Purchase Agreement
Execution
Copy
EXHIBIT 10.1
This Purchase Agreement (this “Agreement”) is made and entered into as of July 13,
2007 by and among the Persons listed on Schedule A attached hereto (each, a “Seller,” and
collectively, the “Sellers”), Lexico Publishing Group, LLC, a California limited liability company
(the “Company”), Answers Corporation, a Delaware corporation (the “Purchaser”) and Xxxxx Xxxxxxx,
as the Sellers Representative. Certain capitalized terms used in this Agreement are defined in
Exhibit A.
Recitals
A. Each of the Sellers owns such percentage of Company’s Membership Interest, which includes
the Economic Interest, as set forth opposite such Seller’s name on Schedule A attached
hereto (collectively, the “Interests”), in each case free and clear of any Encumbrances, which
Interests represents all of the outstanding Membership Interests of the Company;
B. The Purchaser desires to purchase, and the Sellers desire to sell, all of the Interests, at
the Closing, and, upon consummation of such sale, Purchaser shall become the sole owner of the
Company, as more fully set forth herein;
D. The Members of the Company have unanimously approved and authorized the execution, delivery
and performance of this Agreement and the transaction contemplated hereby, including, the
Purchaser’s admission to the Company as a Member at the Closing;
E. Concurrently with the execution of this Agreement and as a material inducement to the
willingness of Purchaser to enter into this Agreement, the parties hereto and the Escrow Agent are
executing the Bonus Plan/Documents Escrow Agreement, pursuant to which, inter alia, the Sellers
have deposited with the Escrow Agent instruments evidencing the transfer of their Interests to the
Purchaser at the Closing, to be held by the Escrow Agent for the benefit of the Sellers and the
Purchaser, in order to facilitate the Closing; and
F. Concurrently with the execution of this Agreement and as a material inducement to the
willingness of Purchaser to enter into this Agreement, the parties hereto and the Escrow Agent are
executing an Indemnity Escrow Agreement, in order to facilitate the indemnification obligations
contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual promises, covenants,
representations and warranties made in this Agreement, the Purchaser, the Company and the Sellers,
intending to be legally bound, hereby agree as follows:
1. Sale and Purchase.
1.1. Sale and Purchase of the Interests. Subject to the terms and conditions
of this Agreement, at the Closing, (a) the Sellers shall each sell, convey, assign and
transfer his Interests to Purchaser, free and clear of all Encumbrances, (b) the Purchaser
shall purchase and accept the Interests from the Sellers, (c) the Sellers shall each
withdraw as a Member of the Company, and (d) the Purchaser shall be admitted as the sole
Member of the Company with respect to the Interests. All Interests together shall be
purchased by the Purchaser and under no circumstances shall only part of the Interests be
purchased by the Purchaser.
1
1.2. Purchase Price.
1.2.1. As full consideration for the sale, conveyance, assignment and transfer of the
Interests to Purchaser, free and clear of all Encumbrances, and all of the obligations,
covenants and conditions contained in this Agreement, (i) at Closing, Purchaser shall
deposit in a bank account in the name of the Escrow Agent an aggregate amount equal to
$90,000,000 (subject to adjustments in accordance with the provisions of Section 1.2.2)
(the “Purchase Price”), to be immediately thereafter transferred by the Escrow Agent to the
Sellers, after deducting the Escrow Amount pursuant to Section 1.3, pro-rata in accordance
with the percentage Membership Interest held by each Seller as set forth in Schedule A; and
(ii) the amount of Forfeited Employee Bonus Amount (if any) shall be transferred and paid
to the Sellers, pro-rata in accordance with the percentage Membership Interest held by each
Seller as set forth in Schedule A, in the manner set forth in Section 1.4.2 (such amount,
if any, the “Second Installment”, and together with the Purchase Price, the “Aggregate
Purchase Price”).
1.2.2. No later than two (2) Business Days prior to the Closing, the Company shall
prepare in good faith and deliver to the Purchaser (with a duplicate copy to the Escrow
Agent) a certificate in the form attached hereto as Schedule 1.2.2 (the “Estimated
Closing Adjustments Certificate”) setting forth, in reasonable detail, the estimated
Closing Net Working Capital (together with the Company’s balance sheet) and the Transaction
Expenses, each as of the Closing. The Company shall deliver to Purchaser, together with
the Estimated Closing Adjustment Certificates, all the supporting work papers prepared for
the calculation of the amounts stated therein and such other supporting documentation as
Purchaser shall reasonably request. The Estimated Closing Adjustments Certificate shall be
deemed to be a representation and warranty of the Sellers hereunder. The Purchase Price
shall be subject to the following adjustments:
1.2.2.1. The Purchase Price shall be reduced, on a dollar for dollar basis, by
the amount, if any, by which the Closing Net Working Capital is less than $500,000
(with any negative result, i.e. the estimated Closing Net Working Capital being in
excess of $500,000, treated in accordance with Section 1.2.2.2), as set forth in the
Estimated Closing Adjustments Certificate.
1.2.2.2. In the event that the Closing Net Working Capital as set forth in the
Estimated Closing Adjustments Certificate is in excess of $500,000, then, at the
Sellers’ election, such excess amount shall be: (i) added to the Purchase Price, on a
dollar for dollar basis, or (ii) permitted to be declared and paid as dividends by
the Company to the Sellers prior to or concurrently with the Closing. Sellers may
elect either of the manners of payments set forth in clauses (i) or (ii) above, or a
combination thereof that has the result of making the full payment of such excess
amount to the Sellers.
1.2.2.3. The Purchase Price shall be reduced, on a dollar for dollar basis, by
the amount of any Transaction Expenses outstanding at the Closing, as set forth in
the Estimated Closing Adjustments Certificate.
Failure of the Company to timely and duly deliver the Estimated Closing Adjustments
Certificate may be waived by Purchaser, in its sole discretion (without derogating from any rights
or remedies under this Agreement, including, without limitation, under Section 9).
1.3. Escrow Amount. The Sellers hereby agree that the Escrow Amount shall not
be paid to the Sellers at the Closing, but instead they shall instruct the Escrow Agent to
retain such
amounts in a separate bank account in the name of the Escrow Agent, to be held by the
Escrow Agent pursuant to an Indemnity Escrow Agreement, to secure the obligations of the
Sellers under Sections 1.2 and 9 hereof.
2
1.4. Employees Bonus Plan; Forfeited Employee Bonus Amount.
1.4.1. At the Closing, Purchaser shall deposit with the Escrow Agent the Employee
Bonus Amount, to be held pursuant to the Bonus Plan/Documents Escrow Agreement. The
portion of the Employee Bonus Amount to be paid at Closing shall be transferred by the
Escrow Agent to the Company for the purpose of making payments under the Employee Bonus
Plan as soon as practicable after the Closing. The employees entitled to participate in the
Employee Bonus Plan, and their bonus amounts, shall be determined by the Sellers, with
Purchaser’s prior written consent. The timing and content of the notice to eligible
participants shall be coordinated with Purchaser in advance and be subject to Purchaser’s
prior consent.
1.4.2. Any portion of the Employee Bonus Amount (if any), including interest accrued
thereon (if any), which the participants in the Employee Bonus Plan shall not be entitled
to receive in accordance with the terms and conditions thereof (the “Forfeited Employee
Bonus Amount”), shall be paid to the Sellers, pro-rata in accordance with the allocation of
the percentage Membership Interest held by each Seller as set forth in Schedule A. Payment
to the Sellers of the Forfeited Employee Bonus Amount shall be made in accordance with the
Bonus Plan/Documents Escrow Agreement. The Sellers shall not make any payments from the
Forfeited Employee Bonus Amounts to current or former employees of the Company after the
Closing.
1.5. Taxes; Withholding. Purchaser, the Company and the Escrow Agent shall
each be entitled to deduct and withhold from the cash otherwise deliverable under this
Agreement, and from any other payments otherwise required pursuant to this Agreement such
amounts as it is required to deduct and withhold with respect to any such deliveries and
payments under the Internal Revenue Code of 1986, as amended or any provision of state,
local, provincial or foreign Tax law and to request any necessary Tax forms, including IRS
Form W-9 or the appropriate series of Form W-8, as applicable, or any other proof of
exemption from withholding or any similar information, from the Sellers and any other
recipient of any payment hereunder. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes of this Agreement as having been
delivered and paid to such recipients in respect of which such deduction and withholding
was made.
1.6. Manner of Payment. The Purchase Price shall be paid in U.S. Dollars. The
Escrow Agent shall be instructed to transfer the Purchase Price, after retaining the Escrow
Amount, by wire transfer in immediately available funds to such bank accounts the details
of which shall be provided by each of the Sellers to the Escrow Agent, in accordance with
the Bonus Plan/Documents Escrow Agreement.
