EXHIBIT 10.39
EXECUTION COPY
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ASSET PURCHASE AGREEMENT
BY AND AMONG
ZIFF XXXXX MEDIA INC.,
XXXX.XXX, INC.,
FILEFRONT, L.P.
AND
THE FILEFRONT PRINCIPALS
DATED AS OF NOVEMBER 4, 2005
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TABLE OF CONTENTS
SECTION 1. DEFINITIONS.................................................................................... 1
1A. Definitions.................................................................................... 1
1B. Other Definitions.............................................................................. 6
SECTION 2. PURCHASE AND SALE OF ASSETS.................................................................... 8
2A. Purchase and Sale of Assets.................................................................... 8
2B. No Assumption of Liabilities................................................................... 8
2C. Closing Transactions........................................................................... 9
2D. Adjustment Amount.............................................................................. 10
2E. Additional Purchase Price Payment.............................................................. 11
2F. Allocation of Purchase Price................................................................... 12
SECTION 3. CONDITIONS TO CLOSING.......................................................................... 13
3A. Conditions to Buyer's Obligations.............................................................. 13
3B. Conditions to Sellers' Obligations............................................................. 15
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE FILEFRONT PRINCIPALS.......................... 16
4A. Organization and Limited Partnership Power..................................................... 16
4B. Authorization of Transactions.................................................................. 16
4C. Absence of Conflicts........................................................................... 16
4D. Absence of Liabilities......................................................................... 17
4E. Purchased Assets............................................................................... 17
4F. Legal Compliance............................................................................... 17
4G. Contracts and Commitments...................................................................... 17
4H. Intellectual Property.......................................................................... 17
4I. Brokerage...................................................................................... 18
4J. Affiliate Transactions......................................................................... 18
4K. Disclosure..................................................................................... 18
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER........................................................ 19
5A. Organization and Corporate Power............................................................... 19
5B. Authorization of Transactions.................................................................. 19
5C. No Violation................................................................................... 19
5D. Governmental Authorities and Consents.......................................................... 19
5E. Brokerage...................................................................................... 19
SECTION 6. INDEMNIFICATION AND RELATED MATTERS............................................................ 19
6A. Survival....................................................................................... 19
6B. Indemnification of Buyer....................................................................... 20
6C. Indemnification of Sellers..................................................................... 20
6D. Procedure...................................................................................... 21
6E. Payments; Setoff............................................................................... 22
SECTION 7. ADDITIONAL AGREEMENTS.......................................................................... 00
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0X. Tax Matters.................................................................................... 22
7B. Press Releases and Announcements............................................................... 22
7C. Further Transfers.............................................................................. 22
7D. Specific Performance........................................................................... 22
7E. Expenses....................................................................................... 23
7F. Non-Competition, Non-Solicitation and Confidentiality.......................................... 23
7G. Amendment of Filefront's Limited Partnership Agreement and MBPS Certificate of Incorporation... 25
7H. Transfer of Ownership of Sellers............................................................... 25
7I. Websites....................................................................................... 25
7J. Budgets and Operations......................................................................... 26
7K. Other Business Obligations..................................................................... 27
7L. Amendment of Filefront Name.................................................................... 28
7M. The Queue...................................................................................... 28
SECTION 8. MISCELLANEOUS.................................................................................. 28
8A. Amendment and Waiver........................................................................... 28
8B. Notices........................................................................................ 28
8C. Binding Agreement; Assignment.................................................................. 29
8D. Severability................................................................................... 30
8E. Xxxxxxxxxxxx................................................................................... 00
0X. Headings....................................................................................... 30
8G. Entire Agreement............................................................................... 30
8H. Counterparts................................................................................... 30
8I. Governing Law.................................................................................. 30
8J. Submission to Jurisdiction..................................................................... 30
8K. No Third-Party Beneficiaries................................................................... 31
8L. Arbitration.................................................................................... 31
8M. Delivery by Facsimile.......................................................................... 31
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INDEX OF EXHIBITS
Exhibit A-1 Form of Executive Agreement with Xxxx Xxxxx
Exhibit A-2 Form of Executive Agreement with Xxxxx Xxxxxx
Exhibit B Budget
INDEX OF SCHEDULES
Schedule 1.1 Assumed Indebtedness
Schedule 2A(i)(A) List of Purchased Assets
Schedule 2A(i)(B) List of Assigned Contracts
Schedule 2A(ii) List of Excluded Assets
Schedule 2F Allocation of Purchase Price
Schedule 4C Absence of Conflicts
Schedule 4D Absence of Liabilities
Schedule 4E Title to Assets
Schedule 4G Contracts and Commitments
Schedule 4H(ii) Intellectual Property
Schedule 4H(iv) Historical Monthly Unique Visitors
Schedule 4I Brokerage
Schedule 4J Affiliate Transactions
Schedule 5E Brokerage
Schedule 7K Other Business Obligations
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of
November 4, 2005, by and among FILEFRONT, L.P., a Texas limited partnership
("Filefront"), XXXX.xxx, Inc. ("MBPS" and together with Filefront, each a
"Seller" and collectively, the "Sellers"); Xxxx Xxxxx ("Xxxxx"); Xxxxx Xxxxxx
("Xxxxxx") (each of Xxxxx and Labian a "Filefront Principal" and, collectively,
the "Filefront Principals"); and Ziff Xxxxx Media Inc., a Delaware corporation
("Buyer"). Sellers, the Filefront Principals, and Buyer are collectively
referred to herein as the "Parties" and individually as a "Party."
On the terms and subject to the conditions set forth in this
Agreement, Buyer desires
to acquire from each Seller, and each Seller desires to sell to
Buyer, all of the assets of such Seller other than the Excluded Assets.
NOW, THEREFORE, in consideration of the premises, representations
and warranties and mutual covenants contained herein and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1A. Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities or otherwise.
"Assumed Indebtedness" means Indebtedness of Sellers and their
Subsidiaries expressly agreed to be assumed by Buyer at the Closing as set forth
on Schedule 1.1 attached hereto.
"Assumed Liabilities" means, with respect to the Purchased Assets,
(i) liabilities to the extent included in (but only to the extent included in)
the computation of Effective Date Net Working Capital, (ii) accounts payable and
accrued liabilities first incurred in the ordinary course of business between
the Effective Date and the Closing Date that would, on a balance sheet prepared
in accordance with GAAP, be characterized as current liabilities, (iii)
performance obligations under Assigned Contracts that first arise after the
Closing Date and (iv) the Assumed Indebtedness to the extent included in (but
only to the extent included in) the computation of Closing Indebtedness;
provided that, notwithstanding the foregoing, "Assumed Liabilities" shall not
include any obligation or liability that arises from breach of any such Assigned
Contract arising on or prior to the Closing Date or any obligation or liability
that arises in whole or in part from consummation of the transactions
contemplated hereby.
"Average Number of Monthly Unique Visitors" means, for any
Applicable Measurement Period, the quotient equal to the number of Monthly
Unique Visitors for such
Applicable Measurement Period divided by (i) three (3) in the case of the
Alternative Measurement Period and (ii) six (6) in the case of the General
Measurement Period.
"Business" means the business of Sellers as conducted on or prior to
the Closing Date, including the operation of xxx.xxxxxxxxx.xxx website and
sub-domains.
"Cause" means, with respect to the circumstances surrounding the
termination of a Filefront Principal's employment by Buyer, (i) the indictment
of, or plea of no contest, by the Filefront Principal with respect to a felony
or a crime involving moral turpitude; (ii) the commission of any other act or
omission by the Filefront Principal constituting fraud against Buyer or any of
its Affiliates or any of their customers, suppliers, or business relations, or
the violation of any fiduciary duty to Buyer and/or its Affiliates under
applicable law; (iii) willful or reckless misconduct or gross negligence (which,
in the case of gross negligence by the Filefront Principal is not cured within
fifteen (15) days after written notice thereof to the Filefront Principal), with
respect to Buyer or any of its Affiliates; (iv) failure of such Filefront
Principal to devote substantially all of his business time and attention to
Buyer in accordance with his Executive Agreement or failure to perform his job
responsibilities, in each case not cured within fifteen (15) days after written
notice thereof to the Filefront Principal, (v) any breach of any of Sections 7F,
7G, or 7H of this Agreement or breach of the restrictive covenants of such
Filefront Principal's Executive Agreement, in each case which is not cured
within fifteen (15) days after written notice thereof to the Filefront
Principal; or (vi) any material breach of Buyer's company policies established
by the CEO of Buyer, which breach, if curable, is not cured within fifteen (15)
calendar days after written notice thereof to such Filefront Principal.
"Closing Indebtedness" means Assumed Indebtedness as of 12:01 am on
the Closing Date.
"Closing Net Working Capital" means Net Working Capital as of 12:01
am on the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Contract" means any contract, license, sublicense, franchise,
permit, mortgage, purchase order, indenture, loan agreement, lease, sublease,
agreement, obligation, instrument, Employee Benefit Plan, Employee Pension
Benefit Plan, or other arrangement or any commitment to enter into any of the
foregoing (in each case, whether written or oral).
"Effective Date" means November 1, 2005.
"Effective Date Net Working Capital" means Net Working Capital as of
12:01 am on the Effective Date.
"Employee Benefit Plan" means any "employee benefit plan" (as such
term is defined in ERISA Section 3(3)) and any other employee benefit plan,
program, or arrangement of any kind.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
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"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Executive Agreement" means, as the context may require, (i) the
Executive Agreement, dated as of the Closing Date, by and between Xxxxx and
Buyer in form and substance as set forth on Exhibit A-1 attached hereto and (ii)
the Executive Agreement, dated as of the Closing Date, by and between Labian and
Buyer in form and substance as set forth on Exhibit A-2 attached hereto, in each
case as the same may be amended, modified, supplemented, or waived from time to
time.
"Full Calendar Month" means any calendar month for which there are
at least 20 Measurable Calendar Days.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time, consistently applied.
"Good Reason" means, with respect to any Filefront Principal, the
occurrence, without a Filefront Principal's consent, of any of the following:
(i) failure to make funding available for the Business in accordance with the
Budget by more than 10% in the aggregate in any fiscal quarter which is not
cured after written notice to Buyer by making available to the Business
additional funding in an amount equal to such shortfall in the fiscal quarter
immediately following such notice; (ii) a reduction in such Filefront
Principal's annual Base Salary as contemplated by such Filefront Principal's
Executive Agreement, except for across-the-board salary reductions similarly
affecting all senior executives of the Buyer; or (iii) Buyer moves the
headquarters for the Business more than 30 miles from Spring, Texas.
"Guarantor" means Ziff Xxxxx Holdings Inc., a Delaware corporation.
