 2.6.
The
Purchase Price shall be paid as provided in Section 2.3 and shall be
subject to adjustment as provided herein. The purchase and sale of the Shares
is
referred to in this Agreement as the "Acquisition".
2.2 Closing
Date.
The
closing of the Acquisition (the "Closing")
shall
take place at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C., 666 Third Avenue, New York, New York 10017, as soon as possible, but
in no
event later than five Business Days after satisfaction (or waiver as provided
herein) of the conditions set forth in Article VIII (other than those
conditions that by their nature will be satisfied at the Closing), or such
other
place, time and date as Buyer and Sellers may agree. The date on which the
Closing occurs is referred to in this Agreement as the "Closing
Date."
2.3 Transactions
to be Effected at the Closing.
(a) At
the
Closing Buyer shall deliver:
(i) to
Sellers’ Representative on behalf of each Seller, the Cash Consideration (less
the sums set forth in Section 2.1(a)), in the amounts set forth on Schedule
A,
in
immediately available funds by wire transfer to an account of Sellers’
Representative designated in writing by Sellers’ Representative to Buyer no
later than three Business Days prior to the Closing Date;
(ii) to
each
Seller, duly executed stock certificates (or an irrevocable instruction letter
to the Buyer’s transfer agent) for the shares of Buyer Common Stock representing
each Seller’s proportionate share of the Stock Consideration, in the amounts set
forth on Schedule
A;
(iii) to
Sellers’ Representative, the Note; and
(iv) to
AMV,
an amount equal to the Tax Withholding; and
(v) all
other
documents, instruments or certificates required to be delivered by Buyer at
or
prior to the Closing pursuant to this Agreement.
(b) At
the
Closing Sellers shall deliver to Buyer:
(i) duly
completed and executed transfers of the Shares in favour of the Buyer or as
it
directs;
(ii) certificates
for the Shares
or an
indemnity in the form reasonably required by Buyer for any lost
certificates;
(iii) (A)
the
resignations of all persons, other than the Founding Sellers, as directors
of
the Acquired Companies and their Subsidiaries and the secretary of the Acquired
Companies and their Subsidiaries in the agreed form from their respective
offices and employment in the Acquired Companies and their Subsidiaries
containing a written acknowledgement under seal from each of them that he has
no
claim against the relevant Acquired Company or its Subsidiary on any grounds
whatsoever, and (B) the appointment of three of Buyer’s nominees to serve as
directors of AMV and each of its Subsidiaries;
(iv) Form
288a’s and 288b’s in respect of appointments and resignations of officers of
the
Acquired Companies or their Subsidiaries;
(v) the
certificate of incorporation, any certificate or certificates of incorporation
on change of name, any common seal, all statutory books duly completed up to
Closing, all share certificate books (with any unissued share certificates),
copies of the up to date memorandum and articles of association and all existing
Companies House electronic filing company authentication codes of the Acquired
Companies or any of their Subsidiaries;
(vi) all
title
deeds and documents (including plans and consents) relating to the Real Property
occupied by the Acquired Companies or any of their Subsidiaries;
(vii) the
appropriate forms to amend all existing bank mandates and authorities of the
Acquired Companies or any of their Subsidiaries;
(viii) bank
statements in respect of each account of the Acquired Companies as at the close
of business on the last Business Day prior to the Closing Date, together with
in
each case a reconciliation statement prepared by the Seller to show the position
at the Closing Date;
(ix) evidence
to the satisfaction of the Buyer that all debts and accounts between the Sellers
and any Affiliates of the Sellers (on the one hand) and the Acquired Companies
(on the other hand) have been fully paid and settled;
(x) all
other
documents and instruments reasonably necessary to vest in Buyer all of Sellers’
right, title and interest in and to the Shares, with full title guarantee under
English Law, free and clear of all Liens; and
(x) all
other
documents, instruments or certificates reasonably required to be delivered
by
Sellers at or prior to the Closing pursuant to this Agreement.
(c) At
the
Closing, a board meeting of each of the Acquired Companies and their
Subsidiaries shall be duly convened and held at which, with effect from
Closing:
(i) the
transfers referred to in Section 2.3(b)(i) shall (subject to stamping) be
approved and registered;
(ii) such
persons as the Buyer may nominate shall be appointed as directors and as the
secretary of the Acquired Companies and their Subsidiaries and the resignations
referred to in clause 2.3(b)(iii) shall be submitted and accepted;
(iii) all
authorities to the bankers of the Acquired Companies and their Subsidiaries
relating to bank accounts shall be revoked and new authorities to such persons
as the Buyer may nominate shall be given to operate the same;
(iv) the
registered office of the Acquired Companies and their Subsidiaries shall be
changed to such address as the Buyer shall specify; and
(v) the
accounting reference date of the Acquired Companies and their Subsidiaries
shall
be changed to such date as the Buyer shall specify.
2.4 Earn-Out
Payments. (a)
Delivery
of Financial Information.
Within
90 days after the last Business Day of each Earn-Out Period (as defined below),
Buyer shall deliver to Sellers’ Representative (at Buyer’s cost and expense) a
worksheet (the “Earn-Out
Worksheet”)
prepared by AMV’s accountants or Buyer’s accountants (or its designee), setting
forth Buyer’s determination of earnings before interest, tax, depreciation and
amortization (each measured in accordance with UK GAAP) as determined from
the
Seller Companies’ historical financial statements consistent with past practice
(“EBITDA”).
Notwithstanding the foregoing, the determination of EBITDA for any Earn-Out
Period shall be made using the following guidelines: (i) except as set forth
below, any profits, losses or other items relating to Fierce shall be excluded
from the EBITDA determination, (ii) any payments or management charges made
by
AMV at the written direction of Buyer or the board of directors of AMV, which
are outside of the normal course of operations of AMV shall be excluded from
the
EBITDA determination, and/or (iii) any revenue from any source, except as
contemplated by the parties, other than the existing business of the Acquired
Companies on the date hereof shall not be included in the EBITDA determination.
Subject to execution of a Non-Disclosure Agreement in customary form, Sellers
shall have the right, at Sellers’ expense, during each Earn-Out Period, at
reasonable times and upon reasonable notice, to examine, and to have the
Sellers’ Representative and their advisors examine, the books and records of the
Seller Companies to determine whether the calculation and payment of the
Earn-Out Payment are being conducted in accordance with the provisions of this
Agreement.
(b) Disputes
Regarding Earn-Out Worksheet.
In the
event that Sellers dispute any amounts reflected on any Earn-Out Worksheet,
Sellers’ Representative shall notify Buyer in writing (such notice, a
“Section
2.4(b) Notice”),
within 30 days after the delivery of the Earn-Out Worksheet, setting forth
the
amount, nature and basis of the dispute. Within the following 10 days, the
parties shall use their reasonable best efforts to resolve in good faith such
dispute. Upon their failure to do so, Sellers’ Representative and Buyer shall
within 10 days from the end of such 10 day period jointly engage an independent
accountant (the “Section
2.4(b) Accountants”),
or in
the absence of agreement, within seven days of the first disagreement being
expressed, such firm as the President of the Institute of Chartered Accountants
in England and Wales (or in his absence the next most senior officer) shall
determine to act as the Section 2.4(b) Accountants on the application of either
Buyer or the Sellers’ Representative. The Section 2.4(b) Accountants shall be
engaged jointly by Buyer and Sellers’ Representative to decide the dispute with
respect to the Earn-Out Worksheet within 30 days from its appointment, such
decision to be communicated to both parties in writing. The decision of the
Section 2.4(b) Accountants shall be final and binding upon the parties and
accordingly a declaratory judgment by a court of competent jurisdiction may
be
entered in accordance therewith. For greater certainty, the Section 2.4(b)
Accountants shall act in a capacity which under English Law would be deemed
to
be as expert and not as arbitrator. The fees and expenses of such accounting
firm shall be borne one-half by Buyer and one-half by Sellers.
(c) Calculation
of Earn-Out Payment.
The
Earn-Out Payment (the “Earn-Out
Payment”)
for
each of the periods from October 1, 2008 to March 31, 2009, from April 1, 2009
to March 31, 2010, and from April 1, 2010 to September 30, 2010 (each, an
“Earn-Out
Period,”
and
collectively, the “Earn-Out
Term”)
shall
be determined as follows:
(i) if
the
Acquired Companies’ EBITDA for the period of October 1, 2008 to March 31, 2009
exceeds £1,566,000, then the Sellers shall be entitled to an Earn-Out Payment
equal to 50% of the Acquired Companies’ EBITDA for such period, provided, that,
the calculation of the Acquired Companies’ EBITDA for such period shall be
reduced by 50% of the Stub Period Adjustment;
(ii) if
the
Acquired Companies’ EBITDA for the period of April 1, 2009 to March 31, 2010
exceeds £3,422,000, then the Sellers shall be entitled to an Earn-Out Payment
equal to 50% of the Acquired Companies’ EBITDA for such period; and
(iii) if
the
Acquired Companies’ EBITDA for the period of April 1, 2010 to September 30, 2010
exceeds £1,800,000, then the Sellers shall be entitled to an Earn-Out Payment
equal to 50% of the Acquired Companies’ EBITDA for such period.
Notwithstanding
the foregoing, in no event shall the aggregate amount of the three potential
Earn-Out Payments made to the Sellers exceed the result of the following formula
in pounds sterling:
Where:
P
= C
plus the Acquired Companies’ EBITDA for the period of October 1, 2008 to March
31, 2009
C
=
£5,000,000
F
=
0.0005
D
=
0.1
(d) Payment.
Subject
to the provisions of Section 2.4(e), Buyer shall deliver any Earn-Out Payment
that may be due to Sellers to Sellers’ Representative on behalf of each Seller.
Any Earn-Out Payments that may be due will be paid not later than ten (10)
Business Days following the date that it is finally determined that such
Earn-Out Payment is payable in accordance with the provisions of this Section
2.4.
(e) Right
of Set-Off.
Buyer’s
obligation to make the Earn-Out Payments is subject to reduction or non-payment
(for each Sellers’ pro rata share of the Earn-Out Payment) due to any claim for
damages that a Buyer Indemnitee has against Sellers in accordance with Article
X. In the event that Buyer determines to exercise its right of set-off pursuant
to this Section 2.4, Buyer shall comply with the provisions of this Section
2.4
in determining the Earn-Out Payment and shall pay the amount, if any, by which
the Earn-Out Payment exceeds the amount set-off by Buyer.
(f) Conduct
During Earn-Out Term.
During
the Earn-Out Term, the Buyer will operate the Acquired Companies in the Ordinary
Course of Business, including, but not limited to, not making any material
changes in the nature of their businesses as they exist at the date of this
Agreement (except with respect to a potential sale or shutdown of Fierce),
not
incurring any major capital expenditures, not diverting customers or income
away
from the Acquired Companies and using its reasonable endeavours to promote
the
businesses of the Acquired Companies. The Founding Sellers shall manage the
day-to-day operations of AMV and its Subsidiaries, pursuant to and in accordance
with the terms of their employment agreements. During the Earn-Out Term,
dividends, loans or other similar payments may only be made by AMV to Buyer
to
the extent that AMV has cash surplus to the Working Capital requirements of
AMV
following Closing.
(g) Sale
of Fierce.
In the
event that Buyer determines, prior to September 30, 2010, to sell all or
substantially all of Fierce, whether by way of merger, stock sale, asset sale
or
otherwise, then, after taking into account any losses, charges or other
liabilities incurred by AMV, Buyer or Fierce in the ownership and operation
of
Fierce through the closing of any such transaction (including the costs and
expenses of such transaction), but excluding any amounts relating to Fierce
that
were used as an adjustment to the Purchase Price in determining Final Closing
Working Capital (as defined below), Sellers shall be entitled to receive, as
a
credit to the determination of EBITDA in the applicable Earn-Out Period (and
not
in cash), 12% of the gain of such transaction, determined in accordance with
the
principles set forth in this Section 2.4(g).
(h) Founding
Sellers’ Employment.
If,
during the Earn-Out Term, a Founding Seller resigns from employment with any
Acquired Company, then such Founding Seller shall not be entitled to receive
any
portion of any Earn-Out Payment that may become due to Sellers in the applicable
Earn-Out Period and any subsequent Earn-Out Periods and any aggregate Earn-Out
Payment that may otherwise be deliverable to the Sellers’ Representative shall
be reduced by the pro rata amount that such Founding Seller would otherwise
have
been entitled to if he had not resigned.
2.5 Sellers’
Representative.
(a) In
order
to administer efficiently (i) the implementation of the Agreement on behalf
of
the Sellers and (ii) the settlement of any dispute with respect to this
Agreement or the Note, the Sellers hereby designate Nathaniel MacLeitch as
the
Sellers’ representatives (the “Sellers’
Representative”).
Sellers’ Representative is also empowered to take all actions of an “authorized
person” pursuant to and under clause 6.5 of Article 6 of the Articles of
Association of AMV.
(b) From
and
after the Closing, the Sellers hereby authorize the Sellers’ Representative (i)
to take all action necessary in connection with the implementation of the
Agreement on behalf of the Sellers or the settlement of any dispute, including,
without limitation, with regard to matters pertaining to the indemnification
provisions of this Agreement and the Note, (ii) to give and receive all notices
required to be given under the Agreement and (iii) to take any and all
additional action as is contemplated to be taken by or on behalf of the Sellers
by the terms of this Agreement and the Note.
(c) In
the
event that the Sellers’ Representative dies, becomes legally incapacitated or
resigns from such position, another individual designated by the Sellers, who
shall be identified to Buyer as soon as practicable, shall fill such vacancy
and
shall be deemed to be the Sellers’ Representative for all purposes of this
Agreement; provided, however, that no change in the Sellers’ Representative
shall be effective until Buyer is given written notice of such change by the
Sellers.
(d) All
decisions and actions by the Sellers’ Representative as provided in this Section
2.5 or under the Note shall be binding upon all of the Sellers, and no Seller
shall have the right to object, dissent, protest or otherwise contest the
same.
(e) By
their
execution and/or approval of this Agreement and the Acquisition, the Sellers
agree that:
(i) Buyer
shall be able to rely conclusively on the instructions and decisions of the
Sellers’ Representative as to any actions required or permitted to be taken by
the Sellers or the Sellers’ Representative hereunder, and no party hereunder
shall have any cause of action against Buyer for any action taken by Buyer
in
reasonable reliance upon the instructions or decisions of the Sellers’
Representative;
(ii) all
actions, decisions and instructions of the Sellers’ Representative shall be
conclusive and binding upon all of the Sellers and no Seller shall have any
cause of action against the Sellers’ Representative for any action taken,
decision made or instruction given by the Sellers’ Representative under this
Agreement and under the Note, except for fraud or willful breach of this
Agreement or the Note by the Sellers’ Representative; and
(iii) the
provisions of this Section 2.5 are independent and severable, shall constitute
an irrevocable power of attorney, coupled with an interest and surviving death,
granted by the Sellers to the Sellers’ Representative and shall be binding upon
the executors, heirs, legal representatives and successors of the
Sellers.
(f) All
fees
and expenses incurred by the Sellers’ Representative shall be paid by the
Sellers severally to the extent of their pro rata interest in the aggregate
of
the Purchase Price.
(g) In
taking
any action hereunder and under the Note, the Sellers’ Representative shall be
protected in relying upon any notice, paper or other document reasonably
believed by it to be genuine, or upon any evidence reasonably deemed by it,
in
its good faith judgment, to be sufficient; provided,
however,
that
the Sellers’ Representative shall not waive any rights with respect to any
individual Seller’s interest(s) if such waiver would have the effect of
disproportionately and adversely affecting such individual Seller as compared
to
the interests of the other Sellers, without the prior consent of the affected
Sellers. The Sellers’ Representative shall not be liable to Buyer or the Sellers
for any act performed or omitted to be performed by it in the good faith
exercise of its duties and shall be liable only in the case of bad faith or
willful misconduct or gross negligence. The Sellers’ Representative may consult
with counsel in connection with its duties hereunder and shall be fully
protected in any act taken, suffered or permitted by it in good faith in
accordance with the advice of counsel. The Sellers’ Representative shall not be
responsible for determining or verifying the authority of any person acting
or
purporting to act on behalf of any party to this Agreement. The Sellers’
Representative may be replaced at any time by affirmative vote or written
consent of the Sellers.
2.6 Closing
Working Capital.
(a)Within
75
days after the Closing Date, Buyer will prepare, or cause to be prepared, and
deliver to Sellers’ Representative an audited Closing Working Capital Statement
(the "Closing
Working Capital Statement"),
which
shall set forth (i) Buyer's calculation of Working Capital as of September
30,
2008, (ii) which calculation shall also include (as an adjustment to the
Purchase Price) an amount equivalent to all other debt of AMV and its
Subsidiaries as at September 30, 2008 not included as part of the Working
Capital calculation, including debt that is payable longer than 12 months
relating to the acquisition of the Connection Makers business and (iii) which
calculation shall also include (as an adjustment to the Purchase Price) an
amount equivalent to a pro rata portion of the net profit after tax of AMV
and
its Subsidiaries for the period October 1, 2008 through the Closing Date, based
on the number of whole days elapsed from October 1, 2008 to the Closing Date
as
a proportion of the total net profit after tax of AMV and its Subsidiaries
for
the month of October 2008 (the “Stub
Period Adjustment”)
("Closing
Working Capital").
The
Closing Working Capital Statement and its components shall be prepared in
accordance with UK GAAP applied on a basis substantially consistent with those
used in the preparation of the Balance Sheet and the exchange rate used shall
be
the exchange rate as of the Closing Date as specified by the New York Federal
Reserve Bank.
(b)Upon
receipt from Buyer, Sellers’ Representative shall have 15 days to review the
Closing Working Capital Statement (the "Review
Period").
If
Sellers’ Representative disagrees with Buyer's computation of Closing Working
Capital, Sellers’ Representative may, on or prior to the last day of the Review
Period, deliver a notice to Buyer (the "Notice
of Objection"),
which
sets forth its objections to Buyer's calculation of Closing Working Capital;
provided that
the
Notice of Objection shall include only objections based on
(i) non-compliance with the standards set forth in Section 2.6(a) for the
preparation of the Closing Working Capital Statement and (ii) mathematical
errors in the computation of Closing Working Capital. Any Notice of Objection
shall specify those items or amounts with which Sellers’ Representative
disagrees, together with a detailed written explanation of the reasons for
disagreement with each such item or amount, and shall set forth Sellers’
Representative’s calculation of Closing Working Capital based on such
objections. To the extent not set forth in the Notice of Objection, Sellers’
Representative shall be deemed to have agreed with Buyer's calculation of all
other items and amounts contained in the Closing Working Capital Statement.
(c)Unless
Sellers’ Representative delivers the Notice of Objection to Buyer within the
Review Period, Sellers’ Representative shall be deemed to have accepted Buyer's
calculation of Closing Working Capital and the Closing Working Capital Statement
shall be final, conclusive and binding. If Sellers’ Representative delivers the
Notice of Objection to Buyer within the Review Period, Buyer and Sellers’
Representative shall, during the 30 days following such delivery or any mutually
agreed extension thereof, use their commercially reasonable efforts to reach
agreement on the disputed items and amounts in order to determine the amount
of
Closing Working Capital. If, at the end of such period or any mutually agreed
extension thereof, Buyer and Sellers’ Representative are unable to resolve their
disagreements, they shall jointly retain and refer their disagreements to an
independent accounting firm mutually acceptable to Buyer and Sellers’
Representative (the "Independent
Expert"),
or in
the absence of agreement, within seven days of the first disagreement being
expressed, such firm as the President of the Institute of Chartered Accountants
in England and Wales (or in his absence the next most senior officer) shall
determine to act as the Independent Expert on the application of either Buyer
or
the Sellers’ Representative. The parties shall instruct the Independent Expert
promptly to review this Section 2.6 and to determine solely with respect to
the
disputed items and amounts so submitted whether and to what extent, if any,
the
Closing Working Capital set forth in the Closing Working Capital Statement
requires adjustment. The Independent Expert shall base its determination solely
on written submissions by Buyer and Sellers’ Representative and not on an
independent review. Buyer and Sellers’ Representative shall make available to
the Independent Expert all relevant books and records and other items reasonably
requested by the Independent Expert. As promptly as practicable but in no event
later than 45 days after its retention, the Independent Expert shall deliver
to
Buyer and Sellers’ Representative a report which sets forth its resolution of
the disputed items and amounts and its calculation of Closing Working Capital;
provided that
in no
event shall Closing Working Capital as determined by the Independent Expert
be
less than Buyer's calculation of Closing Working Capital set forth in the
Closing Working Capital Statement nor more than Sellers’ Representative’s
calculation of Closing Working Capital set forth in the Notice of Objection.
The
decision of the Independent Expert shall be final, conclusive and binding on
the
parties. The costs and expenses of the Independent Expert shall be borne
one-half by Buyer and one-half by Sellers.
2.7 Adjustment
of Purchase Price.
(a) "Final
Closing Working Capital"
means
the Closing Working Capital (i) as shown in the Closing Working Capital
Statement delivered by Buyer to Sellers’ Representative pursuant to Section
2.6(a), if no Notice of Objection with respect thereto is timely delivered
by
Sellers’ Representative to Buyer pursuant to Section 2.6(b); or (ii) if a
Notice of Objection is so delivered, (A) as agreed by Buyer and Sellers’
Representative pursuant to Section 2.6(c) or (B) in the absence of such
agreement, as shown in the Independent Expert's calculation delivered pursuant
to Section 2.6(c). If the deficit amount of Final Closing Working Capital
exceeds $1,500,000, Sellers shall pay to Buyer, as an adjustment to the Purchase
Price, in the manner as provided in Section 2.7(b), an amount equal to the
difference between $1,500,000 and Final Closing Working Capital (the
“Excess
Amount”).
If
the deficit amount of Final Closing Working Capital is less than $1,500,000,
Buyer shall pay to Sellers, in the manner as provided in Section 2.7(b), an
amount equal to the difference between Final Working Capital and $1,500,000
(the
“Deficit
Amount”).