2. Closing.
2.1. Closing Date. Unless this Agreement is earlier terminated in accordance
with Section 8, the delivery by the Purchaser of the Purchase Price (subject to adjustments
in accordance with the provisions of Section 1.2.2) and the Employee Bonus Amount to the
Escrow Agent and Purchaser’s admission to the Company as the sole Member thereof (the
“Closing”) and all other actions specified in this Agreement to occur at the Closing, shall
take place at the offices of Xxxxxxxxxx & Co., LLC, 000 Xxxxxxxx Xxxx., Xxxxx 000, Xxxxx
Xxxxxx, XX 00000, on the
date specified by Purchaser which will be no later than the fifth Business Day after
the date on which the last of the conditions set forth in Section 7 has been satisfied or
waived (if permissible) (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) or
at such other time and place as Purchaser and the Sellers Representative shall agree. The
date on which the Closing occurs is herein referred to as the “Closing Date”. All
transactions to occur at the Closing shall be deemed to take place simultaneously, and no
transaction shall be deemed to have been completed or any document
3
delivered until all such
transactions have been completed and all required documents delivered.
2.2. Sellers Deliveries.
2.2.1. Sellers Closing Deliveries. The Sellers shall deliver, or cause to be
delivered, to Purchaser, at or prior to the Closing, each of the following (unless delivery
of any such document has been waived by Purchaser, in its sole discretion):
2.2.1.1. a certificate, dated as of the Closing Date in the form attached
hereto as Schedule 2.2.1.1, executed by each of the Sellers, on behalf of
themselves and the Company, to the effect that each of the conditions set forth in
Section 7.3 have been satisfied;
2.2.1.2. a bring down written opinion from the legal counsel(s) to the Sellers
and the Company and addressed to Purchaser, that the written opinions rendered on
the date hereof, in the form attached hereto as Exhibit D, are true and correct as
of the Closing Date, as though made on and as of such date;
2.2.1.3. a certificate executed by each of the Sellers, on behalf of the
Company, in the form attached hereto as Schedule 2.2.1.3 and in substance
satisfactory to Purchaser, setting forth and certifying the Company’s aggregate
liability for Transaction Expenses as of the Closing Date (including all Transaction
Expenses paid by the Company through such date), accompanied by such supporting
documentation, information and calculations as are necessary for Purchaser to verify
and determine the amount of such Transaction Expenses as of the Closing Date;
2.2.1.4. all other documents expressly required to be delivered at or prior to
Closing pursuant to the Sellers’ obligations hereunder.
2.2.2. Sellers Signing Deliveries. Concurrently with the execution of this
Agreement, the Sellers have delivered, or cause to be delivered, each of the following:
2.2.2.1. To the Escrow Agent:
(i) instruments of transfer of Membership Interests, validly executed by each
of the Sellers, evidencing the transfer of his Membership Interest to the
Purchaser, free and clean of any Encumbrance (dated blank);
(ii) spousal consent to the transfer of Membership Interests, validly
executed by the spouse of each of the Sellers (if applicable), relating to the
transfer of Membership Interest to the Purchaser (dated blank); and
(iii) the list of Company’s Members maintained pursuant to Section
17058(a)(1) of the California Corporations Code, evidencing the withdrawal of the
Sellers as Members and the admission of the Purchaser as the sole Member
(with the date of admission blank).
At the Closing, the Escrow Agent shall, automatically, and without any further action
required by either party (and the parties hereby irrevocably instruct the Escrow Agent to)
date the documents specified in this Section 2.2.2.1 as of the Closing Date and deliver
them to the Purchaser.
4
2.2.2.2. to the Purchaser, a written opinion from the legal counsel to the
Sellers and the Company, in the form attached hereto as Exhibit D, dated as of the
date hereof and addressed to the Purchaser.
2.3. Expenses. Whether or not the Closing occurs, subject to Section 8.3.1,
the Sellers shall be responsible for the payment of all Transaction Expenses they have
incurred or will incur or that the Company has incurred at or prior to Closing, in
connection with the negotiation, execution and delivery of this Agreement and consummation
of the transactions contemplated hereby (and, if the Closing occurs, the Sellers shall
reimburse the Company to the extent any such costs were paid by the Company). Purchaser
shall be responsible for the payment of costs (including legal and accounting fees) it has
incurred and will incur in connection with the execution and delivery of this Agreement and
consummation of the transactions contemplated hereby.
2.4. Further Action. The Sellers shall at any time and from time to time upon
the request of the Purchaser execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, all such further assignments, instruments of sale and transfer
and other documents as may be reasonably required for the assigning and transferring to the
Purchaser or its successors and assigns full right, title to, and interest in, the
Interests, and for the purpose of carrying out the intent of this Agreement.
3. Representations and Warranties of the Sellers and the Company
Subject to the disclosures set forth in the Disclosure Schedule, the Sellers and the Company
hereby represent and warrant to Purchaser as follows:
3.1. Organization, Standing and Power.
3.1.1. The Company is a limited liability company duly organized, validly existing
and, to the extent that such jurisdiction recognizes the concept of good standing, is in
good standing under the laws of its jurisdiction of organization. The Company has all
necessary power and authority to own and use its assets in the manner in which its assets
are currently owned and used, conduct its business in the manner in which its business is
currently being conducted, and to perform its obligations under all Contracts by which it
is bound. The Company is duly qualified to do business and is in good standing in each
jurisdiction where the failure to be so qualified and in good standing, individually or in
the aggregate with any such other failures, would reasonably be expected to be material to
the Company.
3.1.2. The Company has delivered to Purchaser a true and correct copy of its Charter
Documents, as in effect on the date hereof. The Charter Documents constitute the sole and
exclusive governing document of the Company. The Company is not in violation of any of the
provisions of its Charter Documents.
3.1.3. Each Seller that is not a natural person is duly organized, validly existing
and is not in violation of any of the provisions of its formation documents.
3.2. No Subsidiaries; No officers. The Company does not directly or indirectly
own any equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any Person. The Sellers (in their
capacities as Members, or the beneficial holders of the Interests) are managing the
Company, and there are no other managing members, directors or officers.
5
3.3. Capital Structure.
3.3.1. The Interests constitute all of the Membership Interests of the Company and are
owned of record and beneficially solely by the Sellers, free and clear of any Encumbrances.
The Sellers have not sold, pledged or otherwise transferred (whether by operation of law
or otherwise, including, without limitation, transfers pursuant to any decree of divorce or
separate maintenance, any property settlement, any separation agreement or any other
agreement with a spouse) any Economic Interests in their Interest to any other Person.
Other than the Interest, there are no other issued and outstanding rights, interests of any
kind or other securities of the Company and no outstanding commitments or Contracts to
issue any rights, interests of any kind or other securities of the Company. No Person has
any right to, and there is no condition or circumstance that could reasonably be expected
to give rise to or provide a basis for the assertion of a valid claim by any Person to the
effect that such Person is entitled to, acquire rights, interests of any kind or other
securities of the Company or any options, warrants or other rights to purchase the same,
from the Company or from any Member of the Company. The Company has no Members, other than
the Sellers. There are no outstanding contributions required to be made by any Member to
the Company. The Interests are duly authorized, validly issued, fully paid and
non-assessable and are free of any Encumbrances, preemptive rights, rights of first refusal
or “put” or “call” rights created by any Legal Requirements, the Charter Documents of the
Company or any Contract to which the Company or any of the Sellers is a party or by which
the Company or any of the Sellers is bound. The Interests were issued in compliance with
all applicable Legal Requirements and all requirements set forth in applicable Contracts.
3.3.2. There is no liability for dividends accrued and unpaid by the Company. All
distributions were made in compliance with all applicable Legal Requirements.
3.3.3. No bonds, debentures, notes or other indebtedness of the Company (i) having the
right to vote on any matters on which Members may vote (or which is convertible into, or
exchangeable for, securities having such right) or (ii) the value of which is any way based
upon or derived from Membership Interest or other securities of the Company, are issued or
outstanding as of the date hereof (collectively, “Company Voting Debt”). There are no
options, warrants, calls, rights or Contracts of any character to which the Company is a
party or by which it is bound obligating the Company to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any rights,
interests of any kind or other securities of the Company, options, warrants or other rights
to purchase rights, interests of any kind or other securities of the Company, or any
Company Voting Debt, or obligating the Company to grant, extend, accelerate the vesting
and/or repurchase rights of, change the price of, or otherwise amend or enter into any such
option, warrant, call, right or Contract. There are no Contracts relating to voting
(including, voting trusts or proxies), participation in the management of the Company,
granting the right to information concerning the business and affairs of the Company, or
the purchase or sale of any Membership Interests (i) between or among the Company and any
of its Members, or (ii) between or among any of the Company’s Members.
The Company is not under any obligation to register under the Securities Act any
Membership Interest or any other securities of the Company, whether currently outstanding
or that may subsequently be issued.