"Incapacity" means, for each Filefront Principal, the disability of
such Filefront Principal caused by any physical or mental injury, illness or
incapacity as a result of which such Filefront Principal is unable to
effectively perform the essential functions of such Filefront Principal's duties
as determined by Buyer in good faith, for a period of ninety (90) consecutive
calendar days or a period of one hundred and twenty (120) calendar days during
any one hundred and eighty (180) calendar day period.
"Indebtedness" means (i) any indebtedness for borrowed money or
issued in substitution for or exchange of indebtedness for borrowed money
(including, but not limited to, interest and prepayment penalties computed as
though payment is being made on the Closing Date), (ii) any indebtedness
evidenced by any note, bond, debenture or other debt security, (iii) any
indebtedness for the deferred purchase price of property or services with
respect to which a Person is liable, contingently or otherwise, as obligor or
otherwise (including any deferred purchase price in the form of contingent
consideration, whether in the form of seller debt, earn-out or otherwise), (iv)
any commitment by which a Person assures a creditor against loss (including,
without limitation, contingent reimbursement liabilities with respect to letters
of credit), (v) any indebtedness guaranteed in any manner by a Person
(including, without limitation, guarantees in the form of an agreement to
repurchase or reimburse), (vi) any liabilities under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as
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obligor, guarantor or otherwise, or with respect to which liabilities a Person
assures a creditor against loss, (vii) any amounts owed to any Person under any
noncompetition, consulting or similar arrangements, (viii) all liabilities
related to any change-of-control or similar payment or increased cost which is
triggered in whole or in part by the transactions contemplated by this
Agreement, and (ix) any liabilities incurred by such Person (including, but not
limited to, any fees, costs and expenses incurred on behalf of Sellers) in
connection with the negotiation of the Letter of Intent, this Agreement, the
other Transaction Documents, the performance of such Person's and its
pre-Closing Affiliates' obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereby and thereby.
"Initial Period" means the 24-month period beginning on November 1,
2005 and ending on October 31, 2007.
"Intellectual Property" means in any jurisdiction throughout the
world: (i) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (ii) all trademarks, service marks, trade dress, logos, slogans, trade
names (including filefront and derivations thereof), corporate names, Internet
domain names (including xxx.xxxxxxxxx.xxx and any sub-domain names) and rights
in telephone numbers, and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (iii) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (iv) all mask works and all applications,
registrations, and renewals in connection therewith, (v) all trade secrets,
website content, and confidential business information (including ideas,
research and development, know-how, formulas, notes, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (vi) all computer software
(including source code, executable code, data, databases, and related
documentation), (vii) all advertising and promotional materials, (viii) all
other proprietary rights, and (ix) all copies and tangible embodiments thereof
(in whatever form or medium).
"Knowledge" as used in the phrases "to the Knowledge of Sellers",
"to Sellers' Knowledge" or phrases of similar import means the actual knowledge
of the either Filefront Principal or either Seller (which shall include the
actual knowledge of the partners, managers, officers and key employees of
Sellers), after making reasonable inquiry with respect to the particular matter
in question.
"Letter of Proposal" means that certain letter agreement, dated
August 2, 2005, addressed to Filefront.
"Liens" means any mortgage, pledge, lien, encumbrance, security
interest, Tax, or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against any Seller or any of its
Affiliates, and any filing or agreement to file a financing statement as debtor
under the Uniform Commercial Code or any similar statute.
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"Measurable Calendar Day" means a calendar day during which there
are not more than six (6) hours during which (a) access to the xxxxxxxxx.xxx
website and sub-domains thereof or (b) proper measurement of site traffic by the
applicable third party site tracking tool is materially and adversely
interrupted due to external events outside the control of the Filefront
Principals and Buyer (e.g., earthquake or internet shutdown).
"Monthly Unique Visitors" means United States unique visitors to the
xxx.xxxxxxxxx.xxx web site or any sub-domains of xxxxxxxxx.xxx (excluding unique
visitors generated by (a) paid referrals for uniques, including search engines
and (b) non-U.S. domains) calculated on a monthly, unduplicated basis, as
measured by Omniture SiteCatalyst; provided that paid referrals shall not
include any general advertising or marketing campaign by Buyer in the ordinary
course of business; provided further that in the event that (i) Omniture
SiteCatalyst is not available to measure Monthly Unique Visitors, then Monthly
Unique Visitors will be determined by a similar third party site tracking tool
for measurement proposed by Buyer consented to by Sellers (which consent shall
not be unreasonably withheld, delayed or conditioned) or (ii) no third party
tracking tool is agreed to by the Parties, the Parties will jointly calculate
the Monthly Unique Visitors (with the default method being to calculate United
States Monthly Unique Visitors by setting a cookie on the visitor's browser,
uniquely identifying the visitor, with spiders and BOTS to be excluded from any
such calculation of Monthly Unique Visitors).
"Net Working Capital" means the difference between (i) the sum of
operating expenses paid by Sellers prior to the Effective Date with respect to
which Buyer will receive the benefit for the operation of the Business on and
after the Effective Date over (ii) the sum of customer deposits and revenues and
subscription revenues received by Sellers prior to the Effective Date with
respect to periods on and after the Effective Date. In calculating amounts
pursuant to clauses (i) and (ii) of this definition, amounts shall be ratably
applied between periods prior to the Effective Date, on the one hand, and on and
after the Effective Date, on the other hand, such that, by way of example, if a
$1,000 payment is made by Sellers for the period between September 1, 2005 and
December 31, 2005, the amount included for such expense in the calculation of
Net Working Capital shall be $1,000 multiplied by a fraction, the numerator of
which is the number of days between the Effective Date and the December 31, 2005
and the denominator of which is the number of days between September 1, 2005 and
December 31, 2005.
"Person" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, and a governmental entity (or any
department, agency, or political subdivision thereof).
"Purchase Price" means the Cash Portion plus the Additional Purchase
Price Payment, as adjusted by the Final Adjustment Amount.
"Remaining Filefront Principal" means in the event that one
Filefront Principal ceases to be employed with Buyer for any reason, the other
Filefront Principal that remains employed with Buyer after cessation of
employment for the first Filefront Principal.
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"Remaining Vesting Period" means, for a Remaining Filefront
Principal, the number of calendar days between the Termination Date for such
Remaining Filefront Principal and the last day of the Initial Period, inclusive.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association, or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited
liability company, partnership, association, or other business entity (other
than a corporation), a majority of partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons owns a majority ownership interest in
such a business entity (other than a corporation) if such Person or Persons
shall be allocated a majority of such business entity's gains or losses or shall
be or control any managing director or general partner of such business entity
(other than a corporation). The term "Subsidiary" shall include all Subsidiaries
of such Subsidiary.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, whether computed on a
separate or consolidated, unitary or combined basis or in any other manner,
including any interest, penalty, or addition thereto, whether disputed or not
and including any obligation to indemnify or otherwise assume or succeed to the
tax liability of any other Person.
"Termination Date" with respect to a Filefront Principal shall have
the same meaning as defined in that Filefront Principal's Executive Agreement.
"Total Vesting Period" means the number of calendar days in the
Initial Period.
"Transaction Documents" means this Agreement, the Executive
Agreements and any other agreement or document contemplated hereby to which
either Seller or either of the Filefront Principals is a party.
"Treas. Reg." means the Treasury Regulations promulgated pursuant to
the Code.
"Unvested Portion" means the percentage obtained by dividing the
Remaining Vesting Period by the Total Vesting Period.
1B. Other Definitions. Each of the following defined terms has the meaning
given such term in the Section set forth opposite such defined term:
DEFINED TERM SECTION REFERENCE
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Accounting Firm 2C(iv)
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Acquisition Target 7F(ii)
Additional Purchase Price Payment 2E(i)
Agreement Preamble
Allocation 2F
Alternative Measurement Period 2E(iii)
Applicable Measurement Period 2E(iii)
Assigned Contracts 2A(i)
Basket 6B
Budget 7J(i)
Buyer Preamble
Buyer Parties 6B
Cash Portion 2C(ii)
Closing 2C(i)
Closing Date 2C(i)
Closing Statement 2C(iii)
Closing Transactions 2C(ii)
Confidential Information 7F(iii)
Dispute Notice 2C(iii)
Estimated Closing Indebtedness 2C(ii)
Excluded Assets 2A(ii)
Xxxxx Preamble
Filefront Preamble
Filefront Principals Preamble
Final Adjustment Amount 2D
Forfeited Amount 2E(v)
General Measurement Period 2E(iii)
Indemnified Party 6D
Indemnifying Party 6D
Insiders 4J
Item of Dispute 2C(iii)
Labian Preamble
Loss 6B
Losses 6B
MBPS Preamble
Noncompete Period 7F(i)
Parties Preamble
Party Preamble
Purchased Assets 2A(i)
Restricted Person 7F(i)
Retained Liabilities 2B
Rules 8L
Seller(s) Preamble
ZD Entity 7F(ii)
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SECTION 2. PURCHASE AND SALE OF ASSETS
2A. Purchase and Sale of Assets.
(i) Purchased Assets. On the terms and subject to the conditions
contained in this Agreement, on the Closing Date, Buyer shall purchase from each
Seller, and each Seller shall sell, convey, assign, transfer, and deliver to
Buyer, free and clear of all Liens, all assets, properties, rights, titles, and
interests of every kind and nature owned or leased by such Seller (including
indirect and other forms of beneficial ownership) as of the Closing Date whether
tangible, intangible, real or personal and wherever located and by whomever
possessed (the "Purchased Assets"), including, but not limited to, the assets
listed on Schedule 2A(i)(A) attached hereto, cash on hand arising from business
generated from and after the Effective Date through the Closing Date,
receivables arising from and after the Effective Date and all Intellectual
Property, but excluding all Excluded Assets, against payment by Buyer of an
aggregate amount in cash equal to the Cash Portion (as defined below); provided
that the Purchased Assets shall include only those contracts of Sellers listed
as being assigned to Buyer on Schedule 2A(i)(B) hereof that are actually
assigned to Buyer in accordance with its terms (the "Assigned Contracts");
provided further that in no event shall Assigned Contracts include any Employee
Benefit Plan or Employee Pension Benefit Plan.
(ii) Excluded Assets. Notwithstanding the foregoing, the following
assets are expressly excluded from the purchase and sale contemplated hereby
(the "Excluded Assets") and, as such, are not included in the Purchased Assets:
(a) the limited partnership certificate of formation, limited
partnership agreement, certificate of incorporation, bylaws, qualifications to
conduct business as a foreign company, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, unit or stock transfer books, blank unit or stock
certificates, and other documents relating to the organization, maintenance, and
existence of Seller as a limited partnership;
(b) any of the rights of Sellers under this Agreement (or
under any side agreement between either Seller on the one hand and Buyer on the
other hand entered into on or after the date of this Agreement);
(c) any right to receive mail and other communications
addressed to either Seller relating exclusively to the Excluded Assets;
(d) any rights in and with respect to the assets associated
with Seller's Employee Benefit Plans or Employee Pension Benefit Plans, if any;
and
(e) any assets listed on Schedule 2A(ii).