(b) Within
three Business Days after Final Working Capital has been finally determined
pursuant to Section 2.6, (i) if there is an Excess Amount, Sellers shall pay
to
Buyer by means of a downward adjustment in the principal sum due under the
Note,
an amount equal to such Excess Amount, and (ii) if there is a Deficit Amount,
the aggregate amount outstanding under the Note shall be increased by such
Deficit Amount.
(c) Any
rights accruing to a party under this Section 2.7 shall be in addition to and
independent of the rights to indemnification under Article X and any payments
made to any party under this Section 2.7 shall not be subject to the terms
of
Article X; provided,
that,
Buyer
shall not be entitled to indemnification for any breach of any representation,
warranty or covenant of Sellers of this Agreement to the extent that amounts
paid to Buyer under this Section 2.7 may be attributed solely to such breach.
Nothing herein shall preclude Buyer from seeking indemnification to the extent
that payments to Buyer under this Section 2.7 do not satisfy all Losses arising
from such breach.
2.8 Working
Capital Following Closing.
(a) Within
60
days after June 30, 2009, Buyer will prepare, or cause to be prepared, and
deliver to Sellers an audited Working Capital Statement (the "Nine-Month
Closing Working Capital Statement"),
which
shall set forth Buyer's calculation of Working Capital as of the nine-month
anniversary of September 30, 2008, which calculation shall exclude any
particular remaining debt of AMV and its Subsidiaries which were included as
part of the calculation of Final Closing Working Capital and shall exclude
any
costs and liabilities relating to Fierce ("Nine-Month
Working Capital").
The
Nine-Month Working Capital Statement shall be prepared in accordance with UK
GAAP applied on a basis substantially consistent with those used in the
preparation of the Balance Sheet and the exchange rate used shall be the
exchange rate as of the Closing Date as specified by the New York Federal
Reserve Bank.
(b) Upon
receipt from Buyer, Sellers’ Representative shall have 15 days to review the
Nine-Month Working Capital Statement (the "Second Review
Period").
If
Sellers’ Representative disagrees with Buyer's computation of Nine-Month Working
Capital, Sellers’ Representative may, on or prior to the last day of the Second
Review Period, deliver a notice to Buyer (the "Second Notice
of Objection"),
which
sets forth its objections to Buyer's calculation of Nine-Month Working Capital;
provided that
the
Second Notice of Objection shall include only objections based on
(i) non-compliance with the standards set forth in Section 2.8(a) for the
preparation of the Nine-Month Working Capital Statement and
(ii) mathematical errors in the computation of Nine-Month Working Capital.
Any Second Notice of Objection shall specify those items or amounts with which
Sellers’ Representative disagrees, together with a detailed written explanation
of the reasons for disagreement with each such item or amount, and shall set
forth Sellers’ Representative’s calculation of Nine-Month Working Capital based
on such objections. To the extent not set forth in the Second Notice of
Objection, Sellers’ shall be deemed to have agreed with Buyer's calculation of
all other items and amounts contained in the Nine-Month Working Capital
Statement.
(c) Unless
Sellers’ Representative delivers the Second Notice of Objection to Buyer within
the Second Review Period, Sellers shall be deemed to have accepted Buyer's
calculation of Nine-Month Working Capital and the Nine-Month Working Capital
Statement shall be final, conclusive and binding. If Sellers’ Representative
delivers the Notice of Objection to Buyer within the Second Review Period,
Buyer
and Sellers’ Representative shall, during the 30 days following such delivery or
any mutually agreed extension thereof, use their commercially reasonable efforts
to reach agreement on the disputed items and amounts in order to determine
the
amount of Nine-Month Working Capital. If, at the end of such period or any
mutually agreed extension thereof, Buyer and Sellers’ Representative are unable
to resolve their disagreements, they shall jointly retain and refer their
disagreements to an Independent Expert mutually acceptable to Buyer and Sellers’
Representative, or in the absence of agreement, within seven days of the first
disagreement being expressed, such firm as the President of the Institute of
Chartered Accountants in England and Wales (or in his absence the next most
senior officer) shall determine to act as the Independent Expert on the
application of either Buyer or the Sellers’ Representative. The parties shall
instruct the Independent Expert promptly to review this Section 2.8 and to
determine solely with respect to the disputed items and amounts so submitted
whether and to what extent, if any, the Nine-Month Working Capital set forth
in
the Nine-Month Working Capital Statement requires adjustment. The Independent
Expert shall base its determination solely on written submissions by Buyer
and
Sellers’ Representative and not on an independent review. Buyer and Sellers’
Representative shall make available to the Independent Expert all relevant
books
and records and other items reasonably requested by the Independent Expert.
As
promptly as practicable but in no event later than 45 days after its retention,
the Independent Expert shall deliver to Buyer and Sellers’ Representative a
report which sets forth its resolution of the disputed items and amounts and
its
calculation of Nine-Month Working Capital; provided that
in no
event shall Nine-Month Working Capital as determined by the Independent Expert
be less than Buyer's calculation of Nine-Month Working Capital set forth in
the
Nine-Month Working Capital Statement nor more than Sellers’ Representative’s
calculation of Closing Working Capital set forth in the Second Notice of
Objection. The decision of the Independent Expert shall be final, conclusive
and
binding on the parties. The costs and expenses of the Independent Expert shall
be borne one-half by Buyer and one-half by Sellers.
2.9 Working
Capital Adjustment.
(a) "Final
Working Capital"
means
the Nine-Month Working Capital (i) as shown in the Nine-Month Working
Capital Statement delivered by Buyer to Sellers pursuant to Section 2.8 (a),
if
no Second Notice of Objection with respect thereto is timely delivered by
Sellers’ Representative to Buyer pursuant to Section 2.8 (b); or (ii) if a
Second Notice of Objection is so delivered, (A) as agreed by Buyer and
Sellers’ Representative pursuant to Section 2.8 (c) or (B) in the absence
of such agreement, as shown in the Independent Expert's calculation delivered
pursuant to Section 2.8 (c). If the deficit amount of Final Working Capital
exceeds Final Closing Working Capital, then the aggregate principal sum then
due
under the Note shall automatically be reduced by such amount.
(b) Any
rights accruing to a party under this Section 2.9 shall be in addition to and
independent of the rights to indemnification under Article X and any payments
made to any party under this Section 2.9 shall not be subject to the terms
of
Article X; provided,
that,
Buyer
shall not be entitled to indemnification for any breach of any representation,
warranty or covenant of Sellers of this Agreement to the extent that amounts
paid to Buyer under this Section 2.9 may be attributed solely to such breach.
Nothing herein shall preclude Buyer from seeking indemnification to the extent
that payments to Buyer under this Section 2.9 do not satisfy all Losses arising
from such breach.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE SELLERS
Each
Seller represents and warrants to Buyer as of the date hereof as follows:
3.1 Authority
and Enforceability.
Each of
the Founding Sellers and Non-Founding Sellers has the requisite power and
authority to enter into this Agreement and to complete the Acquisition. This
Agreement has been duly executed and delivered by each of the Founding Sellers
and Non-Founding Sellers and, assuming due authorization, execution and delivery
by Buyer, constitutes the valid and binding obligation of each Founding Seller
and Non-Founding Seller, enforceable against it in accordance with its terms.
Sellers’ Representative has the requisite power and authority to enter into this
Agreement and, at Closing, to complete the Acquisition on behalf of the Option
Holder Sellers. This Agreement has been duly executed and delivered by Sellers’
Representative, and assuming due authorization, execution and delivery by Buyer,
at Closing, shall constitute the valid and binding obligation of each Option
Holder Seller, enforceable against them in accordance with its
terms.
3.2 The
Shares.
Each
Founding Seller and Non-Founding Seller is the record and beneficial owner
of
the Shares to be sold by such Founding Seller or Non-Founding Seller hereunder,
and at Closing, each Option Holder Seller will be the record and beneficial
owner of the Shares to be sold by such Option Holder Seller, as set forth on
Schedule
A,
free
and clear of any Liens and, upon transfer of the Shares to Buyer on the Closing
Date in accordance with the terms of this Agreement, Buyer will receive good
and
valid title to the Shares (which for greater certainty would mean under English
Law with full title guarantee), free and clear of any Liens.
3.3 Receipt
of Stock Consideration for Seller’s Own Account.
The
Stock Consideration is being acquired for investment for each Seller’s own
account, not as a nominee or agent, and not with a view to the sale or
distribution of all or any part thereof in violation of federal or state
securities laws.
3.4 Issuance
of Securities.
Each
Seller satisfies the requirements of Regulation S under the Securities Act
of
1933 (the “Securities Act”)
to
receive securities pursuant to this Agreement. Such Seller agrees to furnish
any
additional information requested to assure compliance with applicable federal
and state securities laws in connection with the issuance of the Stock
Consideration.
3.5
Disclosure of Information.
Each
Seller represents and warrants that he (a) has had an opportunity to discuss
the
Buyer’s business, management, financial affairs and is aware of the character,
business acumen and general business and financial circumstances of Buyer,
(b)
has the requisite knowledge and experience to assess the relative merits and
risks of a sale of the Shares and acquisition of the Stock Consideration, (c)
has received and has carefully read and evaluated copies of all documents
relevant to the sale and purchase contemplated by this Agreement, and (d) has
had full opportunity to ask questions and receive answers concerning the
historical business and operations of the Buyer, as well to evaluate the
prospects, future financial condition and the likelihood of success of
Buyer.
3.6 Restricted
Securities.
Each
Seller is aware that the Stock Consideration is subject to significant
restrictions on transfer and may not be freely sold. Each Seller represents
that
he or she (a) has liquid assets sufficient to assure that the purchase
contemplated by this Agreement will cause no undue financial difficulties,
(b)
can afford the complete loss of his or her investment, and (c) can provide
for
current needs and possible contingencies without the need to sell or dispose
of
the Stock Consideration.
3.7 Legends.
In
addition to any legend placed on the certificates pursuant to any other
agreement or arrangement among the parties, each certificate evidencing the
Stock Consideration shall bear the following legends (unless Buyer receives
an
acceptable opinion of counsel that any such legend is not required):
THE
SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE LAWS OF ANY STATE, AND MAY
NOT
BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT AND APPLICABLE STATE LAWS, OR AN EXEMPTION FROM THE
REGISTRATION AND QUALIFICATION REQUIREMENTS THEREOF.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES RELATING
TO THE SELLER COMPANIES
Each
Founding Seller represents and warrants to Buyer as of the date hereof that
the
statements contained in this Article IV are true and correct, except as set
forth in the disclosure schedule dated and delivered as of the date hereof
by
Sellers to Buyer (the "Seller
Disclosure Schedule"),
which
is attached to this Agreement and is designated therein as being the Seller
Disclosure Schedule. The Seller Disclosure Schedule shall be arranged in
sections corresponding to each Section of this Article IV. Each exception to
a
representation and warranty set forth in the Seller Disclosure Schedule shall
be
deemed to qualify the specific representation and warranty which is referenced
in the applicable section of the Seller Disclosure Schedule, and no other
representation or warranty; provided,
however,
that
any
disclosures made therein shall apply to any other section or subsection where
it
is reasonably apparent from a reading of the disclosure that such disclosure
is
applicable to such other section or subsection.
4.1 Organization
and Good Standing.
(a) Each
of the Acquired Companies and their Subsidiaries is a limited company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite power to own, lease and
operate its properties and to carry on its business as currently conducted
and
as proposed to be conducted, and is duly qualified to do business and is in
good
standing in each jurisdiction in which it owns or leases property or conducts
any business so as to require such qualification. The Seller Disclosure Schedule
contains a complete and accurate list of each jurisdiction in which the Acquired
Companies and each of their Subsidiaries carries on its business.
(b) None
of
the Acquired Companies nor any of their Subsidiaries is in default under its
Charter Documents. The Charter Documents of the Acquired Companies and each
of
their Subsidiaries in the forms attached to the Seller Disclosure Schedule
are
the Charter Documents of the Acquired Companies and their Subsidiaries as in
effect on the date of this Agreement.
4.2 Capitalization.
(a) The
authorized Capital Stock of AMV consists of 980,000 ordinary shares, par value
£0.001 per share and 20,000 A Shares, par value £0.001 per share (“A
Shares”).
All
of the AMV Shares are duly authorized, validly issued, fully paid and non
assessable and are owned legally and beneficially by the Sellers free and clear
of all Liens. Upon transfer of the AMV Shares to Buyer in accordance with the
terms of Article II, Buyer will receive valid title to the AMV Shares, free
and
clear of all Liens. As of the date hereof, 104,075 ordinary shares are issued
and outstanding, 7,142 A Shares are issued and outstanding, 15,881 AMV Shares
are reserved for issuance pursuant to outstanding options to purchase AMV
Shares, no AMV Shares are reserved for issuance upon exercise of outstanding
warrants to purchase AMV Shares and no shares are reserved for issuance upon
the
conversion of any convertible notes issued by the AMV. Schedule
4.2(a)
of the
Seller Disclosure Schedule sets forth a true, complete and correct list of
all
holders of AMV Shares and all holders of options and warrants to purchase AMV
Shares, indicating the number held by each of them.
(b) The
authorized Capital Stock of Fierce consists of 100 ordinary shares, par value
£0.001 per share. All of the Fierce Shares are duly authorized, validly issued,
fully paid and non assessable and, on the Closing Date, and are owned legally
and beneficially by Founding Sellers free and clear of all Liens. Upon transfer
of the Fierce Shares to Buyer in accordance with the terms of Article II, Buyer
will receive valid title to the Fierce Shares, free and clear of all Liens.
(c)
All
of
the Shares were issued in compliance with applicable Laws and with the Charter
Documents. None of the Shares was issued in violation of any Contract to which
Sellers or the Acquired Companies is a party or is subject. All preemption
rights with respect to the Shares have been waived by the Sellers and any other
shareholders.
(d) Other
than the Shares, the Acquired Companies do not have outstanding any Equity
Securities or any other securities. The Acquired Companies are not a party or
subject to any Contract obligating the Company to issue any Equity Securities
or
any other securities.
(e)
The
Acquired Companies do not have outstanding or authorized any stock appreciation,
phantom stock, profit participation, or similar rights.
(f) Neither
Sellers nor the Acquired Companies is a party or subject to any stockholder
agreement, voting agreement, voting trust or any other similar arrangement
which
has the effect of restricting or limiting the transfer, voting or other rights
associated with the Shares.
(g) There
are
no obligations, contingent or otherwise, of the Acquired Companies to provide
funds to or make any investment (in the form of a loan, capital contribution
or
otherwise) in any Person.
4.3 Subsidiaries
of the Acquired Companies.
(a) Each
Subsidiary of the Acquired Companies is validly existing and in good standing
under the laws of the jurisdiction of its formation, has all requisite power
to
own, lease and operate its properties and to carry on its business as currently
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing in each jurisdiction in which it owns or leases property
or conducts any business so as to require such qualification.
(b)
The
Seller Disclosure Schedule contains a true and complete list of the Subsidiaries
of the Acquired Companies and sets forth with respect to each such Subsidiary
the jurisdiction of formation, the authorized and outstanding Capital Stock
of
such Subsidiary and the owner(s) of record of such outstanding Capital Stock.
The outstanding shares of Capital Stock of each Subsidiary (collectively, the
"Subsidiary Shares")
are
duly authorized, validly issued, fully paid and non assessable, and are owned
by
one of the Acquired Companies or a Subsidiary of one of the Acquired Companies
free and clear of all Liens.
(c) All
of
the Subsidiary Shares were issued in compliance with applicable Laws. None
of
the Subsidiary Shares was issued in violation of any Contract to which Sellers,
the Acquired Companies or any Subsidiary of the Acquired Companies is a party
or
is subject.
(d) Other
than the Subsidiary Shares set forth in the Seller Disclosure Schedule, no
Subsidiary of the Acquired Companies has outstanding any Equity Securities
or
any other securities. No Subsidiary of the Acquired Companies is a party or
subject to any Contract obligating such Subsidiary to issue any Equity
Securities or any other securities.
(e) No
Subsidiary of the Acquired Companies has outstanding or authorized any stock
appreciation, phantom stock, profit participation, or similar rights.
(f) Other
than the Subsidiaries set forth in the Seller Disclosure Schedule, neither
the
Acquired Companies nor any Subsidiary of the Acquired Companies directly or
indirectly owns any Equity Securities or other securities in any Person.
(g) No
Subsidiary of the Acquired Companies is a party or subject to any stockholder
agreement, voting agreement, voting trust or any other similar arrangement
which
has the effect of restricting or limiting the transfer, voting or other rights
associated with the Subsidiary Shares.
(h) There
are
no obligations, contingent or otherwise, of any Subsidiary of the Acquired
Companies to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any Person.
4.4
No
Conflicts; Consents.
(a) The
execution and delivery of this Agreement by Sellers does not, and the completion
of the Acquisition by Sellers (in each case, with or without the passage of
time
or the giving of notice), will not, directly or indirectly, (i) violate the
provisions of any of the Charter Documents of the Acquired Companies or any
Subsidiary of the Acquired Companies, (ii) violate or constitute a default,
an
event of default or an event creating rights of acceleration, termination,
cancellation, imposition of additional obligations or loss of rights under
any
Material Contract (A) to which Sellers, the Acquired Companies or any Subsidiary
of the Acquired Companies is a party, (B) of which Sellers, the Acquired
Companies or any Subsidiary of the Acquired Companies is a beneficiary or (C)
by
which Sellers, the Acquired Companies or any Subsidiary of the Acquired
Companies or any of their respective assets is bound, (iii) violate or conflict
with any Law, Authorization or Order applicable to Sellers, the Acquired
Companies or any Subsidiary of the Acquired Companies, or give any Governmental
Entity or other Person the right to challenge any of the transactions
contemplated hereby or to exercise any remedy, obtain any relief under or revoke
or otherwise modify any rights held under, any such Law, Authorization or Order,
or (iv) result in the creation of any Liens upon any of the assets owned or
used
by Sellers, the Acquired Companies or any Subsidiary of the Acquired Companies.
(b) No
consent, approval, order or authorization of, or registration, declaration
or
filing with, any Governmental Entity or other Person, is required by or with
respect to the Acquired Companies or any Subsidiary of the Acquired Companies
in
connection with the execution and delivery of this Agreement and the completion
of the Acquisition, except for (i) such filings as may be required under the
antitrust or competition Laws of any foreign country, and (ii) such consents,
approvals, orders, authorizations, registrations, declarations and filings
as
may be required under applicable federal and state securities laws and the
laws
of any foreign country.
4.5 Financial
Statements.
True
and complete copies of the Acquired Companies’ audited consolidated financial
statements consisting of the consolidated balance sheet of the Acquired
Companies and their Subsidiaries as at December 31 in each of the years 2006
through 2007 and the related statements of income and retained earnings,
stockholders' equity and cash flow, for the years then ended (the "Audited
Financial Statements"),
and
unaudited consolidated financial statements consisting of the balance sheet
of
the Acquired Companies and their Subsidiaries as at July 31, 2008 and the
related statements of income and retained earnings, stockholders' equity (the
"Interim
Financial Statements"
and
together with the Audited Financial Statements, the "Financial
Statements"),
are
included in the Seller Disclosure Schedule. The Audited Financial Statements
are
true, complete and correct in all material respects and have been prepared
in
accordance with UK GAAP (but includes audited footnotes reconciling UK GAAP
to
US GAAP in a form suitable for filing with the SEC) applied on a consistent
basis throughout the periods involved, subject, in the case of the Interim
Financial Statements, to normal and recurring year end adjustments (the effect
of which will not be materially adverse) and the absence of notes. The Financial
Statements are based on the books and records of the Acquired Companies and
their Subsidiaries, and fairly present the financial condition of the Acquired
Companies and their Subsidiaries as of the respective dates they were prepared
and the results of the operations of the Acquired Companies and their
Subsidiaries for the periods indicated. The consolidated balance sheet of the
Acquired Companies and their Subsidiaries as of December 31, 2007 is referred
to
herein as the "Balance
Sheet"
and the
date thereof as the "Balance
Sheet Date"
and the
consolidated balance sheet of the Acquired Companies and their Subsidiaries
as
of July 31, 2008 is referred to herein as the "Interim
Balance Sheet"
and the
date thereof as the "Interim
Balance Sheet Date."
Each
of the Acquired Companies and their Subsidiaries maintains a standard system
of
accounting established and administered in accordance with UK GAAP.
4.6 No
Undisclosed Liabilities.
The
Acquired Companies and their Subsidiaries have no material liabilities,
obligations or commitments of any nature whatsoever, including but not limited
to any regulatory penalties, asserted or unasserted, known or unknown, absolute
or contingent, accrued or unaccrued, matured or unmatured or otherwise
("Liabilities"),
except (a) those which are adequately reflected or reserved against in the
Balance Sheet as of the Balance Sheet Date, and (b) those which have been
incurred in the Ordinary Course of Business and consistent with past practice
since the Balance Sheet Date and which are not, individually or in the
aggregate, material in amount.
4.7 Inventory.
All
inventory of the Acquired Companies and their Subsidiaries (including materials,
supplies, parts, work-in-process and finished goods) is of a quality, quantity
and condition useable or saleable in the Ordinary Course of Business. None
of
such inventory is obsolete and no write-down of such inventory has been made
or
should have been made in the period since December 31, 2007. The quantities
of
each item of inventory are not excessive and are reasonable in the present
circumstances of the Acquired Companies and their Subsidiaries. All
work-in-process and finished goods inventory is free of any defect or other
deficiency. All of such inventory is located at the facilities of the Acquired
Companies or a Subsidiary of the Acquired Companies and no inventory is held
on
a consignment basis.
4.8 Accounts
Receivable.
