Document:

ex10_1.htm

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

           THIS AGREEMENT is made as of the 28th day of December, 2011 (the “Effective Date”), by and among First Security Group, Inc., a bank holding company organized under the laws of the State of Tennessee (the “Company”), FSGBank, N.A., a national association organized under the laws of the United States (the “Bank” and collectively with the Company, the “Employer”), and Michael Kramer (the “Executive”).

BACKGROUND:

The Company and the Bank each desire to employ the Executive, respectively, as the Chief Executive Officer of the Company and the Chief Executive Officer of the Bank on the terms and conditions set forth below and Executive desires to accept such employment subject to such terms and conditions.

 

AGREEMENT:

           In consideration of the above premises and the mutual agreements hereinafter set forth, effective as of the Effective Date, the parties hereby agree as follows:

1.        Duties.

           1.1           Positions.  The Executive shall be employed as the Chief Executive Officer of the Company and of the Bank and shall perform and discharge faithfully the duties and responsibilities which may be assigned to the Executive from time to time in connection with the conduct of the businesses.  The duties and responsibilities of the Executive shall be commensurate with similar positions at other publically-traded community bank holding companies. The Executive shall report directly to the Board of Directors.  During the Term, at appropriate intervals and with the consent of the Executive, the Company and the Bank shall each nominate the Executive as a candidate for election or re-election to their respective Boards of Directors, subject to any necessary regulatory non-objections.

           1.2           Full-Time Status. In addition to the duties and responsibilities specifically assigned to the Executive pursuant to Section 1.1 hereof, the Executive shall:

(a)           subject to Section 1.3, devote substantially all of the Executive’s time, energy and skill during regular business hours to the performance of the duties of the Executive’s employment (reasonable vacations and reasonable absences due to illness excepted) and faithfully and industriously perform such duties;

 

(b)           diligently follow and implement all reasonable and lawful management policies and decisions communicated to the Executive by the Board of Directors; and

 

(c)           timely prepare and forward to the Board of Directors all reports and accountings as may be requested of the Executive.

 

  

  

  

 

   1.3         Permitted Activities. The Executive shall devote substantially all of the Executive’s entire business time, attention and energies to the Business of the Employer and shall not during the Term be engaged (whether or not during normal business hours) in any other significant business or professional activity, whether or not such activity is pursued for gain, profit or other pecuniary advantage, but as long as the following activities do not interfere with the Executive’s obligations to the Employer, this shall not be construed as preventing the Executive from:

(a)           investing the Executive’s personal assets in any manner which will not require any services on the part of the Executive in the operation or affairs of the entity and in which the Executive’s participation is solely that of an investor; provided that such investment activity following the Effective Date shall not result in his owning beneficially at any time one percent (1%) or more of the equity securities of any Competing Business; or

(b)           participating in civic and professional affairs and organizations and conferences, preparing or publishing papers or books, or teaching or serving on the board of directors of an entity so long as any such participation does not interfere with the ability of the Executive to effectively discharge his duties hereunder; provided further, that the Board of Directors may direct the Executive in writing to resign from any such organization and/or cease such activities should the Board of Directors reasonably conclude that continued membership and/or activities of the type identified would not be in the best interests of the Employer.

2.        Period of Employment.  This Agreement and the parties’ employment relationship shall have no fixed period.  The employment relationship is an “at will” relationship, which means that this Agreement and the Executive’s employment with the Employer may be terminated by the Employer or by the Executive, by written notice of one to the other at any time for any reason, or for no reason whatsoever, without any obligations owing to the Executive other than as provided in Section 4.

3.        Compensation.  The Company shall pay the Executive the following during his period of employment, except as otherwise provided below:

           3.1           Annual Base Salary.  The Executive shall be compensated at an annual base rate of Three Hundred Twenty-Five Thousand and No/100 Dollars ($325,000.00) (the “Annual Base Salary”).  The Executive’s Annual Base Salary shall be reviewed by the Board of Directors at least annually for adjustments, as determined by the Board of Directors based on an evaluation of the Executive’s performance.  The Executive’s Annual Base Salary shall be payable in accordance with the Employer’s normal payroll practices.

 

  

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           3.2           Annual Incentive Compensation.

           (a)           The Executive shall be eligible to receive annual bonus compensation, if any, as may be determined by, and based on performance measures established by, the Board of Directors upon the recommendation of the Compensation Committee of the Board of Directors (the “Committee”) consistent with the Employer’s strategic planning process and in consultation with the Executive, pursuant to any incentive compensation program as may be adopted from time to time by the Board of Directors, based on recommendations by the Committee (an “Annual Bonus”).

           (b)           Any Annual Bonus earned shall be payable in cash in the year following the year in which the bonus is earned in accordance with the Employer’s normal practices for the payment of short-term incentives.  The payment of any Annual Bonus shall be subject to any approvals or non-objections required by any regulator of the Employer, and it is understood by the parties that it is contemplated that Executive will not be eligible to receive any such Annual Bonus or other short-term incentive compensation while the Company or any Affiliate is subject to restrictions imposed on the Company or any Affiliate by the United States Department of Treasury (“Treasury”), the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation (“FDIC”), or any other bank-regulatory authority, or otherwise restricted under applicable law.

           (c)           The provisions of this Section 3.2 shall become effective from and after the date the Company’s participation in the Treasury’s Troubled Asset Relief Program (“TARP”) ceases by reason of its full repayment of the financial assistance obtained from Treasury under TARP.

           3.3           Equity Compensation.  As soon as practicable after the Effective Date, the Company shall grant the Executive a restricted stock award representing the opportunity to earn up to thirty-five thousand (35,000) shares of the Company’s common stock.  The award shall contain terms consistent with TARP Guidance (as defined in Exhibit “A” attached hereto) and shall be subject to such other terms and conditions set forth in the form of award employed by the Company.

 

3.4          Relocation Expenses.

 

(a)       The Employer shall reimburse the Executive for reasonable expenses incurred by the Executive during the 2012 calendar year in relocating to the metropolitan Chattanooga area in an amount not to exceed Twenty Thousand and No/Dollars ($20,000.00).  Such reimbursable relocation expenses may include customary closing costs incurred in connection with the sale of the Executive’s existing primary residence, packing, moving, and, if necessary, short-term storage by a professional moving and storage firm.

 

  

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(b)       The Employer shall provide the Executive with temporary housing, inclusive of rent and all utilities, in the metropolitan Chattanooga area until the expiration of a period of one-hundred and twenty (120) days following the Effective Date or, if earlier, until the Executive moves into permanent housing in the metropolitan Chattanooga area.

 

3.5          Automobile Allowance.  The Employer will provide the Executive with a monthly automobile allowance in the amount of Seven Hundred and Fifty and No/100 Dollars ($750.00).

 

           3.6           Business and Professional Education Expenses; Memberships.  Subject to the reimbursement policies from time to time adopted by the Board of Directors and consistent with the annual budget approved for the period during which an expense was incurred, the Employer specifically agrees to reimburse the Executive for reasonable and necessary business expenses incurred by the Executive in the performance of his duties hereunder; provided, however, that as a condition of any such reimbursement, the Executive submit verification of the nature and amount of such expenses in accordance with such reimbursement policies and in sufficient detail to comply with rules and regulations promulgated by the United States Treasury Department.  Examples of appropriate categories of expenses include membership in professional and civic organizations, professional development, and customer entertainment.  The Executive acknowledges that the Employer makes no representation with respect to the taxability or nontaxability of the benefits provided under this Section 3.6.

3.7          Paid Vacation.  The Executive shall be entitled to no less than twenty-five (25) days of paid leave, prorated for any partial calendar year of service.  The provisions of this Section 3.7 shall apply notwithstanding any less generous paid leave policy then maintained by the Employer, but the use of Executive’s paid leave shall otherwise be determined in accordance with the Employer’s paid leave policy as in effect from time to time.

 

3.8          Benefits.  In addition to the benefits specifically described in this Agreement, the Executive shall be entitled to such benefits as may be available from time to time to similarly situated employees.  All such benefits shall be awarded and administered in accordance with the written terms of any applicable benefit plan or, if no written terms exist, the Employer’s standard policies and practices relating to such benefit.

3.9          Withholding.  The Employer may deduct from each payment of compensation hereunder all amounts required to be deducted and withheld in accordance with applicable federal and state income, FICA and other withholding requirements.

3.10        Reimbursement of Expenses; In-Kind Benefits.  All expenses eligible for reimbursements described in this Agreement must be incurred by the Executive during the Term of this Agreement to be eligible for reimbursement.  Any in-kind benefits provided by the Employer must be provided during the Term of this Agreement.  The amount of reimbursable expenses incurred, and the amount of any in-kind benefits provided, in one taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits provided, in any other taxable year.  Each category of reimbursement shall be paid as soon as administratively practicable, but in no event shall any such reimbursement be paid after the last day of the calendar year following the calendar year in which the expense was incurred.  Neither rights to reimbursement nor in-kind benefits are subject to liquidation or exchanges for other benefits.

 

  

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3.11        TARP Compliance.  The Executive understands and acknowledges that, as a condition of receiving TARP financial assistance, the Company is required to comply with the compensation requirements established under the TARP Guidance (as defined in Exhibit “A” attached hereto).  Because the Executive is expected to be, or reasonably anticipated to become, a Senior Executive Officer, the Most Highly Compensated Employee and/or an Other Highly Compensated Employee Officer (all as defined in Exhibit “A” attached hereto), the Executive agrees to enter into a TARP Restricted Employee Agreement, in substantially the form attached hereto as Exhibit “A,” as modified from time to time by the Company to reflect any revisions to the TARP Guidance.  In addition, the Executive understands and acknowledges that the compensatory arrangements in favor of the Executive as set forth in this Agreement are subject to modifications as may be effected from time to time by the Company as the Company may reasonably determine is necessary to comply with the TARP Guidance, including, but not limited to, any modifications reasonably determined to be necessary to discourage (a) the taking of unnecessary or excessive risks, or (b) the manipulation of reported earnings.

 

3.12        Clawback of Compensation.  The Executive agrees to repay any compensation previously paid or otherwise made available to him that is subject to recovery under any applicable law (including any rule of any exchange or service through which the securities of the Company are then traded) where such compensation was in excess of what should have been paid or made available because the determination of the amount due was based, in whole or in part, on materially inaccurate financial information of the Employer or was in excess of, or a type of compensation limited by, the compensation limitations imposed by the TARP Guidance.  The Executive agrees to return promptly any such compensation identified by the Employer.  If the Executive fails to return such compensation promptly, the Executive agrees that the amount of such compensation may be deducted from any and all other compensation owed to the Executive.  The Executive acknowledges that the Employer may take appropriate disciplinary action (up to, and including, termination of employment) if the Executive fails to return such compensation.  The provisions of this Section 3.12 shall be modified to the extent, and remain in effect for the period, required by applicable law.

3.13        Apportionment of Obligations.  The obligations for the payment of the amounts otherwise payable pursuant to this Section 3 shall be apportioned between the Company and the Bank as they may agree from time to time in their sole discretion.

 

  

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4.        Termination of Employment.

           4.1           Cessation of Compensatory Obligations; Resignation. 

           (a)           The Employer shall have no further obligations to the Executive or the Executive’s estate with respect to this Agreement, except for the payment of any amount earned and owing under Section 3 through the effective date of the termination of the Executive’s employment and termination of the Agreement.