3.3.4. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not, of itself, dissolve the Company or entitle the
Sellers or any other Person to vote or participate in the management and affairs of the
Company or to become or exercise any rights of a Member.
3.4. Title to the Interest. There are no restrictions on the transfer of the
Interests. The Sellers have good and valid title to the Interests held by them, free and
clear of all Encumbrances. Upon
6
delivery of the Interests to the Purchaser and payment
therefor pursuant hereto, good and valid title to the Interests, free and clear of all
Encumbrances will pass to the Purchaser.
3.5. Authority; Non-Contravention.
3.5.1. The Company and each Seller has all requisite power and authority to enter into
this Agreement and the Transaction Agreements to which they are a party, and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and each of the Transaction Agreements to which they are a party, and the
consummation of the transactions contemplated hereby and thereby, have been duly authorized
by the Company and each Seller that is not a natural person. This Agreement and each of
the Transaction Agreements to which they are a party has been duly executed and delivered
by the Company and the Sellers and constitutes the valid and binding obligation of the
Company and the Sellers enforceable against each of them in accordance with its terms,
subject only to the effect, if any, of (i) applicable bankruptcy and other similar laws
affecting the rights of creditors generally and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies. The Members of the Company,
by resolutions duly adopted (and not thereafter modified or rescinded) by the unanimous
vote thereof has approved and adopted this Agreement, and no other vote is required for the
consummation of the transactions contemplated hereby..
3.5.2. The execution and delivery of this Agreement and each of the Transaction
Agreements to which they are a party by the Company and the Sellers does not, and the
consummation of the transactions contemplated hereby and thereby, will not (i) result in
the creation of any Encumbrance on the Interests or any of the material properties or
assets of the Company, or (ii) conflict with, or result in any violation of or default
under (with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any benefit under,
or require any consent, approval or waiver from any Person pursuant to, (A) any provision
of the Charter Documents of the Company, as amended to date, (B) any Contract of the
Company or any Contract applicable to any of their respective material properties, assets
or to the Interests, other than as set forth in Schedule 3.5.2(ii)(B) of the Disclosure
Schedule, or (C) any Legal Requirements applicable to the Sellers, the Company or any of
their respective material properties, assets or the Interests.
3.5.3. No consent, approval, order or authorization of, or registration, declaration
or filing with, any Governmental Entity is required by or with respect to the Company or
the Sellers in connection with the execution and delivery of this Agreement, each of the
Transaction Agreements to which they are a party, or the consummation of the transactions
contemplated hereby or thereby, or in order to vest in the Purchaser good and marketable
title in and to all of the Interest upon the Closing, except (to the extent applicable) for
notification
pursuant to, and expiration or termination of the waiting period under, the HSR Act.
Neither Sellers nor the Company have any knowledge that the Company will be unable to
continue to operate its business following Closing in the same manner as conducted prior to
the Closing without violating any covenant or agreement that binds the Company or the
Sellers.
3.5.4. No state takeover statute or similar Legal Requirement applies or purports to
apply to this Agreement or any of transactions contemplated hereby.
3.6. Financial Statements.
3.6.1. Schedule 3.6.1 of the Disclosure Schedule consists of the following (referred
to collectively as the “Financial Statements”) the audited consolidated financial
statements of the Company as of and for the fiscal years ended December 31, 2005 and 2006
(including, in each case, balance sheets, income statements, statement of changes in
shareholders equity and statement of cash
7
flows), together with the an audit opinion
thereon of independent auditors associated with one of the “Big 4” accounting firms.
3.6.2. The Financial Statements (i) are derived from and in accordance with the books
and records of the Company, (ii) complied as to form in all material respects with
applicable accounting requirements with respect thereto as of their respective dates, (iii)
have been prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated and consistent with each other, (iv) fairly present the consolidated
financial condition of the Company at the dates therein indicated and the consolidated
results of operations and cash flows of the Company for the periods therein specified, and
(v) are true, complete and correct in all material respects.
3.6.3. The Company has no obligations or liabilities of any nature (matured or
un-matured, absolute or accrued, fixed or contingent or otherwise) other than (i) those set
forth or adequately provided for in the balance sheet included in the Financial Statements
as of December 31, 2006 (the “Company Balance Sheet”), and (ii) those incurred in the
conduct of the Company’s business since December 31, 2006 (the “Company Balance Sheet
Date”) in the ordinary course, consistent with past practice, which are of the type that
ordinarily recur and, individually or in the aggregate, are not material in nature or
amount and do not result from any breach of Contract, tort or violation of law. Except for
obligations and liabilities reflected in the Financial Statements, the Company has no off
balance sheet obligation or liability of any nature (matured or un-matured, fixed or
contingent) to, or any financial interest in, any third party or entities (including the
Sellers and any of their Affiliates), the purpose or effect of which is to defer, postpone,
reduce or otherwise avoid or adjust the recording of debt expenses incurred by the Company.
All reserves that are set forth in or reflected in the Company Balance Sheet have been
established in accordance with GAAP consistently applied and are adequate.
3.6.4. The Company has established and maintains a system of internal accounting
controls sufficient to provide reasonable assurances (i) that transactions, receipts and
expenditures of the Company are being executed and made only in accordance with appropriate
authorizations of management of Company, (ii) that transactions are recorded as necessary
(A) to permit preparation of financial statements in conformity with GAAP and (B) to
maintain accountability for assets, (iii) regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the assets of Company, and (iv) that the
amount recorded for assets on the books and records of the Company is compared with the
existing assets at reasonable intervals and appropriate action is taken with respect to any
differences. Neither the Company, Company’s independent auditors, nor to the Company’s
knowledge, any current or
former employee, consultant or manager (or director, as the case may be) of Company,
has identified or been made aware of any fraud, whether or not material, that involves
Company’s management or other current or former employees, consultants, managers of Company
who have a role in the preparation of financial statements or the internal accounting
controls utilized by the Company, or any claim or allegation regarding any of the
foregoing. Neither the Company nor, to the Company’s knowledge, any manager, officer,
employee, auditor, accountant or representative of the Company has received or otherwise
had or obtained knowledge of any material complaint, allegation, assertion or claim,
whether written or oral, in each case, regarding deficient accounting or auditing
practices, procedures, methodologies or methods of the Company or its internal accounting
controls or any material inaccuracy in the Company’s financial statements. No attorney
representing the Company, whether or not employed by the Company, has reported to Company’s
management or any committee thereof or to any manager or officer of the Company evidence of
a material violation of securities laws, breach of fiduciary duty or similar violation by
the Company or any of its officers, managers, employees or agents. There are no
significant deficiencies or material weaknesses in the design or operation of the Company’s
internal controls, which could adversely affect the Company’s ability to record, process,
summarize and report financial data. There has been no change in the Company accounting
policies since the Company’s inception, except as described in the Financial Statements.
8
3.6.5. Schedule 3.6.5 of the Disclosure Schedule sets forth the names, account number,
account type and locations of all banks, trust companies, savings and loan associations and
other financial institutions at which the Company maintain accounts of any nature and the
names of all persons authorized to draw thereon or make withdrawals therefrom.
3.6.6. Schedule 3.6.6 of the Disclosure Schedule accurately lists all indebtedness of
Company for money borrowed (“Company Debt”), including, for each item of Company Debt, the
Contract governing the Company Debt, the Person to whom it is owed, the interest rate,
maturity date and any assets or properties securing such Company Debt. All Company Debt
may be prepaid at the Closing without penalty under the terms of the Contracts governing
such Company Debt.