The
accounts receivable of the Acquired Companies and their Subsidiaries as set
forth on the Interim Balance Sheet or arising since the date thereof are, to
the
extent not paid in full by the account debtor prior to the date hereof, (a)
valid and genuine and have arisen solely out of bona fide sales and deliveries
of goods, performance of services and other business transactions in the
Ordinary Course of Business, (b) not subject to valid defenses, set-offs or
counterclaims, and (c) to Sellers’ Knowledge, are collectible within 90 days
after billing at the full recorded amount thereof less, in the case of accounts
receivable appearing on the Interim Balance Sheet, the recorded allowance for
collection losses on the Interim Balance Sheet. The allowance for collection
losses on the Interim Balance Sheet has been determined in accordance with
UK
GAAP consistent with past practice. The accounts receivable existing as of
the
Closing Date will be collectible within 90 days after billing at the full
recorded amount thereof net of the reserves shown on the accounting records
of
the Acquired Companies and their Subsidiaries as of the Closing Date (which
reserves shall be adequate and shall not represent a greater percentage of
the
accounts receivable as of the Closing Date than the reserves reflected in the
Interim Balance Sheet represented of the accounts receivable reflected
therein).
4.9 Taxes. (a)
All
Tax Returns required to have been filed by or with respect to each Seller
Company or a Relevant Group have been duly and timely filed (or, if due between
the date hereof and the Closing Date, will be duly and timely filed), and each
such Tax Return correctly and completely reflects liability for Taxes and all
other information required to be reported thereon. All Taxes owed by any Seller
Company or any member of a Relevant Group (whether or not shown on any Tax
Return) have been timely paid (or, if due between the date hereof and the
Closing Date, will be duly and timely paid). The Seller Companies have
adequately provided for, in their books of account and related records,
liability for all unpaid Taxes, being current Taxes not yet due and payable.
(b) To
Sellers’ Knowledge, there is no action or audit now proposed, threatened or
pending against, or with respect to, the Seller Companies in respect of any
Taxes. No Seller Company is the beneficiary of any extension of time within
which to file any Tax Return, nor have any of the Seller Companies made (or
had
made on their behalf) any requests for such extensions. No claim has ever been
made by an authority in a jurisdiction where any of the Seller Companies do
not
file Tax Returns that any of them is or may be subject to taxation by that
jurisdiction or that any of them must file Tax Returns. There are no Liens
on
any of the stock or assets of any Seller Company with respect to
Taxes.
(c) The
Seller Companies have withheld and timely paid all Taxes required to have been
withheld and paid and have complied with all information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto.
(d) There
is
no dispute or claim concerning any liability for Taxes with respect to any
Seller Company for which notice has been provided, or which is asserted or
threatened, or which is otherwise known to Seller or any other Seller Company.
No issues have been raised in any Taxes examination with respect to any Seller
Company which, by application of similar principles, could be expected to result
in liability for Taxes for any other Seller Company or period not so examined.
The Seller Disclosure Schedule (i) lists all federal, state, local, corporation
and foreign income Tax Returns filed with respect to any Seller Company for
taxable periods ended on or after December 31, 2006, (ii) indicates those Tax
Returns that have been audited, and (iii) indicates those Tax Returns that
currently are the subject of audit. Sellers have delivered to Buyer correct
and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by any Seller Company
since December 31, 2006. No Seller Company has waived (or is subject to a waiver
of) any statute of limitations in respect of Taxes or has agreed to (or is
subject to) any extension of time with respect to a Tax assessment or
deficiency.
(e) Each
of
the Acquired Companies and their Subsidiaries has maintained and has in its
possession and under its control all records and documentation which it is
required by any of the Tax Statutes to maintain and the Acquired Companies
and
their Subsidiaries have complete and accurate books and records and/or
information to enable them to calculate their future liability to Tax upon
the
disposal of any asset owned by any of the Acquired Companies or their
Subsidiaries at the Closing Date.
(f) No
Tax
Authority has agreed to operate any special arrangement (being an arrangement
which is not based on a strict application of the Tax Statutes) in relation
to
the affairs of any of the Acquired Companies or their Subsidiaries.
(g) All
transactions or arrangements made by each of the Acquired Companies and their
Subsidiaries have been made on fully arm’s length terms there are no
circumstances in which any rule or provision contained within the Tax Statutes
could apply causing any Taxing Authority to make an adjustment to the terms
on
which such transaction or arrangement is treated as being made for Tax
purposes.
(h) Since
the
Balance Sheet Date:
(i) no
accounting period of either of the Acquired Companies and their Subsidiaries
has
ended or could be treated as having ended;
(ii) none
of
the Acquired Companies or their Subsidiaries has been involved in any
transaction for which any statutory tax clearance or other tax clearance
commonly obtained by companies carrying on businesses similar to those carried
on by the relevant Acquired Companies and their Subsidiaries has been sought
or
obtained or ought to have been sought or obtained;
(iii) none
of
the Acquired Companies or their Subsidiaries has declared, made or paid any
distribution for Tax purposes;
(iv) there
has
been no:
(A)
disposal of any material asset (including trading stock) outside the Ordinary
Course of Business by any of the Acquired Companies or their Subsidiaries;
or
(B)
supply of any service or business facility of any kind (including a loan of
money or the letting, hiring or licensing of any property whether tangible
or
intangible) by any of the Acquired Companies or their Subsidiaries;
in
circumstances where the consideration actually received or receivable for such
disposal or supply was less than the consideration which could be deemed to
have
been received for Tax purposes;
(v) no
event
has occurred which will or may have the effect of crystallising a liability
to
Tax which was or should have been included in the provision for deferred
taxation contained in the Financial Statements;
(vi) no
event
has occurred which will (or may) give rise to a liability to Tax on any of
the
Acquired Companies or their Subsidiaries where such liability would be computed
by reference to deemed income, profits or gains;
(vii) no
event
has occurred which will (or may) give rise to a liability to Tax on any of
the
Acquired Companies or their Subsidiaries where such liability is directly or
primarily chargeable against or attributable to another person, firm or
company;
(viii) none
of
the Acquired
Companies or their Subsidiaries:
(A)
has
paid (or become liable to pay) any surcharge, interest or penalty in connection
with any Tax;
(B)
has
otherwise paid any Tax after its due date for payment; or
(C) owes
any
Tax the due date for payment of which has passed or will arise within 45 days
following the date of this Agreement; and
(D) has
received any notice from any Taxation Authority which required or will (or
may)
require such Acquired Companies or
any of
their Subsidiaries to withhold Tax from any payment actually made since the
Balance Sheet Date or which is likely to be or may be made after the date of
this Agreement.
(i) Each
of
the Acquired Companies and their Subsidiaries is resident in its country of
incorporation for Tax purposes and has not been at any time resident in any
jurisdiction other than (or in addition to) its country of incorporation for
Tax
purposes.
(j) Each
of
the Acquired Companies and their Subsidiaries is treated as a member of a group
of companies for the purposes of section 43 VATA (groups of companies) (the
"VAT
Group")
of
which the representative member is AMV (the "Representative
Member")
and no
company other than the Acquired Companies and their Subsidiaries is a member
of
the VAT Group nor has any such company been a member of the VAT Group within
the
last six years.
(k) The
Representative Member has made, given, obtained and kept full, complete, correct
and up to date records, invoices and other documents appropriate or required
for
the purposes of the VATA and is not in arrears with any payments or returns
due
and has not been required by HM Revenue and Customs to give security under
paragraph 4 schedule 11 VATA.
(l) None
of
the Seller Companies has ever made any supplies which are exempt from VAT of
such proportion that it is unable to claim credit for all input tax paid or
suffered by it.
(m) None
of
the Acquired Companies or their Subsidiaries has applied to waive its right
to
exemption from VAT in relation to property pursuant to Schedule 10 to
VATA.
(n) No
Tax
liability will be suffered by any of the Acquired Companies or their
Subsidiaries in consequence of Closing otherwise by virtue of this Agreement
or
of the relevant Acquired Companies ceasing to be a member of a group of
companies with any other company.
(o) All
expenditure which any of the Acquired Companies or their Subsidiaries has
incurred or may incur under any subsisting commitment on the provision of
machinery, plant or buildings which, (if not deductible as a trading expense
of
a trade carried on by the relevant Acquired Companies or
any
Subsidiary) has qualified for capital allowances, industrial buildings allowance
or other form of depreciation or amortization for Tax purposes (as the case
may
be) is disclosed in the capital allowance calculation included within the most
recent Tax computations filed with a Taxation Authority.
(p) No
balancing charge under the Capital Allowances Act 2001 would be made on any
of
the Seller Companies on the disposal of any asset, or of any pool of assets
(that is to say all those assets expenditure relating to which would be taken
into account in computing whether a balancing charge would arise on a disposal
of any other of those assets) on the assumption that the disposals are made
for
a consideration equal to the book value shown in or adopted for the purpose
of
the Balance Sheet for each of the assets.
(q) If
each
of the capital assets of the Seller Companies were to be disposed of for a
consideration equal to the book value of the asset in, or adopted for the
purpose of, the Balance Sheet (or, in respect of any asset acquired after the
Balance Sheet Date, for a value equal to the actual consideration given for
its
acquisition) no chargeable profit or gain would arise and for this purpose
there
shall be disregarded any relief and allowances available other than amounts
falling to be deducted under section 38 Taxation of Chargeable Gains Act
1992.
(r) Neither
the Seller Companies nor any company which was a member of the same group of
companies as any of the Seller Companies at the relevant time has made any
claim
under sections 152 to 157 inclusive Taxation of Chargeable Gains Act
1992.
(s) No
distributions within section 418 Taxes Act or transfers of value within section
94 Inheritance Tax Act 1984 have been made by any of the Seller
Companies.
(t) No
loan
or advance within section 419 Taxes Act has been made or agreed to be made
by
the Seller Companies and the Seller Companies have not since the Balance Sheet
Date released or written off, and there is no agreement or arrangement for
the
release or writing off of the whole or part of the debt in respect of any such
loan or advance.
(u) In
respect of every surrender or claim for group or consortium relief pursuant
to
sections 402 to 413 Taxes Act made or received or agreed to be made or received
by the Seller Companies in the six years ending on Closing no payment remains
due or outstanding and relevant claims, elections and surrenders will be allowed
in full and no further action is required of the Seller Companies.
(v) All
instruments (other than those which have ceased to have any legal effect) to
which any of the Seller Companies is a party or in the enforcement of which
any
of the Seller Companies is interested and which, whether in the United Kingdom
or elsewhere, either attract stamp duty or are required to be stamped with
a
particular stamp denoting that no duty is chargeable or that the document has
been produced to the appropriate authority, have been properly stamped, and
no
such documents which are outside the United Kingdom would attract stamp duty
if
they were brought into the United Kingdom.
(w) No
liability under section 111 or section 113 of the Finance Act 2002, or paragraph
3 or paragraph 9 of Schedule 7 of the Finance Act 2003, will arise as a
consequence of the execution and performance of this Agreement.
(x) None
of
the Seller Companies have entered into or been a party to any schemes or
arrangements designed partly or wholly for the purpose of avoiding or deferring
any liability to Tax.
(y) None
of
the Seller Companies have entered into or been party to or otherwise been
concerned with any Event as a result of which any provision of Part XVII Taxes
Act or Part 13 Income Tax Act 2007 applied, applies or may apply.
(z) The
Seller Companies have properly operated the PAYE system, making such deductions
and payments of tax as required by law from all payments to or treated as made
to employees, ex-employees, officers and ex-officers of the Acquired Companies
and punctually accounted to HM Revenue and Customs for all such tax and all
returns required pursuant to section 684 Income Tax (Earnings and Pensions)
Act
2003 and regulations made thereunder have been punctually made and are accurate
and complete in all respects.
(aa) No
circumstances exist whereby any of the Acquired Companies or their Subsidiaries
may at any time be liable to pay any inheritance tax to any Taxation
Authority.
4.10 Compliance
with Law.
(a) To
Sellers’ Knowledge, each of the Acquired Companies and their Subsidiaries has
complied with each, and is not in violation of, any applicable Law to which
the
Acquired Companies and their Subsidiaries or its respective business,
operations, assets or properties is or has been subject.
(b)
To
Sellers’ Knowledge, no event has occurred or circumstances exist that (with or
without the passage of time or the giving of notice) may result in a violation
of, conflict with or failure on the part of the Acquired Companies or any of
their Subsidiaries to comply with, any Law. None of the Acquired Companies
nor
any of their Subsidiaries has received notice regarding any violation of,
conflict with, or failure
to comply with, any Law.
4.11 Authorizations.
(a) Each
of the Acquired Companies and their Subsidiaries owns, holds, possesses or
lawfully uses in the operation of its business all Authorizations which are
required or otherwise necessary for it to conduct its business as currently
conducted or as proposed to be conducted or for the ownership and use of the
assets owned or used by the Acquired Companies or any such Subsidiary in the
conduct of its business, free and clear of all Liens. Such Authorizations are
valid and in full force and effect and none of such Authorizations will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. All Authorizations are listed in the Seller
Disclosure Schedule.
(b) No
event
has occurred or circumstances exist that (with or without the passage of time
or
the giving of notice) may result in a violation of, conflict with, failure
on
the part of the Acquired Companies or any of their Subsidiaries to comply with
the terms of, or the revocation, withdrawal, termination, cancellation,
suspension or modification of any Authorization. Neither the Acquired Companies
nor any of their Subsidiaries has received notice regarding any violation of,
conflict with, failure to comply with the terms of, or any revocation,
withdrawal, termination, cancellation, suspension or modification of, any
Authorization. Neither the Acquired Companies nor any of their Subsidiaries
is
in default, nor has the Acquired Companies or any of their Subsidiaries received
notice of any claim of default, with respect to any Authorization.
(c)
No
Person other than the Acquired Companies or one of their Subsidiaries owns
or
has any proprietary, financial or other interest (direct or indirect) in any
Authorization which the Acquired Companies or such Subsidiary owns, possesses
or
uses in the operation of its business as currently conducted or as proposed
to
be conducted.
4.12 Title
to Assets.
(a) The
Seller Disclosure Schedule sets forth a complete and accurate list of all the
tangible assets owned or leased by the Acquired Companies or any of their
Subsidiaries as of the Balance Sheet Date or acquired thereafter, with a current
fair market value in excess of $5,000, specifying whether each such asset is
owned or leased and, in the case of leased assets, indicating the parties to,
execution dates of and annual payments under, the lease.
(b)
With
respect to assets that are owned, the Acquired Companies or a Subsidiary of
the
Acquired Companies has good and valid title to all of such assets, including,
without limitation, all assets reflected as owned in the books and records
of
the Acquired Companies and their Subsidiaries, the Balance Sheet (except for
inventory sold since the Balance Sheet Date in the Ordinary Course of Business),
free and clear of all Liens.
(c) With
respect to tangible assets that are leased, the Acquired Companies or a
Subsidiary of the Acquired Companies has a valid contractual right to use such
assets and all such contracts are in full force and effect and constitute valid
and binding obligations of the other party(ies) thereto. None of the Acquired
Companies, the Subsidiaries of the Acquired Companies or any other party thereto
is in breach of any of the terms of any such contract.
4.13 Condition
of Tangible Assets.
To
Sellers’ Knowledge, all buildings, plants, leasehold improvements, structures,
facilities, equipment and other items of tangible property and assets which
are
owned, leased or used by the Acquired Companies or any of their Subsidiaries
are
structurally sound, are in good operating condition and repair (subject to
normal wear and tear given the use and age of such assets), are usable in the
regular and Ordinary Course of Business and conform to
all
Laws and Authorizations relating to their construction, use and operation.
No
Person other than the Acquired Companies, and a Subsidiary of the Acquired
Companies owns, or has any interest in, any equipment or other tangible assets
or properties owned, leased or used by the Acquired Companies or any of their
Subsidiaries.
4.14 Real
Property.
(a) The
Seller Disclosure Schedule contains (i) a list of all freehold properties owned
by the Acquired Companies or any Subsidiary of the Acquired Companies (the
"Owned
Real Property"),
(ii)
a list of all interests in real property leased by the Acquired Companies or
any
Subsidiary of the Acquired Companies (the "Leased
Real Property"),
and
(iii) all other estates, interests, rights and titles whatsoever in respect
of
any land or premises owned by the Acquired Companies or a Subsidiary of the
Acquired Companies (the “Other
Interests in Real Property”).
The
Owned Real Property, the Leased Real Property and the Other Interests in Real
Property are hereafter collectively referred to as the "Real
Property".
The
Real Property listed on the Seller Disclosure Schedule includes all interests
in
real property necessary to conduct the business and operations of the Acquired
Companies and their Subsidiaries as currently conducted and as proposed to
be
conducted.
(b) With
respect to each parcel of the Real Property:
(i) The
Acquired Companies or the Subsidiary of the Acquired Companies is the sole
legal
and beneficial owner of the Real Property and is in sole and undisputed
occupation subject only to the (sub)leases, tenancies or other rights of
occupation in favour of third parties details of which are summarized in the
Seller Disclosure Schedule.
(ii) The
legal
description for the Real Property including the tenure of the Real Property,
the
principal terms of the lease or licences held by the Acquired Companies or
the
Subsidiary of the Acquired Companies, and the principal terms of the tenancies
and licences subject to and with the benefit of which the Real Property held
are
true and are accurately described in the Seller Disclosure Schedule. The present
use of the Real Property is correctly described in the Seller Disclosure
Schedule.
(iii) The
Acquired Companies or a Subsidiary of the Acquired Companies has good and
marketable title to each such parcel of Real Property and is clear of all Liens.
(iv) The
Real
Property is not subject to any outgoings other than business rates water and
sewerage charges and insurance premiums and, in the case of Leased Real
Property, rent and service charges and all outgoings have been duly paid to
date
and none is in dispute.
(v) The
Real
Property is not subject to any covenants, obligations, exceptions, reservations,
stipulations, easements, quasi-easements, profits á prendre, wayleaves,
licences, grants, restrictions, overriding interests or any other matters which
may adversely affect the value of the Real Property or their proper use,
occupation or enjoyment for the purposes of the business of the Acquired
Companies or any Subsidiary of the Acquired Companies.
(vi) There
is
no person who is in occupation (other than pursuant to any of the tenancies
referred to in the Seller Disclosure Schedule) or who , has or claims any rights
or easements of any kind, in respect of the Real Property that adversely affect
the estate, interest, right or title of the Acquired Companies of the Subsidiary
of the Acquired Companies.
(vii) There
is
no circumstance which would entitle any third party to exercise a right of
power
of entry or to take possession or which would in any other way affect or
restrict its continued possession, enjoyment or use of the Real
Property.
(viii) All
fixtures, fittings, plant and equipment (other than any tenant's property and
meters and other equipment belonging to the suppliers of telephone, electricity,
gas and water services) are the Acquired Companies’ or the Subsidiary of the
Acquired Companies’ own absolute property free from any
encumbrances.
(ix) The
Sellers have delivered or made available to Buyer copies of all the deeds and
other instruments (including any leases, licenses and tenancies) by which the
Acquired Companies or a Subsidiary of the Acquired Companies acquired such
parcel of Real Property, and copies of all title insurance policies, opinions,
abstracts and surveys in the possession of Seller, the Acquired Companies or
any
Subsidiary of the Acquired Companies relating thereto.
(x) There
are
no outstanding options, rights of pre-emption or rights of first refusal to
purchase such parcel of Real Property, or any portion thereof or interest
therein.
(c) The
use
of Real Property is the lawful use for the purposes of the Planning Acts. All
consents applicable to such use are either unconditional or are subject only
to
conditions which have been satisfied or are subject to continuing conditions
all
of which have been and are being duly complied with and which are not onerous.
No consents are personal or for a limited period only.
(d) All
necessary planning permissions, bye-law consents, building regulation consents
and other statutory permissions and approvals have been obtained and complied
with, with respect to all development, alterations and improvements to the
Real
Property.
(e) There
is
no outstanding and unobserved or unperformed obligation with respect to the
Real
Property necessary to comply with the requirements (whether formal or informal)
of any competent authority exercising statutory or delegated
powers.
(f) There
are
no compulsory purchase notices, orders or resolutions or blight notices
affecting the Real Property nor are there any circumstances likely to lead
to
any being made.
(g) The
Real
Property is insured against all normally insurable risks (including terrorism)
in their respective full reinstatement values (with no unusual exclusions)
and
for not less than 3 years' loss of rent and against third party and public
liabilities to an adequate extent.
(h) In
respect of the Leased Real Property:
(i) The
Acquired Companies or the Subsidiary of the Acquired Companies has paid the
rent
and all other sums payable under the lease on the due dates for payment and
the
last demand for rent was unqualified and the Acquired Companies or the
Subsidiary of the Acquired Companies observed and performed the covenants on
the
part of the tenant and the conditions contained in any leases (which expressions
includes underleases) under which the Leased Real Property is held and all
such
leases are valid and in full force and contain no unusual or onerous
provisions.
(ii) There
are
no circumstances which would entitle any landlord to exercise any powers of
entry or to take possession, whether by way of forceable re-entry or
proceedings, or which would otherwise restrict the continued possession and
enjoyment of the properties.
(iii) There
are
no side letters, collateral assurances, undertakings or concessions which have
been made by any party to the leases under which the Acquired Companies or
the
Subsidiary of the Acquired Companies occupies any of the properties, other
than
as disclosed in the Seller Disclosure Schedule.
(i) The
Acquired Companies or the Subsidiary of the Acquired Companies has not at any
time where there is a continuing obligation:
(i) had
vested in it (whether as an original tenant or undertenant or as an assignee,
transferee or otherwise) any Owned Real Property or Leased Real Property other
than the Real Property; or
(ii) given
any
covenant or entered into any agreement, deed or other document (whether as
a
tenant or undertenant or as an assignee, transferee, guarantor or otherwise)
in
respect of any Owned Real Property or Leased Real Property other than those
disclosed in the Seller Disclosure Schedule respect of which any contingent
or
potential liability remains with the Acquired Companies or Subsidiary of the
Acquired Companies.
(j) The
Real
Property is in suitable condition for the Acquired Companies’ and each
Subsidiary's business as currently conducted and as proposed to be conducted.
Each of the Acquired Companies and their Subsidiaries has good and valid rights
of ingress and egress to and from all Real Property from and to a publicly
maintained road and no means of access is shared with any other party nor
subject to rights of determination by any other party.
4.15 Intellectual
Property.