2B. No Assumption of Liabilities. Subject to the conditions specified in
this Agreement, from and after the Closing Date, except for the Assumed
Liabilities, Buyer will not assume or in any way be responsible for any
liabilities or obligations whatsoever related to the ownership, operation, or
condition of the Business or the Purchased Assets at any time on or prior to the
Closing Date or any liabilities or other obligations of any Seller or any
Filefront
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Principal, whether incurred prior to, on, or after the Closing Date (such
liabilities or obligations, other than the Assumed Liabilities, are referred to
herein as the "Retained Liabilities") and Sellers shall pay and discharge all
Retained Liabilities when such become due and payable.
2C. Closing Transactions.
(i) Closing. Subject to satisfaction or waiver of the conditions
contained in this Agreement, the closing of the transactions contemplated by
this Agreement (the "Closing") will occur at the offices of Xxxxxxxx & Xxxxx
LLP, 000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, at 10 a.m. on November 4,
2005 or at such other time and on such other date as the Parties hereto mutually
agree. The date and time of the Closing are herein referred to as the "Closing
Date." Notwithstanding anything to the contrary herein, the Closing shall be
effective as of 12:01 am on the Closing Date.
(ii) Closing Transactions. Subject to the conditions set forth in
this Agreement, the Parties shall consummate the following "Closing
Transactions" on the Closing Date:
(a) Sellers shall convey all of the Purchased Assets to Buyer
and shall deliver to Buyer such appropriately executed instruments of sale,
transfer, or assignment, transfer tax declarations, and all other instruments of
conveyance that are necessary or desirable to effect transfer to Buyer of good
and marketable title to the Purchased Assets (free and clear of all Liens),
including documents acceptable for recording with the United States Patent and
Trademark Office, the United States Copyright Office, and any other similar
domestic or foreign office, department or agency and all instruments necessary
or desirable to change the registered owner of all internet domain names to
Buyer (it being understood that all of the foregoing shall be satisfactory in
form and substance to Buyer and its counsel);
(b) Buyer shall deliver to Sellers an aggregate amount in cash
(the "Cash Portion") equal to the result of (1) $5,235,000 minus (2) the amount
of Closing Indebtedness (estimated by Seller and agreed to by Buyer prior to the
Closing Date to be $200,776.39 (the "Estimated Closing Indebtedness")), with
such consideration to be allocated between Sellers as directed in writing signed
by Sellers prior to the Closing Date; and
(c) Sellers and Buyer shall deliver the opinions, certificates
and other documents and instruments required to be delivered by or on behalf of
such Party under Section 3 hereof.
(iii) The Closing Statement. Promptly, but in any event within 60
days after the Closing, Buyer shall furnish to Sellers a statement (the "Closing
Statement") setting forth (a) Closing Indebtedness and (b) Effective Date Net
Working Capital. Unless within the 30-day period following Sellers' receipt of
the Closing Statement, Sellers deliver written notice to Buyer (the "Dispute
Notice") setting forth in reasonable detail any and all items of disagreement
related to the Closing Statement (each, an "Item of Dispute"), the Closing
Statement shall be conclusive and binding upon Sellers and Buyer; provided that
the only basis on which Sellers shall be permitted to submit an Item of Dispute
is that such Item of Dispute was not prepared in accordance with this Agreement.
Each Seller and each of the Filefront Principals shall cooperate
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fully with Buyer in connection with the preparation of the Closing Statement.
After the delivery of the Closing Statement, Buyer shall cooperate with Sellers
in connection with the review of the Closing Statement, including, without
limitation, providing Sellers and their accountants reasonable access during
business hours to materials (including accountants' work papers) used in the
preparation of the Closing Statement.
(iv) Dispute Resolution. If Sellers deliver the Dispute Notice to
Buyer within such 30-day period, Buyer and Sellers shall use reasonable efforts
to resolve their differences concerning the Items of Dispute, and if any Item of
Dispute is so resolved, the Closing Statement shall be modified as necessary to
reflect such resolution. If all Items of Dispute are so resolved, the Closing
Statement (as so modified) shall be conclusive and binding on Sellers and Buyer.
If any Item of Dispute remains unresolved for a period of twenty (20) days after
Buyer's receipt of the Dispute Notice, Buyer and Sellers shall submit the
dispute to a nationally-recognized, independent certified public accountant (the
"Accounting Firm") selected by the mutual agreement of Buyer and Sellers within
ten (10) days after the end of such 20-day period. If Buyer and Sellers are
unable to mutually agree upon such an accountant within such 10-day period, then
Buyer and Sellers shall each select a "nationally recognized" accountant and
within five (5) days after their selection, those two accountants shall select a
third "nationally recognized" accountant, which third accountant shall act as
the Accounting Firm. Buyer and Sellers shall request that the Accounting Firm
render a determination (which determination shall be solely based on whether
such Item of Dispute was prepared in accordance with this Agreement) as to each
unresolved Item of Dispute within 45 days after its retention, and Buyer, and
Sellers shall cooperate fully with the Accounting Firm so as to enable it to
make such determination as quickly and as accurately as practicable. The
Accounting Firm's determination as to each Item of Dispute submitted to it shall
be in writing and shall be conclusive and binding upon Buyer and Sellers, and
the Closing Statement shall be modified to the extent necessary to reflect such
determination. The fees and expenses of the Accounting Firm shall be allocated
to be paid by Buyer and/or Sellers based upon the percentage which the portion
of the contested amount not awarded to each party bears to the amount actually
contested by such party, as determined by the Accounting Firm.
(v) Indebtedness Adjustment. If the amount of the Closing
Indebtedness as reflected on the final Closing Statement is greater than the
Estimated Closing Indebtedness, each of Sellers and each of the Filefront
Principals (on a joint and several basis) shall pay to Buyer an amount equal to
such excess. If the amount of the Closing Indebtedness as reflected on the final
Closing Statement is less than the Estimated Closing Indebtedness, Buyer shall
pay to Sellers an aggregate amount equal to such shortfall.
(vi) Net Working Capital Adjustment. If the Effective Date Net
Working Capital as determined by reference to the final Closing Statement is
negative, each of Sellers and each of the Filefront Principals (on a joint and
several basis) shall pay to Buyer an amount equal to the absolute value of such
negative amount. If the Effective Date Net Working Capital as determined by
reference to the final Closing Statement is positive, Buyer shall pay to Sellers
an aggregate amount equal to such excess.
2D. Adjustment Amount. Without duplication, all amounts owed pursuant to
Sections 2C(v) and/or 2C(vi) shall be aggregated, and the net amount (if any)
owed by Buyer to Sellers,
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on the one hand, or Sellers and the Filefront Principals to Buyer, on the other
hand, is referred to as the "Final Adjustment Amount". The Final Adjustment
Amount shall be calculated as an adjustment to the Purchase Price on the first
business day on which the Closing Statement becomes conclusive and binding. The
Final Adjustment Amount shall bear simple interest at a rate of 6% per annum
measured from the Closing Date to the date of such payment. Payment of the Final
Adjustment Amount shall be paid by delivery of immediately available funds to an
account designated by the recipient Party within ten business days after the
date of final determination.
2E. Additional Purchase Price Payment.
(i) In addition to the Cash Portion, Buyer shall pay to Sellers, on
the terms and subject to the conditions and limitations set forth below, the
following additional purchase price (the "Additional Purchase Price Payment").
(ii) The Additional Purchase Price Payment shall be determined as
the dollar amount resulting from: (A) the product of two dollars and fifty cents
($2.50) times the number by which the Average Number of Monthly Unique Visitors
during the Applicable Measurement Period exceeds two (2) million minus (B) the
amount, as set forth in Section 7J(ii), by which the actual aggregate operating
and capital expenses of the Business during the Initial Period exceed the agreed
total of the budgeted operating and capital expenses during the Initial Period
as set forth on Exhibit B. For example, by way of illustration only, if the
Average Number of Monthly Unique Visitors during the Applicable Measurement
Period is three (3) million (and assuming aggregate operating and capital
expenses during the Initial Period do not exceed the agreed upon budget amount),
then the Additional Purchase Price Payment would equal two million five hundred
thousand dollars ($2,500,000) (i.e., $2.50 x (3,000,000 - 2,000,000)).
Notwithstanding anything to the contrary herein, the Additional Purchase Price
Payment shall in no event exceed $10 million.
(iii) When used herein, "Applicable Measurement Period" means (A)
the three most recent Full Calendar Months during the Initial Period immediately
prior to the Termination Date for the Remaining Filefront Principal (the
"Alternative Measurement Period") in the event that (x) the employment of both
Filefront Principals is terminated due to death or Incapacity of the Filefront
Principals occurring during the Initial Period, or (y) the Remaining Filefront
Principal's employment is terminated due to death or Incapacity of the Remaining
Filefront Principal occurring during the Initial Period, and (B) otherwise, the
last six Full Calendar Months during the Initial Period (the "General
Measurement Period"); provided that, in the event that the Remaining Filefront
Principal's employment with the Company is terminated by the Company without
Cause or by the Remaining Filefront Principal's resignation with Good Reason
prior to the expiration of the Initial Period, the "Applicable Measurement
Period" shall be (I) the Alternative Measurement Period in the event that the
Additional Purchase Price Payment to Sellers would be greater by application of
the Alternative Measurement Period than the General Measurement Period or (II)
the General Measurement Period in the event that the Additional Purchase Price
Payment would be greater or equal by application of the General Measurement
Period than the Alternative Measurement Period.
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(iv) The Additional Purchase Price Payment shall be payable within
30 days after the calculation thereof has been made, which such calculation
shall be made within 30 days after the end of the Applicable Measurement Period
or, in the case of application of the proviso to the foregoing clause (iii),
within 30 days after the end of the General Measurement Period.
(v) Notwithstanding anything to the contrary herein, if the
Remaining Filefront Principal ceases to be a full-time employee of Buyer or any
of its Affiliates prior to the expiration of the Initial Period as a result of
such Remaining Filefront Principal's termination by the Company with Cause or
such Remaining Filefront Principal's resignation without Good Reason, the
Additional Purchase Price Payment otherwise payable to Sellers shall be reduced
by the product of (a) the Additional Purchase Price Payment otherwise due and
owing hereunder (as determined in accordance with Section 2E(ii) and without
regard to this Section 2E(v)), multiplied by (b) the Unvested Portion (such
product, the "Forfeited Amount"). Each of the Parties agrees that no Seller nor
any Filefront Principal shall have any rights to all or any portion of the
Forfeited Amount and that Buyer may retain the Forfeited Amount or make payments
of the Forfeited Amount to any Person as Buyer may determine in its sole
discretion.