(b)           If the Executive is a member of a Board of Directors and the Executive’s employment is terminated by the Employer or by the Executive pursuant to Section 4.1, the Executive shall immediately resign from his position on the Board(s) of Directors, effective no later than the date his employment is terminated.

 

4.2          Regulatory Action.

(a)       If the Executive is removed and/or permanently prohibited from participating in the conduct of the Employer’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (“FDIA”) (12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Employer under this Agreement shall terminate, as of the effective date of such order, except for the payment of Annual Base Salary due and owing under Section 3.1 on the effective date of said order, and reimbursement under Section 3.6 of expenses incurred as of the effective date of termination.

(b)       If the Executive is suspended and/or temporarily prohibited from participating in the conduct of the Employer’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)), all obligations of the Employer under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings.  If the charges in the notice are dismissed, the Employer shall reinstate any of its obligations which were suspended to the extent permitted by applicable law.

(c)       If the Employer is in default (as defined in Section 3(x)(1) of the FDIA), all obligations under this Agreement shall terminate as of the date of default, but the vested rights of the parties shall not be affected.

(d)       If the FDIC is appointed receiver or conservator under Section 11(c) of the FDIA (12 U.S.C. 1821(c)) of the Company or any depository institution controlled by the Company, the Company shall have the right to terminate all obligations of the Employer under this Agreement as of the date of such receivership or conservatorship, other than any rights of the Executive that vested prior to such appointment.  To the extent the Company is or encompasses a depository institution, any vested rights of the Executive may be subject to such modifications that are consistent with the authority of the FDIC.

 

  

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(e)       If the FDIC provides open bank assistance under Section 13(c) of the FDIA (12 U.S.C. 1823(c)) to the Company or any depository institution controlled by the Company, but excluding any such assistance provided to the industry generally, the Company shall have the right to terminate all obligations of the Employer under this Agreement as of the date of such assistance, other than any rights of the Executive that vested prior to the FDIC action.  To the extent the Company is or encompasses a depository institution, any vested rights of the Executive may be subject to such modifications that are consistent with the authority of the FDIC.

(f)        If the FDIC requires a transaction under Section 13(f) or 13(k) of the FDIA (12 U.S.C. 1823(f) and (k)) by the Company or any depository institution controlled by the Company, the Company shall have the right to terminate all obligations of the Employer under this Agreement as of the date of such transaction, other than any rights of the Executive that vested prior to the transaction.  To the extent the Company is or encompasses a depository institution, any vested rights of the Executive may be subject to such modifications that are consistent with the authority of the FDIC.

(g)       All obligations under this Agreement are further subject to such conditions, restrictions, limitations and forfeiture provisions as may separately apply pursuant to any applicable national banking laws.

5.        Employer Information.

           5.1           Ownership of Employer Information.   All Employer Information received or developed by the Executive or by the Employer while the Executive is employed by the Employer will remain the sole and exclusive property of the Employer.

           5.2           Obligations of the Executive.  The Executive agrees:

 

	 	
(a)

	
to hold Employer Information in strictest confidence;

        

	 	
(b)

	
not to use, duplicate, reproduce, distribute, disclose or otherwise disseminate Employer Information or any physical embodiments of Employer Information to any unauthorized recipient; and

	 	
(c)

	
in any event, not to take any action causing or fail to take any action necessary in order to prevent any Employer Information from losing its character or ceasing to qualify as Confidential Information or a Trade Secret;

provided, however, that none of the foregoing obligations shall preclude the Executive from making any disclosures of Employer Information required by law.  This Section 5 shall survive for a period of two (2) years following termination of this Agreement for any reason with respect to Confidential Information, and shall survive termination of this Agreement for any reason for so long as is permitted by applicable law, with respect to Trade Secrets.

 

  

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           5.3           Delivery upon Request or Termination.  Upon request by the Employer, and in any event upon the Executive’s termination of employment with the Employer, the Executive will promptly deliver to the Employer all property belonging to the Employer, including, without limitation, all Employer Information then in the Executive’s possession or control.

6.        Non-Competition.  The Executive agrees that during the Executive’s employment by the Employer hereunder, and in the event of the Executive’s involuntary termination of employment with Cause or the Executive’s resignation, for the duration of the Post-Termination Period, the Executive will not (except on behalf of or with the prior written consent of the Employer), within the Area, either directly or indirectly, on the Executive’s own behalf or in the service or on behalf of others, perform for any Competing Business any services which are the same as or essentially the same as the services the Executive provided for the Employer.

7.        Non-Solicitation of Customers.  The Executive agrees that during the Executive’s employment by the Employer hereunder, and in the event of the Executive’s termination of employment, regardless of the reason, for the duration of the Post-Termination Period, the Executive will not (except on behalf of or with the prior written consent of the Employer) on the Executive’s own behalf or in the service or on behalf of others, solicit, divert or appropriate or attempt to solicit, divert or appropriate, any business from any of the Employer’s customers, including prospective customers actively sought by the Employer, with whom the Executive has or had material contact during the last two (2) years of the Executive’s employment with Employer, for purposes of providing products or services that are competitive with those provided by the Employer.

8.        Non-Solicitation of Employees.  The Executive agrees that during the Executive’s employment by the Employer hereunder, and in the event of the Executive’s termination of employment, regardless of the reason, for the duration of the Post-Termination Period, the Executive will not (except on behalf of or with the prior written consent of the Employer) on the Executive’s own behalf or in the service or on behalf of others, solicit, recruit or hire away or attempt to solicit, recruit or hire away, any employee of the Employer with whom the Executive had material contact during the last two (2) years of the Executive’s employment, whether or not such employee is a full-time employee or a temporary employee of the Employer, such employment is pursuant to written agreement, for a determined period, or at will.

9.        Non-disparagement.  The Executive agrees that during the Executive’s employment by the Employer hereunder, and for a period of two (2) years thereafter, he will not make any untruthful statement (written or oral) that could reasonably be perceived as disparaging to the Employer or any Affiliate.

 

  

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10.      Remedies.  The Executive agrees that the covenants contained in Sections 5 through 9 of this Agreement are of the essence of this Agreement; that each of the covenants is reasonable and necessary to protect the business, interests and properties of the Employer, and that irreparable loss and damage will be suffered by the Employer should the Executive breach any of the covenants.  Therefore, the Executive agrees and consents that, in addition to all the remedies provided by law or in equity, the Employer shall be entitled to a temporary restraining order and temporary and permanent injunctions to prevent a breach or contemplated breach of any of the covenants.  The Employer and the Executive agree that all remedies available to the Employer shall be cumulative.

11.      Severability.  The parties agree that each of the provisions included in this Agreement is separate, distinct and severable from the other provisions of this Agreement and that the invalidity or unenforceability of any Agreement provision shall not affect the validity or enforceability of any other provision of this Agreement.  Further, if any provision of this Agreement is ruled invalid or unenforceable by a court of competent jurisdiction because of a conflict between the provision and any applicable law or public policy, the provision shall be redrawn to make the provision consistent with, and valid and enforceable under, the law or public policy.

12.      No Set-Off by the Executive.  The existence of any claim, demand, action or cause of action by the Executive against the Employer whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement by the Employer of any of its rights hereunder.

13.      Notice.  All notices, requests, waivers and other communications required or permitted hereunder shall be in writing and shall be either personally delivered, sent by reputable overnight courier service or mailed by first class mail, return receipt requested, to the recipient at the address below indicated:

	 	
If to the Company:

	
First Security Group, Inc.

	 	 	
Attn: Chairman, Board of Directors

	 	

531 Broad Street

	 	

Chattanooga, TN  37402

 

	 	
If to the Bank:

	
FSGBank, N.A.

	 	 	
Attn: Chairman, Board of Directors

	 	

531 Broad Street

	 	

Chattanooga, TN  37402

 

	 	
If to the Executive:

	
Mr. Michael Kramer

	 	

30 Old Orchard Lane

	 	

Newburgh, IN  47630

 

 

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or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.  All such notices, requests, waivers and other communications shall be deemed to have been effectively given:  (a) when personally delivered to the party to be notified; (b) when sent by confirmed facsimile to the party to be notified; (c) five (5) business days after deposit in the United States Mail postage prepaid by certified or registered mail with return receipt requested at any time other than during a general discontinuance of postal service due to strike, lockout, or otherwise (in which case such notice, request, waiver or other communication shall be effectively given upon receipt) and addressed to the party to be notified as set forth above; or (d) two (2) business days after deposit with a national overnight delivery service, postage prepaid, addressed to the party to be notified as set forth above with next-business-day delivery guaranteed. A party may change its or his notice address given above by giving the other party ten (10) days’ written notice of the new address in the manner set forth above.

14.      Assignment.  The rights and obligations of the Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Employer, as applicable, including without limitation, a purchaser of all or substantially all the assets of the Employer.  If the Agreement is assigned pursuant to the foregoing sentence, the assignment shall be by novation and the Employer shall have no further liability hereunder, and the successor or assign, as applicable, shall become the “Employer” hereunder, but the Executive will not be deemed to have experienced a termination of employment by virtue of such assignment.  The Agreement is a personal contract and the rights and interest of the Executive may not be assigned by the Executive.  This Agreement shall inure to the benefit of and be enforceable by the Executive and the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

15.      Waiver.  A waiver by one party to this Agreement of any breach of this Agreement by any other party to this Agreement shall not be effective unless in writing, and no waiver shall operate or be construed as a waiver of the same or another breach on a subsequent occasion.

16.      Mediation.  Except with respect to Sections 5 through 10 and 22 herein, and as provided in Section 17 hereof, if any dispute arises out of or relates to this Agreement, or a breach thereof, and if the dispute cannot be settled through direct discussions between the parties, the parties agree to first endeavor to settle the dispute in an amicable manner by non-binding mediation in accordance with the rules of alternative dispute resolution of the State of Tennessee for the judicial circuit containing Hamilton County, Tennessee before resorting to any other process for resolving the dispute.

17.      Applicable Law and Choice of Forum.  This Agreement shall be construed and enforced under and in accordance with the laws of the State of Tennessee.  The parties agree that any appropriate state court located in Hamilton County, Tennessee or federal court for the Eastern District of Tennessee shall have exclusive jurisdiction of any case or controversy arising under or in connection with this Agreement shall be a proper forum in which to adjudicate such case or controversy.  The parties consent and waive any objection to the jurisdiction or venue of such courts.

 

  

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18.      Interpretation.  Words importing any gender include all genders.  Words importing the singular form shall include the plural and vice versa.  The terms “herein,” “hereunder,” “hereby,” “hereto,” “hereof” and any similar terms refer to this Agreement.  Any captions, titles or headings preceding the text of any article, section or subsection herein are solely for convenience of reference and shall not constitute part of this Agreement or affect its meaning, construction or effect.

19.      Entire Agreement.  This Agreement embodies the entire and final agreement of the parties on the subject matter stated in this Agreement.  No amendment or modification of this Agreement shall be valid or binding upon the Employer or the Executive unless made in writing and signed by all parties.  All prior understandings and agreements relating to the subject matter of this Agreement are hereby expressly terminated, including, but not limited to, the Consulting Agreement between the parties dated October 4, 2011.

20.      Rights of Third Parties.  Nothing herein expressed is intended to or shall be construed to confer upon or give to any person, firm or other entity, other than the parties hereto and their permitted assigns, any rights or remedies under or by reason of this Agreement.