(a) As
used in this Agreement, "Intellectual
Property"
means:
(i)
inventions (whether or not patentable), trade secrets, technical data,
databases, customer lists, designs, tools, methods, processes, technology,
ideas, know how and other confidential or proprietary information and materials
("Proprietary
Information");
(ii)
trade marks and service marks (whether or not registered), applications for
trade marks and service marks, trade names, logos, trade dress and other
proprietary indicia and all goodwill associated therewith ("Marks");
(iii)
documentation, advertising copy, marketing materials, specifications, mask
works, drawings, graphics, databases, recordings and other works of authorship,
whether or not protected by Copyright;
(iv)
source code, object code, data and operating files, user manuals, documentation,
flow charts, algorithms, compilers, development tools, maintenance records
and
other materials related to computer programs;
(v)
internet web-sites and domain names; and
(vi)
all
forms of legal rights and protections that may be obtained for, or may pertain
to, the Intellectual Property set forth in clauses (i) through (v) in any
country of the world ("Intellectual
Property Rights"),
including, without limitation, all letters
patent,
patent applications, provisional patents, design patents and other rights to
inventions or designs ("Patents"),
all
registered and unregistered copyrights in both published and unpublished works
("Copyrights"),
trade
secret rights, mask works, moral rights or other literary property or authors
rights, rights regarding trademarks and other proprietary indicia, and all
applications, registrations, issuances, divisions, continuations, renewals,
reissuances and extensions of the foregoing.
(b)
The
Seller Disclosure Schedule lists (by name, owner and, where applicable,
registration number and jurisdiction of registration, application, certification
or filing) all Intellectual Property that is owned by the Acquired Companies
and/or one or more of their Subsidiaries ("Acquired
Company Owned Intellectual Property"),
other
than items of Acquired Company Owned Intellectual Property that are neither
(i)
registered or the subject of an application for registration nor (ii) material
to the Acquired Companies or any of their Subsidiaries.
(c) The
Seller Disclosure Schedule lists all material licenses, sublicenses and other
agreements ("Third
Party Licenses")
pursuant to which the Acquired Companies or any of their Subsidiaries is
authorized to use any Intellectual Property owned by a third party other than
Third Party Licenses that consist solely of "shrink-wrap" and similar
commercially available end-user licenses.
(d) The
Seller Disclosure Schedule lists all material licenses, sublicenses and other
agreements ("Acquired
Company Licenses")
pursuant to which a third party is authorized to use any Acquired Company Owned
Intellectual Property.
(e) The
Acquired Companies and/or one or more of their Subsidiaries (i) own the entire
right, interest and title to each item of Intellectual Property that is used
in
or necessary for the business of the Acquired Companies and their Subsidiaries
as it is currently conducted or as proposed to be conducted free and clear
of
Liens, or (ii) are otherwise licensed to use such Intellectual Property pursuant
to the terms of a valid and enforceable Third Party License that is listed
in
the Seller Disclosure Schedule. Without limiting the foregoing, neither the
Acquired Companies nor any of their Subsidiaries uses any Intellectual Property
in its business which is not (A) Acquired Company Owned Intellectual Property,
or (B) subject to a valid and enforceable Third Party License that is listed
in
the Seller Disclosure Schedule.
(f) All
Patents, Marks, Copyrights and any other certifications, filings or
registrations that are owned by the Acquired Companies or any of their
Subsidiaries ("Acquired
Company Registered Items")
are
valid and subsisting. All registration, maintenance and renewal fees related
to
Acquired Company Registered Items that are currently due have been paid and
all
documents and certificates related to such Acquired Company Registered Items
have been filed with the relevant Governmental Entity or foreign jurisdictions,
as the case may be, for the purposes of maintaining such Acquired Company
Registered Items. There are no actions that must be taken by the Acquired
Companies or any of their Subsidiaries within 60 days of the Closing Date,
including the payment of any registration, maintenance or renewal fees or the
filing of any documents, applications or certificates for the purposes of
maintaining, perfecting or preserving or renewing any Acquired Company
Registered Items.
(g) Sellers
are not aware of any challenges (or any basis therefor) with respect to the
validity or enforceability of any Acquired Company Intellectual Property. The
Seller Disclosure Schedule lists the status of any proceedings or actions before
the UK Intellectual Property Office or any other Governmental Entity anywhere
in
the world related to any of the Acquired Company Owned Intellectual Property,
including the due date for any outstanding response by the Acquired Companies
or
any of their Subsidiaries in such proceedings.
(h) To
Sellers’ Knowledge, neither the Acquired Companies nor any of their Subsidiaries
has infringed, does infringe or, by conducting its business as currently
conducted or as proposed to be conducted, will infringe upon or unlawfully
or
wrongfully use, any Intellectual Property Rights of a third party. None of
Sellers, the Acquired Companies or any of their Subsidiaries has received any
communication alleging that the Acquired Companies or any of their Subsidiaries
has violated or, by conducting its business as now conducted or as currently
proposed to be conducted, would violate, any Intellectual Property Rights of
a
third party. No action, suit, proceeding or investigation has been instituted,
or, to Sellers’ Knowledge, threatened, relating to any Intellectual Property
formerly or currently used by the Acquired Companies or any of their
Subsidiaries and none of the Acquired Company Owned Intellectual Property is
subject to any outstanding Order. To Sellers’ Knowledge, no Person is infringing
any Intellectual Property Rights of the Acquired Companies or any of their
Subsidiaries or otherwise misappropriating any Acquired Company Owned
Intellectual Property.
(i) The
Acquired Companies and their Subsidiaries have taken commercially reasonable
steps to protect and preserve the confidentiality of all Proprietary Information
owned by the Acquired Companies or any of their Subsidiaries. Without limiting
the generality of the foregoing, the trade secrets of the Acquired Companies
and
their Subsidiaries are not part of the pubic knowledge and have not been used
or
divulged for the benefit of any Person other than the Acquired Companies and
their Subsidiaries. Any receipt or use by, or disclosure to, a third party
of
Proprietary Information owned by the Acquired Companies or any of their
Subsidiaries has been pursuant to the terms of binding written confidentiality
and non-use agreement between the Acquired Companies or such Subsidiary and
such
third party ("Nondisclosure
Agreements").
True
and complete copies of the Nondisclosure Agreements, and any amendments thereto,
have been provided to Buyer. The Acquired Companies and their Subsidiaries
are,
and to Sellers’ Knowledge, all other parties thereto are, in compliance with the
provisions of the Nondisclosure Agreements.
(j) All
current and former employees, consultants and contractors of the Acquired
Companies and their Subsidiaries have executed and delivered, and are in
compliance with, enforceable agreements regarding the protection of proprietary
information and providing valid written assignments of all Intellectual Property
conceived or developed by such employees, consultants or contractors in
connection with their services for the Acquired Companies and their Subsidiaries
("Work
Product Agreements").
True
and complete copies of the Work Product Agreements have been provided to Buyer.
No current or former employee, consultant or contractor or any other Person
has
any right, claim or interest to any of the Acquired Company Intellectual
Property.
(k) To
Sellers’ Knowledge, no employee, consultant or independent contractor of the
Acquired Companies or any of their Subsidiaries has been, is or will be, by
performing services for the Acquired Companies or such Subsidiary, in violation
of any term of any employment, invention disclosure or assignment,
confidentiality, non competition agreement or other restrictive covenant or
any
Order as a result of such employee's, consultant's or independent contractor's
employment by the Acquired Companies or any Subsidiary or any services rendered
by such employee, consultant or independent contractor.
(l) All
Intellectual Property that has been distributed, sold or licensed to a third
party by the Acquired Companies or any of their Subsidiaries that is covered
by
a currently effective warranty conforms to and performs in accordance with
the
representations and warranties provided with respect to such Intellectual
Property by or on behalf of the Acquired Companies or such Subsidiary for the
time period during which such representations and warranties apply.
4.16 Absence
of Certain Changes or Events.
Since
the Balance Sheet Date to the date of this Agreement (with respect to the
representation and warranty made as of the date of this Agreement) and to the
Closing Date (with respect to the representation and warranty made as of the
Closing Date):
(a)
there
has
not been any material adverse change in the business, financial condition,
operations or results of operations of the Acquired Companies and their
Subsidiaries taken as a whole;
(b)
neither
the Acquired Companies nor any of their Subsidiaries has amended or changed
its
Charter Documents;
(c)
neither
the Acquired Companies nor any of their Subsidiaries has declared, set aside
or
paid any dividend or other distribution (whether in cash, stock or property)
with respect to any Equity Security or any other security;
(d)
neither
the Acquired Companies nor any of their Subsidiaries has split, combined or
reclassified any Equity Security or other security, or issued, or authorized
for
issuance, any Equity Security or other security;
(e) neither
the Acquired Companies nor any of their Subsidiaries has altered any term of
any
outstanding Equity Security or other security;
(f) neither
the Acquired Companies nor any of their Subsidiaries has (i) increased or
modified the compensation or benefits payable or to become payable by the
Acquired Companies or any of their Subsidiaries to any of its current or former
directors, employees or consultants, (ii) increased or modified any bonus,
severance, termination, pension, insurance or other employee benefit plan,
payment or arrangement made to, for or with any current or former directors,
employees or consultants of the Acquired Companies or any of their Subsidiaries,
or (iii) entered into any employment, severance or termination agreement;
(g) other
than (i) the sale of inventory in the Ordinary Course of Business, and (ii)
the
grant of non-exclusive Acquired Company Licenses in the Ordinary Course of
Business, neither the Acquired Companies nor any of their Subsidiaries has
sold,
leased, transferred or assigned any property or assets of the Acquired Companies
or any such Subsidiary;
(h) neither
the Acquired Companies nor any of their Subsidiaries has incurred, assumed
or
guaranteed any Indebtedness;
(i) neither
the Acquired Companies nor any of their Subsidiaries has created or assumed
any
Lien on any asset (other than Liens arising under lease financing arrangements
existing as of the Balance Sheet Date and Liens for Taxes not yet due and
payable with respect to which the Acquired Companies and their Subsidiaries
maintain adequate reserves);
(j) neither
the Acquired Companies nor any of their Subsidiaries has made any loan, advance
or capital contribution to, or investment in, any Person other than travel
loans
or advances in the Ordinary Course of Business;
(k) neither
the Acquired Companies nor any of their Subsidiaries has entered into any
Contract or transaction involving more than $25,000 or outside the Ordinary
Course of Business;
(l) neither
the Acquired Companies nor any of their Subsidiaries and, to Sellers’ Knowledge,
no other party has accelerated, terminated, modified or cancelled any Contract,
Acquired Company License or Third Party License or transaction involving more
than $25,000;
(m) neither
the Acquired Companies nor any of their Subsidiaries has sold, transferred,
pledged, assigned or granted, and there has been no material reduction in the
value of, any Acquired Company Intellectual Property other than grant of
non-exclusive Acquired Company Licenses in the Ordinary Course of Business;
(n) there
has
not been any trade dispute as defined by section 218 Trade Union and Labour
Relations (Consolidation) Act 1992.
(o) to
Sellers’ Knowledge, there has not been any violation of or conflict with any Law
to which the business, operations, assets or properties of the Acquired
Companies or any of their Subsidiaries are subject;
(p) none
of
Sellers, the Acquired Companies or the Subsidiaries of the Acquired Companies
has agreed or entered into any arrangement to take any action which, if taken
prior to the date hereof, would have made any representation or warranty set
forth in this Article IV untrue or incorrect;
(q) there
has
not been any material damage, destruction or loss with respect to the property
and assets of the Acquired Companies or any of their Subsidiaries, whether
or
not covered by insurance;
(r) none
of
the Acquired Companies or any Subsidiary of the Acquired Companies has made
any
change in accounting practices;
(s) none
of
the Acquired Companies or any Subsidiary of the Acquired Companies has made
any
Tax election, changed its method of Tax accounting or settled any claim for
Taxes; or
(t) none
of
Seller, the Acquired Companies or any Subsidiary of the Acquired Companies
has
agreed, whether in writing or otherwise, to do any of the
foregoing.
4.17 Contracts.
(a) The
Seller Disclosure Schedule contains a complete and accurate list of each
Contract or series of related Contracts to which the Acquired Companies or
any
of their Subsidiaries is a party or is subject, or by which any of their
respective assets are bound:
(i)
for
the purchase of materials, supplies, goods, services, equipment or other assets
and which involves (A) annual payments by the Acquired Companies or any of
their
Subsidiaries of $25,000 or more, or (B) aggregate payments by the Acquired
Companies or any of their Subsidiaries of $100,000 or more;
(ii)
(A)
for the sale by the Acquired Companies or any of their Subsidiaries of
materials, supplies, goods, services, equipment or other assets, and which
involves a specified annual minimum dollar sales amount by the Acquired
Companies or any of their Subsidiaries of $25,000 or more, or (B) pursuant
to
which the Acquired Companies or any of their Subsidiaries received payments
of
more than $100,000 in the year ended December 31, 2007;
(iii)
that requires the Acquired Companies or any of their Subsidiaries to purchase
its total requirements of any product or service from a third party;
(iv)
that
(A) continues over a period of more than six months from the date hereof or
(B)
involves payments to or by the Acquired Companies or any of their Subsidiaries
exceeding $25,000, other than arrangements disclosed pursuant to the preceding
subsections (i) and (ii);
(v)
that
is a partnership, joint venture or similar Contract;
(vi)
that
is a distribution, dealer, representative or sales agency Contract;
(vii)
that is a (A) Lease or (B) Contract for the lease of personal property, in
either case which provides for payments to or by the Acquired Companies or
any
of their Subsidiaries in any one case of $25,000 or more annually or $100,000
or
more over the term of the lease;
(viii)
that provides for the indemnification by the Acquired Companies or any of their
Subsidiaries of any Person, the undertaking by the Acquired Companies or any
of
their Subsidiaries to be responsible for consequential damages, or the
assumption by the Acquired Companies or any of their Subsidiaries of any Tax,
environmental or other Liability;
(ix)
with
any Governmental Entity;
(x)
that
is a note, debenture, bond, equipment trust, letter of credit, loan or other
Contract for Indebtedness or lending of money (other than to employees for
travel expenses in the Ordinary Course of Business) or Contract for a line
of
credit or guarantee, pledge or undertaking of the Indebtedness of any other
Person;
(xi)
for
a charitable or political contribution in any one case in excess of $1,000
or in
the aggregate greater than $5,000;
(xii)
for
any capital expenditure or leasehold improvement in any one case in excess
of
$5,000 or in the aggregate greater than $25,000;
(xiii)
that restrains the ability of the Acquired Companies or any of their
Subsidiaries to engage or compete in any manner or in any business;
(xiv)
that is an Acquired Company License or Third Party License;
(xv)
relating to the acquisition or disposition of any material business (whether
by
merger, sale of stock, sale of assets or otherwise);
(xvi)
that is a collective bargaining Contract or other Contract with any labor
organization, union or association; and
(xvii)
that is otherwise material to the Acquired Companies and their Subsidiaries
as a
whole and not previously disclosed pursuant to this Section 4.17.
(b)
Each
Contract required to be listed in the Seller Disclosure Schedule (collectively,
the "Material
Contracts")
is
valid and enforceable in accordance with its terms. The Acquired Companies
or a
Subsidiary of the Acquired Companies, as applicable, has complied with and
is in
compliance with, and to Sellers’ Knowledge, all other parties thereto have
complied with and are in compliance with,
the
provisions of each Material Contract.
(c) Neither
the Acquired Companies nor any of their Subsidiaries is, and to Sellers’
Knowledge, no other party thereto is, in default in the performance, observance
or fulfillment of any obligation, covenant or condition contained in any
Material Contract, and neither the Acquired Companies nor any of their
Subsidiaries has given or received notice to or from any Person relating to
any
such alleged or potential default that has not been cured. No event has occurred
which with or without the giving of notice or lapse of time, or both, may
conflict with or result in a violation or breach of,
or
give any Person the right to exercise any remedy under or accelerate the
maturity or performance of, or cancel, terminate or modify, any Material
Contract.
(d) None
of
the rights of the Acquired Companies or any of their Subsidiaries under any
Material Contract will be terminated or impaired by the completion of the
Acquisition, and all such rights contained in such Material Contract will be
enforceable by the Acquired Companies or a Subsidiary of the Acquired Companies
after the Acquisition without the consent or agreement of any other Person
and
without payment of any kind. The Seller Disclosure Schedule sets forth an
accurate and complete list of all Material Contracts that require the consent
of
any third party to the Acquisition, a consent to assignment in connection with
the Acquisition or that are otherwise subject to termination, cancellation,
imposition of additional obligations or loss of rights in connection with the
Acquisition.
(e) Sellers
have delivered accurate and complete copies of each Material Contract to Buyer.
(f) All
Contracts other than Material Contracts to which the Acquired Companies or
any
of their Subsidiaries is a party or is subject, or by which any of their
respective assets are bound (collectively, the "Minor
Contracts")
are to
Sellers’ Knowledge, in all material respects valid and enforceable in accordance
with their terms. Neither the Acquired Companies nor any of their Subsidiaries
is in default in the performance, observance or fulfillment of any obligation,
covenant or condition contained therein, and no event has occurred which with
or
without the giving of notice or lapse of time, or both, would constitute a
default thereunder by the Acquired Companies or any of their Subsidiaries,
except in either case where such default would not and would not reasonably
be
expected to have, individually or collectively, a material adverse effect on
the
Acquired Companies and their Subsidiaries taken as a whole. None of the rights
of the Acquired Companies or any of their Subsidiaries under the Minor Contracts
will be terminated or impaired by the completion of the Acquisition, except
where any such termination or impairment would not and would not reasonably
be
expected to have, individually or collectively, a material adverse effect on
the
Acquired Companies and their Subsidiaries taken as a whole.
4.18 Litigation.
(a)
There is no action, suit or proceeding, claim, arbitration, litigation or
investigation (each, an "Action")
(i)
pending or, to Sellers’ Knowledge, threatened against or affecting the Acquired
Companies or any of their Subsidiaries, or (ii) that challenges or seeks to
prevent, enjoin or otherwise delay the transactions contemplated by this
Agreement. No event has occurred or circumstances exist that may give rise
or
serve as a basis for any such Action. There is no Action against any current
or,
to Sellers’ Knowledge, former director or employee of the Acquired Companies or
any of their Subsidiaries with respect to which the Acquired Companies or any
such Subsidiary has or is reasonably likely to have an indemnification
obligation.
(b) There
is
no unsatisfied judgment, penalty or award against or affecting the Acquired
Companies or any of their Subsidiaries or any of their respective properties
or
assets. There is no award, injunction, judgment, decree, order, ruling, subpoena
or verdict or other decision (each, an "Order")
entered, issued or rendered by any Governmental Entity to which the Acquired
Companies or any of their Subsidiaries or any of their respective properties
or
assets are subject. Each of the Acquired Companies and their Subsidiaries is
in
compliance with the terms of each Order required to be set forth on the Seller
Disclosure Schedule. No event has occurred or circumstances exist that may
constitute or result in (with or without notice or lapse of time) a violation
of
any such Order.
4.19 Employee
Benefits. (a)
The
Seller Companies have not prior to Completion paid, provided or contributed
towards, and the Seller Companies have not proposed nor are under any
obligation, liability or commitment however established and whether or not
legally enforceable to pay, provide or contribute towards, any benefits under
a
pension scheme (as defined by section 150 of the Finance Act 2004) for or in
respect of any present or past officer or employee (or any spouse, child or
dependant of any of them) of the Seller Companies or of any predecessor in
business of the Seller Companies.
(b) The
Seller Disclosure Schedule contains full and correct details of all benefits
payable to any officers or employees of the Seller Companies under the Health
Plan or otherwise and all of the governing documentation of the Health Plan,
including, without limitation to the generality of the foregoing, copies of
all
trust deeds and rules and amendments and additions to them, members’
announcements and booklets. The documents in respect of the Health Plan
disclosed in the Seller Disclosure Schedule give full particulars of the
benefits and entitlements payable or prospectively payable under the Health
Plan
in respect of the employees or their spouses or dependants.
(c) There
has
been supplied to the Buyer a list of all employees who are members of the Health
Plan, including full details of length of service, date of birth, sex,
pensionable salary and length of membership, and a list of all employees who
could become eligible to join the Health Plan upon the satisfaction of any
conditions of eligibility.
4.20 Labor
and Employment Matters.
(a) Terms
of Employment.
(i) The
Seller Disclosure Schedule sets forth a list of all employees and consultants
of
the Acquired Companies and their Subsidiaries (including full particulars of
the
date of commencement of employment or engagement, period of continuous
employment in respect of employees, job title or grade, age, salary and all
material benefits (including pension and medical insurance coverage) provided
and the applicable terms and conditions of employment and/or engagement) as
of
the date hereof. All such information is true, complete and accurate.
(ii) All
employees and consultants of the Acquired Companies and their Subsidiaries
may
be terminated by the Acquired Companies or a Subsidiary on three months notice
at any time with or without cause and without any severance (other than
statutory severance) or other Liability to the Acquired Companies or such
Subsidiary. The Seller Disclosure Schedule sets forth a list of any written,
and
a written summary of any oral, employment, consulting, termination or severance
agreements to which the Acquired Companies or any of their Subsidiaries is
a
party or by which any of them is bound ("Employment
Agreements").
The
individuals listed in Section 4.20(a) of the Seller Disclosure Schedule have
been properly characterized as independent contractors by HM Revenue and
Customs.
(iii) No
employees of the Acquired Companies and their Subsidiaries are on secondment,
maternity leave or absent on other long term leave of absence.
(iv) No
outstanding offer of employment or engagement has been made by the Acquired
Companies and their Subsidiaries to any person nor has any person accepted
an
offer of employment or engagement made by the Acquired Companies and their
Subsidiaries but who has not yet commenced such employment or
engagement.
(b) Bonus
and Other Schemes.
(i)
The Acquired Companies and their Subsidiaries do not have in existence or
participate in any share incentive scheme or share option scheme nor are they
proposing to introduce or participate in any such scheme.