(vi) Guarantor is a party to this Agreement solely for the purposes
of this Section 2E(vi). In consideration of the transactions contemplated by
this Agreement, the receipt and sufficiency of which are hereby acknowledged, in
the event that Buyer fails to make any Additional Purchase Price Payment it is
required to make hereunder, Guarantor hereby unconditionally and irrevocably
guarantees payment by Buyer of the Additional Purchase Price Payment required to
be made by Buyer and agrees to indemnify Sellers for any Losses suffered by
Sellers as a result of its failing to comply with its obligations under this
Section 2E(iv) or breach of any representations of Seller made in this Section
2E(vi), subject to any defenses of Buyer. In no event shall the aggregate
liability of Guarantor arising under or related to this Agreement and the
transactions contemplated hereby, whether based in contract, tort, strict
liability, other Law or otherwise, exceed Buyer's obligations under this
Agreement. Guarantor hereby represents and warrants to Seller that (A) Guarantor
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware has full corporate power and authority to execute,
deliver and perform this Agreement, (B) the execution, delivery and performance
by Guarantor of this Agreement have been duly authorized by all requisite
corporate action on the part of Guarantor, and (C) this Agreement has been duly
executed and delivered by Guarantor and constitutes the valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar Laws relating to
creditors' rights generally, and general equitable principles. Guarantor's
obligations shall terminate on the earliest of (x) the time that the Additional
Purchase Price Payment is made, (y) the time that Buyer ceases to be a
Subsidiary of Guarantor, and (z) the time that Buyer's obligations to make the
Additional Purchase Price Payment are assigned to another Person (other than an
Affiliate of Buyer) in accordance with Xxxxxxx 0X xxxxxx.
0X. Allocation of Purchase Price. Buyer and Sellers shall jointly allocate
the Purchase Price in accordance with Section 1060 of the Code (the
"Allocation") among the Purchased Assets using the methodology and allocation
amounts set forth on the Schedule 2F attached hereto. For purposes of the
Allocation, the Purchase Price shall mean an amount equal to the Purchase Price
plus Assumed Liabilities for U.S. federal income Tax purposes. To the
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extent that the Purchase Price is adjusted after the Closing Date pursuant to
Section 2, Buyer and Sellers agree to revise and amend the Allocation in
accordance with the character of each such adjustment, consistent with the
methodology on Schedule 2F. Sellers and Buyer agree to prepare and file an IRS
Form 8594 for or such other form or statement as may be required by applicable
law, rule or regulation, and any comparable state or local income tax form, in a
manner consistent with the Allocation. Sellers and Buyer shall adhere to the
Allocation for all Tax-related purposes including any federal, foreign, state,
county or local income and franchise Tax return filed by them after the Closing
Date, including the determination by Sellers of taxable gain or loss on the sale
of the Purchased Assets and the determination by Buyer of its tax basis with
respect to the Purchased Assets. Neither Buyer nor Sellers shall file any Tax
returns or, in a judicial or administrative proceeding, assert or maintain any
Tax reporting position that is inconsistent with this Agreement or the
Allocation agreed to in accordance with this Agreement, unless required to do so
by applicable law.
SECTION 3. CONDITIONS TO CLOSING
3A. Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
fulfillment of the following conditions as of the Closing Date to Buyer's
satisfaction in its sole discretion:
(i) The representations and warranties set forth in Section 4 hereof
shall be true and correct in all material respects at and as of the Closing Date
as though then made and as though the Closing Date were substituted for the date
of this Agreement throughout such representations and warranties, except to the
extent that such representations and warranties are qualified by terms such as
"material" and "material adverse effect," in which case such representations and
warranties shall be true and correct in all respects at and as of the Closing
Date as though then made and as though the Closing Date were substituted for the
date of this Agreement throughout such representations and warranties.
(ii) Sellers shall have performed and complied with all of its
covenants hereunder requiring performance by Sellers on or prior to Closing
including, without limitation, the simultaneous transfer of the Purchased
Assets;
(iii) All consents and approvals by third parties that are required
or desirable for the transfer of the Purchased Assets, for the consummation of
the transactions contemplated hereby (including, but not limited to, the consent
of Buyer's lenders), or in order to prevent a breach of or a default under or a
termination or modification of or any right of acceleration of any obligations
under any Assigned Contract which is included as one of the Purchased Assets and
all consents required to assign the Contracts listed on Schedule 2A(i)(B)
attached hereto to Buyer shall have been obtained, in each case on terms and
conditions satisfactory to Buyer;
(iv) All governmental filings, authorizations, and approvals that
are required for the transfer of the Purchased Assets to Buyer and the
consummation of the transactions contemplated hereby shall have been duly made
and obtained on terms satisfactory to Buyer;
(v) No action, suit, or proceeding shall be pending or, to the
Knowledge of Seller, threatened before any court or quasi-judicial or
administrative agency of any federal,
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state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable judgment, decree, injunction, order or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded, or materially and adversely affect the right of
Buyer to own, operate or control the Purchased Assets, and no judgment, decree,
injunction, order or ruling shall have been entered which has any of the
foregoing effects;
(vi) Sellers shall have delivered to Buyer releases of any and all
Liens held by third parties with respect to any of the Purchased Assets, on
terms satisfactory to Buyer;
(vii) On or prior to the Closing Date, Sellers shall have delivered
to Buyer at Seller's expense each of the following:
(a) a certificate from Sellers in form and substance
satisfactory to Buyer, dated the Closing Date, stating that the preconditions
specified in Section 3A(i) - (v) have been satisfied;
(b) copies of all third party and governmental consents,
approvals, filings, releases, terminations, and filings required in connection
with the transfer of the Purchased Assets and the consummation of the
transactions contemplated by this Agreement and the other agreements
contemplated hereby;
(c) a certificate of each Seller, dated the Closing Date, in
form and substance reasonably satisfactory to Buyer, as to (i) no amendments to
the certificate of formation of such Seller or certificate of incorporation of
Seller, as applicable, since the date specified in subsection (d) below; (ii)
the limited partnership agreement or bylaws, as applicable, of such Seller; and
(iii) any resolutions of the general partner and partners, board of directors,
or shareholders of such Seller relating to this Agreement and the transactions
contemplated hereby;
(d) copies of the certificate of formation or certificate of
incorporation of such Seller, as applicable, certified on or soon before the
Closing Date by the Secretary of State (or comparable officer) of the
jurisdiction of such Seller's formation;
(e) copies of the certificate of good standing of such Seller
issued on or soon before the Closing Date by the Secretary of State (or
comparable officer) of the jurisdiction of such Seller's organization;
(f) documents required to be delivered to Buyer pursuant to
Section 2C(ii)(a);
(g) such other documents or instruments as Buyer may
reasonably request to effect the transactions contemplated hereby;
(viii) All proceedings to be taken by Sellers in connection with the
consummation of the Closing Transactions and the other transactions contemplated
hereby and all certificates, opinions, instruments, and other documents required
to be delivered by Seller to effect the transactions contemplated hereby
reasonably requested by Buyer shall be satisfactory in form and substance to
Buyer; and
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(ix) Each of the Filefront Principals shall have executed and
delivered to Buyer an Executive Agreement in form and substance as set forth in
Exhibit A attached hereto and the same shall be in full force and effect.
Any condition specified in this Section 3A may be waived by Buyer; provided,
however, that no such waiver shall be effective unless it is set forth in a
writing executed by Buyer or unless Buyer agrees in writing to consummate the
transactions contemplated by this Agreement without fulfillment of such
condition.
3B. Conditions to Sellers' Obligations. The obligation of Sellers to
consummate the transactions contemplated by this Agreement is subject to the
fulfillment of the following conditions as of the Closing Date to Sellers'
satisfaction in their sole discretion:
(i) The representations and warranties set forth in Section 5 shall
be true and correct in all material respects at and as of the Closing Date as
though then made and as though the Closing Date were substituted for the date of
this Agreement throughout such representations and warranties, except to the
extent that such representations and warranties are qualified by terms such as
"material" and "material adverse effect," in which case such representations and
warranties shall be true and correct in all respects at and as of the Closing
Date as though then made and as though the Closing Date were substituted for the
date of this Agreement throughout such representations and warranties;
(ii) Buyer shall have performed and complied in all material
respects with all of its covenants requiring performance by Buyer at or prior to
Closing.
(iii) No action, suit or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
judgment, decree, injunction, order, or ruling would prevent the transfer of the
Purchased Assets, the performance of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated by this
Agreement, or cause such transactions to be rescinded, and no judgment, decree,
injunction, order, or ruling shall have been entered which has any of the
foregoing effects;
(iv) On or prior to the Closing Date, Buyer shall have delivered to
Sellers a certificate from Buyer, in form and substance satisfactory to Sellers,
stating that the preconditions specified in Sections 3B(i) - (iii) have been
satisfied; and
(v) All proceedings to be taken by Buyer in connection with the
consummation of the Closing Transactions and the other transactions contemplated
hereby and all certificates, instruments, and other documents required to be
delivered by Buyer to effect the transactions contemplated hereby reasonably
requested by Sellers shall be reasonably satisfactory in form and substance to
Sellers.
Any condition specified in this Section 3B may be waived by Sellers; provided
that no such waiver shall be effective against Seller unless it is set forth in
writing executed by Sellers or unless Sellers agree in writing to consummate the
transactions contemplated by this Agreement without the fulfillment of such
condition.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE FILEFRONT PRINCIPALS
As an inducement to Buyer to enter into this Agreement, each Seller
and each of the Filefront Principals hereby jointly and severally represent and
warrant to Buyer as of the Closing Date as follows:
4A. Organization and Limited Partnership Power. Filefront is a limited
partnership duly organized, validly existing, and in good standing under the
laws of the State of Texas. MBPS is a corporation duly organized, validly
existing, and in good standing under the laws of the State of California. Each
Seller is qualified to do business in every jurisdiction where the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified would not reasonably
be expected to have a material adverse effect. Each Seller has all requisite
partnership power and authority or corporate power and authority, as applicable,
and all licenses, permits and approvals necessary to own and operate the
Purchased Assets. The certificate of formation and limited partnership agreement
of Filefront that have previously been furnished to Buyer reflect all amendments
thereto and are correct and complete. The certificate of incorporation and
bylaws of MBPS that have previously been furnished to Buyer reflect all
amendments thereto and are correct and complete. Neither Seller has or ever has
had any Subsidiaries and neither Seller owns or ever has owned the capital
stock, equity securities or rights exercisable or convertible into capital stock
or equity securities of any other Person.