3.7. Absence of Certain Changes. Since the Company Balance Sheet Date, the
Company has conducted its business only in the ordinary course consistent with past
practice and:
3.7.1. there has not been any Material Adverse Effect with respect to the Company, and
no event has occurred or circumstance has arisen that, in combination with any other events
or circumstances, would have or would reasonably be expected to have or result in a Company
Material Adverse Effect;
3.7.2. the Company has not made nor entered into any Contract or letter of intent with
respect to any acquisition, sale or transfer of any asset of the Company (other than the
sale or nonexclusive license of Company Products to its customers in the ordinary course of
its business consistent with its past practice);
3.7.3. except as required by GAAP, there has not occurred any change in accounting
methods or practices (including any change in depreciation or amortization policies or
rates or revenue recognition policies) by the Company or any revaluation by the Company of
any of its assets;
3.7.4. there has not occurred any declaration, setting aside, or payment of a
dividend or other distribution with respect to any securities of the Company, or any
direct or indirect redemption, purchase or other acquisition by the Company of any of its
securities, or any change in any rights, preferences, privileges or restrictions of any of
its outstanding securities, except pursuant to Section 1.2.2.2 hereof;
3.7.5. the Company has not entered into, amended or terminated any Material Contract,
and there has not occurred any default under any Material Contract to which the Company is
a party or by which it is, or any of its assets and properties are, bound;
3.7.6. there has not occurred any amendment or change to the Charter Documents of the
Company;
3.7.7. there has not occurred any increase in or modification of the compensation or
benefits payable or to become payable by the Company to any of its managers, officers,
employees or consultants (other than increases in the base salaries of employees who are
not officers in an amount that does not exceed 3% of such base salaries), any material
modification of any “nonqualified deferred compensation plan” within the meaning of Section
409A of the Code and Internal Revenue Service Notice 2005-1, or any new loans or extension
of existing loans to any such Persons (other than routine expense advances to employees of
the Company consistent with past practice), and the Company has not entered into any
Contract to grant or provide (nor has granted any) severance, acceleration of vesting or
other similar benefits to any such Persons;
9
3.7.8. there has not occurred any change in title, office or position, or material
reduction in the responsibilities of, or change in identity with respect to the management,
supervisory or other key personnel of the Company, any termination of employment of any
such employees, or any labor dispute or claim of unfair labor practices involving the
Company;
3.7.9. the Company has not incurred, created or assumed any Encumbrance (other than a
Permitted Encumbrance) on any of its assets or properties, any liability or obligation for
borrowed money or any liability or obligation as guaranty or surety with respect to the
obligations of any other Person;
3.7.10. the Company has not paid or discharged any Encumbrance or liability which was
not shown on the Company Balance Sheet or incurred in the ordinary course of business
consistent with past practice since the Company Balance Sheet Date;
3.7.11. the Company has not incurred any liability to its employees, managers (or
directors, as the case may be), officers or Members (other than liabilities to pay
compensation or benefits in connection with services rendered in the ordinary course of
business, consistent with past practice);
3.7.12. the Company has not made any deferral of the payment of any accounts payable
other than in the ordinary course of business, consistent with past practice, or in an
amount in excess of $25,000, or given any discount, accommodation or other concession other
than in the ordinary course of business, consistent with past practice, in order to
accelerate or induce the collection of any receivable,
3.7.13. the Company has not made any material change in the manner in which it extends
discounts, credits or warranties to customers or otherwise deals with its customers;
3.7.14. there has been no material damage, destruction or loss, whether or not covered
by insurance, affecting the assets, properties or business of the Company;
3.7.15. there has been no material change in the monthly traffic metrics information
on each Company Web Site individually or in the aggregate, according to the parameters
requested by Purchaser in connection with Schedule 3.12.32(i) of the Disclosure Schedule or
in the number of registered users of each of Company Web Site;
3.7.16. the Company has not (i) sold, disposed of, transferred or licensed to any
Person any rights to any Company IP Rights (other than licenses of Company Products in the
ordinary course of business consistent with past practice), (ii) sold, disposed of,
transferred or provided a copy of any Company Source Code to any Person, (iii) established
a Subsidiary, or (iv) has acquired or licensed from any Person any Intellectual Property
(other than licenses in the ordinary course of business consistent with past practice; and
3.7.17. there has not occurred any announcement of, any negotiation by or any entry
into any Contract by the Company or any Subsidiary to do any of the things described in the
preceding clauses 3.7.1 through 3.7.16 (other than negotiations and agreements with
Purchaser and its representatives regarding the transactions contemplated by this
Agreement).
3.8. Litigation. There is no private or governmental action, suit,
proceeding, claim, mediation, arbitration or investigation pending before any Governmental
Entity, or threatened in writing, or, to the knowledge of the Company, otherwise threatened
against the Company or any of its assets or properties or any of their respective managers,
officers or employees (in their capacities as such or
10
relating to their employment,
services or relationship with the Company), nor, to the knowledge of the Company, is there
any reasonable basis for any such action, suit, proceeding, claim, mediation, arbitration
or investigation. There is no judgment, decree, injunction or order against the Company,
any of its assets or properties, or, to the knowledge of the Company, any of their
respective managers, officers or employees (in their capacities as such or relating to
their employment, services or relationship with the Company). To the knowledge of the
Company, there is no reasonable basis for any Person to assert a claim against the Company
based upon the Company entering into this Agreement or any of the other transactions or
agreements contemplated hereby. The Company has no action, suit, proceeding, claim,
mediation, arbitration or investigation pending against any other Person, nor is it a party
to, or subject to the provisions of, any judgment, order, writ, injunction, decree or award
of any court, arbitrator or governmental or regulatory official, body or authority.
3.9. Restrictions on Business Activities. There is no Contract, judgment,
injunction, order or decree binding upon the Company which has or would reasonably be
expected to have, whether before or after consummation of the transaction contemplated
hereby, the effect of prohibiting or impairing any current or presently proposed business
practice of the Company, any acquisition of property by the Company or the conduct of
business by the Company as currently conducted or as presently proposed to be conducted by
the Company.
3.10. Compliance with Laws; Governmental Permits.
3.10.1. The Company has complied in all material respects with, is not in material
violation of, and has not received any notices of violation with respect to, any Legal
Requirement with respect to the conduct of its business or the ownership or operation of
its business (including the keeping of all required registers and timely filing or delivery
of all required documents under the provisions of any applicable Legal Requirement), except
as set
forth in Schedule 3.10.1 of the Disclosure Schedule. Neither the Company nor any
manager, officer, Affiliate or employee thereof (in their capacities as such or relating to
their employment, services or relationship with the Company), has given, offered, paid,
promised to pay or authorized payment of any money, any gift or anything of value, with the
purpose of influencing any act or decision of the recipient in his or her official capacity
or inducing the recipient to use his or her influence to affect an act or decision of a
government official or employee, to any (i) governmental official or employee, (ii)
political party or candidate thereof, or (iii) Person while knowing that all or a portion
of such money or thing of value would be given or offered to a governmental official or
employee or political party or candidate thereof.
3.10.2. The Company has obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization of a Governmental
Entity (a) pursuant to which the Company currently operates or holds any interest in any of
its assets or properties or (b) that is required for the operation of the Company’s
business or the holding of any such interest (all of the foregoing consents, licenses,
permits, grants, and other authorizations, collectively, the “Company Authorizations”), and
all of the Company Authorizations are in full force and effect. The Company has not
received any notice or other communication from any Governmental Entity regarding (i) any
actual or possible violation of law or any Company Authorization or any failure to comply
with any term or requirement of any Company Authorization or (ii) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification of any
Company Authorization. None of the Company Authorizations will be terminated or impaired,
or will become terminable, in whole or in part, as a result of the consummation of the
transactions contemplated by this Agreement.
3.11. Title to Property and Assets. The Company has good and valid title to
all of their respective properties, and interests in properties and assets, real and
personal, reflected on the Company Balance Sheet or acquired after the Company Balance
Sheet Date (except properties and assets, or
11
interests in properties and assets, sold or otherwise disposed of since the Company Balance
Sheet Date in the ordinary course of business consistent with past practice), or, with respect to
leased properties and assets, valid leasehold interests in such properties and assets which afford
the Company valid leasehold possession of the properties and assets that are the subject of such
leases, in each case, free and clear of all Encumbrances, except (i) Permitted Encumbrances
incurred in the ordinary course of business consistent with past practice for obligations not past
due, (ii) such imperfections of title and non-monetary Encumbrances as do not and will not detract
from or interfere with the use of the properties subject thereto or affected thereby, or otherwise
impair business operations involving such properties, and (iii) liens securing indebtedness that is
reflected on the Company Balance Sheet, if any. The plant, property and equipment of each of the
Company that are used in the operations of its business are (i) in good operating condition and
repair, subject to normal wear and tear and (ii) not obsolete, dangerous or in need of renewal or
replacement, except for renewal or replacement in the ordinary course of business, consistent with
past practice. All properties used in the operations of the Company are reflected on the Company
Balance Sheet to the extent required under GAAP to be so reflected. Schedule 3.11 of the
Disclosure Schedule identifies each parcel of real property leased or sub-leased by the Company.
The Company has adequate rights of ingress and egress into any real property used in the operation
of their respective businesses. The Company has heretofore provided to Purchaser true, correct and
complete copies of all leases, subleases and other Contracts under which the Company uses or
occupies or has the right to use or occupy, now or in the future, any real property or facility,
including all modifications, amendments and supplements thereto. The Company does not currently
owns any real property or any tenant improvement.
3.12. Intellectual Property and Internet Practices.
3.12.1. As used in this Agreement, the following terms shall have the meanings indicated
below:
3.12.1.1. “Intellectual Property” means any and all statutory or common law worldwide
industrial and intellectual property rights and all rights associated therewith, including
all patents and applications therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof, all inventions (whether
patentable or not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data, proprietary processes and formulae,
algorithms, specifications, customer lists and supplier lists, all industrial designs and
any registrations and applications therefor, all trademarks, trade names, trade dress,
logos, and service names and marks (in each case whether or not registered) and
registrations and applications therefore and the right to file applications for the
registration thereof, Internet domain names, Internet and World Wide Web URLs or
addresses, all copyrights (whether or not registered), registrations and applications
therefor and the right to file applications for registration thereof, and all other rights
corresponding thereto, all computer software, including all source code, object code,
firmware, development tools, files, records, documentation, screen displays, layouts, and
data, test methodologies, emulation and simulation tools and reports, all databases and
data collections and all rights therein, all publicity and privacy rights, and all moral
and economic rights of authors and inventors, however denominated, and any similar or
equivalent rights to any of the foregoing, arising under the laws of the United States of
America, any state thereof, or any other country or province, and all tangible embodiments
of the foregoing (in whatever form).