(ii) There
are
no schemes (whether contractual or discretionary) in operation by, or in
relation to, the Acquired Companies and their Subsidiaries under which any
director or employee of the Acquired Companies and their Subsidiaries or former
director or employee is entitled to any bonus, profit-share, commission or
other
incentive scheme (whether calculated by reference to the whole or part of the
turnover, profits/losses or sales of the Acquired Companies and their
Subsidiaries or otherwise).
(iii) The
Acquired Companies and their Subsidiaries are not bound nor accustomed to pay
any monies (other than in respect of contractual remuneration or emoluments
of
employment or pension benefits) to or for the benefit of any director or
employee of the Acquired Companies and their Subsidiaries.
(c) Changes
in remuneration and terms and conditions.
(i)
Since January 1, 2008, no material change has been made in the rate of
remuneration, emoluments, pension benefits or other terms of employment, of
any
director, employee or consultant of the Acquired Companies and the
subsidiaries;
(ii) No
agreement has been reached with any director, employee, trade union or other
body representing employees that will or may on a future date result in an
increase in any director’s or employee’s rate of remuneration or enhanced
emoluments of employment or pension benefits.
(d) Compliance.
(i)
Each person employed, hired or engaged by the Acquired Companies and their
Subsidiaries has valid and subsisting permission to live and work full time
in
the United Kingdom in the role in which they are employed, hired or engaged
for
the purposes of section 8 of the Asylum and Immigration Act 1996 or sections
15
and 21 of the Immigration, Asylum and Nationality Act 2006 and the Acquired
Companies and their Subsidiaries have complied with their obligations under
such
legislation.
(ii) In
relation to any contract of employment between the Acquired Companies and their
Subsidiaries and any of their directors, all statutory requirements (including
without limitation, and provision for enforcement of fair dealing by directors)
have been fulfilled.
(iii) In
relation to each of its employees and so far as relevant in relation to each
of
its former employees, consultants and workers the Acquired Companies and their
Subsidiaries have complied with all statutes, regulations, codes of conduct,
collective agreements, terms and conditions of employment, orders and awards
relevant to their conditions of service or to the relations between it and
its
employees, consultants and workers (or former employees, consultants and workers
as the case may be) or any recognised trade union.
(iv) During
the period of 6 years preceding the date of this Agreement, the Acquired
Companies and their Subsidiaries have not been a party to any "relevant
transfer" (as defined in the Transfer of Undertakings (Protection of Employment)
Regulations 2006, as amended).
(e) Employment
Claims.
(i)
There are no legal or other proceedings between the Acquired Companies and
their
Subsidiaries on the one hand and any director, employee, consultant or former
director or employee of the Acquired Companies and their Subsidiaries on the
other hand nor are any such proceedings pending or threatened.
(ii) There
are
no claims pending or, to Sellers’ Knowledge, threatened or capable of arising
against the Acquired Companies and their Subsidiaries by an employee,
independent contractor or any other third party, in respect of any accident,
disease, illness or injury, which are not fully covered by
insurance.
(iii) In
the 12
months preceding this Agreement, no improvement or prohibition notice has been
served on the Acquired Companies and their Subsidiaries in connection with
the
conduct of its business by any body responsible for health and
safety.
(f) Discrimination.
(i) Each
of
the Acquired Companies and their Subsidiaries has complied with each, and is
not
in violation of any, Law relating to unlawful discrimination and equal pay
and
there are, and have been, no violations of any other Law respecting the hiring,
hours, wages, occupational safety and health, employment, promotion, termination
or benefits of any employee or other Person.
(ii) There
are
no terms or conditions under which any director or employee of the Acquired
Companies and their Subsidiaries is employed nor has anything occurred or not
occurred that may give rise to any claim for any form of unlawful
discriminationor equal pay either under domestic United Kingdom, European law
or
the laws of any other jurisdiction to the extent applicable whether by such
director or employee or a former director or employee or a prospective director
or employee or otherwise.
(iii) In
the 12
months preceding this Agreement, there has been no recommendation made by an
employment tribunal nor any investigation by any body responsible for
investigating or enforcing matters relating to any unlawful
discrimination.
(g) Effect
of Sale.
(i) No
director nor any employee of the Acquired Companies and their Subsidiaries
has
given or received notice terminating his employment or office, except as
expressly contemplated in this agreement and no such director or employee will
be entitled to give such notice as a result of the provisions of this
agreement.
(ii) No
director or employee will be entitled by reason of the transactions contemplated
by this agreement to any one-off payment, bonus or commission or to terminate
his employment other than on normal contractual terms.
(h) Redundancies.
(i)
During the 12 months preceding the date of this Agreement, the Acquired
Companies and their Subsidiaries have not given notice of any redundancies
to
the relevant Secretary of State or started consultations with any trade union
under Chapter II of Part IV Trade Union and Labour Relations (Consolidation
)
Act 1992 or failed to comply with any of their obligations under Chapter II
of
Part IV of such Act.
(ii)
There are no current severance, redundancy or other similar agreements or
schemes conferring any entitlement on any of the directors and employees of
the
Acquired Companies and their Subsidiaries to receive any payment on the
termination of their employment (except for contractual notice
pay).
(i) Collective
Agreements.
The
Acquired Companies and their Subsidiaries have not entered into any collective
agreement or arrangement with nor do they recognise a trade union, works
council, staff association or other body representing any of their employees
nor
have they done any act which might be construed as recognition.
(j) Industrial
disputes.
(i)
Neither the Acquired Companies and their Subsidiaries nor their directors or
employees is involved in any actual or threatened trade dispute as defined
by
section 218 Trade Union and Labour Relations (Consolidation) Act
1992.
(ii) No
dispute has arisen during the 6 years preceding the date of this Agreement
between the Acquired Companies and their Subsidiaries and any material number
or
category of their employees (or any trade union or other body representing
all
or any of such employees) and there are no facts, matters or circumstances
which
may give rise to any such dispute.
4.21 Environmental.
Except
as disclosed in the Seller Disclosure Schedule, (a) each of the Acquired
Companies complies with all applicable Laws protecting the quality of the
ambient air, soil, surface water or groundwater or otherwise relating to
pollution, contamination or protection of the environment and possesses and
complies with all applicable Permits required under any such Laws to operate
as
it currently operates and (b) there are no legal proceedings pending or, to
the
Knowledge of Sellers, threatened, that seek to enforce or impose liability
under
any such Law against the Acquired Companies, or to revoke or modify any such
Permit held by the Acquired Companies.
4.22 Insurance.
(a) The
Seller Disclosure Schedule sets forth (i) an accurate and complete list of
each
insurance policy which covers the Acquired Companies or any of their
Subsidiaries or their respective businesses, properties, assets, directors
or
employees (the "Policies")
and
(ii) a list of all pending claims and the claims history for the Acquired
Companies and their Subsidiaries during the current year and the preceding
three
years (including with respect to insurance obtained but not currently
maintained). There are no pending claims under any of such Policies as to which
coverage has been questioned, denied or disputed by the insurer or in respect
of
which the insurer has reserved its rights.
(b) All
Policies are issued by an insurer that is reputable, are in full force and
effect and, to Sellers’ Knowledge are enforceable in accordance with their terms
and will continue in full force and effect with respect to the Acquired
Companies and their Subsidiaries following the Acquisition. Such Policies
provide adequate insurance coverage for the Acquired Companies and their
Subsidiaries and their respective businesses, properties, assets and employees,
and are sufficient for compliance with all Laws and Contracts to which the
Acquired Companies or any of their Subsidiaries is a party or by which it is
bound.
(c) All
premiums due under the Policies have been paid in full or, with respect to
premiums not yet due, accrued. Neither the Acquired Companies nor any Subsidiary
of the Acquired Companies has received a notice of cancellation of any Policy
or
of any material changes that are required in the conduct of the business of
the
Acquired Companies and their Subsidiaries as a condition to the continuation
of
coverage under, or renewal of, any such Policy. There is no existing default
or
event which, with the giving of notice or lapse of time or both, would
constitute a default under any Policy or entitle any insurer to terminate or
cancel any Policy. Sellers have no Knowledge of any threatened termination
of,
or material premium increase with respect to, any Policy and none of such
Policies provides for retroactive premium adjustments.
4.23 Product
Warranty.
(a)
There are no warranties (express or implied) outstanding with respect to any
products currently or formerly manufactured, sold, distributed or licensed,
or
any services rendered, by the Acquired Companies or any of their Subsidiaries
("Products"),
beyond that set forth in the applicable standard conditions of sale, copies
of
which are included in the Seller Disclosure Schedule.
(b) Each
Product manufactured, sold, distributed or licensed by the Acquired Companies
or
any of their Subsidiaries has been in conformity with all applicable contractual
commitments and warranties. There are no material design, manufacturing or
other
material defects, latent or otherwise, with respect to any Products and such
Products are not toxic when used in accordance with their intended use. Each
Product which has been sold or shipped prior to Closing contains all warnings
required by applicable Law and such warnings are in accordance with reasonable
industry practice.
(c) The
Interim Balance Sheet reflects adequate reserves (in accordance with UK GAAP)
for product design and warranty claims and other damages in connection with
any
Product manufactured, shipped or sold by the Acquired Companies or any of their
Subsidiaries on or prior to the Interim Balance Sheet Date. The accounting
records of the Acquired Companies and their Subsidiaries will reflect adequate
reserves (in accordance with UK GAAP) for all such claims in connection with
Products manufactured, shipped or sold by the Acquired Companies and their
Subsidiaries on or prior to the Closing Date.
4.24 Books
and Records.
The
minute books (containing the records of the meetings, or written consents in
lieu of such meetings, of the stockholders, the board of directors and any
committees of the board of directors), the stock certificate books, and the
stock record books of the Acquired Companies and their Subsidiaries are correct
and complete, and have been maintained in accordance with the Companies Acts
and
otherwise in accordance with sound business practices. The minute books of
the
Acquired Companies and their Subsidiaries contain accurate and complete records
of all meetings, or actions taken by written consent, of the stockholders,
the
board of directors and any committees of the board of directors, of the Acquired
Companies and their Subsidiaries, and no meeting, or action by written consent
in lieu of such meeting, of any such stockholders, board of directors or
committee of such board of directors, has been held for which minutes have
not
been prepared and not contained in the minute books. At the Closing, all of
the
books and records of the Acquired Companies and their Subsidiaries will be
in
the possession of the Acquired Companies. At the Closing, Sellers will deliver,
or cause to be delivered, to Buyer or its designee all of the minute books
of
the Acquired Companies and their Subsidiaries.
4.25 Suppliers
and Aggregators.
The
Seller Disclosure Schedule sets forth with respect to each of the Acquired
Companies and their Subsidiaries (a) each supplier from whom purchases exceeded
$25,000 in the year ended December 31, 2006 or December 31, 2007 or that is
otherwise material to the Acquired Companies or any of their Subsidiaries,
(b)
each supplier who constitutes a sole source of supply to the Acquired Companies
or any of their Subsidiaries; and (c) with respect to each year ended December
31, 2006 or December 31, 2007 and the eight-month period ended August 31, 2008,
each aggregator that has contributed in excess of 15% percent of the Companies’
revenues on a consolidated basis for such year or period. The relationships
of
each of the Acquired Companies and their Subsidiaries with each such supplier
and aggregator are good commercial working relationships. No such supplier
or
aggregator has canceled or otherwise terminated, or threatened to cancel or
otherwise terminate, its relationship with the Acquired Companies or any of
their Subsidiaries. None of Sellers, the Acquired Companies or the Subsidiaries
of the Acquired Companies has received notice that any such supplier or
aggregator may cancel or otherwise materially and adversely modify its
relationship with the Acquired Companies or any Subsidiary of the Acquired
Companies or limit its services, supplies or materials to the Acquired Companies
or any Subsidiary of the Acquired Companies, either as a result of the
Acquisition or otherwise.
4.26 Brokers
or Finders.
Sellers
represent, as to themselves and their Affiliates, including the Acquired
Companies and the Subsidiaries of the Acquired Companies, that no agent, broker,
investment banker or other firm or person is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any
of
the transactions contemplated by this Agreement.
4.27 Bank
Accounts.
The
Seller Disclosure Schedule sets forth the name of each bank, safe deposit
company or other financial institution in which the Acquired Companies or any
of
their Subsidiaries has an account, lock box or safe deposit box and the names
of
all persons authorized to draw thereon or have access thereto.
4.28 Powers
of Attorney.
Except
as set forth in the Seller Disclosure Schedule, there are no outstanding powers
of attorney executed by or on behalf of the Acquired Companies or any of their
Subsidiaries in favor of any Person.
4.29 Fierce
Sale.
The
total costs and expenses that would be incurred by AMV in connection with a
shut-down, dissolution, liquidation or similar closing of the business of Fierce
as it currently exists without any material change or the entering into of
any
material commitment prior to such event (except for the costs and expenses
of
the acquisition of the Sky Channel) (a “Fierce Sale”),
prior
to January 1, 2009 are less than £25,000, Sellers acknowledge that in the event
that the total costs and expenses of such a Fierce Sale exceed £25,000, then the
excess amount of such costs and expenses over £25,000 shall be borne by Sellers
in accordance with Article X. In the event that a Fierce Sale occurs on or
after
January 1, 2009, then the costs and expenses incurred in connection with such
Fierce Sale shall be borne by Buyer.
4.30 Completeness
of Disclosure.
No
representation or warranty by Sellers in this Agreement, and no statement made
by Sellers in the Seller Disclosure Schedule, or any certificate or other
document furnished or to be furnished to Buyer pursuant hereto, or in connection
with the execution or performance of this Agreement, when taken together,
contains or will at the Closing contain any untrue statement of a material
fact
or omits or will omit to state a material fact required to be stated herein
or
therein or necessary to make any statement herein or therein not misleading.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
represents and warrants to Sellers that each statement contained in this Article
IV is true and correct as of the date hereof, except as set forth in the
disclosure schedule dated and delivered as of the date hereof by Buyer to
Sellers (the "Buyer
Disclosure Schedule"),
which
is attached to this Agreement and is designated therein as being the Buyer
Disclosure Schedule. The Buyer Disclosure Schedule shall be arranged in sections
corresponding to each Section of this Article V. Each exception to a
representation and warranty set forth in the Buyer Disclosure Schedule shall
be
deemed to qualify the specific representation and warranty which is referenced
in the applicable section of the Buyer Disclosure Schedule, and no other
representation or warranty.
5.1 Organization
and Good Standing.
Buyer
is a corporation duly organized, validly existing and in good standing under
the
laws of the jurisdiction of its incorporation, has all requisite corporate
power
to own, lease and operate its properties and to carry on its business as now
being conducted.
5.2 Authority
and Enforceability.
(a) Buyer
has
the requisite power and authority to enter into this Agreement and to complete
the Acquisition. The execution and delivery of this Agreement and the completion
of the Acquisition have been duly authorized by all necessary corporate action
on the part of Buyer. This Agreement has been duly executed and delivered by
Buyer and, assuming due authorization, execution and delivery by Sellers,
constitutes the valid and binding obligation of Buyer, enforceable against
it in
accordance with its terms.
(b) The
shares of Buyer Common Stock to be issued by Buyer in connection with the
Acquisition, upon issuance in accordance with the terms of this Agreement,
will
be duly authorized and validly issued, and, assuming that the representations
and warranties of the Sellers contained herein and in the Regulation S
Certificate are true, will be issued in accordance with the exemption provisions
of the Securities Act and in compliance with state and Federal securities
laws.
(c) Buyer
is
not a party or subject to any stockholder agreement, voting agreement, voting
trust or any other similar arrangement which has the effect of restricting
or
limiting the transfer, voting or other rights associated with the Stock
Consideration.
5.3 No
Conflicts; Consents.
(a) Except
as
set forth on Schedule 5.3 of the Buyer Disclosure Schedule, the execution and
delivery of this Agreement by Buyer does not, and the completion of the
Acquisition by Buyer will not, (i) violate the provisions of any of the Charter
Documents of Buyer, (ii) violate any Contract to which Buyer is a party, (iii)
to the knowledge of Buyer, violate any Law of any Governmental Entity applicable
to Buyer on the date hereof, or (iv) to the knowledge of Buyer, result in the
creation of any Liens upon any of the assets owned or used by Buyer, except
in
each such case where such violation or Lien would not reasonably be expected
materially to impair or delay the ability of Buyer to perform its obligations
under this Agreement or consummate the Acquisition.
(b) No
consent of or filing with any Governmental Entity is required by Buyer in
connection with the execution and delivery of this Agreement and the completion
of the Acquisition, except for (i) such filings as may be required under the
antitrust or competition Laws of any foreign country, (ii) such consents,
approvals, orders, authorizations, registrations, declarations and filings
as
may be required under applicable federal and state securities laws and the
laws
of any foreign country, and (iii) such consents or filings the failure to obtain
which would not reasonably be expected to materially impair or delay the ability
of Buyer to perform its obligations under this Agreement or complete the
Acquisition.
5.4 Litigation.
There
is no Action pending or, to the knowledge of Buyer, threatened against or
affecting, Buyer which (a) in any manner challenges or seeks to enjoin, alter
or
materially delay the Acquisition, or (b) would reasonably be expected to have
a
material adverse effect on Buyer.
5.5 Purchase
for Investment.
The
Shares purchased by Buyer pursuant to this Agreement are being acquired for
investment only and not with a view to any public distribution thereof. Buyer
shall not offer to sell or otherwise dispose of, or sell or otherwise dispose
of, the Shares so acquired by it in violation of any of the registration
requirements of the Securities Act.
5.6 SEC
Filings; Financial Statements.
(a)
Buyer has made available to the Sellers a correct and complete copy of each
report, registration statement and definitive proxy statement filed by Buyer
with the Securities and Exchange Commission (the “SEC”)
(the
“Buyer
SEC Reports”)
on or
since January 1, 2008, which are all the forms, reports and documents required
to be filed by Buyer with the SEC since such date. As of their respective dates
the Buyer SEC Reports: (i) were prepared in accordance and complied in all
material respects with the requirements of the Securities Act or the Exchange
Act of 1934, as amended (the “Exchange Act”),
as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such Buyer SEC Reports, and (ii) did not at the time they were filed (and
if
amended or superseded by a filing prior to the date of this Agreement then
on
the date of such filing and as so amended or superseded) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they were made, not misleading. Except to the
extent set forth in the preceding sentence, Buyer makes no representation or
warranty whatsoever concerning the Buyer SEC Reports as of any time other than
the time they were filed.
(b) Each
set
of financial statements (including, in each case, any related notes thereto)
contained in Buyer SEC Reports, including each Buyer SEC Report filed after
the
date hereof until the Closing, complied or will comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, was or will be prepared in accordance with US GAAP applied
on a
consistent basis throughout the periods involved (except as may be indicated
in
the notes thereto or, in the case of unaudited statements, do not contain
footnotes as permitted by Form 10-Q of the Exchange Act) and each fairly
presents or will fairly present in all material respects the financial position
of Buyer at the respective dates thereof and the results of its operations
and
cash flows for the periods indicated, except that the unaudited interim
financial statements were, are or will be subject to normal adjustments which
were not or are not expected to have a material adverse effect on Buyer taken
as
a whole.
5.7 Brokers
or Finders.
Buyer
represents, as to itself and its Affiliates, that no agent, broker, investment
banker or other firm or person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee in connection with any
of
the transactions contemplated by this Agreement.
5.8 Indebtedness.
Except
for as set forth in that certain Amendment and Waiver to Senior Secured Note,
entered into as of February 12, 2008, relating to that certain Senior Secured
Note issued by Twistbox Entertainment, Inc. (a wholly-owned subsidiary of Buyer)
to ValueAct Smallcap Master Fund, L.P. (“ValueAct”),
as
amended on February 12, 2008, due on January 30, 2010 (the “ValueAct
Note”),
Buyer
has not agreed to assume, incur or guarantee any Indebtedness. The ValueAct
Note
is valid and enforceable in accordance with its terms. Buyer and its
wholly-owned subsidiary, Twistbox Entertainment, Inc., have complied with and
are in compliance with the provisions of the ValueAct Note applicable to them.
5.9 Completeness
of Disclosure.
No
representation or warranty by Buyer in this Agreement, and no statement made
by
Buyer in the Buyer Disclosure Schedule, or any certificate or other document
furnished or to be furnished to Sellers pursuant hereto, or in connection with
the execution or performance of this Agreement, when taken together, contains
or
will at the Closing contain any untrue statement of a material fact or omits
or
will omit to state a material fact required to be stated herein or therein
or
necessary to make any statement herein or therein not misleading.
ARTICLE
VI
COVENANTS
OF SELLERS
6.1 Conduct
of Business.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement or the Closing Date, except with the prior
written consent of Buyer, Founding Sellers shall cause the Acquired Companies
and each Subsidiary of the Acquired Companies to:
(a) maintain
its corporate existence, pay its debts and Taxes when due, pay or perform other
obligations when due, and carry on its business in the usual, regular and
ordinary course in a manner consistent with past practice and in accordance
with
the provisions of this Agreement and in compliance with all Laws, Authorizations
and Contracts;
(b) use
its
reasonable best efforts consistent with past practices and policies to preserve
intact its present business organization, keep available the services of its
present employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with
it,
to the end that its goodwill and ongoing businesses be substantially unimpaired
on the Closing Date;
(c) maintain
its facilities and assets in the same state of repair, order and conditions
as
they are on the date hereof, reasonable wear and tear excepted;
(d) maintain
its books and records in accordance with past practice, and use its reasonable
best efforts to maintain in full force and effect all Authorizations and
Policies;
(e) promptly
notify Buyer of any event or occurrence not in the Ordinary Course of Business;
and
(f) use
its
reasonable best efforts to conduct its business in such a manner that on the
Closing Date the representations and warranties of Sellers contained in this
Agreement shall be true and correct, as though such representations and
warranties were made on and as of such date, and Sellers shall use their
reasonable best efforts to cause all of the conditions to the obligations of
Buyer under this Agreement to be satisfied on or prior to the Closing
Date.
6.2 Negative
Covenants.