4B. Authorization of Transactions. Each Seller has full partnership power
and authority or corporate power and authority, as applicable, and each of the
Filefront Principal has the capacity, to execute and deliver the Transaction
Documents to which it is a party and to consummate the transactions contemplated
hereby and thereby. Each Filefront Principal and each Seller has duly authorized
the execution and delivery of this Agreement and all other Transaction Documents
to which such Filefront Principal or such Seller is a party and the consummation
of the transactions contemplated hereby and thereby. No other limited
partnership proceedings or corporate proceedings on the part of any Filefront
Principal or any Seller are necessary to approve and authorize the execution and
delivery of this Agreement or the other Transaction Documents to which such
Filefront Principal or such Seller is a party and the consummation of the
transactions contemplated hereby and thereby. This Agreement and all other
Transaction Documents to which any Filefront Principal or any Seller is a party
have been duly executed and delivered by such Filefront Principal or such
Seller, as the case may be, and constitute the valid and binding agreements of
such Filefront Principal and such Seller, enforceable against such Filefront
Principal and such Seller in accordance with their terms.
4C. Absence of Conflicts. Except as set forth in Schedule 4C, the
execution, delivery and performance of this Agreement and the other Transaction
Documents to which any Seller or any Filefront Principal is a party and the
consummation of the transactions contemplated hereby and thereby do not and
shall not (a) conflict with or result in any breach of any of the terms,
conditions or provisions of, (b) constitute a default under, (c) result in a
violation of, (d) give any third party the right to modify, terminate, or
accelerate any obligation under, (e) result in the creation of any Lien upon the
Purchased Assets, or (f) require any authorization, consent, approval,
exemption, or other action by or notice or declaration to, or filing with, any
court or
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administrative or other governmental body or agency, under the provisions of the
certificate of formation or limited partnership agreement of Filefront, the
certificate of incorporation or bylaws of MBPS or any Assigned Contract, or any
law, statute, rule or regulation to which any Seller, any Filefront Principal or
any of the Purchased Assets is subject or any judgment, order or decree to which
any Seller, any Filefront Principal or the Purchased Assets is subject.
4D. Absence of Liabilities. Neither Seller has any obligation or liability
(whether accrued, absolute, contingent, unliquidated or otherwise, whether or
not known, whether due or to become due and regardless of when asserted),
including with respect to the Purchased Assets, arising out of transactions
entered into at or prior to the Closing, or any action or inaction at or prior
to the Closing, or any state of facts existing at or prior to the Closing except
(i) obligations under Contracts or commitments described in Schedule 4G, and
(ii) liabilities expressly disclosed on Schedule 4D.
4E. Purchased Assets. Except as set forth on Schedule 4E, the Sellers own
good and marketable title, free and clear of all Liens, to all of the Purchased
Assets, except for (i) rights of licensors and lessors of such Purchased Assets
which are subject to license or lease as described on Schedule 4G or Schedule
4E, (ii) Liens for current Taxes not yet due and payable, and (iii) Liens
disclosed on the attached Schedule 4E. The Filefront Principals have assigned
any and all of their right, title, and interest in the Purchased Assets to
Sellers, and none of the Filefront Principals has any right, title, or interest
in any of the Purchased Assets. The Purchased Assets constitute all of the
assets (including Intellectual Property) used in the operation of the Business
(other than Excluded Assets). At the Closing, Sellers will convey good and
marketable title to all of the Purchased Assets, free and clear of all Liens.
4F. Legal Compliance. Sellers and their predecessors and Affiliates have
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder and
including the Foreign Corrupt Practices Act, 15 U.S.C. 78dd-1 et seq.) of
federal, state, local, and foreign governments (and all agencies thereof), and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure so to comply.
4G. Contracts and Commitments. Except as specifically contemplated by this
Agreement and except as set forth in Schedule 4G, neither Seller is a party to
or bound by any Contract. Except as disclosed in Schedule 4G, no Contract or
commitment disclosed on Schedule 4G has been (i) to the Knowledge of Sellers,
breached or terminated by the other party, or (ii) breached or terminated by
Sellers. Sellers have provided Buyer with a true and correct copy of all written
Contracts which are required to be disclosed on Schedule 4G, in each case
together with all amendments, waivers or other changes thereto (all of which are
disclosed on Schedule 4G). Schedule 4G contains an accurate and complete
description of all material terms of all oral Contracts referred to therein.
4H. Intellectual Property.
(i) Sellers own or possess or have the right to use pursuant to a
valid and enforceable, written license, sublicense, agreement, or permission all
Intellectual Property
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included in the Purchased Assets. Each item of Intellectual Property owned or
used by Sellers immediately prior to the Closing Date hereunder will be owned or
available for use by Buyer on identical terms and conditions immediately
subsequent to the Closing Date hereunder. Sellers have taken all commercially
reasonable action to maintain and protect each item of Intellectual Property
that they own or use.
(ii) Except as set forth on Schedule 4H(ii), neither Seller has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and no
Filefront Principal nor any Seller has ever received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that either Seller must
license or refrain from using any Intellectual Property rights of any third
party). To the Knowledge of Sellers, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of Sellers or any of their respective Subsidiaries.
(iii) Each Seller has taken all commercially reasonable actions to
maintain and protect all of the Intellectual Property of such Seller and will
continue to take commercially reasonable actions to maintain and protect all of
the Intellectual Property of such Seller prior to Closing so as not to adversely
affect the validity or enforceability thereof.
(iv) Schedule 4H(iv) sets forth the Monthly Unique Visitors for each
of the last three Full Calendar Months prior to the date of this Agreement.
4I. Brokerage. Except as set forth in Schedule 4I, there are no claims for
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of either Seller.
4J. Affiliate Transactions. Except as disclosed on Schedule 4J, no
officer, partner, manager, employee, or Affiliate of either Seller or any
individual related by marriage or adoption to any such individual or any entity
in which any such Person owns any beneficial interest (collectively, the
"Insiders"), is (i) a party to any agreement, Contract, commitment or
transaction with such Seller or pertaining to the Purchased Assets or (ii) has
any interest in any of the Purchased Assets. Except as disclosed on Schedule 4J,
since 12:01 a.m. on the Effective Date, (x) no cash or other funds have been
used except for the payment of accounts payable and accrued liabilities in the
ordinary course of business consistent with past custom and practice, in each
case that have become due in accordance with their terms and (y) no cash or
other asset of the Business has been distributed to any equityholder of any
Seller or used to pay any Indebtedness of any Seller. Neither Seller has taken
any action outside of the ordinary course of business to cause Closing Date Net
Working Capital to be less than Effective Date Net Working Capital.
4K. Disclosure. Neither this Agreement, the other Transaction Documents
nor any of the schedules, attachments or Exhibits hereto, contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein, not misleading.
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to Sellers to enter into this Agreement,
Buyer hereby represents and warrants to Sellers as of the Closing Date as
follows:
5A. Organization and Corporate Power. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, with full corporate power and authority to enter into this Agreement
and the Transaction Documents to which Buyer is a party and perform its
obligations hereunder and thereunder.
5B. Authorization of Transactions. The execution, delivery and performance
of this Agreement and the Transaction Documents to which Buyer is a party have
been duly and validly authorized by all requisite corporate action on the part
of Buyer, and no other corporate proceedings on its part are necessary to
authorize the execution, delivery or performance of this Agreement. This
Agreement constitutes, and each of the Transaction Documents to which Buyer is a
party shall when executed constitute, a valid and binding obligation of Buyer,
enforceable in accordance with their terms.
5C. No Violation. Buyer is not subject to or obligated under its
organizational documents, any applicable law, or rule or regulation of any
governmental authority, or any agreement or instrument, or any license,
franchise or permit, or subject to any order, writ, injunction or decree, which
would be breached or violated by its execution, delivery or performance of this
Agreement and the other agreements contemplated hereby to which Buyer is a
party.
5D. Governmental Authorities and Consents. Buyer does not need to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
5E. Brokerage. Except as set forth in Schedule 5E, there are no claims for
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Buyer.
SECTION 6. INDEMNIFICATION AND RELATED MATTERS
6A. Survival. All representations, warranties, covenants, and agreements
set forth in this Agreement, the Transaction Documents or in any writing or
certificate delivered in connection with this Agreement shall survive the
Closing Date; provided that no Party shall be entitled to bring a claim for
breach of representations or warranties made by Sellers or Buyer hereunder
(other than representations or warranties of Seller made in Xxxxxxx 0X, 0X, 0X,
0X xx 0X, or Section 5A, 5B or 5E, all of which shall survive the Closing
forever) unless such Party delivers written notice of a claim prior to the
expiration of the Initial Period (in which case such claim shall survive until
such claim and the matter upon which such claim is brought are terminated). The
right to indemnification, reimbursement or other remedy based upon such
representations, warranties, covenants and obligations shall not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time,
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whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with
any such representation, warranty, covenant or obligation. The waiver of any
condition based upon the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, shall not affect
the right to indemnification, reimbursement, or other remedy based upon such
representation, warranties, covenants and obligations.
6B. Indemnification of Buyer. Each Seller and each of the Filefront
Principals shall, jointly and severally, indemnify Buyer and its direct and
indirect shareholders, officers, directors, employees, agents, representatives,
affiliates, successors, and permitted assigns (collectively, the "Buyer
Parties") and hold each of them harmless from and against and pay on behalf of
or reimburse such Buyer Parties in respect of any loss (including diminution in
value), liability, demand, claim, action, cause of action, cost, damage,
deficiency, tax, penalty, fine or expense, whether or not arising out of third
party claims (including, without limitation, interest, penalties, reasonable
attorneys' fees and expenses, court costs and all amounts paid in investigation,
defense or settlement of any of the foregoing) (collectively, "Losses" and
individually, a "Loss") which any such Buyer Party may suffer, sustain or become
subject to, as a result of, in connection with, relating or incidental to, or by
virtue of: (i) the breach of any representation, warranty, covenant, or
agreement made by any Seller or any of the Filefront Principals contained in
this Agreement, the other Transaction Documents, any Exhibit or schedule hereto
or any certificate delivered by such Seller or any of the Filefront Principals
to Buyer with respect hereto or thereto in connection with the Closing, (ii) any
Retained Liabilities or any claim, proceeding or assertion made against Buyer
with respect to any Retained Liabilities, or (iii) any claim, suit or proceeding
instituted by either Seller or any of its equityholders or other stakeholders
regarding the allocation of consideration between Sellers. Sellers shall not be
obligated to pay any indemnification amount for Losses pursuant to this Section
6B (x) until the aggregate amount of all Losses exceeds $50,000 (the "Basket")
whereupon Buyer Parties shall be entitled to indemnification for all Losses
(including the Basket) or (y) in excess of $1,000,000 plus 20% of the Additional
Purchase Price Payment paid or payable to Seller; provided that in no event
shall the limits on indemnification pursuant to this sentence apply to any claim
for indemnification (A) pursuant to clause (i) of this Section 6B for breach of
the representations and warranties of Sellers made in any of Sections 0X, 0X,
0X, 0X, 0X xx 0X, (X) pursuant to clause (i) of this Section 6B for breach of
any covenant or agreement made by Seller, or (C) pursuant to clause (ii) or
(iii) of this Section 6B; provided further Sellers shall not be obligated to pay
any indemnification amount with respect to a breach of any representation or
warranty contained in Section 4H in excess of $2,000,000 plus 50% of the
Additional Purchase Price Payment paid or payable to Seller; provided further
that in no event shall Sellers' aggregate obligations for breaches of
representations and warranties exceed the Purchase Price (including, for the
avoidance of doubt, the Additional Purchase Price Payment).