3.12.1.2. “Company IP Rights” means any and all Intellectual Property used in the
conduct of the business of the Company as currently conducted or as currently proposed to
be conducted by the Company, including, without limitation, Intellectual Property
currently under development by or for the Company (whether or not in collaboration with
12
another Person).
3.12.1.3. “Company-Owned IP Rights” means Company IP Rights that are owned or are
purportedly owned by or exclusively licensed to the Company, including, but not limited
to, Company Registered Intellectual Property.
3.12.1.4. “Company Registered Intellectual Property” means all United States,
international and foreign: (A) patents and patent applications (including provisional
applications all reissues, divisions, renewals, extensions, continuations and
continuations-in-part thereof); (B) registered trademarks and service marks, applications
to register trademarks and service marks, intent-to-use applications, and other
registrations and applications related to trademarks or service marks; (C) registered
Internet domain names and Internet and World Wide Web URLs or addresses; (D) registered
copyrights and applications for copyright registration; and (E) any other Intellectual
Property that is the subject of an application, certificate, filing, registration or other
document issued, filed with, or recorded by any governmental authority owned by,
registered or filed in the name of, the Company.
3.12.1.5. “Third Party Intellectual Property Rights” means any Intellectual Property
owned by a third party.
3.12.1.6. “Company Products” means all products and services produced, marketed,
licensed, sold, distributed or performed by or on behalf of the Company and all products
and services currently under development by the Company.
3.12.1.7. “Company Source Code” means, collectively, all software source code and
specifications and designs and all material proprietary information and algorithms
contained in or relating to any software source code or specifications or designs, of any
Company-Owned IP Rights or Company Products.
3.12.2. The Company (i) owns and has independently developed or acquired, or (ii) has the
valid right or license to all Company IP Rights. The Company IP Rights are sufficient for the
conduct of the business of the Company as currently conducted and as currently proposed to be
conducted by the Company.
3.12.3. The Company has not transferred ownership of any Intellectual Property that is or was
Company-Owned IP Rights to any third party, or knowingly permitted the Company’s rights in any
Intellectual Property that is or was Company-Owned IP Rights to enter the public domain or, with
respect to any Intellectual Property for which the Company has submitted an application or obtained
a registration, lapse (other than through the expiration of registered Intellectual Property at the
end of its maximum statutory term).
3.12.4. The Company owns and has good and exclusive title to each item of Company-Owned IP
Rights and each item of Company Registered Intellectual Property, free and clear of any
Encumbrances (other than Permitted Encumbrances). The right, license and interest of the Company
in and to all Third Party Intellectual Property Rights licensed by the Company from a third party
are free and clear of all Encumbrances (excluding restrictions contained in the applicable license
agreements with such third parties and Permitted Encumbrances).
3.12.5. Neither the execution and delivery or effectiveness of this Agreement nor the
performance of the Company’s obligations under this Agreement will cause the forfeiture or
termination of, or give rise to a right of forfeiture or termination of any Company-Owned IP Right,
or impair the right
13
of the Company or Purchaser to use, possess, sell or license any Company-Owned IP Right or
portion thereof. After the Closing, all Company-Owned IP Rights will be fully transferable,
alienable or licensable by Purchaser without restriction and without payment of any kind to any
third party.
3.12.6. Schedule 3.12.6 of the Disclosure Schedule lists all Company Registered Intellectual
Property including the jurisdictions in which each such item of Intellectual Property has been
issued or registered (including, without limitation, the “whois” lookup with respect to domain
names) or in which any application for such issuance and registration has been filed, or in which
any other filing or recordation has been made. Schedule 3.12.6 of the Disclosure Schedule sets
forth a list of all actions that are required to be taken by the Company within 120 days of the
date hereof with respect to any of the Company Registered Intellectual Property in order to avoid
prejudice to, impairment or abandonment of such Company Registered Intellectual Property.
3.12.7. All statements and representations made by the Company in any pending copyright,
trademark, service xxxx, or patent applications, filings or registrations were true in all material
respects as of the time they were made. Each item of Company Registered Intellectual Property is
valid and subsisting (or in the case of applications, applied for), all registration, maintenance
and renewal fees currently due in connection with such Company Registered Intellectual Property
have been paid and all documents, recordations and certificates in connection with such Company
Registered Intellectual Property currently required to be filed have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of prosecuting, maintaining and perfecting such Company
Registered Intellectual Property and recording the Company’s ownership interests therein.
3.12.8. The Company is not nor shall it be as a result of the execution and delivery or
effectiveness of this Agreement or the performance of the Company’s obligations under this
Agreement, in breach of any Contract governing any Company IP Rights (the “Company IP Rights
Agreements”) and the consummation of the transactions contemplated by this Agreement will not
result in the modification, cancellation, termination, suspension of, or acceleration of any
payments with respect to the Company IP Rights Agreements, or give any non-Company party to any
Company IP Rights Agreement the right to do any of the foregoing. Following the Closing, the
Company (as wholly-owned, directly or indirectly, by Purchaser) will be permitted to exercise all
of the Company’s rights under the Company IP Rights Agreements to the same extent the Company would
have been able to had the transactions contemplated by this Agreement not occurred and without the
payment of any additional amounts or consideration other than ongoing fees, royalties or payments
which the Company would otherwise be required to pay.
3.12.9. None of the Company IP Rights Agreements grants any third party exclusive rights to or
under any Company IP Rights or grants any third party the right to sublicense any Company IP
Rights.
3.12.10. There are no royalties, honoraria, fees or other payments payable by the Company to
any Person (other than salaries payable to employees, consultants and independent contractors not
contingent on or related to use of their work product) as a result of the ownership, use,
possession, license-in, license-out, sale, marketing, advertising or disposition of any
Company-Owned IP Rights by the Company.
3.12.11. To the knowledge of the Company, there is no unauthorized use, unauthorized
disclosure, infringement or misappropriation of any Company-Owned IP Rights, by any third party,
including any employee or former employee of the Company. The Company has not brought any action,
suit or proceeding for infringement or misappropriation of any Intellectual Property or breach of
any
14
Company IP Rights Agreement.
3.12.12. The Company has not been sued in any suit, action or proceeding (or received any
written notice or, to the knowledge of the Company, threat) which involves a claim of infringement
or misappropriation of any Intellectual Property right of any third party or which contests the
validity, ownership or right of the Company to exercise any Intellectual Property right. The
Company has not received any written communication that involves an offer to license or grant any
other rights or immunities under any Third Party Intellectual Property Right.
3.12.13. The operation of the business of the Company as such business is currently conducted
and as currently proposed to be conducted by the Company, including (i) the design, development,
manufacturing, reproduction, marketing, licensing, sale, offer for sale, importation, distribution,
provision and/or use of any Company Product and (ii) the Company’s use of any product, device or
process used in the business of the Company as previously conducted, as currently conducted and as
currently proposed to be conducted by the Company, does not and will not infringe or misappropriate
the Intellectual Property of any third party and does not constitute unfair competition or unfair
trade practices under the laws of any jurisdiction and there is no substantial basis for a claim
that the design, development, manufacturing, reproduction, marketing, licensing, sale, offer for
sale, importation, distribution, provision and/or use of any Company Product or the operation of
the business of the Company is infringing or has infringed on or misappropriated any Intellectual
Property of a third party.
3.12.14. None of the Company-Owned IP Rights, the Company Products, the Company is subject to
any proceeding or outstanding order, Contract or stipulation (A) restricting in any manner the use,
transfer, or licensing by the Company of any Company-Owned IP Right or any Company Product, or
which may affect the validity, use or enforceability of any such Company-Owned IP Right or Company
Product, or (B) restricting the conduct of the business of the Company in order to accommodate
third party Intellectual Property rights.
3.12.15. The Company has not received any opinion of counsel that any Company Product or the
operation of the business of the Company, as previously or currently conducted, or as currently
proposed to be conducted by the Company, infringes or misappropriates any Third Party Intellectual
Property Rights.
3.12.16. The Company has secured from all of its consultants, employees and independent
contractors who independently or jointly contributed to the conception, reduction to practice,
creation or development of any Company-Owned IP Rights unencumbered and unrestricted exclusive
ownership of, all such third party’s Intellectual Property in such contribution that the Company
does not already own by operation of law and such third party has not retained any rights or
licenses with respect thereto. Without limiting the foregoing, the Company has obtained
proprietary information and invention disclosure and assignment agreements from all current and
former employees and consultants of the Company.