Except
as expressly provided in this Agreement, during the period from the date of
this
Agreement and continuing until the earlier of the termination of this Agreement
or the Closing Date, Founding Sellers shall not permit the Acquired Companies
or any Subsidiary of the Acquired Companies to, without the prior written
consent of Buyer except in the Ordinary Course of Business and consistent with
past practices:
(a) adopt
or
propose any amendment to the Charter Documents of the Acquired Companies or
any
Subsidiary of the Acquired Companies;
(b) declare,
set aside or pay any dividend or other distribution (whether in cash, stock
or
other property) with respect to any Equity Security or other security;
(c) issue
or
authorize for issuance any Equity Security or other security, or make any change
in any issued and outstanding Equity Security or other security, or redeem,
purchase or otherwise acquire any Equity Security or other
security;
(d) (i)
other
than pursuant to a written agreement or the schemes disclosed in the Seller
Disclosure Schedule in the amount required thereunder, (A) increase or modify
the compensation or benefits payable or to become payable by the Acquired
Companies or any Subsidiary of the Acquired Companies to any of its current
or
former directors, employees or consultants, or (B) increase or modify any bonus,
severance, termination, pension or insurance, payment or arrangement made to,
for or with any current or former directors, employees or consultants of the
Acquired Companies or any Subsidiary of the Acquired Companies, or (ii) enter
into any employment, severance or termination agreement;
(e) establish,
adopt, enter into, amend or terminate any schemes, collective bargaining,
thrift, compensation or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any current or former directors, employees or
consultants of the Acquired Companies or any Subsidiary of the Acquired
Companies;
(f) sell,
lease, transfer or assign any property or assets of the Acquired Companies
or
any Subsidiary of the Acquired Companies, except (i) sales of inventory in
the
Ordinary Course of Business consistent with past practice and (ii) the grant
of
non-exclusive Acquired Company Licenses in the Ordinary Course of Business
consistent with past practice;
(g) assume,
incur or guarantee any Indebtedness, except for endorsements for collection
in
the Ordinary Course of Business, or modify the terms of any existing
Indebtedness;
(h) mortgage,
pledge or subject to Liens any properties or assets of the Acquired Companies
or
any Subsidiary of the Acquired Companies;
(i) make
any
loans, advances or capital contributions to, or investments in, any Person
other
than travel loans or advances in the Ordinary Course of Business consistent
with
past practice;
(j) (i)
amend, modify, cancel or waive any rights under any Material Contract, (ii)
enter into any Contract which, if entered into prior to the date hereof, would
have been required to be set forth in the Seller Disclosure Schedule, or (iii)
otherwise take any action or engage in any transaction that is material to
the
Acquired Companies and their Subsidiaries taken as a whole;
(k) make
any
capital expenditure, or commit to make any capital expenditure which in any
one
case exceeds $5,000 or capital expenditures which in the aggregate exceed
$25,000;
(l) acquire
any assets other than inventory in the Ordinary Course of Business consistent
with past practice;
(m) make
any
filings or registrations, with any Governmental Entity, except routine filings
and registrations made in the Ordinary Course of Business;
(n) be
party
to any merger, acquisition, consolidation, recapitalization, liquidation,
dissolution or similar transaction involving, or any purchase of all or any
substantial portion of its assets or Equity Securities or other
securities;
(o) take
any
actions outside the Ordinary Course of Business;
(p) make
any
changes in its accounting methods, principles or practices;
(q) make
any
Tax election, change its method of Tax accounting or settle any claim relating
to Taxes;
(r) take
any
action or omit to do any act within its control which action or omission will
cause it to breach any obligation contained in this Agreement or cause any
representation or warranty of Sellers not to be true and correct as of the
Closing Date; or
(s) agree,
whether in writing or otherwise, to do any of the foregoing.
6.3 Access
to Information.
Subject
to the terms of Section 8 of that certain letter of intent, by and between
Buyer, the Founding Sellers and AMV, dated August 20, 2008 (the "Letter
of Intent"),
Founding Sellers shall, and shall cause the Acquired Companies and the
Subsidiaries of the Acquired Companies to, afford to Buyer's officers,
directors, employees, accountants, counsel, consultants, advisors and agents
("Representatives")
free
and full access to and the right to inspect, during normal business hours,
all
of the Real Property, properties, assets, records, Contracts and other documents
related to the Acquired Companies and the Subsidiaries of the Acquired
Companies, and shall permit them to consult with the officers, employees,
accountants, counsel and agents of the Seller Companies for the purpose of
making such investigation of the Acquired Companies and the Subsidiaries of
the
Acquired Companies as Buyer shall desire to make. Sellers shall furnish to
Buyer
all such documents and copies of documents and records and information with
respect to the Acquired Companies and the Subsidiaries of the Acquired Companies
and copies of any working papers
relating thereto as Buyer may request. Without limiting the foregoing, Sellers
shall permit Buyer and its Representatives to conduct environmental due
diligence of the Acquired Companies and their Subsidiaries and the Real
Property, including, without limitation, the collecting and analysis of samples
of indoor or outdoor air, surface water, groundwater or surface or subsurface
land on, at, in, under or from the Acquired Companies, their Subsidiaries and
the Real Property.
6.4 Resignations;
Appointments.
(a) On
the Closing Date, Founding Sellers shall cause to be delivered to Buyer, from
all Persons other than the Founding Sellers, duly signed resignations, effective
immediately after the Closing, of all directors or members of other similar
governing body of their position as a director (and, if requested by Buyer
prior
to Closing, of officers of their position as an officer) of the Acquired
Companies and the Subsidiaries of the Acquired Companies.
(b) Buyer
shall appoint three nominees to serve as directors (or officers, as requested)
of AMV and each of its Subsidiaries.
6.5 Release
of Liens.
Except
with respect to the charge existing in favor of HSBC, prior to the Closing
Date,
Founding Sellers shall have caused to be released all mortgages, liens, pledges,
debentures, charges, rent charges, security interests or similar encumbrances
in
and upon any of the properties and assets of the Acquired Companies and the
Subsidiaries of the Acquired Companies.
6.6 Confidentiality.
From
and after the Closing Date, Founding Sellers will severally and not jointly,
and
will cause their Affiliates to, hold, and will use its reasonable best efforts
to cause its and their respective Representatives to hold, in confidence any
and
all information, whether written or oral, concerning the Acquired Companies
and
the Subsidiaries of the Acquired Companies, except to the extent that Founding
Sellers can show that such information (a) is in the public domain through
no
fault of Founding Sellers or any of their Affiliates or (b) is lawfully acquired
by Founding Sellers or any of their Affiliates after the Closing Date from
sources which are not prohibited from disclosing such information by a legal,
contractual or fiduciary obligation. If Founding Sellers or any of their
Affiliates or Representatives is compelled to disclose any such information
by
judicial or administrative process or by other requirements of Law, Founding
Sellers shall promptly notify Buyer in writing and shall disclose only that
portion of such information which Founding Sellers are advised by their counsel
in writing is legally required to be disclosed, provided that
Founding
Sellers shall exercise their reasonable best efforts to obtain an appropriate
protective order or other reasonable
assurance that confidential treatment will be accorded such
information.
Notwithstanding anything else in this Agreement to the contrary, Founding
Sellers (and each employee, representative, or other agent of Founding Sellers)
may disclose to any and all persons, without limitation of any kind, the tax
treatment and tax structure of any and all transaction(s) contemplated herein
and all materials of any kind (including opinions or other tax analyses) that
are or have been provided to Founding Sellers (or to any employee,
representative, or other agent of Founding Sellers) relating to such tax
treatment or tax structure; provided that
this
authorization of disclosure shall not apply to restrictions reasonably necessary
to comply with securities laws.
6.7 Consents.
Founding Sellers shall, and shall cause the Acquired Companies and each
Subsidiary of the Acquired Companies to, obtain the consents, waivers,
assignments and approvals (collectively, "Consents")
under
each material Contract to which it is a party as may be required in connection
with the Acquisition so as to preserve all rights of, and benefits to, Buyer,
the Acquired Companies and the Subsidiaries of the Acquired Companies
thereunder; provided that
no
Indebtedness shall be repaid, and no Contract shall be amended nor any right
thereunder be waived, to obtain any such Consent. All of the Consents are set
forth in the Seller Disclosure Schedule.
6.8 Notification
of Certain Matters.
Sellers'
Representative shall give prompt notice to Buyer of (a) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which would
reasonably be expected to cause any representation or warranty of Sellers
contained in this Agreement to be untrue
or
inaccurate at or prior to the Closing and (b) any failure of Sellers
to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder.
Sellers' representative shall notify Buyer in writing of the existence or
happening of any fact, event or occurrence which should be included in the
Seller Disclosure Schedule in order to make the representations and warranties
set forth in Articles III and IV true and correct as of the Closing Date (each
such additional written disclosure, a "Seller Disclosure Schedule Supplement").
Within 15 days of the date of receipt of such a Seller Disclosure Schedule
Supplement, Buyer may elect to terminate this Agreement by giving written notice
to the Buyer pursuant to Section 9.1;
provided,
however,
that
Seller
shall be granted a reasonable opportunity to cure any events occurring prior
to
Closing disclosed pursuant to such Seller Disclosure Schedule Supplement.
Buyer's failure to terminate this Agreement within such 15 day period shall
be
deemed Buyer's acceptance of any such Seller Disclosure Schedule Supplement
as
if it was part of the Seller Disclosure Schedules as of the date of this
Agreement.
6.9 [INTENTIONALLY
LEFT BLANK].
6.10 Insurance.
(a) To
the
extent that Founding Sellers shall be entitled under the terms and conditions
of
"occurrence" based Policies in effect on the date hereof to coverage for losses
suffered by the Acquired Companies or any Subsidiary of the Acquired Companies
after the Closing arising out of any occurrences covered by such Policies
occurring prior to the Closing, Founding Sellers shall, and shall cause their
Subsidiaries to, use such efforts and take such actions to recover such losses
on behalf of the Acquired Companies or such Subsidiary of the Acquired Companies
pursuant to such Policies as it would use or take in conducting its own
businesses in the ordinary course if such losses were suffered by Founding
Sellers, and shall deliver the proceeds thereby recovered to the Acquired
Companies or such Subsidiary of the Acquired Companies. In the event of any
dispute regarding the date of any loss or occurrence, the terms of the
applicable Policy shall govern. Founding Sellers shall continue to maintain
such
Policies, to the extent they apply on the date hereof to the Acquired Companies
and the Subsidiaries of the Acquired Companies, in full force and effect (and
without any amendment that would be adverse, in any material respect, to the
Acquired Companies or any Subsidiary of the Acquired Companies) with respect
to
occurrences prior to and including the Closing. Founding Sellers shall continue
to have the Acquired Companies and each Subsidiary of the Acquired Companies
as
a named insured party under each such Policy with respect to occurrences prior
to and including the Closing.
(b) Following
the Closing, Buyer shall provide, and shall cause the Acquired Companies and
the
Subsidiaries of the Acquired Companies to provide, Founding Sellers with all
records and other information necessary for the reporting, investigation,
negotiation and, if applicable, prosecution of any claim made by Founding Seller
pursuant to this Section 6.10.
6.11 No
Solicitation of Other Proposals. (a)
From
the date hereof until the earlier of the Closing or the termination of this
Agreement in accordance with its terms, the Founding Sellers shall not and
shall
cause the Acquired Companies to not, authorize or permit any of their respective
officers, directors, employees, representatives or agents (collectively, the
“Company
Representatives”)
directly or indirectly to, (i) solicit, facilitate, initiate, encourage or
take
any action to solicit, facilitate, initiate or encourage, any inquiries or
communications or the making of any proposal or offer that constitutes or may
constitute an Acquisition Proposal or (ii) participate or engage in any
discussions or negotiations with, or provide any information to or take any
other action with the intent to facilitate the efforts of, any Person concerning
any possible Acquisition Proposal or any inquiry or communication which might
reasonably be expected to result in an Acquisition Proposal. For purposes of
this Agreement, the term “Acquisition
Proposal”
shall
mean any inquiry, proposal or offer from any Person (other than Buyer or any
of
its Affiliates) relating to any merger, consolidation, recapitalization,
liquidation or other direct or indirect business combination or reorganization,
involving the Acquired Companies or the issuance or acquisition of shares of
capital stock or other securities of the Acquired Companies or any tender or
exchange offer that if consummated would result in any Person, together with
all
Affiliates thereof, beneficially owning shares of capital stock or other
securities of the Acquired Companies, or the sale, lease, exchange, license
(whether exclusive or not), or other disposition of any significant portion
of
the business or other assets of the Acquired Companies, or any other
transaction, the completion of which could reasonably be expected to impede,
interfere with, prevent or materially delay the completion of the transactions
contemplated hereby or which would reasonably be expected to diminish
significantly the benefits to Buyer or its Affiliates of the transactions
contemplated hereby. The Founding Sellers shall and shall cause the Acquired
Companies to immediately cease and cause to be terminated and shall cause all
Company Representatives to immediately terminate and cause to be terminated
all
existing discussions or negotiations with any Persons conducted heretofore
with
respect to, or that could reasonably be expected to lead to, an Acquisition
Proposal. The Founding Sellers shall and shall cause the Acquired Companies
to
promptly notify the Company Representative of its obligations under this Section
6.11. Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth above by any Affiliate of the Acquired Companies or
any
Company Representative, whether or not such Person is purporting to act on
behalf of the Acquired Companies, shall be deemed to be a breach of this Section
6.11 by the Acquired Companies.
(b) From
the
date hereof until the earlier of the Closing or the termination of this
Agreement in accordance with its terms, neither the Founding Sellers or the
Board of Directors of the Acquired Companies nor any committee thereof shall
(i)
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal other than the sale of the Shares to Buyer contemplated by this
Agreement, (ii) subject to applicable Law, withdraw or modify or propose to
withdraw or modify in a manner adverse to Buyer its approval or recommendation
of the sale of the Shares to Buyer, this Agreement or the transactions
contemplated hereby, (iii) upon a request by Buyer to reaffirm its approval
or
recommendation of this Agreement or the sale of the Shares to Buyer, fail to
do
so within two Business Days after such request is made, (iv) approve, enter
or
permit or cause the Acquired Companies to enter, into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement related
to any Acquisition Proposal or (v) resolve or announce its intention to do
any
of the foregoing.
(c) In
addition to the other obligations of the Founding Sellers and the Acquired
Companies set forth in this Section 6.11, the Sellers shall and shall cause
the
Acquired Companies to immediately advise Buyer orally and in writing of any
Acquisition Proposal, any request for information with respect to any
Acquisition Proposal, or any inquiry with respect to or which could result
in an
Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the Person making the
same.
6.12 Change
in Year End.
Following Closing, the Acquired Companies shall change their year-end from
December 31 to March 31, and the current accounting reference period shall
be
extended from December 31, 2008 to cover the 15 months ended on March 31, 2009.
6.13 Financial
Statements.
Within
60 days following Closing, Sellers shall use commercially reasonable best
efforts to deliver complete copies of the Acquired Companies’ audited
consolidated financial statements for the nine month period ending on September
30, 2008, prepared in accordance with UK GAAP (reconciled to US GAAP in a form
suitable for filing with the SEC).
6.14 Directors’
Accounts.
Any
amounts owed by any directors of the Acquired Companies to AMV or any of its
Subsidiaries in connection with any overdrawn accounts, shall be repaid by
such
directors to AMV prior to Closing. Any tax liabilities, excluding normal PAYE
tax, that may be incurred by AMV in connection with any over-drawn accounts
that
have not been repaid prior to October 1, 2008, shall be subject to the
indemnification provisions set forth in Article X.
ARTICLE
VII
COVENANTS
OF BUYER AND SELLERS
7.1 Regulatory
Approvals.
Each of
Buyer and Founding Sellers shall promptly apply for, and take all reasonably
necessary actions to obtain or make, as applicable, all consents, approvals,
orders and authorizations of, and all registrations, declarations and filings
with, any Governmental Entity or other Person required to be obtained or made
by
it for the completion of the Acquisition. Each party shall cooperate with and
promptly furnish information to the other party necessary in connection with
any
requirements imposed upon such other party in connection with the completion
of
the Acquisition.
7.2 Public
Announcements.
Neither
Buyer nor Sellers shall, and Sellers shall cause the Acquired Companies not
to,
issue any press releases or otherwise make any public statements with respect
to
the transactions contemplated by this Agreement; provided that
Buyer or
Sellers may, without such approval, make such press releases or other public
announcement as it believes are required pursuant to any listing agreement
with
any national securities exchange or stock market or applicable securities laws,
in which case the party required to make the release or announcement shall
allow
the other party reasonable time to comment on such release or announcement
in
advance of such issuance; provided,
further,
that
each of the parties may make internal announcements to their respective
employees that are consistent with the parties' prior public disclosures
regarding the Acquisition.
7.3 Tax
Matters.
(a) Preparation
and Filing of Pre-Closing and Post-Closing Period Tax Returns.
(i) Tax
Periods Ending on or Before the Closing Date.
Buyer
shall prepare, or cause to be prepared, and file, or cause to be filed, all
Tax
Returns of the Acquired Companies and the Subsidiaries of the Acquired Companies
for all periods ending on or prior to the Closing Date which are filed after
the
Closing Date. Buyer shall permit Sellers to review and comment on each such
Tax
Return described in the preceding sentence prior to filing.
(ii) Tax
Periods Beginning Before and Ending After the Closing Date.
Buyer
shall prepare, or cause to be prepared, and file, or cause to be filed, all
Tax
Returns of the Acquired Companies and the Subsidiaries of the Acquired Companies
for Tax periods which begin before the Closing Date and end after the Closing
Date. Buyer shall permit Sellers to review and comment upon such Tax
Returns.
7.4 Further
Assurances.
Subject
to the terms of this Agreement, each of Buyer and Sellers shall execute such
documents and other instruments and take such further actions as may be
reasonably required to carry out the provisions hereof and complete the
Acquisition.
Following Closing, to the extent that any Intellectual Property, including
URL’s
and other items of Intellectual Property, are in or under the Founding Sellers’
names that relate to the business of the Acquired Companies, the Founding
Sellers shall take all actions reasonably necessary to transfer such
Intellectual Property to Buyer, AMV or its Subsidiaries, as requested by Buyer.
7.5 Key
Man Life Insurance.
Buyer
may obtain (at the cost and expense of Buyer) after the Closing key man life
insurance on the life of each of Nathaniel MacLeitch and Jonathan Cresswell,
who
shall cooperate with Buyer in obtaining such life insurance (the “Key
Man Policy”).
The
Key Man Policy shall be in such amounts and on terms reasonably acceptable
to
Buyer, with the proceeds from such policies to be payable to the order of
Buyer.
7.6 Board
Observer Rights.
Prior
to the Closing, the Founding Sellers shall designate one representative,
reasonably acceptable to Buyer, to serve as an observer (the “Observer”)
who
shall be entitled to attend all meetings of Buyer’s Board of Directors in a
nonvoting, observer capacity, and to receive copies of all notices, minutes,
consents and other materials that Buyer provides to its directors; provided,
however, that the Observer shall agree in writing to be bound by the same duties
of confidentiality, good faith and loyalty as if such Observer were a director
of Buyer, with respect to all information provided to him in such materials
and
in the course of his attendance at any meeting of Buyer’s Board of Directors.
Notwithstanding the foregoing, Buyer reserves the right to withhold any
information and exclude such Observer from any meeting of the Board of
Directors, or any portion thereof, if access to such information or attendance
at such meeting could adversely affect the attorney-client privilege, or to
protect confidential information or avoid a potential conflict of interest.
The
Observer shall not be entitled to vote on any matter as to which action of
the
Board of Directors is to be taken. The right to designate the Observer set
forth
in this Section 7.6 shall cease and be of no force or effect at such time as
the
Founding Sellers own, in the aggregate, less than 50% of the shares of Buyer
Common Stock issued to the Founding Sellers at Closing.
7.7 Rule
144 Sales.
Provided that Sellers provide customary evidence to Buyer of their compliance
with the requirements of Rule 144, including obtaining a standard opinion of
counsel, Buyer will provide the appropriate instructions to its transfer agent
to permit any such sale of Buyer Common Stock by Sellers pursuant to Rule
144.
7.8 AMV
Options.
On or
before the Closing, Founding Sellers shall ensure that each outstanding option
(an “AMV Option”)
to
purchase AMV Shares will either be exercised in full or terminated on or before
the Closing. Prior to the Closing, Founding Sellers or AMV, as applicable,
shall
give written notice to the holders of all AMV Options then outstanding, that
(a)
the AMV Options will not be assumed in the Acquisition, and the vesting of
all
AMV Options will accelerate in full, effective as of a date determined by AMV
on
or prior to the Closing, (b) such holder must notify AMV of its intent to
exercise its AMV Options and deliver to AMV by cash or by check the exercise
price for the AMV Options to be exercised, and (c) if not so exercised, the
AMV
Options shall terminate prior to the Closing.
7.9 Drag-Along.
On or
before Closing, the Founding Sellers and the Non-Founding Sellers shall ensure
that the “drag-along” provisions of Article 6 of AMV’s Articles of Association
have been initiated and that all shares of capital stock of AMV, including
shares issued upon the exercise of AMV Options referred to in Section 7.8,
shall
be delivered to Buyer at Closing (the “Drag-Along”).
ARTICLE
VIII
CONDITIONS
TO CLOSING
8.1 Conditions
to Obligations of Buyer and Sellers.
The
obligations of Buyer and Sellers to complete the Acquisition are subject to
the
satisfaction on or prior to the Closing Date of the following
conditions:
(a) All
applicable UK, US federal and state and foreign filing and licensing
requirements related to or in connection with the Acquisition, which are
required to permit the completion of the Acquisition, shall have been satisfied.
(b) All
applicable UK, US and federal, state and foreign regulatory approvals, consents,
orders and authorizations required to permit the completion of the Acquisition
shall have been obtained.
(c) Any
consents, waivers and approvals from ValueAct that are required in order to
consummate the Acquisition or the Financing shall have been obtained.
8.2 Conditions
to Obligation of Buyer.
The
obligation of Buyer to complete the Acquisition is subject to the satisfaction
(or waiver by Buyer in its sole discretion) of the following further
conditions:
(a) Representations
and Warranties.