6C. Indemnification of Sellers. Buyer shall indemnify and hold harmless
Sellers and each of the Filefront Principals from and against and pay on behalf
of or reimburse Sellers and each of the Filefront Principals in respect of any
Loss which Sellers or any of the Filefront Principals may suffer, sustain or
become subject to, as the result of, in connection with, relating to, or
incidental to or by virtue of the breach by Buyer of any representation,
warranty, covenant or agreement made by Buyer contained in this Agreement, any
other Transaction Document or any certificate delivered by Buyer to Sellers with
respect thereto in connection with the Closing.
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Buyer shall not be obligated to pay any indemnification amount for Losses
pursuant to this Section 6C (x) until the aggregate amount of all Losses exceeds
the Basket whereupon Sellers shall be entitled to indemnification for all Losses
(including the Basket) or (y) in excess of $1,000,000 plus 20% of the Additional
Purchase Price Payment paid or payable to Sellers; provided that in no event
shall the limits on indemnification pursuant to this sentence apply to any claim
for indemnification (A) pursuant to this Section 6C for breach of the
representations and warranties of Buyer made in any of Sections 5A, 5B or 5E, or
(B) pursuant to this Section 6C for breach of any covenant or agreement made by
Buyer.
6D. Procedure. If a Party hereto seeks indemnification under this Section
6, such Party (the "Indemnified Party") shall give written notice to the other
Party(ies) (the "Indemnifying Party") after receiving written notice of any
action, lawsuit, proceeding, investigation or other claim against it (if by a
third party) or discovering the liability, obligation, or facts giving rise to
such claim for indemnification, describing the claim, the amount thereof (if
known and quantifiable), and the basis thereof; provided that the failure to so
notify the Indemnifying Party shall not relieve the Indemnifying Party of its or
his obligations hereunder except to the extent such failure shall have harmed
the Indemnifying Party. In that regard, if any action, lawsuit, proceeding,
investigation or other claim shall be brought or asserted by any third party
which, if adversely determined, would entitle the Indemnified Party to indemnity
pursuant to Section 6, the Indemnified Party shall promptly notify the
Indemnifying Party of the same in writing, specifying in detail the basis of
such claim and the facts pertaining thereto and the Indemnifying Party shall be
entitled to participate in the defense of such action, lawsuit, proceeding,
investigation or other claim giving rise to the Indemnified Party's claim for
indemnification at its expense, and at its option (subject to the limitations
set forth below) shall be entitled to appoint lead counsel of such defense with
a counsel acceptable to the Indemnified Party; provided that, as a condition
precedent to the Indemnifying Party's right to assume control of such defense,
it must first enter into an agreement with the Indemnified Party (in form and
substance reasonably satisfactory to the Indemnified Party) pursuant to which
the Indemnifying Party agrees to be fully responsible (with no reservation of
rights) for all Losses relating to such claims and furnish the Indemnified Party
with reasonable evidence that the Indemnifying Party is and will be able to
satisfy any such liability; and provided further that the Indemnifying Party
shall not have the right to assume control of such defense and shall pay the
fees and expenses of counsel retained by the Indemnified Party, if the claim
which the Indemnifying Party seeks to assume control (A) involves criminal or
quasi-criminal allegations, (B) involves a claim to which the Indemnified Party
reasonably believes an adverse determination would be detrimental to or injure
the Indemnified Party's reputation or future business prospects, or (C) involves
a claim which, upon petition by the Indemnified Party, the appropriate court
rules that the Indemnifying Party failed or is failing to vigorously prosecute
or defend. If the Indemnifying Party is permitted to assume and control the
defense and elects to do so, the Indemnified Party shall have the right to
employ counsel separate from counsel employed by the Indemnifying Party in any
such action and to participate in the defense thereof, but the fees and expenses
of such counsel employed by the Indemnified Party shall be at the expense of the
Indemnified Party unless (x) the employment thereof has been specifically
authorized by the Indemnifying Party in writing, or (y) the Indemnifying Party
has been advised by counsel that a reasonable likelihood exists of a conflict of
interest between the Indemnifying Party and the Indemnified Party. If the
Indemnifying Party shall control the defense of any such claim, the Indemnifying
Party shall obtain the prior written consent of the Indemnified Party (which
shall not be unreasonably
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withheld) before entering into any settlement of a claim or ceasing to defend
such claim, if pursuant to or as a result of such settlement or cessation,
injunction or other equitable relief will be imposed against the Indemnified
Party or if such settlement does not expressly unconditionally release the
Indemnified Party from all liabilities and obligations with respect to such
claim and all other claims arising out of the same or similar facts and
circumstances, with prejudice.
6E. Payments; Setoff. The Indemnifying Party shall pay the Indemnified
Party in immediately available funds promptly after the Indemnified Party
provides the Indemnifying Party with written notice of a claim hereunder and the
Parties reasonably agree that there is a reasonable basis for such claim;
provided, however, that Buyer may elect to setoff any amount to which it may be
entitled under this Section 6 against any Additional Purchase Price Payment.
Neither the exercise of nor the failure to exercise such right of setoff will
constitute an election of remedies or limit Buyer in any manner in the
enforcement of any other remedies that may be available to it.
SECTION 7. ADDITIONAL AGREEMENTS
7A. Tax Matters. All transfer, documentary, sales, use, stamp,
registration and other such Taxes, and all conveyance fees, recording charges
and other fees and charges (including any penalties and interest) incurred in
connection with the consummation of the transactions contemplated by this
Agreement shall be paid by each Seller, on a joint and several basis, when due,
and each Seller will, at its own expense, file all necessary Tax returns and
other documentation with respect to all such Taxes, fees and charges, and, if
required by applicable law, the Parties will, and will cause their Affiliates
to, join in the execution of any such Tax returns and other documentation.
7B. Press Releases and Announcements. No Party shall issue any press
release or make any public announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of the other
Party; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure). After the Closing, neither Seller nor any
Filefront Principal shall issue any press release or make any public
announcement relating to the subject matter of this Agreement after the Closing
without the prior written approval of Buyer.
7C. Further Transfers. Each Seller shall execute and deliver such further
instruments of conveyance and transfer and take such additional action as Buyer
may reasonably request to effect, consummate, confirm or evidence the transfer
to Buyer of the Purchased Assets and any other transactions contemplated hereby.
Each Seller will execute such documents as may be necessary to assist Buyer in
preserving or perfecting its rights in the Purchased Assets.
7D. Specific Performance. Each Party acknowledges and agrees that the
other Party would be damaged irreparably if any provision of this Agreement is
not performed in accordance with its specific terms or otherwise is breached, so
that a Party shall be entitled to injunctive relief to prevent breaches of the
provisions of this Agreement and to enforce specifically this
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Agreement and the terms and provisions hereof in addition to any other remedy to
which such Party may be entitled, at law or in equity. In particular, the
Parties acknowledge that the business of Sellers is unique and recognize and
affirm that if either Seller or any of the Filefront Principals breaches this
Agreement, money damages would be inadequate and Buyer would have no adequate
remedy at law, so that Buyer shall have the right, in addition to any other
rights and remedies existing in its favor, to enforce its rights and the other
Parties' obligations hereunder not only by action for damages but also by action
for specific performance, injunctive, and/or other equitable relief, in case
without the requirement of posting a bond or proving actual damages.
7E. Expenses. Each Party shall pay all of its own fees, costs, and
expenses (including, without limitation, fees, costs, and expenses of legal
counsel, investment bankers, brokers or other representatives and consultants,
and appraisal fees, costs, and expenses) incurred in connection with the
negotiation of this Agreement, the performance of their obligations hereunder,
and the consummation of the transactions contemplated hereby.
7F. Non-Competition, Non-Solicitation and Confidentiality.
(i) Non-Competition. During the period from the date hereof until
the second anniversary after the expiration of the Initial Period (the
"Noncompete Period"), neither Seller nor any of the Filefront Principals shall
directly or indirectly (whether for such Party or for any other Person) own any
interest in, operate, manage, control, engage in, participate in (whether as an
officer, director, employee, partner, agent, representative or otherwise),
invest in, permit any of their names to be used by, consult with, advise, render
services for (alone or in association with any other Person), or otherwise
assist in any manner (a) any Person (each a "Restricted Person") that engages in
or owns, invests in, operates, manages or controls any venture or enterprise
which directly or indirectly engages or proposes to engage in a business which
Buyer's Game Group engages as of the Closing Date or any time during the Initial
Period or which any Seller or any Filefront Principal has knowledge that Buyer's
Game Group intends to engage as of the Closing Date or any time during the
Initial Period; (b) any successor, assignee, partner, joint venture or
collaboration partner, subsidiary, division or Affiliate of any Restricted
Person; or (c) any Person in which any Restricted Person owns an interest or
participates, which any of Restricted Person manages or controls (whether as an
officer, director, employee, partner, agent, representative or otherwise), or
with which any Restricted Person consults or to which any Restricted Person
otherwise provides management or financial support. Notwithstanding the
foregoing, the Noncompete Period shall terminate in the event that Buyer and
Guarantor have breached any obligations to make the Additional Purchase Price
Payment on the 10th day after written notice of such breach, unless prior to
such time, Buyer's obligations to make the Additional Purchase Price Payment are
satisfied (by Buyer or Guarantor). Nothing herein shall prohibit Sellers or the
Filefront Principals from being an owner, indirectly through a mutual fund or
other similar pooled investment vehicle, of a passive investment in the stock of
a corporation that is publicly traded, so long as neither Seller nor any of the
Filefront Principals has any other participation in the business of any such
corporation. The Parties expressly acknowledge and agree that each and every
restriction imposed by this Section 7F(i) is reasonable with respect to subject
matter, time period and geographical area.