21.      Survival.  The obligations of the parties pursuant to Sections 3.12, 5 through 9, 16, 17 and 21, as applicable, shall survive the Executive’s termination of employment hereunder for the period designated under each of those respective sections.

22.      Representation Regarding Restrictive Covenants.  The Executive represents that the Executive is not and will not become a party to any non-competition or non-solicitation agreement or any other agreement which would prohibit the Executive from entering into this Agreement or providing the services for the Employer contemplated by this Agreement on or after the Effective Date.  In the event the Executive is subject to any such agreement, this Agreement shall be rendered null and void and the Employer shall have no obligations to the Executive under this Agreement.

23.      Section 409A.  It is the intent of the parties that any payment to which the Executive is entitled under this Agreement be exempt from Section 409A of the Code, to the maximum extent permitted under Section 409A of the Code. However, if any such amounts are considered to be “nonqualified deferred compensation” subject to Section 409A of the Code, such amounts shall be paid and provided in a manner, and at such time and form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for non-compliance. Neither the Executive nor the Employer shall intentionally take any action to accelerate or delay the payment of any amounts in any manner which would not be in compliance with Section 409A of the Code without the consent of the other party.  For purposes of this Agreement, all rights to payments shall be treated as rights to receive a series of separate payments to the fullest extent allowed by Section 409A of the Code. To the extent that some portion of the payments under this Agreement may be bifurcated and treated as exempt from Section 409A of the Code under the “short-term deferral” or “separation pay” exemptions, then such amounts may be so treated as exempt from Section 409A of the Code.

 

  

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24.      Definitions.       Whenever used in this Agreement, the following terms and their variant forms shall have the meanings set forth below:

(a)       “Affiliate” shall mean any entity which controls, is controlled by, or is under common control with another entity.  For this purpose, “control” means ownership of more than fifty percent (50%) of the ordinary voting power of the outstanding equity securities of an entity.

(b)       “Agreement” shall mean this Agreement and any appendices incorporated herein together with any amendments hereto made in the manner described in this Agreement.

(c)       “Area” shall mean, during the period of employment, a radius of twenty (20) miles from each banking office maintained by the Company and its Affiliates from time to time during the period of employment and, following the period of employment, a radius of twenty (20) miles from each banking office maintained by the Company and its Affiliates as of the last day of employment.

(d)       “Board of Directors” shall mean the board of directors of the Company and/or of the Bank, as the context requires and, where appropriate, includes any committee thereof or other designee.

(e)       “Business of the Employer” shall mean the business conducted by the Employer, which is the business of commercial and consumer banking.

(f)        “Cause” shall mean:

 

(1)          a material breach of the terms of this Agreement by the Executive not cured by the Executive within ten (10) business days after his receipt of the Employer’s written notice thereof, including, without limitation, failure by the Executive to perform the Executive’s duties and responsibilities in the manner and to the extent required under this Agreement;

 

(2)          any act by the Executive of fraud against, material misappropriation from, or material dishonesty to the Employer or any Affiliate;

 

(3)          conviction of the Executive of a crime involving breach of trust or moral turpitude or any felony;

 

 

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(4)          conduct by the Executive that amounts to willful misconduct, gross neglect or material failure to perform the Executive’s duties and responsibilities hereunder, including prolonged absences without the written consent of the Board of Directors; provided that the nature of such conduct shall be set forth with reasonable particularity in a written notice to the Executive who shall have ten (10) days following delivery of such notice to cure such alleged conduct, provided that such conduct is, in the reasonable discretion of the Board of Directors, susceptible to a cure;

(5)          the exhibition of a standard of behavior within the scope of or related to his employment that is in violation of a written Employer policy; provided that the nature of such conduct shall be set forth with reasonable particularity in a written notice to the Executive who shall have ten (10) days following delivery of such notice to cure such alleged conduct, provided that such conduct is, in the reasonable discretion of the Board of Directors, susceptible to a cure;

(6)          receipt of any form of written notice that any regulatory agency having jurisdiction over the Employer has instituted any form of regulatory action against the Executive; or

(7)          Executive’s removal and/or permanent prohibition from participating in the conduct of the Employer’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the FDIA (12 U.S.C. 1818(e)(4) and (g)(1)).

  

(g)       “Code” shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

 

(h)       “Competing Business” shall mean any entity (other than the Company and its Affiliates) that is conducting business that is the same or substantially the same as the Business of the Employer.

(i)        “Confidential Information” means data and information relating to the business of the Company and its Affiliates (which does not rise to the status of a Trade Secret) which is or has been disclosed to the Executive or of which the Executive became aware as a consequence of or through the Executive’s relationship to the Company and its Affiliates and which has value to the Company and its Affiliates and is not generally known to its competitors.  Confidential Information shall not include any data or information that has been voluntarily disclosed to the public by the Company or its Affiliates, provided that such public disclosure shall not be deemed to be voluntary when made without authorization by the Executive or any other employee of Employer, or that has been independently developed and disclosed by others, or that otherwise enters the public domain through lawful means.

 

  

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(j)        “Employer Information” shall mean Confidential Information and Trade Secrets.

(k)       “Post-Termination Period” shall mean twelve (12) months following the effective date of the Executive’s termination of employment.

 

(l)       “Trade Secrets” shall mean Company or Affiliate information including, but not limited to, technical or nontechnical data, formulas, patterns, compilations, programs, devices, methods, techniques, drawings, processes, financial data, financial plans, product plans or lists of actual or potential customers or suppliers which:

(1)           derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(2)           is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

 

[Signatures are on the Following Page]

 

  

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      IN WITNESS WHEREOF, the Employer and the Executive have executed and delivered this Agreement as of the date first shown above.

 

	 	
First Security Group, Inc.:

	 	 	 
	 	By:	/s/ John R. Haddock
	 	 	
Signature

	 	 	 
	 	 	John R. Haddock
	 	 	
Print Name

	 	 	 
	 	 	Secretary, EVP & CFO 
	 	 	
Title

	 	 	 
	 	 	 
	 	
FSGBank, N.A.:

	 	 	 
	 	 	 
	 	By:	/s/ John R. Haddock
	 	 	
Signature

	 	 	 
	 	 	John R. Haddock
	 	 	
Print Name

	 	 	 
	 	 	Secretary, EVP & CFO 
	 	 	
Title

	 	 	 
	 	Executive:
	 	 	 
	 	 	 
	 	 	/s/ D. M. Kramer 
	 	Michael Kramer

 

  

15

  

 

Exhibit “A”

 

	
TARP RESTRICTED EMPLOYEE AGREEMENT

           THIS AGREEMENT is made as of the 28th day of December, 2011 (the “Effective Date”), by and between the Company (as defined below), and Michael Kramer (the “Executive”).

The Company has entered into a Securities Purchase Agreement (the “Participation Agreement”), with the United States Department of Treasury (the “Treasury”) that provides for the Company’s participation in the Treasury’s Troubled Asset Relief Program (“TARP”).  If the Company does not participate or ceases at any time to participate in TARP, this Agreement shall be of no further force and effect.

As a condition of receiving such financial assistance, the Company is required to comply with the compensation requirements established by the TARP Guidance (as defined below) and applicable to entities receiving assistance through TARP.  The requirements of this Agreement shall apply to the Executive from the first day of the TARP Covered Period (as defined below) through the earlier of the last day of the TARP Covered Period or the date the Executive ceases to be a Senior Executive Officer (as defined below) and/or Other Highly Compensated Employee (as defined below), except as otherwise contemplated by the TARP Guidance.  To comply with these requirements, and in consideration of the benefits that the Executive will receive as a result of the Company’s participation in TARP and for other good and valuable consideration the sufficiency of which the Executive hereby acknowledges, the parties agree as follows:

 

	
 

	
1.

	
No Golden Parachute Payments.  The Company is prohibited from making, and the Executive shall not be entitled to receive, a Golden Parachute Payment during the TARP Covered Period if the Executive is a Senior Executive Officer or Other Highly Compensated Employee at the date the Golden Parachute Payment would otherwise be paid.  For purposes of this Agreement, the date the Golden Parachute Payment would otherwise be paid is the date of the Executive’s departure or the change in control event that gives rise to the payment, even if any portion of the payment would be paid after the TARP Covered Period.

 

	
 

 

	
2.

	
Recovery of Bonus and Incentive Compensation.  Any bonus, retention award, or incentive compensation paid to the Executive during the TARP Covered Period is subject to recovery or “clawback” by the Company if the payments were based on statements of earnings, revenues, gains, or other criteria that are later found to be materially inaccurate and at the time the bonus, retention award or incentive compensation was paid the Executive was a Senior Executive Officer or Other Most Highly-Compensated Employee.  The Executive agrees to return promptly any such bonus, retention award, or incentive compensation identified by the Company.  If the Executive fails to properly return such bonus, retention award, or incentive compensation, the Executive hereby agrees that the amount of such bonus, retention award, or incentive compensation may be deducted from any and all other compensation owed to the Executive.  The Executive acknowledges that the Company may take appropriate disciplinary action (up to, and including, termination of employment) if the Executive fails to return such bonus, retention award, or incentive compensation.

 

  

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3.

	
Prohibition on Tax Gross-Ups.  The Company is prohibited from formally or informally providing a right to a gross-up to any Senior Executive Officer or any Other Highly Compensated Employees during the TARP Covered Period.  This includes, but is not limited to, a right to a gross-up that is given to the Executive during the TARP Covered Period, even if the gross-up is actually paid at a future date.  A “gross-up” is any reimbursement of taxes owed with respect to any compensation (other than tax equalization agreements for employees subject to tax from a non-U.S. jurisdiction).

 

	  	
4.

	
Limitation of Bonus, Retention Award, and Incentive Compensation.  The Company is prohibiting payment or accrual of any bonus, retention award, or incentive compensation during the TARP Covered Period if the Executive, at the time of such payment or accrual, is an Other Highly Compensated Employee of the Company.  However, this limitation does not apply to payment of any long-term restricted stock by the Company if the restricted stock vests in accordance with the vesting schedule provided in the TARP Guidance, has a value that is no more than one-third (1/3) of the Executive’s total annual compensation, and is subject to such other terms and conditions as the Secretary of the Treasury may determine is in the public interest.  In addition, this prohibition does not apply to any bonus payment required to be paid pursuant to a written employment agreement between the Executive and the Company if such agreement was executed on or before February 11, 2009, and has not been materially modified after February 11, 2009.

 

	  	
5.

	
Limitation of Compensation Encouraging Risks and Manipulation.  The Company is prohibited from paying or accruing compensation that includes incentives for Senior Executive Officers to take unnecessary and excessive risks that threaten the value of the Company, or maintaining any Benefit Plan that encourages manipulation of the Company’s reported earnings to enhance the compensation of the Executive or any other employee of the Company.  To the extent any such compensation is paid or accrued under an arrangement that is later determined to contain such incentives, the Executive waives any right to such compensation, and, if such compensation has already been delivered to the Executive, the Executive agrees to repay such amount to the Company.  To the extent any Benefit Plan in which the Executive participates encourages such unnecessary and excessive risks or manipulation, the Executive hereby acknowledges that any such Benefit Plan (or portion thereof) and the obligations thereunder shall be void or, to the extent permitted by the TARP Guidance, shall be modified in a manner compliant with the TARP Guidance.

 

  

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6.