3.12.17. No current or former employee, consultant or independent contractor of the Company:
(i) is in violation of any term or covenant of any Contract relating to employment, invention
disclosure, invention assignment, non-disclosure or non-competition or any other Contract with any
other party by virtue of such employee’s, consultant’s or independent contractor’s being employed
by, or performing services for, the Company or using trade secrets or proprietary information of
others without permission; or (ii) has developed any technology, software or other copyrightable,
patentable or otherwise proprietary work for the Company that is subject to any agreement under
which such employee, consultant or independent contractor has assigned or otherwise granted to any
third party any rights
15
(including Intellectual Property rights) in or to such technology, software or other
copyrightable, patentable or otherwise proprietary work.
3.12.18. The employment of any employee of the Company or the use by the Company of the
services of any consultant or independent contractor does not subject the Company to any liability
to any third party for improperly soliciting such employee, consultant or independent contractor to
work for the Company, whether such liability is based on contractual or other legal obligations to
such third party. No current or former employee, consultant or independent contractor of the
Company has any right, license, claim or interest whatsoever in or with respect to any
Company-Owned IP Rights.
3.12.19. To the extent that any Intellectual Property that is or was a Third Party
Intellectual Property Right is incorporated into, integrated or bundled with, or used by the
Company in the development, manufacture or compilation of any of the Company Products, the Company
has a written agreement with such third party with respect thereto pursuant to which the Company
either (A) has obtained complete, unencumbered and unrestricted ownership of, and is the exclusive
owners of such Intellectual Property by operation of law or by valid assignment, or (B) has
obtained perpetual, assignable and non terminable (other than for breach) licenses (sufficient for
the conduct of its business as currently conducted by the Company and as currently proposed to be
conducted by the Company) to all such Third Party Intellectual Property Rights.
3.12.20. The Company has taken all commercially reasonable steps to protect and preserve the
confidentiality of all confidential or non-public information included in the Company IP Rights
(“Confidential Information”). All use, disclosure or appropriation of Confidential Information
owned by the Company to a third party has been pursuant to the terms of a written Contract between
the Company and such third party. All use, disclosure or appropriation of Confidential Information
by the Company not owned by the Company has been pursuant to the terms of a written agreement
between the Company and the owner of such Confidential Information, or is otherwise lawful. All
current and former employees and consultants of the Company having access to Confidential
Information or proprietary information of any of their respective customers or business partners
have executed and delivered to the Company an agreement regarding the protection of such
Confidential Information or proprietary information (in the case of proprietary information of the
Company’s customers and business partners, to the extent required by such customers and business
partners).
3.12.21. Schedule 3.12.21 of the Disclosure Schedule lists all software or other material that
is distributed as “free software”, “open source software” or under a similar licensing or
distribution terms (including but not limited to the GNU General Public License (GPL), GNU Lesser
General Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the Artistic License,
the Netscape Public License, the Sun Community Source License (SCSL) the Sun Industry Standards
License (SISL) and the Apache License) (“Open Source Materials”) used by the Company in any way.
The Company is in compliance with the terms and conditions of all licenses for the Open Source
Materials.
3.12.22. The Company has not (i) incorporated Open Source Materials into, or combined Open
Source Materials with, the Company IP Rights or Company Products; (ii) distributed Open Source
Materials in conjunction with any Company IP Rights or Company Products; or (iii) used Open Source
Materials, in such a way that, with respect to (i), (ii), or (iii), creates, or purports to create
obligations for the Company with respect to any Company IP Rights or grant, or purport to grant, to
any third party, any rights or immunities under any Company IP Rights (including using any Open
Source Materials that require, as a condition of use, modification and/or distribution of such Open
Source Materials that other software incorporated into, derived from or distributed with such Open
Source Materials be (A) disclosed or distributed in source code form, (B) be licensed for the
purpose of making derivative works, or (C) be redistributable at no charge).
16
3.12.23. All Company Products sold, licensed, leased or delivered by the Company to customers
and all services provided by or through the Company to customers on or prior to the Closing Date
conform to applicable contractual commitments, express and implied warranties (to the extent not
subject to legally effective express exclusions thereof), and to any representations provided to
customers and conform in all material respects to packaging, advertising and marketing materials
and to applicable product or service specifications or documentation. The Company has no liability
(and, to the knowledge of the Company, there is no legitimate basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against the
Company giving rise to any material liability relating to the foregoing Contracts) for replacement
or repair thereof or other damages in connection therewith in excess of any reserves therefor
reflected on the Company Balance Sheet.
3.12.24. The Company has provided Purchaser with all documentation and notes relating to the
testing of all Company Products. The Company has documented all bugs, errors and defects in all
the Company Products, and such documentation is retained and is available internally at the
Company. All Company Products are free from any material defect, bug, virus, time bomb, Trojan
horse, backdoor or programming, design or documentation error and operate and run in a reasonable
manner.
3.12.25. For all software used by the Company in providing services, or in developing or
making available any of the Company Products, the Company has implemented any and all security
patches or upgrades that are generally available for that software.
3.12.26. No (i) government funding; (ii) facilities of a university, college, other
educational institution or research center; or (iii) funding from any Person (other than funds
received in consideration for the Membership Interests) was used in the development of the
Company-Owned IP Rights. No current or former employee, consultant or independent contractor of
the Company, who was involved in, or who contributed to, the creation or development of any
Company-Owned IP Rights, has performed services for or otherwise was under restrictions resulting
from his/her relations with any government, university, college or other educational institution or
research center during a period of time during which such employee, consultant or independent
contractor was also performing services for the Company.
3.12.27. Neither the Company nor any other Person then acting on its behalf has disclosed,
delivered or licensed to any Person, agreed to disclose, deliver or license to any Person, or
permitted the disclosure or delivery to any escrow agent or other Person of, any Company Source
Code. No event has occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time, or both) will, or would reasonably be expected to, result in the disclosure,
delivery or license by the Company or any Person then acting on its behalf to any Person of any
Company Source Code. Schedule 3.12.27 of the Disclosure Schedule identifies each Contract pursuant
to which the Company has deposited, or is or may be required to deposit, with an escrow holder or
any other Person, any of the Company Source Code, and describes whether the execution of this
Agreement or any of the transactions contemplated by this Agreement, in and of itself, would
reasonably be expected to result in the release from escrow of any Company Source Code.
3.12.28. The Company is not now and has never been a member or promoter of, or a contributor
to, any industry standards body or any similar organization that could reasonably be expected to
require or obligate any of the Company to grant or offer to any other Person any license or right
to any Company-Owned IP Rights.
3.12.29. The Company has implemented and maintains a comprehensive security plan which (i)
identifies internal and external risks to the security of the Confidential Information, including
personally identifiable information; (ii) implements, monitors and improves adequate and effective
17
administrative, electronic and physical safeguards to control those risks; and (iii) maintains
notification procedures in compliance with applicable Legal Requirements in the case of any breach
of security compromising unencrypted data containing personally identifiable information. The
Company has not experienced any breach of security or otherwise unauthorized access by third
parties to the Confidential Information, including personally identifiable information in the
Company’s possession, custody or control, or to any Company Product.
3.12.30. The Company (i) has not collected, and is not collecting, any personally identifiable
information from any third parties, (ii) is in compliance with their respective internal privacy
policies and terms of use, (iii) has not and does not, directly or indirectly, deliver or has third
parties deliver unsolicited electronic mails, nor place metatags in a manner that infringes rights
of third parties, (iv) complies with the safe harbor requirements of the United States Designated
Agent Filings For Safe Harbor Under Digital Millennium Copyright Act of 1998, (v) does not provide
goods or services that are regulated or are intended only for adults, or prohibited or controlled
in any jurisdictions, and (vi) does not knowingly collect personally identifiable information from
anyone under the age of 13 and comply with the requirements of the United States Children’s Online
Privacy Protection Act of 1998, as amended. Third parties’ content (including without limitation
text, graphics and technology) included in, or linked to by, the websites maintained by the Company
and the Subsidiary is properly licensed for electronic posting, distribution, storage and all other
intended uses by the Company and users of all such websites.
3.12.31. The Company has complied with all applicable Legal Requirements and their respective
internal and public privacy policies relating to the use, collection, storage, disclosure and
transfer of any personally identifiable information collected by the Company or by third parties
having authorized access to the records of the Company. The execution, delivery and performance of
this Agreement, will comply with all applicable Legal Requirements relating to privacy and with the
Company’s privacy policies. The Company has not received a complaint regarding the Company’s
collection, use or disclosure of personally identifiable information.