(ii) Non-Solicitation. Each Seller and each of the Filefront
Principals agree that, during the Noncompete Period, each Seller and each of the
Filefront Principals shall not,
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and shall not permit any of their Affiliates to, directly or indirectly through
another Person (a) induce or attempt to induce any employee of any ZD Entity to
leave the employ of such ZD Entity, or in any way interfere with the
relationship between any ZD Entity and any employee thereof, (b) hire any person
who was an employee of any ZD Entity at any time during the one (1) year period
prior to the termination of the Noncompete Period, (c) call on, solicit or
service any customer, supplier, licensee, licensor, franchisee or other business
relation of any ZD Entity in order to induce or attempt to induce such Person to
cease or reduce doing business with such ZD Entity (for avoidance of doubt and
without limiting the foregoing, it shall constitute a material violation of this
Section 7F(ii) for either Seller or any Filefront Principal to make any effort
to cause any customer, supplier, licensee, licensor, franchisee or other
business relation of a ZD Entity to purchase from a third party any goods or
services that are offered at such time by such ZD Entity), or in any way
interfere with the relationship between any such customer, supplier, licensee or
business relation and the ZD Entity, including, without limitation, making any
negative statements or communications about any ZD Entity, or (d) directly or
indirectly acquire or attempt to acquire any business in the United States of
America to which any ZD Entity has made an acquisition proposal prior to the
Termination Date to the knowledge of any Filefront Principal relating to the
possible acquisition of such business (an "Acquisition Target") by the ZD
Entity, or take any action to induce or attempt to induce any Acquisition Target
to consummate any acquisition, investment or other similar transaction with any
Person other than a ZD Entity. When used herein, "ZD Entity" means Ziff Xxxxx
Holdings Inc. and its Subsidiaries.
(iii) Confidentiality. Seller and each of the Filefront Principals
shall treat and hold as confidential any information concerning the business of
Sellers and Buyer and their respective Affiliates (the "Confidential
Information") (including all information related to the Purchased Assets),
refrain from using any of the Confidential Information except in connection with
this Agreement, and deliver promptly to Buyer, at the request and option of
Buyer, all tangible embodiments (and all copies) of the Confidential Information
which are in his or its possession or under his or its control. If any Seller or
any Filefront Principal is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, such Person shall notify Buyer promptly of the request or
requirement so that Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 7F(iii). If, in the absence of a
protective order or the receipt of a waiver hereunder such Person is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, such Person may disclose the
Confidential Information to the tribunal; provided that such disclosing Person
shall use his or its best efforts to obtain, at the request of Buyer, an order
or other assurance that confidential treatment shall be accorded to such portion
of the Confidential Information required to be disclosed as Buyer shall
designate. "Confidential Information" shall not include any information that was
made generally available to the public, other than information from any Seller
or any Filefront Principal disclosed in violation of this Agreement.
(iv) Remedy for Breach. Each Seller and each of the Filefront
Principals acknowledge and agree that Buyer is entering into this Agreement and
the Transaction Documents in reliance on the covenants of Sellers and the
Filefront Principals in this Section 7F and that if either Seller or a Filefront
Principal breaches any of the provisions of this Section 7F, monetary damages
shall not constitute a sufficient remedy. Consequently, in the event of any
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such breach, Buyer and/or its respective successors or assigns may, in addition
to other rights and remedies existing in their favor, apply to any court of law
or equity of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce or prevent any violations of the provisions
hereof, in each case without the requirement of posting a bond or proving actual
damages.
(v) Enforcement. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 7F is invalid
or unenforceable, each Seller and each of the Filefront Principals agree that
the court making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
7G. Amendment of Filefront's Limited Partnership Agreement and MBPS
Certificate of Incorporation. Filefront shall not, and each of the Filefront
Principals agrees that it shall cause Filefront not to, amend, modify or waive
any provision of Filefront's partnership agreement or certificate of formation,
as in effect on the date hereof and in the form attached to the certificate
delivered by Sellers to Buyer pursuant to Section 3A hereof on the Closing Date,
without the prior written consent of Buyer. MBPS shall not, and each of the
Filefront Principals agrees that it shall cause MBPS not to, amend, modify or
waive any provision of MBPS' certificate of incorporation or bylaws, as in
effect on the date hereof and in the form attached to the certificate delivered
by Sellers to Buyer pursuant to Section 3A hereof on the Closing Date, without
the prior written consent of Buyer. The covenants of Sellers and the Filefront
Principals in this Section 7G shall terminate on the fourth anniversary of the
Closing Date; provided that such termination shall not release any Seller or any
Filefront Principal of liability for breach of this Section 7G arising before
such termination.
7H. Transfer of Ownership of Sellers. Each of the Filefront Principals
hereby agrees and covenants not to sell, transfer, pledge or encumber all or any
portion of his or her ownership interest in ether Seller or his or her right to
receive any proceeds from any Additional Purchase Price Payment without the
prior written consent of Buyer so long as the Additional Purchase Price Payment
is due and owing and has not yet been made. Each Seller agrees that it shall not
permit or record on the books of such Seller, any sale, transfer, pledge or
encumbrance by any Filefront Principal made in violation of this Section 7H. The
covenants of Sellers and the Filefront Principals in this Section 7H shall
terminate on the fourth anniversary of the Closing Date; provided that such
termination shall not release any Seller or any Filefront Principal of liability
for breach of this Section 7H arising before such termination.
7I. Websites. At all times after Closing, the content appearing on the
xxx.xxxxxxxxx.xxx web site or sub-domains of xxxxxxxxx.xxx shall be
substantially similar to the content on such sites at Closing, and Buyer shall
have the right to approve any material changes relating to the content appearing
on such websites, and any such content shall be subject to Buyer's standard
Terms of Service and Privacy Policy.
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7J. Budgets and Operations.
(i) Each of Buyer, Sellers and the Filefront Principals agrees that
the budget for the Initial Period shall be as attached on Exhibit B attached
hereto (the "Budget") and during the Initial Period shall comply with the
covenants set forth in this Section 7J. Buyer agrees to make funding available
for operation of the Business during the Initial Period in accordance with the
Budget. Notwithstanding the Budget, the Filefront Principals shall use their
best efforts to efficiently deploy the Business' capital and bandwidth during
the Initial Period. Furthermore, during the Initial Period, Buyer agrees to
maintain up to 7.5 Gbps of Internet bandwidth connections to support United
States website traffic. Buyer also commits to support non-United States website
traffic with at lease one (1) Gbps of bandwidth during the Initial Period.
(ii) During each fiscal quarter, the Filefront Principals agree that
they shall cause that the Budget will not, without the prior written consent of
Buyer, be exceeded by more than 10% with respect to any particular category in
such Budget. Notwithstanding anything herein to the contrary, the Filefront
Principals shall not permit the Budget to be exceeded in any fiscal quarter
without the prior written consent of Buyer and in the event that the aggregate
operating and capital expenses for any particular fiscal quarter during the
Initial Period exceed the amount set forth in the Budget for such fiscal
quarter, the amount of expenses in excess of the expenses in the Budget for such
fiscal quarter shall, for each such fiscal quarter in which operating and
capital expenses in the aggregate exceed the operating and capital expenses set
forth in the Budget for such fiscal quarter, reduce the Additional Purchase
Price Payment by an amount equal to such excess; provided that the aggregate
amount by which the Additional Purchase Price Payment is reduced as a result of
application of this Section 7J(ii) shall be decreased by an aggregate amount
equal to the amount by which the aggregate operating and capital expenses in the
Budget for any fiscal quarter during the Interim Period exceed the aggregate
operating and capital expenses for such fiscal quarter; provided further that in
no event shall the foregoing proviso be interpreted to provide for an increase
in the Additional Purchase Price beyond the amount otherwise determined in
accordance with Section 2E hereof.
(iii) Subject to compliance with the Budget and Buyer's human
resource guidelines, the Filefront Principals shall be entitled to hire
employees and independent contractors for the Business; provided that no such
Person shall be given the title or authority of vice president or any position
on par with or senior to vice president without the prior written consent of
Buyer. The Filefront Principals shall, to the extent previously approved by
Buyer, retain operational control over the Business during the Initial Period.
All employees and contractors of the Business shall report to the Filefront
Principals.
(iv) During the Initial Period, Buyer shall not require any user to
register with Buyer in order to download files from the xxxxxxxxx.xxx website or
any sub-domain thereof without the prior written consent of the Filefront
Principals.
(v) During the Initial Period, as long as a Filefront Principal
remains employed with Buyer, Buyer agrees that the Business' headquarters shall
be no located no further than 30 miles from Spring, Texas; provided that the
Filefront Principals shall be required to travel as necessary in the ordinary
course performance of their duties to Buyer. The Budget shall include up to an
aggregate $50,000 for relocation expenses (including post-move expenses
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(including lease expenses) with respect to the Business' current hosting site in
Southern California) for the Purchased Assets from Southern California to a
facility located near Spring, Texas; provided that the Filefront Principals
shall not enter into any Contract or commitment for the new hosting site without
the prior written consent of Buyer nor shall there be any requirement for Buyer
to approve of such relocation if the aggregate hosting and bandwidth costs at
the proposed new facility would exceed expenses at Buyer's existing facility in
Southern California.
(vi) During the Initial Period, the Filefront Principals shall abide
by all standard Buyer policies with respect to the operation of the Business,
including with respect to accounting, human resources and legal matters. Subject
to Buyer's obligations under this Section 7J, Buyer shall retain sales and
marketing control over the Purchased Assets, including with respect to (A)
advertising (including ad sizes, locations, serving, pricing and rate cards),
(B) sales, service and end-user and customer management, (C) subscription
services (including terms, pricing and promotions), (D) marketing and branding
of the site, (E) list rental, and (F) linking to content from xxxxxxxxx.xxx on
Buyer's other properties. The Filefront Principals shall dedicate at least 20%
of the development portion of the HR category of the Budget towards supporting
Buyer's sales and marketing efforts.
(vii) During the Initial Period, the Filefront Principals shall use
good faith efforts to assist Buyer in procuring the advertising customers of the
Business existing as of the Effective Date for Buyer's account after the Closing
on terms satisfactory to Buyer.
(viii) It is understood by the Parties that, as long as Buyer makes
funding available to the Filefront Principals for operation of the Business
during the Initial Period in accordance with the Budget and otherwise complies
with the covenants binding on Buyer set forth in this Section 7J, Buyer shall
make all decisions in its sole discretion relating to the use, non-use, capital
funding, and/or sale of the Purchased Assets in each case without regard to the
impact thereof on the Additional Purchase Price Payment. Subject to Buyer making
funding available to the Filefront Principals for operation of the Business
during the Initial Period in accordance with the Budget and otherwise complying
with the covenants binding on Buyer set forth in Section 7J, each Seller and
each of the Filefront Principals does hereby release, waive, and discharge Buyer
and its successors and assigns from any and all liability or obligation with
respect to such decisions and the budgets approved by Buyer's board of
directors, CEO, President or CFO with respect to the use, non-use and/or capital
funding of the Purchased Assets (except to the extent such decisions were made
in bad faith with a primary purpose of reducing or eliminating the Additional
Purchase Price Payment).