	
Additional TARP Provisions.  The Company and the Executive acknowledge that additional or modified restrictions, whether the result of legislative activity and/or rules and regulations promulgated by the Treasury, may affect the compensation practices of companies that participate in TARP.  To the extent that such additional or modified restrictions impose additional limitations or requirements on the compensation or benefits that would otherwise be payable to the Executive, the Executive specifically agrees that such limitations and requirements shall apply to him and to the Benefit Plans under which such compensation or benefits are provided, and the Executive agrees to enter into any modification to this Agreement to further reflect such limitations and restrictions to the extent that the Company requests Executive do so.

 

	
 

 

	
7.

	
Compensation Program Amendments. Each of the Company’s existing compensation, bonus, incentive and other benefit plans, arrangements and agreements (including golden parachute, severance and employment agreements) (collectively, “Benefit Plans”) with respect to the Executive is hereby amended to the extent necessary to give effect to Paragraphs 1 through 6. In addition, any Benefit Plans with respect to the Executive that are established or amended hereafter, but during the TARP Covered Period, shall be deemed to incorporate, and shall be interpreted to give effect to, Paragraphs 1 through 6 of this Agreement.  Paragraphs 1 through 7 of this Agreement are intended to, and will be interpreted, administered and construed to, comply with the TARP Guidance (and, to the maximum extent consistent with the preceding, to permit operation of the Benefit Plans in accordance with their terms before giving effect to this Agreement).

 

	
 

	
8.

	
Definitions and Interpretation. As used herein, the following capitalized terms shall have the following meanings:

 

	
 

	
(a)

	
“Company,” means First Security Group, Inc. and any entities treated as a single employer with it under the TARP Guidance.  The Executive is also delivering a waiver pursuant to the Participation Agreement, and, as between the Company and the Executive, the term “employer” in that waiver will be deemed to mean the Company as used in this Agreement.

 

	
 

 

	
(b)

	
“TARP Covered Period” means the period during which any obligation of the Company arising from financial assistance provided under the TARP remains outstanding; provided, however, that the TARP Covered Period shall not include any period during which the federal government only holds warrants to purchase common stock of the Company.

 

	  	
(c)

	
“TARP Guidance” means (i) EESA and any successive legislation amending or superseding EESA, (ii) all rules and regulations now or hereafter promulgated by the responsible agencies of the United States government under EESA, including without limitation the interim final rules issued by the Treasury on June 15, 2009 and adopted at 31 CFR Part 30, and (iii) to the extent not inconsistent with the provisions of (i) or (ii), any applicable restrictions in any prior securities purchase agreement with the Treasury.

 

  

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(d)

	
“EESA” means the Emergency Economic Stabilization Act of 2008 as implemented by guidance or regulation issued by the Department of the Treasury and as published in the Federal Register on October 20, 2008, and as amended by the American Recovery and Reinvestment Act of 2009.

 

	
 

	
(e)

	
“Golden Parachute Payment” means a “golden parachute payment” as defined in the TARP Guidance.

 

	
 

	
(f)

	
“Other Highly Compensated Employee” means:

 

	 	
(i)

	
with respect to Paragraph 1 of this Agreement, the next five (5) Most Highly Compensated Employees (as defined in the TARP Guidance) of the Company after the Senior Executive Officers;

 

	 	
(ii)

	
with respect to Paragraphs 2 and 3 of this Agreement, the next twenty (20) Most Highly Compensated Employees of the Company after the Senior Executive Officers; and

 

	 	
(iii)

	
with respect to Paragraph 4 of this Agreement, the Most Highly Compensated Employee of the Company.

 

	
 

	
(g)

	
“Senior Executive Officer” means the Company’s “senior executive officers” as defined in the TARP Guidance.

 

	
 

	
9.

	
Restricted Obligations Void.  Any obligations of the Company to the Executive that are prohibited or otherwise restricted by the terms of this Agreement shall be rendered null and void at the time the prohibition or restriction first becomes effective and the Executive shall have no rights with respect to such obligations thereafter, whether during or following the TARP Covered Period.

	
 

 

	
10.

	
Prior Agreement.  This Agreement constitutes the entire and final agreement of the parties on the subject matter of this Agreement, and supersedes all prior understandings and agreements relating to the subject matter of this Agreement.

 

	
 

 

	
11.

	
Miscellaneous. To the extent not subject to federal law, this Agreement will be governed by and construed in accordance with the laws of the State of Tennessee. This Agreement may be executed in two or more counterparts, each of which will be deemed to be an original. A signature transmitted by facsimile will be deemed an original signature.

 

[Signatures on Next Page]

 

  

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The parties have executed this Agreement as of the date first set forth above.

 

	 	

THE COMPANY:

	 	 	 
	 	/s/ John R. Haddock
	 	 	 
	 	By:	John R. Haddock
	 	 	 
	 	
Title:

	Secretary, EVP & CFO 
	 	
On behalf of all entities constituting the Company.

	 	 	 
	 	 /s/ D. M. Kramer 
	 	Michael Kramer

 

 

5Unassociated Document

ASSET PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT dated as of the 28th day of December, 2011 is by and between Mkono Media Corp., a British Columbia Corporation (“Buyer”), and Atrinsic, Inc., a Delaware corporation (“Seller”).

 

RECITALS:

 

This Agreement sets forth the terms and conditions upon which Buyer has agreed to purchase from Seller, and Seller has agreed to sell to Buyer, certain assets used by Seller in the conduct of the Business (as that term is hereafter defined).

 

In consideration of the mutual agreements, covenants, representations and warranties contained herein, and in reliance thereon, Buyer and Seller, intending to be legally bound, hereby agree as follows:

 

ARTICLE I.

CERTAIN DEFINITIONS

1.1           Definitions.

 

As used herein, the following terms shall have the following meanings:

 

“Affiliate” shall mean any company or other entity which controls, is controlled by or is under common control with the designated Party.  For the purposes of the foregoing, ownership, directly or indirectly, of twenty percent (20%) or more of the voting stock or other equity interest in a business shall be deemed to constitute control.

 

“Agreement” shall mean this Asset Purchase Agreement.

 

“Ancillary Agreements” shall mean the documents referred to in Section 5.1.

 

“Assigned Agreements” means those agreements set out in Exhibit “A” under the heading “Assigned Agreements”.

 

“Assignment and Assumption Agreement” shall have the meaning given to it in Section 5.1.

 

“Assumed Liabilities” shall have the meaning given to it in Section 4.2.

 

 “Business” shall mean only that business presently conducted by Seller utilizing the Purchased Assets.

 

“Buyer” shall have the meaning given to it in the preamble of this Agreement.

 

“Buyer Indemnified Party” shall have the meaning given to it in Section 14.2.

  

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“Closing” shall have the meaning given to it in Section 2.2.

 

“Closing Date” shall have the meaning given to it in Section 2.2.

 

“Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time, and any successor thereto. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.

 

“Confidential Information” shall have the meaning given to it in Section 12.1.

 

“Deposit” has the meaning set out in Section 3.1.

 

“Effective Date”  means December 1, 2011.

 “Encumbrance” shall mean any claim, lien, pledge, option, charge, easement, security interest, deed of trust, mortgage, right-of-way, encroachment, building or use restriction, conditional sales agreement, encumbrance or other right of third parties, whether voluntarily incurred or arising by operation of law, and includes any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof.

 

“Indemnified Liabilities” shall mean, collectively, Seller’s Indemnified Liabilities and Buyer’s Indemnified Liabilities.

 

“Indemnified Party” shall mean either a Seller Indemnified Party or a Buyer Indemnified Party, as the context so requires.

 

 “Knowledge” or “to the knowledge” of a Party (or similar phrases) means to the extent of matters (i) which are actually known by such Party or which Party has reasonable grounds to know (ii) which, based on facts of which such party is aware, would be known to a reasonable Person in similar circumstances, and shall be deemed to include the knowledge of each of its executive officers.

 

“Losses” shall mean all losses, costs, claims, liabilities, fines, penalties, damages and expenses, including interest which may be imposed in connection therewith and court costs and reasonable fees and disbursements of counsel and consultants.

 

“Party” shall mean either Seller or Buyer, individually, as the context so requires, and the term “Parties” shall mean Seller and Buyer together.

 

“Person” shall mean any person or entity, whether an individual, trustee, corporation, limited liability company, general partnership, limited partnership, trust, unincorporated organization, business association, firm, joint venture, governmental agency or authority or any similar entity.

  

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“Proprietary Rights” means any and all of the following in any country, namely (i) patents, (ii) trademarks, (iii) domain names and domain registrations, (iv) copyrights, (v) trade secrets and (vi) all other ideas, inventions, know how, designs, manufacturing, operating and other specifications, technical data and information, and other intangible assets, intellectual properties and rights (whether properties or rights); or (vii) any right (whether at law, equity, by contract or otherwise) to license, use, practice or otherwise exploit any of the items enumerated in the forgoing list.

 

“Purchase Price” shall have the meaning given to it in Section 3.1.

 

“Purchased Assets” shall have the meaning given to it in Section 2.1.

 

“Seller” shall have the meaning given to it in the preamble of this Agreement.

 

“Seller General Liabilities” shall have the meaning given to it in Section 14.2.

 

“Seller Indemnified Party” shall have the meaning given to it in Section 14.3.

 

“Taxes” shall mean all taxes, duties, charges, fees, levies or other assessments imposed by any taxing authority, including, without limitation, income, gross receipts, value-added, excise, withholding, personal property, real estate, sale, use, ad valorem, license, lease, service, severance, stamp, transfer, payroll, employment, customs, duties, alternative, add-on, minimum, estimated and franchise taxes (including any interest, penalties or additions attributable to or imposed on or with respect to any such assessment).

 

 “Trademarks” means all trade or brand names, business names, trade-marks, trade mark registrations and applications, service marks, service mark registrations and applications of the Business as further set out in Exhibit “A”.

ARTICLE II.

TRANSFER OF ASSETS AND PROPERTIES; CLOSING

 

2.1           Purchased Assets.  Subject to the terms and conditions of this Agreement, and based upon the representations and warranties contained in this Agreement, at the Closing, Seller or an Affiliate of Seller shall sell and convey to Buyer, free and clear of all Encumbrances, and Buyer shall purchase from Seller or an Affiliate of Seller, all of such party’s right, title and interest in and to the assets, properties and rights set out in Exhibit “A” (the “Purchased Assets”).

 

2.2           Closing; Effective Time.

 

Subject to the satisfaction or waiver, if permissible, of the conditions set forth in Articles X and XI, the closing of the transactions (the “Transactions”) contemplated by this Agreement (the “Closing”) shall take place at a time and place mutually acceptable to the Parties on or before  January 6, 2012 , or such other date as the Parties shall mutually agree (the “Closing Date”) but not before Seller has received the written consent of Neustar to the transfer of Short Codes in accordance with paragraph 8.1.2; provided, however, that the Parties agree that all revenues earned and costs and Assumed Liabilities (as defined herein below) incurred by or in connection with the Purchased Assets, shall accrue to the benefit and be assumed by the Buyer as of the Effective Date.  The conveyance of the Purchased Assets shall be effective as of 7:00 a.m. or other agreed upon time local time, at the respective locations of such Purchased Assets, on the Closing Date (the “Effective Time”).

  

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ARTICLE III.

PURCHASE PRICE

 

3.1           Purchase Price.

 

The total purchase price (“Purchase Price”) for the Purchased Assets shall be SIX HUNDRED FIFTEEN THOUSAND DOLLARS ($615,000.00) US.