The
representations and warranties of Sellers set forth in this Agreement shall
have
been true and correct at and as of the date hereof and shall be true and correct
at and as of the Closing Date as if made at and as of the Closing Date, except
to the extent that such representations and warranties refer specifically to
an
earlier date, in which case such representations and warranties shall have
been
true and correct as of such earlier date, and Buyer shall have received a
certificate dated the Closing Date signed by Sellers to such
effect.
(b) Agreements
and Covenants.
Sellers
shall have performed or complied with
all
obligations and covenants required by this Agreement to be performed or complied
with by Sellers at or prior to the Closing Date. Buyer shall have received
a
certificate dated the Closing Date signed by Sellers to such
effect.
(c) No
Litigation.
No
Action shall be pending or threatened before any court or other Governmental
Entity or before any other Person wherein an unfavorable Order would (i) prevent
completion of any of the transactions contemplated by this Agreement, (ii)
cause
any of the transactions contemplated by this Agreement to be rescinded following
completion, (iii) affect adversely
the right of Buyer to own the Shares and to control the Acquired Companies
and
the Subsidiaries of the Acquired Companies, or (iv) affect the right of any
of
the Acquired Companies and the Subsidiaries of the Acquired Companies to own
its
assets and to operate its businesses. No such Order shall be in
effect.
(d) Legal
Opinion.
Buyer
shall have received a written opinion from Nicholas Hart Solicitors, counsel
to
Sellers, addressed to Buyer, dated as of the Closing Date, in the form attached
hereto as Exhibit
B.
(e) Consents.
The
Acquired Companies shall have obtained all consents, waivers, permits and
approvals required to be obtained by the Acquired Companies in connection with
the completion of the transactions contemplated hereby.
(f) Resignations
and Appointments.
The
persons listed in Schedule 8.2(f) hereto and those persons identified by Buyer
to the Acquired Companies prior to the Closing with respect to the Subsidiaries
shall have resigned from their positions and offices with the Acquired Companies
and the Subsidiaries, as applicable, and three of Buyer’s nominees shall have
been appointed to the board of directors of AMV and each of its Subsidiaries.
(g)
Directors’
Accounts.
Any
amounts owed by any directors of the Acquired Companies to AMV or any of its
Subsidiaries in connection with any overdrawn accounts, shall have been repaid
by such directors to AMV, and Founding Sellers shall have delivered to Buyer
a
certificate to such effect signed by the Chief Financial Officer (or comparable
person) of AMV.
(h) Key
Executive Employment Agreements.
The
Acquired Companies shall have entered into employment agreements or similar
agreements with MacLeitch and Cresswell prior to Closing, on terms and
conditions acceptable to Buyer and such executives.
(i) Financing.
Buyer
shall have completed a financing on terms acceptable to it and sufficient to
enable it to complete the transactions contemplated by this Agreement (the
“Financing”).
(j) [INTENTIONALLY
LEFT BLANK]
(k) Working
Capital.
Founding Sellers shall have delivered to Buyer a certificate setting forth
the
estimated Working Capital of the Acquired Companies and their Subsidiaries
as of
the Closing Date, and certified by the Chief Financial Officer (or comparable
person) of AMV, to be used only as guidance for reference.
(l) Financial
Statements.
The
Founding Sellers
shall have delivered to Buyer audited financial statements for the fiscal years
ended December 31, 2006 and December 31, 2007 for the Acquired Companies and
their Subsidiaries.
(m) Lock-Up
Agreements.
Buyer
and each of the Sellers shall have entered into lock-up agreements,
substantially in the form of Exhibit
C,
to the
effect that for a period of one year following the Closing, Sellers shall not,
without the written consent of Buyer, sell, transfer, grant an option to, make
a
gift of or otherwise dispose of any shares of the Stock Consideration acquired
under this Agreement or make any short sale of the Stock Consideration.
(n) No
Material Adverse Change.
There
shall have been no material adverse change in the financial condition, business,
assets or operations of the Acquired Companies nor shall any event have occurred
which so far as can reasonably be foreseen on the applicable Closing Date
appears reasonably likely materially and adversely to affect the financial
condition, business, assets or operations of the Acquired
Companies.
(o) Non-Competition
Agreements.
Buyer
shall have received copies of the executed Non-Competition Agreements
substantially in the form of Exhibit
D
attached
hereto, as of the Closing from each of the Founding Sellers, Dan Boss, and
Sellers shall use their best efforts to obtain executed Non-Competition
Agreements from Karen Schill and Alistair Austen.
(p) Regulation
S Certificate.
Buyer
shall have received from each of the Sellers, an executed Regulation S
Certificate, substantially in the form of Exhibit
E attached
hereto.
(q) SkyNet
Shares. The
Founding Sellers shall have taken all necessary action to ensure that prior
to
closing, AMV is the registered and beneficial owner of 100% of the issued and
outstanding share capital of SkyNet Interactive Limited, and the Founding
Sellers shall have delivered documents reasonably satisfactory to Buyer to
such
effect.
(r) Power
of Attorney.
The
Founding Sellers shall have obtained and delivered to Buyer certified copies
of
the Power of Attorney, substantially in the form of Exhibit
F
attached
hereto, executed by each of the Sellers listed on the signature page hereto
(other than the Founding Sellers) in favor of Nathaniel MacLeitch, evidencing
such Seller’s agreement for Nathaniel MacLeitch to consummate the Acquisition
and the transactions contemplated hereby on behalf of such Seller. The Founding
Sellers shall have delivered evidence reasonably satisfactory to Buyer that
the
Option Holder Sellers will at Closing be bound to the terms and conditions
of
this Agreement, including the representations, warranties, covenants and other
terms and conditions of this Agreement.
(s) AMV
Options.
All AMV
Options shall have been properly exercised or terminated, the exercise price
for
each AMV Option that has been exercised shall have been received by AMV, and
the
AMV EMI Share Option Plan (the “AMV Stock Plan”)
shall
have been terminated in accordance with its terms. At or prior to Closing,
Sellers shall have delivered a certificate to Buyer signed by an authorized
officer of AMV confirming that all outstanding AMV Options entitling any person
to acquire any interest in the Company and the AMV Stock Plan have been
exercised or cancelled.
(t) Drag-Along.
The
Drag-Along shall have been properly completed and all shares of capital stock
of
AMV shall be delivered to Buyer at Closing. The Founding Sellers and the
Sellers’ Representative shall have delivered a certificate to Buyer confirming
that the Drag-Along has been duly and properly completed.
8.3 Conditions
to Obligation of Sellers.
The
obligation of Sellers to complete the Acquisition is subject to the satisfaction
(or waiver by Sellers in their sole discretion) of the following further
conditions:
(a) Representations
and Warranties.
The
representations and warranties of Buyer set forth in this Agreement shall have
been true and correct at and as of the date hereof and shall be true and correct
at and as of the Closing Date as if made at and as of the Closing Date, except
to the extent that such representations and warranties refer specifically to
an
earlier date, in which case such representations and warranties shall have
been
true and correct as of such earlier date, and Sellers shall have received a
certificate dated the Closing Date signed by Buyer to such effect.
(b) Agreements
and Covenants.
Buyer
shall have performed or complied with
all
obligations and covenants required by this Agreement to be performed or complied
with by Buyer at or prior to the Closing Date, and Sellers shall have received
a
certificate signed on behalf of Buyer by the President of Buyer to such
effect.
(c) No
Litigation.
No
Action shall be pending or threatened before any court or other Governmental
Entity or other Person wherein an unfavorable Order would (i) prevent completion
of any of the transactions contemplated by this Agreement or (ii) cause any
of
the transactions contemplated by this Agreement to be rescinded following
completion. No such Order shall be in effect.
(d) Legal
Opinion.
Sellers
shall have received from Mintz Levin, counsel to Buyer, an opinion of counsel
in
substantially the form of Exhibit
G
annexed
hereto.
(e) Security
Agreement.
Sellers
shall have received an executed security agreement in favor of Sellers securing
Buyer’s obligation (subordinate to Buyer’s obligations to ValueAct) to pay the
Note, which such agreement shall be in form and substance satisfactory to
Sellers’ Representative.
ARTICLE
IX
TERMINATION
9.1 Termination.
(a) This
Agreement may be terminated and the Acquisition abandoned at any time prior
to
the Closing:
(i) by
mutual
written consent of Buyer and Sellers;
(ii) by
Buyer
or Sellers if:
(A) the
Closing does not occur on or prior to October 31, 2008; provided that
the
right to terminate this Agreement under this clause (ii)(A) shall not be
available to any party whose breach of a representation, warranty, covenant
or
agreement under this Agreement has been the cause of or resulted in the failure
of the Closing to occur on or before such date; or
(B) a
Governmental Entity shall have issued an Order or taken any other action, in
any
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Acquisition, which Order or other action is final and
non-appealable;
(iii) by
Buyer
if:
(A) any
condition to the obligations of Buyer hereunder becomes incapable of fulfillment
other than as a result of a breach by Buyer of any covenant or agreement
contained in this Agreement, and such condition is not waived by Buyer;
or
(B) there
has
been a breach by Sellers of any representation, warranty, covenant or agreement
contained in this Agreement or the Seller Disclosure Schedule, or if any
representation or warranty of Sellers shall have become untrue, in either case
such that the conditions set forth in Sections 8.2(a) or 8.2(b) would not be
satisfied;
(C) and,
in
either case, such breach is not curable, or if curable, is not cured within
15
days after written notice of such breach is given to Sellers; or
(iv) by
Sellers if:
(A) any
condition to the obligations of Sellers hereunder becomes incapable of
fulfillment other than as a result of a breach by Sellers of any covenant or
agreement contained in this Agreement, and such condition is not waived by
Seller; or
(B) there
has
been a breach by Buyer of any representation, warranty, covenant or agreement
contained in this Agreement or the Buyer Disclosure Schedule, or if any
representation or warranty of Buyer shall have become untrue, in either case
such that the conditions set forth in Sections 8.3(a) or 8.3(b) would not be
satisfied;
(C)
and,
in
either case, such breach is not curable, or if curable, is not cured within
15
days after written notice of such breach is given to Buyer.
(b) The
party
desiring to terminate this Agreement pursuant to clause (ii), (iii) or (iv)
shall give written notice of such termination to the other party hereto. If
this
Agreement so terminates, it shall become null and void and have no further
force
or effect, except as provided in Section 9.2.
9.2 Effect
of Termination.
In the
event of termination of this Agreement as provided in Section 9.1, this
Agreement shall immediately become void and there shall be no liability or
obligation on the part of Buyer or Sellers or their respective officers,
directors, stockholders or Affiliates, except as set forth
in
Section 9.3; provided that
the
provisions of Section 7.2 (Public Announcements) and Section 9.3 (Remedies)
and
Article XI of this Agreement shall remain in full force and effect and survive
any termination of this Agreement.
9.3 Remedies.
Any
party terminating this Agreement pursuant to Section 9.1 shall have the right
to
recover damages sustained by such party as a result of any breach by the other
party of this Agreement or failure to perform hereunder; provided that
the
party seeking relief is not in breach of its obligations hereunder under
circumstances which would have permitted the other party to terminate the
Agreement under Section 9.1.
9.4 Break-Up
Fee.
If this
Agreement is terminated pursuant to Section 9.1(a)(ii)(A):
(a) by
reason
of the failure of the Sellers to satisfy any of Buyer’s closing conditions
contained in Section 8.2, and Buyer is ready, willing and able to satisfy the
conditions set forth in Section 8.3, then AMV shall promptly pay to Buyer up
to
an aggregate of $75,000 for all of Buyer’s out-of-pocket costs and expenses
associated with the Acquisition; or
(b) by
reason
of the failure of Buyer to obtain or consummate the Financing or to satisfy
any
of Sellers’ closing conditions contained in Sections 8.1 or 8.3, and Sellers are
ready, willing and able to satisfy the conditions set forth in Section 8.2,
then
Buyer shall promptly pay to Sellers’ Representative for the benefit of the
Sellers up to an aggregate of $75,000 for all of Sellers’ out-of-pocket costs
and expenses associated with the Acquisition.
ARTICLE
X
INDEMNIFICATION
10.1 Survival.
(a) Except
as
set forth in Section 10.1(b), all representations and warranties contained
in
this Agreement, or in any Schedule, certificate or other document delivered
pursuant to this Agreement, shall survive the Closing until June 30,
2010.
(b) The
representations and warranties of Sellers contained in Sections 3.1 (Authority
and Enforceability), 3.2 (The Shares), 4.1 (Organization and Good Standing),
4.2
(Capitalization), 4.26 (Brokers or Finders), and the representation and
warranties of Buyer contained in Sections 5.1 (Organization and Good Standing),
5.2 (Authority and Enforceability) and 5.7 (Brokers or Finders) shall survive
the Closing indefinitely. The representations and warranties of Sellers
contained in Sections 4.9 (Taxes) and 4.19 (Employee Benefits) shall survive
the
Closing until 60 days after the expiration of the applicable statute of
limitations period (after giving effect to any waivers and extensions thereof).
The representations and warranties of Sellers contained in Section 4.21
(Environmental Laws) shall survive the Closing for a period of six years
following the Closing.
(c) The
covenants and agreements which by their terms do not contemplate performance
after the Closing Date shall survive the Closing for a period of one year.
The
covenants and agreements which by their terms contemplate performance after
the
Closing Date shall survive the Closing in accordance with their
terms.
(d) The
period for which a representation or warranty, covenant or agreement survives
the Closing is referred to herein as the "Applicable
Survival Period."
In the
event a Notice of Claim for indemnification under Section 10.2 or 10.3 is given
within the Applicable Survival Period, the representation or warranty, covenant
or agreement that is the subject of such indemnification claim (whether or
not
formal legal action shall have been commenced based upon such claim) shall
survive with respect to such claim until such claim is finally resolved. The
Indemnitor shall indemnify the Indemnitee for all Losses (subject to the
limitations set forth herein, if applicable) that the Indemnitee may incur
in
respect of such claim, regardless of when incurred.
10.2 Indemnification
by Sellers.
(a) Sellers
shall indemnify and defend Buyer and its Affiliates (including, following the
Closing, the Acquired Companies and their Subsidiaries) and their respective
stockholders, officers, directors, employees, agents, successors and assigns
(the "Buyer
Indemnitees")
against, and shall hold them harmless from, and shall reimburse Buyer
Indemnitees first by set-off against their pro rata entitlement to the proceeds
of the Note during the term of the Note for, any and all losses, damages, claims
(including, without limitation, third-party claims), charges, interest,
penalties, damages, Taxes, diminution in value, reasonable costs and expenses
(including, without limitation, reasonable legal, consultant, accounting and
other professional fees, and costs of sampling, testing, investigation, removal,
treatment and remediation of contamination) (collectively, "Losses")
resulting from, arising out of, or incurred by any Buyer Indemnitee in
connection with, or otherwise with respect to:
(i) the
failure of any representation and warranty or other statement by Sellers
contained in this Agreement, the Seller Disclosure Schedule, or any certificate
or other document furnished or to be furnished to Buyer in connection with
the
transactions contemplated hereby, to be true and correct in all respects as
of
the date of this Agreement and as of the Closing Date;
(ii) any
breach of any covenant or agreement of Sellers contained in this Agreement,
the
Seller Disclosure Schedule or any certificate furnished or to be furnished
to
Buyer in connection with the transactions contemplated hereby;
(iii) any
fees,
expenses or other payments incurred or owed by Seller, the Acquired Companies
or
any Subsidiary of the Acquired Companies to any agent, broker, investment banker
or other firm or person retained or employed by it in connection with the
transactions contemplated by this Agreement; and
(iv) fraud
of
Sellers in connection with this Agreement or any Schedule, Exhibit or
certificate delivered pursuant to this Agreement;
provided, that,
this
Section 10.2 shall not apply with respect to any Loss relating to Taxes to
the
extent that indemnification payments for such Loss have been made pursuant
to
Section 10.8.
(b)
Sellers
shall not be liable for any Loss or Losses or any liabilities on the part of
the
Sellers pursuant to this Agreement ("Buyer
Warranty Losses"):
(i)
unless and until the aggregate amount of all Buyer Warranty Losses incurred
by
the Buyer Indemnitees exceeds £100,000, in which event Sellers shall be liable
for all Buyer Warranty Losses from the first dollar, and (ii) to the extent
that
any Buyer Warranty Loss exceeds, in the aggregate, the Purchase Price received
by Sellers; provided, that,
(y) the
limitations set forth in this Section 10.2 shall not apply to any Buyer Warranty
Loss based on any breach of the representations, warranties and covenants set
forth in Sections 3.1, 3.2, 4.1, 4.2, 4.6, 4.9, 4.19, 4.21, 4.26, 4.29, 6.14,
7.8, 7.9, 8.2(s) and 8.2(t), and (z) nothing contained in this Section 10.2
shall be deemed to limit or restrict in any manner any rights or remedies which
Buyer has, or might have, at law, in equity or otherwise, based on fraud.
Further, Sellers shall not be liable for Losses to the extent that such
liability only arises as a result of changes in legislation following the
Closing that have a retrospective effect. Notwithstanding anything to the
contrary set forth herein, in seeking any recovery for Losses or liabilities
on
the part of the Sellers pursuant to this Agreement, Buyer may have recourse
against the Non-Founding Sellers and Option Holder Sellers only with respect
to
the breach or failure of a representation or warranty of such Non-Founding
Seller or Option Holder Seller as set forth in Article III and then only, pro
rata in accordance with such Non-Founding Seller’s or Option Holder Seller’s
ownership interest to be set forth on Schedule
A,
for
Losses only in the aggregate amount of up to $2,451,500 and by means of set-off
against the Note or their pro rata entitlement to any Earn-Out Payment. Further,
Buyer shall not be entitled to indemnification for any breach or failure of
any
representation or warranty of Non-Founding Sellers or Option Holder Sellers
to
the extent that Buyer has already been or can be indemnified by such
Non-Founding Seller or Option Holder Seller pursuant to the terms of this
Agreement. Nothing herein shall preclude Buyer from seeking indemnification
from
Founding Sellers to the extent that indemnification of Non-Founding Sellers
or
Option Holder Sellers does not satisfy Losses arising from such breach or
failure of a representation or warranty of Non-Founding Sellers or Option Holder
Sellers as set forth in Article III hereof.
10.3 Indemnification
by Buyer.
(a) Buyer
shall indemnify and defend Sellers and its Affiliates and their respective
stockholders, officers, directors, employees, agents, successors and assigns
(the "Seller
Indemnitees")
against, and shall hold them harmless from, any and all Losses resulting from,
arising out of, or incurred by any Seller Indemnitee in connection with, or
otherwise with respect to:
(i) the
failure of any representation and warranty or other statement by Buyer contained
in this Agreement, the Buyer Disclosure Schedule, or any certificate or other
document furnished or to be furnished to Sellers in connection with the
transactions contemplated hereby, to be true and correct in all respects as
of
the date of this Agreement and as of the Closing Date; and
(ii) any
breach of any covenant or agreement of Buyer contained in this Agreement or
any
other document furnished or to be furnished to Sellers in connection with the
transactions contemplated hereby.
10.4 Indemnification
Procedure for Third Party Claims.
(a) In
the
event that an Indemnitee receives notice of the assertion of any claim or the
commencement of any Action by a third party in respect of which indemnity may
be
sought under the provisions of this Article X ("Third
Party Claim"),
the
Indemnitee shall promptly notify the Indemnitor in writing ("Notice
of Claim")
of
such Third Party Claim. Failure or delay in notifying the Indemnitor will not
relieve the Indemnitor of any liability it may have to the Indemnitee, except
and only to the extent that such failure or delay causes actual harm to the
Indemnitor with respect to such Third Party Claim. The Notice of Claim shall
set
forth the amount, if known, or, if not known, an estimate of the foreseeable
maximum amount of claimed Losses (which estimate shall not be conclusive of
the
final amount of such Losses) and a description of the basis for such Third
Party
Claim.
(b) Subject
to the further provisions of this Section 10.4, the Indemnitor will have 10
days
(or less if the nature of the Third Party Claim requires) from the date on
which
the Indemnitor received the Notice of Claim to notify the Indemnitee that the
Indemnitor will assume the defense or prosecution of such Third Party Claim
and
any litigation resulting therefrom with counsel of its choice and at its sole
cost and expense (a "Third
Party Defense").
If
the Indemnitor assumes the Third Party Defense in accordance with the preceding
sentence, the Indemnitor shall be conclusively deemed to have acknowledged
that
the Third Party Claim is within the scope of its indemnity obligation hereunder
and shall hold the Indemnitee harmless from and against the full amount of
any
Losses resulting therefrom (subject to the terms and conditions of this
Agreement). Any Indemnitee shall have the right to employ separate counsel
in
any such Third Party Defense and to participate therein, but the fees and
expenses of such counsel shall not be at the expense of the Indemnitor unless
(A) the Indemnitor shall have failed, within the time after having been notified
by the Indemnitee of the existence of the Third Party Claim as provided in
the
first sentence of this paragraph (b), to assume the defense of such Third Party
Claim, or (B) the employment of such counsel has been specifically authorized
in
writing by the Indemnitor, which authorization shall not be unreasonably
withheld.
(c) The
Indemnitor will not be entitled to assume the Third Party Defense:
(i) to
the
extent that the Third Party Claim seeks, in addition to or in lieu of monetary
damages, any injunctive or other equitable relief (except where non-monetary
relief is merely incidental to a primary claim or claims for monetary
damages);
(ii) the
Third
Party Claim relates to or arises in connection with any criminal proceeding,
action, indictment, allegation or investigation;
(iii) under
applicable standards of professional conduct, a conflict on any significant
issue exists between the Indemnitee and the Indemnitor in respect of the Third
Party Claim;
(iv) the
Third
Party Claim involves a material customer or supplier of the Acquired Companies
or any of their Subsidiaries;
(v) the
Indemnitee reasonably believes an adverse determination with respect to the
Third Party Claim would be detrimental to or injure the Indemnitee's reputation
or future business prospects;
(vi) upon
petition by the Indemnitee, the appropriate court rules that the Indemnitor
has
failed or is failing to vigorously prosecute or defend such Third Party Claim;
or
(vii) if
the
Indemnitor fails to provide reasonable assurance to the Indemnitee of its
financial capacity to prosecute the Third Party Defense and provide
indemnification in accordance with the provisions of this
Agreement.