(ix) Notwithstanding the foregoing, Buyer's obligations under this
Section 7J shall terminate upon the earliest of (A) the expiration of the
Initial Period, (B) any date that the Remaining Filefront Principal is
terminated by the Company with Cause or resigns his employment with the Company
without Good Reason, and (C) the first day of the calendar month after which the
average number of Monthly Unique Visitors during the immediately preceding three
Full Calendar Months is less than 1,500,000.
7K. Other Business Obligations. The Filefront Principals hereby advise
Buyer that they are engaged as owners of the Person and business described on
Schedule 7K hereto and
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hereby represent and warrant to Buyer that its activities and services with
respect to such Person and business do not, and covenant and agree that during
the Noncompete Period its activities and services with respect to such Person
and business will not, (i) compete with any business in which Buyer's Game Group
engages, (ii) involve pornography or any other matter that might reasonably be
expected to be of concern to Buyer, or (iii) require more than 10 hours of the
Filefront Principals' time in any month. The Filefront Principals hereby agree
to cause the covenants described in clauses (i) - (iii) foregoing to be complied
with during the Noncompete Period; provided that each Filefront Principals'
obligations under clause (iii) of this Section 7K shall terminate for a
Filefront Principal upon such Filefront Principal's Termination Date.
7L. Amendment of Filefront Name. Filefront agrees that, within 30 days
after the Closing Date, it shall change its name under the laws of State of
Texas and each other jurisdiction where it is authorized to do business to not
include the name "filefront" or anything confusingly similar thereto.
7M. The Queue. In the event that, after the Closing, any Buyer Party
receives any claim, suit or proceeding instituted by a third party, or any
notice given by a third party to any Buyer Party, in each case relating to an
alleged infringement by such Buyer Party concerning the queue used in the
operation of the Business, the Sellers shall have ten business days to, at their
own expense, resolve the issue to Buyer's reasonable satisfaction by any of (i)
changing the existing queue such that it is no longer infringing, (ii) changing
to a new queue that is not infringing, or (iii) entering into a license
agreement with respect to the existing queue with the purported patent holder.
Prior to embarking upon a resolution, the Sellers shall confer with Buyer
regarding their proposed resolution and get their prior approval for such
proposed resolution (which approval shall not be unreasonably withheld). In the
event that Sellers have not resolved the issue prior to the expiration of the
tenth business day, Buyer shall be entitled to resolve the issue in accordance
with clause (i), (ii) or (iii) of this Section 7M or, with Sellers' prior
consent, such other means as Buyer determines to be reasonably practicable and
Sellers shall reimburse Buyer for its reasonable out-of-pocket Losses in so
resolving the issue; provided in no event shall this Section 7M be construed to
provide that Sellers are required to indemnify any Buyer Party for Losses, other
than as specified in this Section 7M, for any out-of-pocket damages suffered by
Buyer Parties for operation of the website during periods from and after the
Closing Date.
SECTION 8. MISCELLANEOUS
8A. Amendment and Waiver. This Agreement may be amended and any provision
of this Agreement may be waived with the prior written consent of Buyer, Sellers
and the Filefront Principals, and upon such consent, such amendment or waiver
shall be binding on all Parties hereto; provided that any amendment to the
Budget shall require only the consent of Buyer and the Filefront Principals. No
course of dealing between or among any persons having any interest in this
Agreement shall be deemed effective to modify, amend, or discharge any part of
this Agreement or any rights or obligations of any Party under or by reason of
this Agreement.
8B Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (i) when delivered
personally to the recipient, (ii) one
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business day after being sent to the recipient by reputable overnight courier
service (charges prepaid), (iii) one business day after being sent to the
recipient by facsimile transmission or electronic mail, or (iv) four business
days after being mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid, and addressed to the intended recipient
as set forth below:
Notices to Seller or the Filefront Principals: with copies to:
---------------------------------------------- --------------------------------
FileFront, L.P. and Xxxx.xxx, Inc. Xxxxxxxxx Xxxxxxx, LLC
c/o Xxxxxx Xxxxxxx 0000 Xxxxxxxx Xxxxxx, Xxxxx 000X
0000 Xxxx Xxxx Xxxxx Xxxxxx, XX 00000
Xxxxxxxxx, Xxxxx 00000 Attn: Xxxxxx X. Xxx
Telecopy: (000) 000-0000
Xxxx Xxxxx Email: XxxX@xxxxx.xxx
00000 Xxxxxxxx Xxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Xxxxx Xxxxxx
0000 Xxxxxx Xxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Notices to Buyer: with copies to:
----------------- ---------------
c/o Ziff Xxxxx Holdings Inc. Xxxxxxxx & Xxxxx LLP
00 X. 00xx Xxxxxx 000 Xxxx Xxxxxxxx Xxxxx
Xxx Xxxx, XX 00000 Xxxxxxx, XX 00000
Attention: General Counsel Attention: Xxxx X. Xxxxxxxxxxx, Esq.
Telecopy: (000) 000-0000 Xxxxxxx X. Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
8C.Binding Agreement; Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party; provided, however, that Buyer may (i) assign any or all of
its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder). Notwithstanding anything
herein to the contrary, (A) no consent of any other Party pursuant to this
Section 8C shall be required for Buyer to assign its rights and obligations
under this Agreement (in whole or in part) (x) where Buyer pays $10,000,000 in
full satisfaction of its obligations to pay the Additional Purchase Price
Payment, (y) after the Additional Purchase Price Payment is made is accordance
herewith, or (z) where the Purchased Assets are being sold as part of a sale of
all or substantially all of the assets of Buyer or a sale of all or
substantially all of the assets of Buyer's Game Group or where there is a sale
of equity securities of, or merger involving, Buyer or any of its Affiliates and
(B) in no event shall any consent of any other Party be required for Buyer to
assign its rights under this Agreement where Buyer is retaining all obligations
with respect to the Additional Purchase Price Payment.
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8D. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
8E. Construction. The language used in this Agreement shall be deemed to
be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Person. The word
"including" shall mean including without limitation regardless of whether such
words are included in some contexts but not others. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
8F. Headings. The headings used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and shall not be
deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no heading had been used in this Agreement.
8G. Entire Agreement. The schedules and exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof. This
Agreement and the documents referred to herein contain the entire agreement
between the Parties and supersede any prior understandings, agreements or
representations by or between the Parties, written or oral, which may have
related to the subject matter hereof in any way, including, without limitation,
the Letter of Proposal.
8H. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken together shall
constitute one and the same instrument.
8I. Governing Law. All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York, without giving
effect to any choice of law or conflict of law provision (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
8J. Submission to Jurisdiction. Each of the Parties irrevocably and
unconditionally submits to the exclusive jurisdiction of any state or Federal
court sitting in New York County, New York, in any action or proceeding arising
out of or relating to this Agreement and agrees that all claims in respect of
the action or proceeding may be heard and determined in any such court. Each
Party also agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Each Party hereby agrees
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that service of any process, summons, notice or document by U.S. registered mail
to the appropriate address and to the attention of the appropriate person
indicated in Section 8B shall be effective service of process for any action,
suit or proceeding brought against such Party in any such court; provided,
however, that nothing in this paragraph shall affect the right of any Party to
serve legal process in any other manner permitted by law or at equity. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity. Notwithstanding the foregoing, nothing in this
Section 8J shall limit the parties' agreement to arbitrate disputes as set forth
in Section 8L.
8K. No Third-Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the Parties and their
respective successors and permitted assigns any rights or remedies under or by
virtue of this Agreement.
8L. Arbitration. Each of the Parties hereto agrees that in the event of
any dispute arising between or among the Parties arising out of or relating to
this Agreement or its breach, except for a dispute relating to the rights and
obligations set forth in Section 7F, such dispute shall be settled by
arbitration to be conducted in New York, New York in accordance with the
Commercial Arbitration Rules (except as modified below) of the American
Arbitration Association and with the Expedited Procedures thereof (collectively,
the "Rules"). Each of the Parties hereto agrees that such arbitration shall be
conducted by a single arbitrator who is mutually agreeable to both Parties. Each
of the Parties agrees that in any such arbitration that pre-arbitration
discovery shall be limited to an exchange of documents which each parties
intends to rely upon at the arbitration proceeding, that the Arbitration
proceeding shall commence within 90 days from selection of the Arbitrator, the
proceeding shall not exceed an aggregate of 16 hours (exclusive of time required
by the Arbitrator for preparation), that the award shall be made in writing no
more than 30 days following the end of the proceeding, that the arbitration
shall not be conducted as a class action, that the arbitration award shall not
include factual findings or conclusions of law, that no punitive damages shall
be awarded, and that all facts and circumstances relating to such arbitration,
including without limitation the existence of the dispute and the ultimate
resolution, shall be kept confidential. Any award rendered by the arbitrator
shall be final and binding and judgment may be entered on it in any court of
competent jurisdiction. The prevailing Party (as determined by the arbitrator)
shall in addition be awarded by the arbitrator such Party's own attorneys' fees
and expenses in connection with such proceeding. The non-prevailing Party (as
determined by the arbitrators) shall pay the fees and expenses of the
arbitration.
8M. Delivery by Facsimile. This Agreement and any Transaction Document,
and any amendments hereto or thereto, to the extent signed and delivered by
means of a facsimile machine, shall be treated in all manner and respects as an
original Contract and shall be considered to have the same binding legal effect
as if it were the original signed version thereof delivered in person. At the
request of any Party hereto or to any such Contract, each other Party hereto or
thereto shall re-execute original forms thereof and deliver them to all other
Parties. No Party hereto or to any such Contract shall raise the use of a
facsimile machine to deliver a signature or the fact that any signature or
Contract was transmitted or communicated through the use of facsimile machine as
a defense to the formation of a Contract and each such Party forever waives any
such defense.
* * * *
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IN WITNESS WHEREOF, the undersigned have executed this Asset
Purchase Agreement as of the date first written above.
FILEFRONT, L.P.
By: Interactive Internet Ventures, LLC
Its: General Partner
By: ___________________________________
Name: ___________________________________
Its: ___________________________________
XXXX.XXX, INC.
By: ___________________________________
Name: ___________________________________
Its: ___________________________________
ZIFF XXXXX MEDIA INC.
By: ___________________________________
Name: ___________________________________
Its: ___________________________________
____________________________________________
Xxxx Xxxxx
____________________________________________
Xxxxx Xxxxxx
Solely for purposes of 2E(vi):
ZIFF XXXXX HOLDINGS INC.
By: ______________________________
Name: ______________________________
Its: ______________________________