 

Concurrently with the execution of this Agreement, the Buyer will pay to Steve Richter, the attorney for the Buyer in trust, by certified cheque or bank draft or other means of immediately available funds, the sum of Six Hundred and Fifteen Thousand Dollars ($615,000.00) US (the “Deposit”) as a deposit.  The Deposit will be deposited in an non- interest bearing account of a United States Bank in the City of San Diego, CA in the name of Union Bank of California.  The Parties acknowledge and agree that Steve Richter, attorney for Buyer, will provide written verification of the Deposit to Seller within one business day of the date of the execution of this Agreement. The Deposit will be released  in accordance with the following provisions:

 

(a)         If the Transactions are completed at the Closing Date, the Deposit  will be immediately released from trust and paid to the Seller and applied toward satisfaction of the Purchase Price.

 

(b)         If the Transactions are not completed for any reason at the Closing Date, the Deposit  will be released from trust and returned to the Buyer; provided, that if the Parties agree to delay the Closing Date for any reason, such Deposit thereon shall remain in trust until the agreed upon Closing Date.

 

(c)         The release from trust and payment of the Deposit to either Party in accordance with this Section 3 shall not prejudice the enforcement of any rights either Party may otherwise have under this Agreement.

 

3.2           Allocation of Purchase Price.

 

 The Purchase Price shall be allocated in accordance with Exhibit “D” which is attached to and made a part of this Agreement.  After the Closing, the Parties shall make consistent use of such allocation for all Tax purposes and in all filings, declarations, and reports with the Internal Revenue Service, including reports required to be filed under Section 1060 of the Code.  Buyer shall prepare and deliver IRS Form 8594 to Seller within forty-five (45) days after the Closing to be filed with the Internal Revenue Service.  In any proceeding related to the determination of any Tax, neither Party shall contend or represent that such allocation is not a correct allocation.

  

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3.3           Transfer Taxes.

 

Seller shall bear and be responsible for the payment of all Taxes (excluding Taxes based on or measured by income) that are or may be imposed by any government or political subdivision thereof and that are payable or arise as a result of this transfer of the Purchased Assets.

 

ARTICLE IV.

ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS

 

4.1           General Limitation on Assumption of Liabilities.

 

At the Effective Time on the Closing Date, Seller or an Affiliate of Seller shall transfer the Purchased Assets to Buyer free and clear of all Encumbrances, and without any assumption of liabilities and obligations, and Buyer shall not, by virtue of its purchase of the Purchased Assets or otherwise, assume or become responsible for any liabilities or obligations of Seller or any other Person (other than as set forth in Section 4.2 or as otherwise specifically set forth herein).  For purposes of this Section 4.1 and Section 4.2, the phrase “liabilities and obligations” shall include, without limitation, any direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or unfixed, known or unknown, asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured or unsecured.

 

4.2           Assumed Liabilities and Obligations.

 

Notwithstanding Section 4.1 and the other provisions of this Agreement and provided Seller has abided by 4.1, as of the Effective Date, Buyer shall assume and thereafter discharge, all of the liabilities and obligations accruing on and after the Effective Date in connection with the Purchased Assets including, without limitation, all expenses and costs in connection with and arising out of the normal day to day use and operation of the Purchased Assets which include, without limitation, all vendor, content provider, hosting, domain name, website content, operations compliance, intellectual property, subscriber database management and maintenance, subscriber enrollement and cancellation expenses and all other fees arising out of and in connection with the Purchased Assets (the “Assumed Liabilities”); provided that the rights thereunder have been duly and effectively assigned to Buyer at the Effective Time; provided further, that Buyer shall not assume or discharge any obligation relating to i) a breach of the terms of an Assigned Agreement caused by the assignment thereof to Buyer as of the Effective Time or ii) a material breach by the Seller of Article 8.1.1 or 8.2 hereof.  Except as specifically provided in this Agreement, Buyer does not and will not assume or become obligated to pay or perform with respect to third parties any liabilities or obligations related to the Purchased Assets, or otherwise of Seller or its Affiliates, arising prior to the Effective Date, for which Seller or any of its Affiliates is or may become liable however arising, including without limitation liabilities and obligations arising pursuant to the law of contracts, tort, strict liability or other applicable laws, rules, regulations, or ordinances.  Notwithstanding any other sentence of this section, Buyer does not and will not assume or become obligated to pay or perform with respect to third parties, any liabilities or obligations related to the Business and the Purchased Assets that arise outside of the normal day to day use and operation of the Purchased Assets during the period between the Effective Date and the actual Closing Date.

  

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ARTICLE V.

CLOSING

 

5.1           Deliveries by Seller.

 

At the Closing, Seller (or, if applicable, an Affiliate of Seller) shall execute and deliver the following instruments of transfer and assignment:

 

5.1.1      An instrument of assignment and assumption in the form attached as Exhibit “B” (the “Assignment and Assumption Agreement”), assigning to Buyer all of such party’s right, title and interest in each of the Purchased Assets, together with all consents of third parties that are required to make each such assignment effective as to such third parties;

 

5.1.2      One or more instruments of assignment (the “Assignment of Intangible Assets”), assigning to Buyer all of such party’s right, title and interest in and to the intangible assets (including intellectual property and Trademarks) included in the Purchased Assets in the forms attached as Exhibit “C”; and

 

5.1.3      Such additional instruments of conveyance and transfer as Buyer may reasonably require in order to more effectively vest in it, and put it in possession of, the Purchased Assets, including the transfer of all Domain Names to Buyer’s preferred registrar, and on the Closing Date, the Seller (or, if applicable, an Affiliate of Seller) undertakes to transfer to Buyer all documents, files, programs, designs, artwork, templates, folders, databases, search engines or other material logins and passwords, guides and tutorials required for the setting up and the running of the Websites included in the Purchased Assets.

 

5.2           Deliveries by Buyer.

 

At the Closing, Buyer shall execute and/or deliver the following:

 

5.2.1      The Purchase Price required by Section 3.1,

 

5.2.2      Certified resolutions of Buyer’s Board of Directors authorizing the execution and delivery of this Agreement and the Ancillary Agreements and consummation of the transactions contemplated hereby.

 

  

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5.3           Delivery of Possession.

 

Prior to the Closing Date, Seller shall take such actions as may be necessary or appropriate so that on the Closing Date, Buyer shall be placed in actual possession and control of all of the Purchased Assets.

 

5.4           Technology Transition.

 

For a period not to exceed sixty (60) days following the Closing Date, the Seller will provide, at no additional charge, (i) reasonable technical assistance to Buyer with regards to the transfer of all IP related Purchased Assets together with (ii) reasonable training on the operation of and how to support the operation of all of the URL portals listed on Exhibit “A”.

ARTICLE VI.

REPRESENTATIONS AND WARRANTIES OF SELLER

 

To induce Buyer to enter into this Agreement, Seller hereby makes, as of the date hereof and as of the Closing Date, the following representations and warranties to Buyer.

 

6.1           Organization, Good Standing and Power.

 

Seller is a company duly organized, validly existing and in good standing under the laws of its jurisdiction of formation, and has all requisite organizational power and authority to own and lease the Purchased Assets and to carry on the Business, to execute and deliver this Agreement and the Ancillary Agreements, to consummate the transactions contemplated hereby and thereby and to perform all the terms and conditions hereof and thereof to be performed by it.

 

6.2           Authorization of Agreement and Enforceability.

 

Seller has taken all necessary organizational action to authorize the execution and delivery of this Agreement and the Ancillary Agreements, the performance by it of all terms and conditions hereof and thereof to be performed by it and the consummation of the transactions contemplated hereby and thereby. This Agreement constitutes, and the Ancillary Agreements to which Seller is a party, upon Seller’s execution and delivery thereof, will constitute, the legal, valid and binding obligations of Seller, enforceable in accordance with their terms.

 

  

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6.3           No Violation; Consents.

 

The execution, delivery and performance by Seller of this Agreement and the Ancillary Agreements, and the consummation of the transactions contemplated hereby and thereby will not (with or without the giving of notice or the lapse of time, or both) (i) violate any provision of the charter or operating agreement of Seller, (ii) violate, or require any consent, authorization or approval of, or exemption by, or filing under any provision of any law, statute, rule or regulation to which Seller, the Business or the Purchased Assets are subject, (iii) violate any judgment, order, writ or decree of any court applicable to Seller, the Business or the Purchased Assets, (iv) conflict with, result in a breach of, constitute a default under, or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under any contract, agreement or instrument to which Seller is a party or any of the Purchased Assets is bound other than those consents, authorizations and approvals that have been or will be obtained prior to the Closing Date or (v) result in the creation or imposition of any Encumbrance upon the Purchased Assets, which violation, conflict, breach, default, acceleration or Encumbrance, or the failure to make or obtain such filing, consent, authorization or approval, with respect to the matters specified in clauses (ii) through (v) could, individually or in the aggregate, reasonably be expected to have a material adverse effect on any of the Purchased Assets or prevent or delay the consummation of the transactions contemplated by this Agreement.

 

6.4           Title to Properties; Absence of Liens and Encumbrances.

 

Seller and/or an Affiliate thereof will transfer to Buyer at the Closing, good, marketable and indefeasible title to all of the Purchased Assets, free and clear of all Encumbrances.

 

6.5           Proprietary Rights.

6.5.1      Seller or an Affiliate thereof owns or possesses adequate licenses or other valid rights to use (without the making of any payment to others or the obligation or grant rights to others in exchange) all of the Proprietary Rights relating to the Purchased Assets.  To the Knowledge of Seller, the Proprietary Rights included in the Purchased Assets constitute all such rights necessary to conduct the Business in accordance with past practice and are being conveyed to Buyer together with the other Purchased Assets.  The validity of the Proprietary Rights relating to the Purchased Assets and the rights therein of Seller and its Affiliates have not been questioned in any litigation to which Seller or an Affiliate of Seller is a party, nor to the Knowledge of Seller has any such litigation been threatened.  To the Knowledge of Seller, the conduct of the Business does not conflict with, nor infringe on patent rights, licenses, trademark rights, trade name rights, copyrights or other intellectual property rights of others, nor has any person or entity alleged so.

 

6.5.2      Seller has no Knowledge of any infringement of any Proprietary Rights owned or licensed by Seller or its Affiliates that relate to the Busines. To the Knowledge of Seller, no present or former director or officer or employee, or consultant of Seller or any Affiliate of Seller has any interest in any of the Proprietary Rights relating to the Purchased Assets.

 

6.5.3      All personnel, including employees, agents, consultants, and contractors, who have contributed to or participated in the conception and development of the Proprietary Rights in the Purchased Assets on behalf of Seller or its Affiliates either (a) have been party to a “work-for-hire” arrangement or agreement with the Seller or its Affiliates, in accordance with applicable federal and state law, that has accorded Seller or its applicable Affiliate full, effective, exclusive, and original ownership of all tangible and intangible property thereby arising, or (b) have executed appropriate instruments of assignment in favor of the Seller or an Affiliate of Seller as assignee that have conveyed to the Seller or an Affiliate of Seller full, effective, and exclusive ownership of all tangible and intangible property thereby arising.