3.12.32. Schedule 3.12.32(i) of the Disclosure Schedule sets forth true and accurate monthly
traffic metrics information on each Company Web site, individually and in the aggregate, according
to the parameters requested by Purchaser and reflects, in all material respects, the actual use of
each Company Web Site by its respective users for the periods covered by such metrics. The number
of registered users of each Company Web Site, as of July 5, 2007, is as set forth in Schedule
3.12.32(ii) of the Disclosure Schedule.
3.13. Environmental Matters. (i) All Hazardous Materials and wastes of the Company
has been disposed of in accordance in all material respects with all Environmental and Safety Laws;
(ii) the Company has not received any notice of any noncompliance of the Facilities or its past or
present operations with Environmental and Safety Laws; (iii) no notices, administrative actions or
suits are pending or threatened relating to an actual or alleged violation of any applicable
Environmental and Safety Laws by the Company; (iv) the Company is not a potentially responsible
party under the federal Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or any analogous state, local or foreign laws arising out of events occurring
prior to the Closing Date; (v) to the Company’s knowledge, there have not been in the past, and are
not now, any Hazardous Materials on, under or migrating to or from any of the Facilities or any
Property; (vi) to the Company’s knowledge, there have not been in the past, and are not now, any
underground tanks or underground improvements at, on or under any Property, including treatment or
storage tanks, sumps, or water, gas or oil xxxxx; and (vii) the Company’s uses and activities at
its Facilities have at all times materially complied with all Environmental and Safety Laws.
18
3.14. Tax Matters.
3.14.1. The Company and any consolidated, combined, unitary or aggregate group for Tax
purposes of which the Company is or has been a member, have properly completed and timely filed all
Tax Returns required to be filed by them and have timely paid all Taxes whether or not shown on any
Tax Return. All Tax Returns were complete and accurate and have been prepared in substantial
compliance with all applicable Legal Requirements. All amounts shown on the Tax Returns to be due
on or before the Closing Date have been or will be paid on or before the Closing Date. The Company
has disclosed on its income Tax Returns in any year for which the statute of limitations has not
expired all positions that would reasonably be expected to give rise to a material understatement
penalty or any similar Legal Requirement.
3.14.2. The Company has delivered or made available to Purchaser (i) complete and correct
copies of all Tax Returns of the Company relating to Taxes for all taxable periods including
related workpapers, (ii) all foreign statutory accounts of the Company, and (iii) complete and
correct copies of all private letter rulings, revenue agent reports, information document requests,
notices of proposed deficiencies, deficiency notices, protests, petitions, closing agreements,
settlement agreements, pending ruling requests and any similar documents submitted by, received by,
or agreed to by or on behalf of the Company relating to Taxes for all taxable periods for which the
statute of limitations has not yet expired. The Company has not been informed by any jurisdiction
that the jurisdiction believes that the Company was required to file any Tax Return that was not
filed.
3.14.3. The Company Balance Sheet reflects all liability for unpaid Taxes of the Company for
periods (or portions of periods) through the Company Balance Sheet Date. The Company has no
liability for unpaid Taxes accruing after the Company Balance Sheet Date except for Taxes arising
in the ordinary course of business subsequent to the Company Balance Sheet Date.
3.14.4. There is (i) no claim for Taxes being asserted against the Company that has resulted
in a lien against the property of the Company other than liens for Taxes not yet due and payable,
(ii) no audit or pending audit of, or Tax controversy associated with, any Tax Return of the
Company being conducted by a Tax Authority, (iii) no extension of any statute of limitations on the
assessment of any Taxes granted by the Company currently in effect, and (iv) no agreement by the
Company to any extension of time for filing any Tax Return which has not been filed.
3.14.5. The Company has not been, nor will it be, required to include any material adjustment
in taxable income for any tax period (or portion thereof) ending after the Closing Date as a result
of transactions or events occurring, or accounting methods employed, prior to the Closing.
3.14.6. The Company (i) is not a party to nor bound by any Tax sharing, Tax indemnity, or Tax
allocation agreement, nor does the Company has any liability or potential liability to another
party under any such agreement; (ii) is not liable for Taxes of any other Person pursuant to any
Contract or any Legal Requirement, nor is it currently under any contractual obligation to
indemnify any Person with respect to any amounts of such Person’s Taxes or is a party to any
Contract providing for payments by an Acquired Corporation with respect to any amount of Taxes of
any other Person; (iii) has not requested nor received a ruling from any Tax authority or signed a
closing or other agreement with any Tax authority, nor has any the Company or anyone acting on its
behalf requested or received a ruling from any Taxation Authority or signed a closing or other
agreement with any Taxation Authority.
3.14.7. No written notice has ever been delivered by any Governmental Entity to the Company in
a jurisdiction where it does not file a Tax Return that claims that it is or may be subject to
taxation by that jurisdiction which has resulted or could reasonably be expected to result in an
obligation
19
to pay material Taxes. The Company has in its possession official foreign government receipts
for any Taxes paid by it to any foreign Tax Authorities.
3.14.8. The Company has provided to the Purchaser all documentation relating to any applicable
Tax holidays or incentives. The Company is in compliance with the requirements for any applicable
Tax holidays or incentives and none of the Tax holidays or incentives will be jeopardized by the
transaction contemplated in this Agreement.
3.14.9. The Company is not nor has it ever been a “United States real property holding
corporation” within the meaning of Section 897 of the Code, and the Company has filed with the
Internal Revenue Service all statements, if any, which are required under Section 1.897-2(h) of the
Treasury Regulations promulgated thereunder.
3.14.10. The Company has complied (and until the Closing will comply) with all applicable
Legal Requirements relating to the payment, reporting and withholding of Taxes (including
withholding of Taxes pursuant to Sections 1441, 1442, 1445 and 1446 of the Code or similar
provisions under any foreign law), has, within the time and in the manner prescribed by law,
withheld from any payments (including, without limitation, employee wages or consulting
compensation) and paid over to the proper governmental authorities (or is properly holding for such
timely payment) all amounts required to be so withheld and paid over under all applicable Legal
Requirements, including federal and state income Taxes, Federal Insurance Contribution Act,
Medicare, Federal Unemployment Tax Act, relevant state income and employment Tax withholding laws,
and has timely filed all withholding Tax Returns, for all periods through and including the Closing
Date. The Company has collected (and remitted to the proper authorities of any state or other
jurisdiction) and/or paid all sales and/or use Taxes required under all applicable Legal
Requirements to be charged on any transactions that it has engaged in.
3.14.11. There is no agreement, plan, arrangement or other Contract covering any current or
former employee or other service provider of the Company or ERISA Affiliate (as defined below) to
which the Company is a party or by which the Company is bound that, considered individually or
considered collectively with any other such agreements, plans, arrangements or other Contracts,
that has resulted, will, or could reasonably be expected to, result, on account of entering into
the transactions contemplated hereby (whether alone or upon the occurrence of any additional or
subsequent events, including, any termination of employment), in the payment of any amount that
could reasonably be expected to be non-deductible under Section 162 of the Code (or any
corresponding or similar provision of state, local or foreign Tax law) or characterized as an
“excess parachute payment” within the meaning of Section 280G of the Code (or any corresponding or
similar provision of state, local or foreign Tax law). Schedule 3.14.11 of the Disclosure Schedule
lists each Person who the Company reasonably believes is, with respect to the Company and/or any
ERISA Affiliate, a “disqualified individual” (within the meaning of Section 280G of the Code and
the regulations promulgated thereunder), as determined as of the date hereof.
3.14.12. Schedule 3.14.12 of the Disclosure Schedule sets forth each jurisdiction (other than
United States federal) in which the Company files, is required to file or has been required to file
a Tax Return or is or has been liable for any Taxes on a “nexus” basis and each jurisdiction that
has sent notices or communications of any kind requesting information relating to the Company’s
nexus with such jurisdiction.
3.14.13. The Company is not nor has it even been a party to a transaction or agreement that is
in conflict with the Tax rules on transfer pricing in any relevant jurisdiction.
3.14.14. The Company has not consummated, has participated in, or is currently
20
participating in any transaction which was or is a “Tax shelter” transaction as defined in
Sections 6662, 6011, 6012 or 6111 of the Code or the Treasury Regulations promulgated thereunder or
in similar provisions of foreign law or which was or is a “Listed Transaction” or a “Reportable
Transaction” as those terms are defined in the Code and the Treasury regulations thereunder or in
similar provisions of foreign law.
3.14.15. Schedule 3.14.15 the Disclosure Schedule sets forth the following information with
respect to the Company as of the most recent practicable date: (i) the basis in its assets and (ii)
the amount of any net operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to it.
3.14.16. No stock transfer Taxes, sales Taxes, use Taxes, real estate transfer or gains Taxes
or other similar Taxes will be imposed on the transactions contemplated by this Agreement.
3.14.17. The Company has always been treated as a partnership for federal income tax purposes
and has not made an election to be treated as an association taxable as a corporation.