(d) If
by
reason of the Third Party Claim a Lien, attachment, garnishment or execution
is
placed upon any of the property or assets of the Indemnitee, the Indemnitor,
if
it desires to exercise its right to assume such Third Party Defense, must
furnish a satisfactory indemnity bond to obtain the prompt release of such
Lien,
attachment, garnishment or execution.
(e) If
the
Indemnitor assumes a Third Party Defense, it will take all steps necessary
in
the defense, prosecution, or settlement of such claim or litigation and will
hold all Indemnitees harmless from and against all Losses caused by or arising
out of such Third Party Claim. The Indemnitor will not consent to the entry
of
any judgment or enter into any settlement except with the written consent of
the
Indemnitee; provided, that,
the
consent of the Indemnitee shall not be required if all of the following
conditions are met: (i) the terms of the judgment or proposed settlement include
as an unconditional term thereof the giving to the Indemnitees by the third
party of a release of the Indemnitees from all liability in respect of such
Third Party Claim, (ii) there is no finding or admission of (A) any violation
of
Law by the Indemnitees (or any Affiliate thereof), (B) any violation of the
rights of any Person and (C) no effect on any other Action or claims of a
similar nature that may be made against the Indemnitees (or any Affiliate
thereof), and (iii) the sole form of relief is monetary damages which are paid
in full by the Indemnitor. The Indemnitor shall conduct the defense of the
Third
Party Claim actively and diligently, and the Indemnitee will provide reasonable
cooperation in the defense of the Third Party Claim. So long as the Indemnitor
is reasonably conducting the Third Party Defense in good faith, the Indemnitee
will not consent to the entry of any judgment or enter into any settlement
with
respect to the Third Party Claim without the prior written consent of the
Indemnitor (not to be unreasonably withheld or delayed). Notwithstanding the
foregoing, the Indemnitee shall have the right to pay or settle any such Third
Party Claim, provided, that,
in such
event it shall waive any right to indemnity therefor by the Indemnitor for
such
claim unless the Indemnitor shall have consented to such payment or settlement
(such consent not to be unreasonably withheld or delayed).
(f) In
the
event that an Indemnitee timely gives Notice of Claim to the Indemnitor and
the
Indemnitor fails or elects not to assume a Third Party Defense which the
Indemnitor had the right to assume under this Section 10.4, the Indemnitee
shall
have the right, at the sole cost and expense of the Indemnitor, to conduct
the
Third Party Defense in such manner as it may reasonably deem appropriate and
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim on such terms as it may deem appropriate. The
Indemnitor shall reimburse the Indemnitee promptly for any Losses incurred
in
connection with any settlement of any such Third Party Claim. If no settlement
of any such Third Party Claim is made, the Indemnitor shall reimburse the
Indemnitee promptly for any Losses arising out of any judgment rendered with
respect to such Third Party Claim. The Indemnitor will be bound by any such
judgment or any settlement effected by the Indemnitee. If the Indemnitor does
not elect to assume a Third Party Defense which it has the right to assume
hereunder, the Indemnitee shall have no obligation to do so.
(g) In
the
event that the Indemnitor is not entitled to assume the Third Party Defense
pursuant to Section 10.4(c), the Indemnitee shall have the right (i) to defend,
conduct and control the Third Party Defense with counsel of its choice at the
expense of the Indemnitor and (ii) to consent to the entry of any judgment
or
enter into any settlement with respect to the Third Party Claim in any manner
and on such terms as it may deem appropriate; provided, that,
the
Indemnitor will not be bound by any judgment or settlement effected without
its
consent (not to be unreasonably withheld or delayed). In each case, the
Indemnitee shall conduct the Third Party Defense actively and diligently, and
the Indemnitor will provide reasonable cooperation in the Third Party
Defense.
(h) Each
party to this Agreement shall use its commercially reasonable efforts to
cooperate and to cause its employees to cooperate with and assist the Indemnitee
or the Indemnitor, as the case may be, in connection with any Third Party
Defense, including attending conferences, discovery proceedings, hearings,
trials and appeals and furnishing records, information and testimony, as may
reasonably be requested; provided, that,
each
party shall use its best efforts, in respect of any Third Party Claim of which
it has assumed the defense, to preserve the confidentiality of all confidential
information and the attorney-client and work-product privileges.
10.5 Indemnification
Procedures for Non-Third Party Claims.
In the
event of a claim that does not involve a Third Party Claim being asserted
against it, the Indemnitee shall send a Notice of Claim to the Indemnitor.
The
Notice of Claim shall set forth the amount, if known, or, if not known, an
estimate of the foreseeable maximum amount of claimed Losses (which estimate
shall not be conclusive of the final amount of such Losses) and a description
of
the basis for such claim. The Indemnitor will have 30 days from receipt of
such
Notice of Claim to dispute the claim and will reasonably cooperate and assist
the Indemnitee in determining the validity of the claim for indemnity. If the
Indemnitor does not give notice to the Indemnitee that it disputes such claim
within 30 days after its receipt of the Notice of Claim, the claim specified
in
such Notice of Claim will be conclusively deemed a Loss subject to
indemnification hereunder.
10.6 [INTENTIONALLY
LEFT BLANK].
10.7 Contingent
Claims.
Nothing
herein shall be deemed to prevent an Indemnitee from making a claim hereunder
for potential or contingent claims or demands; provided, that,
such
claim or demand is reasonably likely to be made in the foreseeable future,
and
that the Notice of Claim sets forth the specific basis for any such contingent
claim to the extent then feasible and the Indemnified Party has reasonable
grounds to believe that such a claim may be made.
10.8 Effect
of Investigation; Waiver.
(a) An
Indemnitee's right to indemnification or other remedies based upon the
representations and warranties and covenants and agreements of the Indemnitor
will not be affected by any investigation or knowledge of the Indemnitee or
any
waiver by the Indemnitee of any condition based on the accuracy of any
representation or warranty, or compliance with any covenant or agreement. Such
representations and warranties and covenants and agreements shall not be
affected or deemed waived by reason of the fact that the Indemnitee knew or
should have known that any representation or warranty might be inaccurate or
that the Indemnitor failed to comply with any agreement or covenant. Any
investigation by such party shall be for its own protection only and shall
not
affect or impair any right or remedy hereunder. Notwithstanding the foregoing,
as of the date hereof, Buyer is not aware of any facts that would cause any
of
the Sellers, representations and warranties not to be true in all material
respects.
(b) Sellers
acknowledge and agree that, upon and following the Closing, neither the Acquired
Companies nor any of their Subsidiaries shall have any liability or obligation
to indemnify, save or hold harmless or otherwise pay, reimburse or make Sellers
whole for or on account of any indemnification or other claims made by any
Buyer
Indemnitee hereunder. Sellers shall have no right of contribution against the
Acquired Companies or any of their Subsidiaries with respect to any such
indemnification or other claim.
10.9 Tax
Indemnification.
(a)Subject
as provided in this Section 10.9 the Founding Sellers jointly and severally
covenant with and undertake to the Buyer to pay to the Buyer an amount equal
to:
(i) any
Actual Tax Liability which arises directly or indirectly, and whether before,
on
or after Closing, by reference to an Event occurring (or deemed to occur for
the
purposes of any Tax) or income profits or gains earned, accrued or received
on
or before Closing;
(ii) the
value
of any Effective Tax Liability;
(iii) any
Actual Tax Liability arising as a result of the application of section 767A
or
section 767AA Taxes Act, or any other secondary liability arising as a result
of
the failure of the Founding Sellers, or any company treated as associated with
the Founding Sellers other than one of the Seller Companies, failing to pay
Tax
due to be paid by it at any time; and
(iv) any
costs
or expenses incurred by the Buyer or any of the Seller Companies in connection
with or in consequence of any of the matters referred to at Section 10.9(a)(i)
to (iii) above or in connection with any Tax Claim or in taking or defending
any
action under this Section 10.9.
(b) The
Founding Sellers shall not be liable under Section 10.9(a) in respect of any
liability for Tax to the extent that:
(i) provision,
reserve or allowance was made for such liability for Tax in the Balance Sheet
or
to the extent that payment or discharge of such liability has been taken into
account in the Balance Sheet;
(ii) such
liability for Tax arises solely in the ordinary course of business of the
Acquired Companies carried on since the Balance Sheet Date and for this purpose,
but without limitation, the following shall not be regarded as being in the
ordinary course of business:
(A) the
declaration or payment of any dividend or the making of any other distribution
or deemed distribution for Tax purposes;
(B) any
transaction entered into in circumstances where the consideration (if any)
received by, or as the case may be, paid in respect thereof is less than or
more
than the consideration deemed to have been received or paid for Tax purposes
but
to the extent only of the Actual Tax Liability arising in respect of the amount
by which the deemed consideration exceeds or is less than the actual
consideration;
(C) any
of
the Seller Companies ceasing or being deemed to cease, for Tax purposes, to
be
the member of any group or associated with any other company or person whether
in consequence of the entering into of this Agreement or anything done under
it
or otherwise;
(D) an
Event
which results in any of the Seller Companies becoming liable for Tax for which
it is not primarily liable;
(E) the
failure by any of the Seller Companies to deduct, charge, recover or account
for
Tax;
(F) the
acquisition or disposal (including any deemed disposal) of a capital
asset;
(G) any
Event
which gives rise to any interest, fine, penalty, charge or surcharge in
connection with Tax; and
(H) a
transaction or arrangement which includes, or a series of transactions or
arrangements which includes, any step or steps having no commercial or business
purpose apart from the deferral, reduction or avoidance of a liability to
Tax;
(iii) such
liability for Tax arises in consequence of any act or transaction which could
reasonably have been avoided, and which was carried out without the agreement
of
the Founding Sellers by the Buyer or one of the Seller Companies after Closing
otherwise than in the ordinary course of business of the Seller Companies,
and
which the Buyer was or should reasonably have been aware would give rise to
the
Tax liability in question;
(iv) such
liability for Tax arises or is increased only as a result of any increase in
rates of Tax made after Closing or of any change in law occurring after Closing;
or
(v) such
liability for Tax arises or is increased as a result of any change after Closing
in the bases, methods or policies of accounting of the Seller Companies save
where such change is made to comply with generally accepted accounting practice,
the published practice of any Taxing Authority or the law or rule of any
regulating authority or body in force at Closing.
(c) Except
in
the case of fraud or negligence, the Founding Sellers shall not be liable under
Section 10.9(a) in respect of a liability for Tax unless they have received
from
the Buyer written notice of the Tax Claim which relates to that Tax liability
within seven years from Closing.
(d) All
sums
payable by the Founding Sellers under Section 10.9 shall be paid free and clear
of all deductions or withholdings (including for or on account of Tax) unless
the deduction or withholding is required by law, in which event or in the event
that the Buyer shall incur any liability for Tax in respect of such payment
the
Founding Sellers shall pay such additional amounts as shall be required to
ensure that the net amount received and retained by the Buyer (after Tax) will
equal the full amount which would have been received and retained by it had
no
such deduction or withholding been required to be made and/or no such liability
to Tax been incurred.
(e) Where
the
Founding Sellers become liable to make any payment pursuant to Section 10.9(a),
the due date for the making of that payment shall be the later of the date
falling seven days after the date of written demand by the Buyer to the Founding
Sellers and:
(i) in
the
case of a claim that arises in respect of any Actual Tax Liability, the date
falling seven days before the last day on which a payment of Tax may be made
by
the relevant Seller Company without incurring any liability to interest and/or
penalties;
(ii) in
the
case of an amount in respect of an Effective Tax Liability within (a) of the
definition of Effective Tax Liability, seven days before the date on which
Tax
becomes payable which would not have been payable if no liability had arisen
Section 10.9(a) or, in the case of a repayment of Tax, the date on which such
repayment would have been made;
(iii) in
the
case of an amount in respect of an Effective Tax Liability within (b) of the
definition of Effective Tax Liability, seven days before the date on which
the
Tax saved thereby would otherwise have become due and payable to the relevant
Tax Authority;
(iv) in
the
case of an amount under Section 10.9(a)(iv) within seven days of the Buyer
giving written notice of the costs and expenses to the Sellers.
(f) Reference
in this Section 10.9 to income, profits or gains earned, accrued or received
on
or before Closing includes income, profits or gains which are deemed to be
or
are treated or regarded as earned, accrued or received on or before Closing
for
any Tax purpose.
10.10 Procedures
Relating to Indemnification of Tax Claims.
(a) If
any
Taxing Authority or other Person asserts a Tax Claim, then the party hereto
first receiving notice of such Tax Claim shall promptly provide written notice
of such Tax Claim to the other party hereto. Such notice shall specify in
reasonable detail the basis for such Tax Claim and shall include a copy of
any
relevant correspondence received from the Taxing Authority or other
Person.
(b) Subject
to this Section 10.10(b) and Sections 10.10(c) to (e) the Buyer shall or shall
procure that the relevant Seller Company shall take such action to avoid,
dispute, resist, appeal, compromise or contest any Tax Claim as the Sellers
may
reasonably request in writing provided, that:
(i) neither
the Buyer nor any of the Seller Companies shall be required to delegate the
conduct of such action to the Founding Sellers or any professional agent or
adviser of the Founding Sellers;
(ii) the
Buyer
shall not be obliged to procure any such action unless the Founding Sellers
have
indemnified the Buyer and the relevant Seller Company to their reasonable
satisfaction against any liabilities, costs or expenses (including additional
Tax) which may be incurred; and
(iii) neither
the Buyer nor any of the Seller Companies shall be obliged to take any action
requested by the Founding Sellers which could reasonably be said to be frivolous
or vexatious or which could adversely affect any of the Seller Companies or
the
Buyer's future Tax position, and the Buyer shall not be obliged to procure
that
such action is taken.
(c) Neither
the Buyer nor any of the Seller Companies shall be obliged to comply with any
request of the Founding Sellers which involves contesting any Tax Claim before
any court or other appellate body unless the Founding Sellers obtain the written
opinion of counsel of at least ten years call that such contest will, on the
balance of probabilities, be successful.
(d) The
Buyer
and the Seller Companies shall be free to take such action as they may in their
absolute discretion think fit and without prejudice to their rights and remedies
under this Agreement if within fourteen days of service of the notice under
Section 10.10(a) the Founding Sellers fail to notify the Buyer of their
intention to resist such Tax Claim or fail within that period to give the
indemnity referred to in Section 10.10(b)(ii).
(e) Section
10.10(b) shall not apply if any of the Founding Sellers or the Seller Companies
has committed acts or omissions which constitute or are alleged to constitute
fraud, willful default or negligent conduct.
10.11 Tax
Treatment of Indemnification Payments.
Except
as otherwise required by applicable Law, the parties shall treat any
indemnification payment made hereunder as an adjustment to Purchase
Price.
ARTICLE
XI
MISCELLANEOUS
11.1 Notices.
Any
notice, request, demand, waiver, consent, approval or other communication which
is required or permitted hereunder shall be in writing and shall be deemed
given
(a) on the date established by the sender as having been delivered personally,
(b) on the date delivered by a private courier as established by the sender
by
evidence obtained from the courier, (c) on the date sent by facsimile, with
confirmation of transmission, if sent during normal business hours of the
recipient, if not, then on the next business day, or (d) on the fifth day after
the date mailed, by certified or registered mail, return receipt requested,
postage prepaid. Such communications, to be valid, must be addressed as
follows:
If
to
Buyer, to:
Mandalay
Media, Inc.
2121
Avenue of the Stars, Suite 2550
Los
Angeles, California 90067
Attention:
James Lefkowitz
Telephone:
(310)
601-2500
With
a
required copy to:
Kenneth
R. Koch, Esq.
Mintz
Levin Cohn Ferris Glovsky and Popeo, P.C.
666
Third
Avenue
New
York,
New York 10017
Telephone:
(212) 935-3000
If
to
Sellers, to:
Jonathan
Cresswell
Nathaniel
MacLeitch
AMV
Holding Limited
65
High
Street
Marlow
Buckinghamshire,
United Kingdom
With
a
required copy to:
Nicholas
Hart Solicitors
39
Hatton
Garden
London
EC1N 8EH
Telephone:
011 44 0207 242 9222
or
to
such other address or to the attention of such Person or Persons as the
recipient party has specified by prior written notice to the sending party
(or
in the case of counsel, to such other readily ascertainable business address
as
such counsel may hereafter maintain). If more than one method for sending notice
as set forth above is used, the earliest notice date established as set forth
above shall control.
11.2 Amendments
and Waivers.
(a) Any
provision of this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and is signed, in the case of an amendment,
by
each party to this Agreement, or in the case of a waiver, by the party against
whom the waiver is to be effective.
(b) No
failure or delay by any party in exercising any right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
(c) To
the
maximum extent permitted by Law, (i) no waiver that may be given by a party
shall be applicable except in the specific instance for which it was given
and
(ii) no notice to or demand on one party shall be deemed to be a waiver of
any
obligation of such party or the right of the party giving such notice or demand
to take further action without notice or demand.
11.3 Expenses.
Each
party shall bear its own costs and expenses in connection with this Agreement
and the transactions contemplated hereby, including, without limitation, all
legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties, whether or not the Acquisition is
completed.
11.4 Successors
and Assigns.
This
Agreement may not be assigned, transferred, changed or made the subject of
a
trust by either party hereto without the prior written consent of the other
party; provided, that,
without
such consent, Buyer may transfer or assign, in whole
or
in part or from time to time, to one or more of its Affiliates, the right to
purchase all or a portion of the Shares, but no such transfer or assignment
will
relieve Buyer of its obligations hereunder. Subject to the foregoing, all of
the
terms and provisions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and
assigns.
11.5 Governing
Law.
This
Agreement and the Exhibits and Schedules hereto shall be governed by and
interpreted and enforced in accordance with the Laws of the State of New York,
without giving effect to any choice of law or conflict of laws rules or
provisions (whether of the State of New York or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
State
of New York.
11.6 Arbitration.
Any
disputes or claims arising under or in connection with this Agreement or the
transactions contemplated hereunder shall be resolved by binding arbitration.
Notice of a demand to arbitrate a dispute by either party shall be given in
writing to the other at their last known address. Arbitration shall be commenced
by the filing by a party of an arbitration demand with the American Arbitration
Association (“AAA”).
The
arbitration and resolution of the dispute shall be resolved by a single
arbitrator appointed by the AAA pursuant to AAA rules. The arbitration shall
in
all respects be governed and conducted by applicable AAA rules, and any award
and/or decision shall be conclusive and binding on the parties. The arbitration
shall be conducted in New York, New York. The arbitrator shall supply a written
opinion supporting any award, and judgment may be entered on the award in any
court of competent jurisdiction. Each party shall pay its own fees and expenses
for the arbitration, except that any costs and charges imposed by the AAA and
any fees of the arbitrator for his services shall be assessed against the losing
party by the arbitrator. In the event that preliminary or permanent injunctive
relief is necessary or desirable in order to prevent a party from acting
contrary to this Agreement or to prevent irreparable harm prior to a
confirmation of an arbitration award, then either party is authorized and
entitled to commence a lawsuit solely to obtain equitable relief against the
other pending the completion of the arbitration in a court having jurisdiction
over the parties. Each party hereby consents to the non-exclusive jurisdiction
of the federal and state courts located in the City of New York in the State
of
New York, New York, for such purpose.
11.7 Counterparts.
This
Agreement may be executed in counterparts, and either party hereto may execute
any such counterpart, each of which when executed and delivered shall be deemed
to be an original and both of which counterparts taken together shall constitute
but one and the same instrument. This Agreement shall become effective when
each
party hereto shall have received a counterpart hereof signed by the other party
hereto.
11.8 Third
Party Beneficiaries.
No
provision of this Agreement is intended to confer upon any Person other than
the
parties hereto any rights or remedies hereunder, except that in the case of
Article X hereof, the other Indemnitees and their respective heirs, executors,
administrators, legal representatives, successors and assigns, are intended
third-party beneficiaries of such sections and shall have the right to enforce
such sections in their own names.
11.9 Entire
Agreement.
This
Agreement and the documents, instruments and other agreements specifically
referred to herein or delivered pursuant hereto set forth the entire
understanding of the parties hereto with respect to the Acquisition. All
Schedules referred to herein are intended to be and hereby are specifically
made
a part of this Agreement. Any and all previous agreements, understandings or
representations between or among the parties regarding the subject matter
hereof, whether written or oral, are superseded by this Agreement, except for
the provisions of Section 8 of the Letter of Intent which shall continue in
full
force and effect in accordance with its terms.
11.10 Captions.
All
captions contained in this Agreement are for convenience of reference only,
do
not form a part of this Agreement and shall not affect in any way the meaning
or
interpretation of this Agreement.
11.11 Severability.
Any
provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any
other jurisdiction.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date first above
written.
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BUYER:
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MANDALAY
MEDIA, INC. |
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By:
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/s/
James Lefkowitz
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Name:
James Lefkowitz |
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Title:
President |
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FOUNDING
SELLERS:
|
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|
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/s/
Jonathan Cresswell
|
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Jonathan
Cresswell (a/k/a Jack Cresswell)
|
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|
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/s/
Nathaniel MacLeitch
|
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Nathaniel
MacLeitch
|
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NON-FOUNDING
SELLERS:
|
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|
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/s/
Nathaniel MacLeitch, as attorney for:
|
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Dave
Vernon
|
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|
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/s/
Nathaniel MacLeitch, as attorney for:
|
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Ivo
Petrov
|
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/s/
Nathaniel MacLeitch, as attorney for:
|
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Hrair
Mekhsian
|
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/s/
Nathaniel MacLeitch, as attorney for:
|
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John
Holgate
|
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Acknowledged
and Agreed:
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SELLERS’
REPRESENTATIVE:
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|
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/s/
Nathaniel MacLeitch
|
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Nathaniel
MacLeitch
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