  

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6.5.4       To Seller’s Knowledge, each of the Assigned Agreements is valid and enforceable in accordance with its terms, the parties thereto are in compliance with the provisions thereof, no party is in default in the performance, observance or fulfillment of any material obligation, covenant or condition contained therein, and no event has occurred that with or without the giving of notice or lapse of time, or both, would constitute a default thereunder.  To Seller’s Knowledge, no such agreement, contract, commitment, lease or other instrument, document or undertaking contains any contractual requirement with which there is a reasonable likelihood Seller or any other party thereto will be unable to comply.   No advance payments have been received by Seller or an Affiliate thereof by or on behalf of any party to any of the Assigned Agreements for services to be rendered or products to be delivered to such party after the Closing Date.  Except as has been obtained by Seller or an Affiliate thereof in writing and delivered to Buyer at or before Closing, no consent or approval of any party to any Assigned Agreement is required for the execution of this Agreement or the consummation of the transactions contemplated hereby.

 

6.6           Permits; Licenses.

 

Seller, to the best of its Knowledge, has all permits, licenses, registrations, orders and approvals of federal, state or local government or regulatory bodies that are required to operate the Business (collectively, the “Permits”) and Seller is in compliance with the terms and conditions of the Permits.  Exhibit “E” sets forth a correct and complete list of all Permits, each one of which is in full force and effect.  No suspension or cancellation of any of the Permits has been threatened and no cause exists for such suspension or cancellation.  Any Permits that cannot be transferred are identified as such on this Exhibit “E”.

 

6.7           Compliance with Laws.

 

Seller, to the best of its Knowledge, has at all times conducted, and is presently conducting, the Business so as to comply with all laws, ordinances and regulations (including rules, guidelines and contractual obligations of the relevant carriers and aggregators) applicable to the conduct or operation of the Business or the ownership or use of the Purchased Assets, in each case except where the failure to comply would not, individually or in the aggregate, have a material adverse effect on any of the Purchased Assets or the operation of the Business.

  

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6.8           Legal Proceedings.

 

There is no claim, action, suit, proceeding, investigation or inquiry pending before any federal, state or other court or governmental or administrative agency or threatened against Seller, the Business or any of the Purchased Assets, or relating to the transactions contemplated by this Agreement that could reasonably be expected to have a material adverse effect on the Purchased Assets, nor does Seller have Knowledge of any basis for any such claim, action, suit, proceeding, investigation, or inquiry. Seller is not a party to or subject to the provisions of any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental, regulatory or administrative official, body or authority that relates to the Purchased Assets or the Business or that might affect the transactions contemplated by this Agreement.

 

6.9           No Finder.

 

Seller has not taken any action that would give to any Person a right to a finder’s fee or any type of brokerage commission in relation to, or in connection with, the transactions contemplated by this Agreement.

 

6.10         Interest in Business.

 

Seller has not granted, and there is not outstanding, any option, right, agreement or other obligation pursuant to which any Person could claim a right to acquire in any way all or any part of, or interest in, the Business or any of the Purchased Assets.

 

6.11         Taxes.

 

Seller has paid all state Taxes and any other Taxes, the non-payment of which would result in a lien on any of the Purchased Assets.

 

6.12         Material Contracts.

 

The contracts listed on Exhibit “A” under the heading “Assigned Agreements” constitute all the material contracts of the Seller that are required to utilize the Purchased Assets in the Business.

 

ARTICLE VII.

REPRESENTATIONS AND WARRANTIES OF BUYER

 

To induce Seller to enter into this Agreement, Buyer hereby makes, as of the date hereof and as of the Closing Date, the following representations and warranties to Seller.

 

7.1           Organization, Good Standing, Power.

 

Buyer is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own and lease the Purchased Assets and to execute and deliver this Agreement and the Ancillary Agreements to which Buyer is a party, to consummate the transactions contemplated hereby and thereby and to perform all the terms and conditions hereof and thereof to be performed by it.

  

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7.2           Authorization of Agreement and Enforceability.

 

Buyer has taken all necessary corporate action to authorize the execution and delivery of this Agreement and the Ancillary Agreements to which Buyer is a party, the performance by it of all terms and conditions hereof and thereof to be performed by it and the consummation of the transactions contemplated hereby and thereby. This Agreement constitutes, and the Ancillary Agreements, upon Buyer’s execution and delivery thereof, will constitute, the legal, valid and binding obligations of Buyer, enforceable in accordance with their terms.

 

7.3           No Violations; Consents.

 

The execution, delivery and performance by Buyer of this Agreement and the Ancillary Agreements to which Buyer is a party and the consummation of the transactions contemplated hereby and thereby will not (with or without the giving of notice or the lapse of time, or both) (i) violate any provision of the charter or bylaws of Buyer, (ii) violate, or require any consent, authorization or approval of, or exemption by, or filing under any provision of any law, statute, rule or regulation to which Buyer is subject, (iii) violate any judgment, order, writ or decree of any court applicable to Buyer, (iv) conflict with, result in a breach of, constitute a default under, or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under any contract, agreement or instrument to which Buyer is a party or any of its assets is bound or (v) result in the creation or imposition of any Encumbrance upon its assets, which violation, conflict, breach, default, acceleration or Encumbrance, or the failure to make or obtain such filing, consent, authorization or approval, with respect to the matters specified in clauses (ii) through (v) could, individually or in the aggregate, reasonably be expected to have a material adverse effect on Buyer or prevent or delay the consummation of the transactions contemplated by this Agreement.

 

7.4           Legal Proceedings.

 

There is no claim, action, suit, proceeding, investigation or inquiry pending before any federal, state or other court or governmental or administrative agency or threatened against Buyer or any of Buyer’s properties, assets, operations or businesses, nor does Buyer have Knowledge of any basis for any such claim, action, suit, proceeding, investigation or inquiry, nor is Buyer a party to or subject to the provisions of any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental, regulatory or administrative official, body or authority, that might prevent or delay the consummation of the transactions contemplated hereby.

 

ARTICLE VIII.

COVENANTS OF SELLER PRIOR TO CLOSING DATE

 

8.1           Required Actions.

 

Between the date of this Agreement and the Closing Date, Seller covenants that it will, in its conduct of the Business, except as otherwise agreed by Buyer in writing:

  

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8.1.1       Performance of Obligations.

(a)            Operate the Business only in the usual, regular and ordinary manner as such Business was conducted immediately prior to the date of signing and, to the extent consistent with such operation, use commercially reasonable efforts until the Closing Date to (i) preserve and keep intact the Business, (ii) preserve its relationships with customers, suppliers and others having business dealings with Seller in connection with the Business;

(b)          Perform all material obligations of Seller relating to the Purchased Assets and the Business in accordance with Seller’s past practice;

8.1.2       Approvals, Consents.   Obtain in writing as promptly as possible all approvals and consents required to be obtained by Seller or any Affiliate thereof in order to effectuate the Transactions contemplated hereby and deliver to Buyer copies of such approvals and consents, including but not limited to that of Neustar, Inc. (CSCA) to the transfer of all the Short Codes set out in Exhibit “A”;

 

8.1.3       Update Schedules. Promptly disclose to Buyer any information contained in the representations and warranties of Seller contained in Article VI or in the Schedules to this Agreement which Seller discovers is no longer complete or correct in all material respects;

 

8.1.4       Compliance with Agreement. Not undertake any course of action inconsistent with satisfaction of the conditions applicable to it set forth in this Agreement, and do all such acts and take all such measures as may be reasonably necessary to comply with the representations, agreements, conditions and other provisions of this Agreement.

 

8.2           Prohibited Actions.

Between the date of this Agreement and the Closing Date, in its conduct of the Business, Seller shall not, except as otherwise agreed by Buyer in writing:

(a)          Sell, transfer, assign, lease, encumber or otherwise dispose of any of the Purchased Assets other than in the ordinary course of the Business consistent with past practices;

(b)          Change in any material respect the character of the Purchased Assets or the Business;

(c)           Incur any material fixed or contingent obligation or enter into any material agreement, commitment or other transaction or arrangement that is not in the ordinary course of the Business consistent with past practices;

(d)          Subject to new lien, security interest or any other Encumbrance any of the Purchased Assets;

  

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(e)           Except as required by law, including the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, and except as required pursuant to this Agreement to obtain the requisite consent of third parties, publicize, advertise or announce to any third party, the entering into of this Agreement, the terms of this Agreement or the transactions contemplated hereby;

(f)           Except in the ordinary course of business consistent with past practices, cancel, release or relinquish any material debts of or claims against others by Seller with respect to the Business or waive any material rights relating to the Business or the Purchased Assets;

(g)          Terminate or materially modify any material lease, contract, governmental license, permit or other authorization or agreement affecting the Business or the Purchased Assets or the operation thereof; or

(h)          directly or indirectly, (a) solicit any inquiries or proposals or enter into or continue any discussions, negotiations or agreements relating to (i) the direct or indirect disposition of any of the Purchased Assets or the Business to any Person other than Buyer, or (ii) license any of Seller’s Proprietary Rights relating to the Business to any Person other than in the ordinary course of business consistent with past practice, or (b) provide any assistance or any information to or otherwise cooperate with any Person other than Buyer in connection with any such inquiry, proposal or transaction.  Seller hereby represents that neither Seller nor any of its Affiliates is now engaged in discussions or negotiations with any party other than Buyer with respect to any transaction of the kind described in clause (a) of the preceding sentence (a “Proposed Acquisition Transaction”).  

ARTICLE IX.

COVENANTS OF BUYER PRIOR TO CLOSING DATE

 

9.1           Required Actions.

 

Between the date of this Agreement and the Closing Date, Buyer shall, except as otherwise agreed by Seller in writing:

 

9.1.1      Confidentiality.  Not publish or disclose and not authorize or permit any of its officers, employees, directors, agents or representatives or any third party to publish or disclose any trade secrets or other Confidential Information or any data or business or financial books, records or other information of or pertaining to Seller, which have been furnished to Buyer by Seller or to which Buyer, or any of its officers, employees, directors, agents, attorneys or accountants, or any financial institution have had access during any investigation made in connection with this Agreement and which is not otherwise available to Buyer, except as required by law;

  

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9.1.2      Notice of Changes. Advise Seller promptly in writing of any fact that, if known at the Closing Date, would have been required to be set forth or disclosed in or pursuant to this Agreement, or which would result in the breach in any material respect by Buyer of any of its representations, warranties, covenants or agreements hereunder; and

 

9.1.3      Compliance with Agreement. Not undertake any course of action inconsistent with satisfaction of the conditions applicable to it set forth in this Agreement, and do all such acts and take all such measures as may be reasonably necessary to comply with the representations, agreements, conditions and other provisions of this Agreement.

 

ARTICLE X.

CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

 

The obligations of Buyer hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions:

 

10.1         Accuracy of Representations and Warranties.

 

The representations and warranties of Seller contained in this Agreement shall have been true in all material respects on and as of the Closing Date.

 

10.2         Performance of Agreement.

 

Seller shall have complied in all material respects with all covenants and conditions contained in this Agreement to be performed or complied with by it at or prior to the Closing Date.

 

10.3         Secretary’s Certificate.

 

Buyer shall have received a certificate, dated the Closing Date, of the Secretary or any Assistant Secretary or similar officer of Seller with respect to the incumbency and specimen signature of each officer or representative of Seller executing this Agreement and the Ancillary Agreements to which Seller is a party.

 

10.4         Injunction.

 

On the Closing Date, there shall be no injunction, writ, preliminary restraining order or any order of any nature in effect issued by a court of competent jurisdiction directing that the transactions provided for herein, or any of them, not be consummated as herein provided and no suit, action, investigation, inquiry or other legal or administrative proceeding by any governmental body or other Person shall have been instituted or threatened which questions the validity or legality of the transactions contemplated hereby or which if successfully asserted might otherwise have a material adverse effect on the conduct of the Business or impose any additional material financial obligation on, or require the surrender of any material right by, Buyer.

  

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10.5         Actions and Proceedings.

 

All corporate or organizational actions, proceedings, instruments and documents required to carry out the transactions contemplated by this Agreement or incidental thereto and all other related legal matters shall be reasonably satisfactory to counsel for Buyer, and such counsel shall have been furnished with such certified copies of such corporate actions and proceedings and such other instruments and documents as it shall have reasonably requested.

 

10.6         Consents.

 

Any third party and governmental consents, approvals or authorizations necessary for the conveyance of any of the Purchased Assets, and the effective use or operation thereof by Buyer, or valid consummation of the transactions contemplated hereby shall have been obtained, including, but not limited to, the consent of Neustar, Inc. to the transfer of all of the Short Codes, and the consent of all wireless carriers (if required) to the Buyer.

 

ARTICLE XI.

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER

 

The obligations of Seller are subject to the fulfillment at or prior to the Closing of each of the following conditions:

 

11.1         Accuracy of Representations and Warranties.

 

The representations and warranties of Buyer contained in this Agreement shall have been true in all material respects on and as of the Closing Date.

 

11.2         Performance of Agreement.

 

Buyer shall have paid the Purchase Price and performed in all material respects all obligations and agreements and complied in all material respects with all covenants and conditions contained in this Agreement to be performed or complied with by it at or prior to the Closing Date.

 

11.3         Secretary’s Certificate.

 

Seller shall have received a certificate, dated the Closing Date, of the Secretary or any Assistant Secretary of Buyer with respect to the incumbency and specimen signature of each officer or representative of Buyer executing this Agreement and the Ancillary Agreements to which Buyer is a party.

 

11.4         Injunction.

 

On the Closing Date, there shall be no injunction, writ, preliminary restraining order or any order of any nature in effect issued by a court of competent jurisdiction directing that the transactions provided for herein, or any of them, not be consummated as herein provided.

  

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11.5         Actions or Proceedings.

 

All corporate actions, proceedings, instruments and documents required to carry out the transactions contemplated by this Agreement or incidental thereto and all other related legal matters shall be reasonably satisfactory to counsel for Seller, and such counsel shall have been furnished with such certified copies of such corporate actions and proceedings and such other instruments and documents as it shall have reasonably requested.

 

ARTICLE XII.

OBLIGATIONS AFTER THE CLOSING DATE

 

12.1         Confidentiality.

 

Both Parties hereby covenant and agree that, except as may be required by law, rule or regulation or court order, unless this Agreement is terminated, it will not at any time reveal, divulge or make known to any Person (other than the other Party or its agents) any information that relates to this Agreement, the transactions contemplated hereby or the Business (whether now possessed by a Party or furnished by a Party  after the Closing Date), including, but not limited to, customer lists or other customer information, trade secrets or formulae, marketing plans or proposals, financial information or any data, written material, records or documents used by or relating to the Business that are of a confidential nature (collectively, the “Confidential Information”).

 

12.2         Technology Transition.

 

Seller shall fulfill its obligation with regard to the transition of technology as set forth in Section 5.4.

12.3         Further Assurances of Seller.

From and after the Closing Date, Seller shall, at the request of Buyer, execute, acknowledge and deliver to Buyer (or shall cause to be executed and delivered by an Affiliate thereof to Buyer), without further consideration, all such further assignments, conveyances, endorsements, deeds, special powers of attorney, consents and other documents, and take such other action, as Buyer may reasonably request (i) to transfer to and vest in Buyer, and protect its rights, title and interest in, all the Purchased Assets and (ii) otherwise to consummate the transactions contemplated by this Agreement.

  

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ARTICLE XIII.

TERMINATION

 

13.1       Termination of Agreement.

 

This Agreement may be terminated (by written notice provided to the other Party):

 

(i)             by the mutual consent of Seller and Buyer;

 

(ii)            by Seller or Buyer if the Closing has not occurred on or prior to the Closing Date, unless the absence of such occurrence shall be due to the delay or failure of the Party seeking to terminate this Agreement (or its subsidiaries or affiliates) to perform in all material respects each of its obligations under this Agreement required to be performed by it at or prior to the Closing;

 

(iii)           by Buyer if (A) any of the representations and warranties of Seller contained in Article VI hereof were incorrect in any material respect when made or become incorrect in any material respect, or (B) any of the conditions set forth in Article X are not met or cannot be met on or before the Closing Date; or

 

(iv)           by Seller if (A) any of the representations and warranties of Buyer contained in Article VII hereof were incorrect in any material respect when made or become incorrect in any material respect, or (B) any of the conditions set forth in Article XI are not met or cannot be met on or before the Closing Date.

 

13.2       Return of Documents.

 

If this Agreement is terminated for any reason pursuant to this Article XIII, each Party shall return to the other Party all documents and copies thereof which shall have been furnished to it by such other Party or, with the agreement of the other Party, shall destroy all such documents and copies thereof and certify in writing to the other Party any such destruction.

 

13.3       Limitations on Remedies.

 

If this Agreement is terminated by Seller or Buyer as permitted under Section 13.1 and not as a result of a breach of a representation or warranty or the failure of any Party to perform its obligations hereunder, such termination shall be without liability of any Party.

  

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ARTICLE XIV.

SURVIVAL OF REPRESENTATIONS

AND WARRANTIES; INDEMNIFICATION

 

14.1         Survival of Representations and Warranties.

 

All representations and warranties of the Parties shall survive the Closing Date and continue in full force and effect for a period of six (6) months thereafter (“Survival Period”).  Except as otherwise expressly provided in this Agreement, all covenants, agreements, undertakings and indemnities set forth in this Agreement shall survive during the Survival Period.  No investigation made by any Party hereto (whether prior to, on or after the Closing Date) shall in any way limit the representations and warranties of the other Party.

 

14.2         Indemnification by Seller.

 

	
  

	
14.2.1

	
“Seller General Liabilities” shall mean all Losses resulting from, arising out of, or incurred by Buyer or any of its successors or assigns and their respective directors, officers and employees (each a “Buyer Indemnified Party”) after the Closing Date in connection with (i) any breach of any of the representations or warranties made by Seller in this Agreement (provided Buyer makes a written claim for indemnification within the Survival Period), (ii) any default by Seller in respect of any of the covenants or agreements made by Seller in this Agreement or (iii) any attempt (whether or not successful) by any Person to cause or require Buyer to pay any liability of, or claim against, Seller of any kind in respect of licensing, ownership or use of the Purchased Assets in the Business prior to the Closing Date, to the extent not specifically assumed or subject to an indemnity by Buyer under the terms of this Agreement.  Subject to the further provisions of this Article XIV, Seller covenants and agrees with Buyer that Seller shall pay, and shall indemnify all Buyer Indemnified Parties, and hold them harmless from, against and in respect of, any and all Seller General Liabilities

 

	
  

	
14.2.2

	
Notwithstanding anything to the contrary set forth in Section 14.2.1, Seller shall have no obligation to indemnify any Buyer Indemnified Party from and against any Losses until the aggregate indemnifiable Losses exceed Fifty Thousand $50,000.00, at which point Seller will be obligated to indemnify the Buyer Indemnified Parties from and against all such Losses relating back to the first dollar.

 

  

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14.3         Indemnification by Buyer.

 

“Buyer General Liabilities” shall mean all Losses resulting from, arising out of, or incurred by any of Seller or its successors or assigns and their respective directors, officers and employees (each a “Seller Indemnified Party”) after the Effective Date, in connection with (i) any breach of any of the representations or warranties made by Buyer in this Agreement (provided Seller makes a written claim for indemnification within the Survival Period), (ii) any default by Buyer in respect of any of the covenants or agreements made by Buyer in this Agreement, (iii) any attempt (whether or not successful) by any Person to cause or require Seller to pay or discharge any Assumed Liability or any liability of, or claim against, Buyer of any kind in respect of licensing, ownership or use of the Purchased Assets or the operation of the Business on or after the Effective Date to the extent not specifically subject to an indemnity by Seller under the terms of this Agreement. Subject to the further provisions of this Article XIV, Buyer covenants and agrees with Seller that Buyer shall pay, and shall indemnify all Seller Indemnified Parties, and hold them harmless from, against and in respect of, any and all Buyer General Liabilities. Notwithstanding anything else set out in this section, “Buyer General Liabilities does not include Losses resulting from actions of the Seller between the Effective Date and the Closing Date that are in material breach of Article 8.1.1 or 8.2 hereof.

 

14.4         Procedures for Indemnification.

 

14.4.1     Each Indemnified Party shall promptly give notice hereunder to the indemnifying Party after becoming aware of any claim as to which recovery may be sought against the indemnifying Party because of the indemnity in this Article XIV, and, if such indemnity shall arise from the claim of a third party, shall permit the indemnifying Party to assume the defense of any such claim and any litigation or other proceeding resulting from such claim; provided, that any Indemnified Party may, in any event, at its own expense, monitor and participate in, but not control, the defense of any such claim or litigation.  Notwithstanding the foregoing, the right to indemnification hereunder shall not be affected by any failure of an Indemnified Party to give such notice (or by delay by an Indemnified Party in giving such notice) unless, and then only to the extent that, the rights and remedies of the indemnifying Party shall have been prejudiced as a result of the failure to give, or delay in giving, such notice. The notice required hereunder shall specify the basis for the claim for indemnification to the extent ascertainable at the time of the notice. Failure by the indemnifying Party to notify an Indemnified Party of its election to defend any such claim or action by a third party within thirty (30) days after notice thereof shall have been given to the indemnifying Party shall be deemed a waiver by the indemnifying Party of its right to defend such claim or action.  Nothing herein shall be deemed to prevent an Indemnified Party from making a contingent claim for indemnification hereunder, provided the Indemnified Party has reasonable grounds to believe that the claim or demand for indemnification will be made and sets forth the estimated amount of such claim to the extent then ascertainable.

 

14.4.2      The indemnifying Party shall not, in the defense of such claim or any litigation resulting therefrom, consent to entry of any judgment (other than a judgment of dismissal on the merits without costs) or enter into any settlement, except with the written consent, which consent shall not be unreasonably withheld, of the Indemnified Party, which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party a release from all liability in respect of such claim or litigation.

  

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14.4.3      If the indemnifying Party shall not assume the defense of any such claim by a third party, or litigation resulting therefrom, after receipt of notice from the Indemnified Party, the Indemnified Party may defend against such claim or litigation in such manner as it deems appropriate.

 

14.4.4      If the indemnifying Party shall not, within thirty (30) days after its receipt of the notice required by Section 14.4.1 hereof, advise the Indemnified Party that the indemnifying Party denies the right of the Indemnified Party to indemnity in respect of the claim, then the amount of such claim shall be deemed to be finally determined between the Parties hereto.  If the indemnifying Party shall notify the Indemnified Party that it disputes any claim made by the Indemnified Party, then the Parties hereto shall endeavor to settle and compromise such claim, and if unable to agree on any settlement or compromise, such claim for indemnification shall be settled by appropriate litigation, and any liability established by reason of such settlement, compromise or litigation shall be deemed to be finally determined. Any claim that is finally determined in the manner set forth above shall be paid promptly by the indemnifying Party in cash.

 

14.5         Payment of Indemnification Obligations.

 

Each indemnifying Party shall pay promptly to any Indemnified Party the amount of all non-disputed damages, losses, deficiencies, liabilities, costs, expenses (including reasonable attorneys’ fees), claims and other obligations to which the foregoing provisions of this Article XIV relates;  provided, however, that the aggregate of such indemnification obligation of either Party under this Article XIV shall not exceed the Purchase Price.

 

14.6         Interest on Unpaid Obligations.

 

If all or part of any indemnification obligation under this Agreement is not paid when due, the indemnifying Party shall pay the Indemnified Party interest on the unpaid amount of such obligation for each day from the date the amount became due until it is paid in full, payable on demand, at the rate equal to the lower of (i) the maximum rate permitted by law or (ii) two percent (2%) per annum.

 

14.7         Exclusive Remedy.

 

Other than with respect to breaches of a Party’s representations, covenants and warranties hereunder which are a result of fraud or intentional misrepresentation (for which all statutory, equitable or common law remedies that a Party may have in its favor shall be available), the foregoing indemnification provisions shall be the sole and exclusive remedy of a Seller Indemnified Party or a Buyer Indemnified Party, as applicable, for all claims arising from this Agreement against the other Party. To the maximum extent permitted by law, the Parties hereby waive all other rights and remedies with respect to any matter in any way relating to a breach of any representation or warranty of a Party, whether under any laws, at common law or otherwise.  Except as provided in this Article XIV, no claim, action or remedy shall be brought or maintained by any Party (including any Seller Indemnified Party or Buyer Indemnified Party) against any other Party, and no recourse shall be brought or granted against any of them, by virtue of or based upon any alleged misstatement or omission respecting an inaccuracy in or breach of any of the representations or warranties of any of the Parties hereto set forth or contained in this Agreement.

  

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ARTICLE XV.

GENERAL

 

15.1           Expenses.

 

Except as otherwise provided in this Agreement, and whether or not the transactions herein contemplated shall be consummated, Buyer and Seller shall pay their own fees, expenses and disbursements, including the fees and expenses of their respective counsel, accountants and other experts, in connection with the subject matter of this Agreement and all other costs and expenses incurred in performing and complying with all conditions to be performed under this Agreement.

 

15.2           Publicity.

 

All notices to third parties and all other publicity concerning the transactions contemplated by this Agreement shall be jointly planned and coordinated by and between Buyer and Seller. Except as may be required by law or regulation (including SEC disclosure obligations), no Party shall act unilaterally in this regard without the prior written approval of the other Party, such approval not to be unreasonably withheld.

 

15.3           Waivers.

 

The waiver by either Party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or any other provision.

 

15.4           Binding Effect; Benefits.

 

This Agreement shall be binding upon, and inure to the benefit of, the Parties hereto, and  and their respective successors and assigns.   Nothing in this Agreement, express or implied, is intended to confer on any Person other than the Parties hereto, or their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

15.5           Bulk Transfer Laws.

 

Seller shall take such actions as are necessary to comply with the provisions of any and all applicable laws relating to bulk transfers in connection with the sale of the Purchased Assets. Seller covenants and agrees to indemnify and save harmless Buyer from and against any and all losses, liability, cost and expense (including reasonable attorneys fees) arising out of noncompliance with such bulk transfer laws.

  

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15.6           Notices.

 

All notices, requests, demands, elections and other communications which either Party to this Agreement may desire or be required to give hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, by a reputable courier service which requires a signature upon delivery, by mailing the same by registered or certified first class mail, postage prepaid, return receipt requested, or by telecopying with receipt confirmation (followed by a first class mailing of the same) to the Party to whom the same is so given or made. Such notice, request, demand, waiver, election or other communication will be deemed to have been given as of the date so delivered or electronically transmitted or seven (7) days after mailing thereof.

 

	
If to Seller, to:

	
Atrinsic, Inc.

	  	
469 7th Avenue, 10th Floor

	  	
New York, NY  10018

	  	  
	
If to Buyer, to:

	
Mkono Media Corp.

	  	
601 W. Broadway, Suite 400, Vancouver, BC, Canada V5Z 4C2.

	  	
Vancouver, British Columbia, Canada

or to such other address as such Party shall have specified by notice to the other Party hereto.

 

15.7           Entire Agreement.

 

This Agreement (including the Exhibits and Schedules) and the documents delivered constitute the entire agreement and understanding between the Parties as to the matters set forth herein and supersede and revoke all prior agreements and understandings, oral and written, between the Parties hereto or otherwise with respect to the subject matter hereof including for sake of clarity only, the Letter of Intent signed August 4, 2011. No change, amendment, modification or supplement to this Agreement (including the Exhibits and Schedules) shall be binding upon or legally enforceable against the Parties unless set forth in an instrument in writing signed by both Parties or their respective successors in interest.  No termination, waiver or attempted waiver of any of right, option, obligation, remedy or provision(s) hereof shall be binding upon any Party unless set forth in an instrument in writing signed by the Party to be bound or their respective successors in interest.

 

15.8           Counterparts.

 

This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.

  

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15.9           Headings.

 

The article, section and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be a part of this Agreement or to affect the meaning or interpretation of this Agreement.

 

15.10         Construction.

 

Within this Agreement, the singular shall include the plural and the plural shall include the singular, and any gender shall include all other genders, all as the meaning and the context of this Agreement shall require. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.

 

15.11         Governing Law and Choice of Forum.

 

The validity and interpretation of this Agreement shall be construed in accordance with, and governed by the internal laws of the domicile state of the defending party, without regard to conflicts of laws principles.  All claims, disputes or causes of action relating to or arising out of this Agreement shall be brought, heard and resolved solely and exclusively by and in a federal or state court situated in the domicile county and state of the defending party.  Each of the Parties agrees to submit to the jurisdiction of such courts shall be proper for all purposes of this Agreement.

 

15.12         Cooperation.

 

The Parties hereto shall cooperate fully at their own expense, except as otherwise provided in this Agreement, with each other and their respective counsel and accountants in connection with all steps to be taken as part of their obligations under this Agreement.

 

15.13         Severability.

 

If any term, covenant, condition or provision of this Agreement or the application thereof to any circumstance shall be invalid or unenforceable to any extent, the remaining terms, covenants, conditions and provisions of this Agreement shall not be affected thereby and each remaining term, covenant, condition and provision of this Agreement shall be valid and shall be enforceable to the fullest extent permitted by law. If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only as broad as is enforceable.

 

15.14         Attorneys’ Fees.

 

If a dispute arises among the Parties as a result of which an action is commenced to interpret or enforce any of the terms of this Agreement, the losing Party shall pay to the prevailing Party reasonable out-of-pocket attorneys’ fees, costs and expenses incurred in connection with the prosecution or defense of such action.

  

23

  

15.15         Successors and Assigns.

 

The covenants, agreements and conditions contained herein or granted hereby shall be binding upon and shall inure to the benefit of Parties hereto and each of their respective successors and permitted assigns.

 

[Signature Page Follows]

  

24

  

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.

 

	
MKONO MEDIA CORP.

	  
	
By:

	/s/ Steve Richter
	  	
Steve Richter

	  
	
ATRINSIC, INC.

	  
	
By:  

	/s/ Stuart Goldfarb
	  	
Stuart Goldfarb

	  	
CEO

  

25

  

EXHIBIT A

 

TO

 

ASSET PURCHASE AGREEMENT

 

[Assets]

 

CSC Short Codes         Associated Domain Name

 

	
(i)

	
MMP3G.com also (short code 71422),

	
(ii)

	
Ringtone.com (short code 36726),

	
(iii)

	
Bid4prizes.com (short codes 81000 and 88230),

	
(iv)

	
Gatorarcade.com (short codes 44577 and 87777),

	
(v)

	
Gatorarcade.ca (short code 87777),

	
(vi)

	
Ringtonechannel.com (short code 25000 and 44577),

	
(vii)

	
Imatchup.com (short code 44577),

	
(viii)

	
Imatchup.ca (short code 25000), and

	
(ix) 

	
SlimLizard.tv (short code 24885)

All right, title and interest including intellectual property interests in all the above referenced Short Codes and associated URLs.

Included with the gatorarcde.com site are all right, title and interest including intellectual property interests and software source code in the below referenced “games” (the “Games”):

GameName      Developer

	
Ancient Hearts

	
Toybox Games

	
Ancient Quick 21

	
Toybox Games

	
Ancient Spades

	
Toybox Games

	
Bongo Bingo

	
Toybox Games

	
Cribbage

	
Toybox Games

	
Crossword

	
Toybox Games

	
FreeCell

	
Toybox Games

	
Garden Dreams

	
Toybox Games

	
Gator Factory

	
Toybox Games

	
Gator Flip or Flop

	
Toybox Games

	
Gator Sudoku

	
Toybox Games

	
Gator Tripeaks

	
Toybox Games

	
KrazyKubes

	
Toybox Games

	
Ouba

	
Toybox Games

	
Paradise Pet Salon

	
Toybox Games

	
Poker Squares

	
Toybox Games

	
Roller Rush

	
Toybox Games

	
Space Lander

	
Toybox Games

	
Video Poker

	
Toybox Games

  

26

  

 On the Closing Date, the Buyer grants to the Seller an irrevocable, perpetual, royalty free,worldwide and non-exclusive license to continue using the Games and offering them for use by consumers on its own websites in accordance with past practices and to maintain its obligations under existing distribution agreements.

All website content including copyright to same related to the above referenced websites in current useable format, all source code for the above referenced websites including but not limited to internal files for using the sites with the following extensions.ASPX, .BMP, .CCT, .CFM, .CHM, .CONFIG, .CST, .CSV, .CXT, .DAT, .DB, .DCR, .DIR, .DLL, .DOC, .EXE, .FLV, .GIF, .GIFBK, .HTML, .ICO, .INI, .JAD, .JAR, .JPEG, PGBK, .JSCRIPT, .JSFL, .MID, .MIDI, .MP3, .MUS, .NSIS, .PAR, .PDF, .PHP, .PNG, .PPTX, .PREARM, .PREFS, .PSD, .SCC, .SKL, .STATS, .SWD, .SWF,.TMP,.TXT, .WINRAR, .X32, and .XML , together with an export of the complete customer database in a digital format to be agreed with fields as already agreed upon and on timeframes to be agreed upon relating to each website.

All past content and all present content (that are currently in inventory) that was or is being provided to consumers as the service element of Business operated through the Domain Names listed above.

All registered and unregistered trademarks associated with any of the above referenced Purchased Assets.

All 1-800 numbers for the associated customer care centre for the Short Codes and URLS (Seller to take all necessary actions to facilitate transfer of these numbers to Buyer through its third party provider Five9.)

All records, files and papers relating to the Purchased Assets, including but not limited to domain name registration and Short Code registration.

The subscriber database(s) containing only those active and inactive subscribers for the above-referenced URLs, but not including any active or inactive subscribers that are, or who have been, identified as active or inactive subscribers to Kazaa.

Assigned Agreements:

1.           Neustar License Agreements for the Short Codes.

  

27

  

List of Trademarks

	
Name

	 	
Owner

	
B4P

	 	
Atrinsic or an Affiliate of Atrinsic

	  	 	  
	
IMATCHUP.COM

	 	
Atrinsic Inc. or an Affiliate of Atrinsic

	
IMATCHUP.COM

	 	
Atrinsic Inc. or an Affiliate of Atrinsic.

  

28

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