3.15. Employee Benefit Plans and Employee Matters.
3.15.1. Schedule 3.15.1 of the Disclosure Schedule lists, with respect to the Company and any
trade or business (whether or not incorporated) which is treated as a single employer with the
Company (an “ERISA Affiliate”) within the meaning of Section 414(b), (c), (m) or (o) of the Code,
(i) all “employee benefit plans” within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), (ii) each loan to an employee in excess of
$10,000, (iii) all stock option, stock purchase, phantom stock, stock appreciation right,
supplemental retirement, severance, sabbatical, medical, dental, vision care, disability, employee
relocation, cafeteria benefit (Section 125 of the Code), dependent care (Section 129 of the Code),
life insurance or accident insurance plans, programs or arrangements, (iv) all bonus, pension,
profit sharing, savings, severance, retirement, deferred compensation or incentive plans, programs
or arrangements, (v) all other fringe or employee benefit plans, programs or arrangements that
apply to senior management and that do not generally apply to all employees, and (vi) all
employment or executive compensation or severance agreements, written or otherwise, as to which
unsatisfied obligations of the Company of greater than $10,000 remain for the benefit of, or
relating to, any present or former employee, consultant or non-employee manager (or director, as
the case may be) of the Company (all of the foregoing described in clauses (i) through (vi),
collectively, the “Company Employee Plans”, and each a “Company Employee Plan”).
3.15.2. The Company has furnished to Purchaser a true, correct and complete copy of each of
the Company Employee Plans and related plan documents (including trust documents, insurance
policies or Contracts, employee booklets, summary plan descriptions and other authorizing
documents, and any material employee communications relating thereto) and has, with respect to each
Company Employee Plan which is subject to ERISA reporting requirements, provided to Purchaser true,
correct and complete copies of the Form 5500 reports filed for the last three plan years. Any
Company Employee Plan intended to be qualified under Section 401(a) of the Code has either obtained
from the Internal Revenue Service a favorable determination letter as to its qualified status under
the Code, including all amendments to the Code effected by the Tax Reform Act of 1986 and
subsequent legislation, or has applied (or has time remaining in which to apply) to the Internal
Revenue Service for such a determination letter prior to the expiration of the requisite period
under applicable Treasury Regulations or Internal Revenue Service pronouncements in which to apply
for such determination letter and to make any amendments necessary to obtain a favorable
determination or has been established under a standardized prototype plan for which an Internal
Revenue Service opinion letter has been obtained by the plan sponsor and is valid as to the
adopting employer. The Company has also provided to Purchaser a
21
true, correct and complete copy of the most recent Internal Revenue Service determination or
opinion letter issued with respect to each such Company Employee Plan, and nothing has occurred
since the issuance of each such letter which would reasonably be expected to cause the loss of the
Tax-qualified status of any Company Employee Plan subject to Section 401(a) of the Code. The
Company has also provided to Purchaser all registration statements and prospectuses prepared in
connection with each Company Employee Plan. All individuals who, pursuant to the terms of any
Company Employee Plan, are entitled to participate in any Company Employee Plan, are currently
participating in such Company Employee Plan or have been offered an opportunity to do so and have
declined in writing. No employee of the Company and no person subject to any health plan of the
Company has made medical claims through any such health plan during the 12 months preceding the
date hereof for more than $25,000 in the aggregate for which the Company is responsible. For the
purposes of the forgoing sentence, any exception to such representation and warranty set forth in
the Disclosure Letter shall be stated generally and shall not identify any employee of the Company
or person subject to any health plan of the Company who has made medical claims. The Company does
not sponsor or maintain any self-funded employee benefit plan.
3.15.3. None of the Company Employee Plans promises or provides retiree medical or other
retiree welfare benefits to any person other than as required under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”), or similar state law. There has been no
“prohibited transaction” (within the meaning of Section 406 of ERISA and Section 4975 of the Code
and not exempt under Section 408 of ERISA and regulatory guidance thereunder) with respect to any
Company Employee Plan. Each Company Employee Plan has been administered in accordance with its
terms and in compliance with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), and the Company and each ERISA Affiliate has performed
all obligations required to be performed by it under, is not in default under or in violation of,
and has no knowledge of any default or violation by any other party to, any of the Company Employee
Plans. Neither the Company nor any ERISA Affiliate is subject to any liability or penalty under
Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any of the Company
Employee Plans. All contributions required to be made by the Company or any ERISA Affiliate to any
Company Employee Plan have been made on or before their due dates and a reasonable amount has been
accrued for contributions to each Company Employee Plan for the current plan years (and no further
contributions will be due or will have accrued thereunder as of the Closing Date, other than
contributions accrued in the ordinary course of business, consistent with past practice, after the
Company Balance Sheet Date as a result of the operations of Company after the Company Balance Sheet
Date). In addition, with respect to each Company Employee Plan intended to include a Code Section
401(k) arrangement, the Company and ERISA Affiliates have at all times made timely deposits of
employee salary reduction contributions and participant loan repayments, as determined pursuant to
regulations issued by the United States Department of Labor. No Company Employee Plan is covered
by, and neither the Company nor any ERISA Affiliate has incurred or expects to incur any liability
under Title IV of ERISA or Section 412 of the Code. Each Company Employee Plan can be amended,
terminated or otherwise discontinued after the Closing in accordance with its terms, without
liability to Purchaser and/or the Company (other than ordinary administrative expenses typically
incurred in a termination event). With respect to each Company Employee Plan subject to ERISA as
either an employee pension benefit plan within the meaning of Section 3(2) of ERISA or an employee
welfare benefit plan within the meaning of Section 3(1) of ERISA, the Company has prepared in good
faith and timely filed all requisite governmental reports (which were true, correct and complete as
of the date filed), including any required audit reports, and has properly and timely filed and
distributed or posted all notices and reports to employees required to be filed, distributed or
posted with respect to each such Company Employee Plan. No suit, administrative proceeding, action
or other litigation has been brought, or to the knowledge of the Company, is threatened, against or
with respect to any such Company Employee Plan, including any audit or inquiry by the Internal
Revenue Service or United States Department of Labor.
22
3.15.4. With respect to each Company Employee Plan, the Company has complied with (i) the
applicable health care continuation and notice provisions of COBRA and the regulations (including
proposed regulations) thereunder, (ii) the applicable requirements of the Family Medical and Leave
Act of 1993 and the regulations (including proposed regulations) thereunder, (iii) the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996 and the regulations
(including proposed regulations) thereunder, (iv) the applicable requirements of the Americans with
Disabilities Act of 1990, as amended and the regulations (including proposed regulations)
thereunder, (v) the Age Discrimination in Employment Act of 1967, as amended, and (vi) the
applicable requirements of the Women’s Health and Cancer Rights Act of 1998 and the regulations
(including proposed regulations) thereunder.
3.15.5. There has been no amendment to, written interpretation or announcement (whether or not
written) by the Company or any ERISA Affiliate relating to, or change in participation or coverage
under, any Company Employee Plan which would materially increase the expense of maintaining such
Company Employee Plan above the level of expense incurred with respect to such Company Employee
Plan for the most recent fiscal year included in the Financial Statements. No Company Employee
Plan will be subject to any surrender fees or service fees upon termination other than the normal
and reasonable administrative fees associated with the termination of benefit plans.
3.15.6. Neither the Company nor any current or former ERISA Affiliate currently maintains,
sponsors, participates in or contributes to, or has ever maintained, established, sponsored,
participated in, or contributed to, any pension plan (within the meaning of Section 3(2) of ERISA)
which is subject to Part 3 of subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of
the Code. Neither the Company nor any ERISA Affiliate is a party to, or has made any contribution
to or otherwise incurred any obligation under, any “multiemployer plan” as such term is defined in
Section 3(37) of ERISA or any “multiple employer plan” as such term is defined in Section 413(c) of
the Code.
3.15.7. Each compensation and benefit plan maintained or contributed to by the Company under
the law or applicable custom or rule of the relevant jurisdiction outside of the United States
(each such plan, a “Foreign Plan”) is listed in Schedule 3.15.7 of the Disclosure Schedule. As
regards each Foreign Plan, (i) such Foreign Plan is in material compliance with the provisions of
the Legal Requirements of each jurisdiction in which such Foreign Plan is maintained, to the extent
those Legal Requirements are applicable to such Foreign Plan, (ii) all contributions to, and
material payments from, such Foreign Plan which may have been required to be made in accordance
with the terms of such Foreign Plan, and, when applicable, the Legal Requirements of the
jurisdiction in which such Foreign Plan is maintained, have been timely made or shall be made by
the Closing Date, and all such contributions to such Foreign Plan, and all payments under such
Foreign Plan, for any period ending before the Closing Date that are not yet, but will be, required
to be made, are reflected as an accrued liability on the Company Balance Sheet, (iii) the Company
and each ERISA Affiliate has materially complied with all applicable reporting and notice
requirements, and such Foreign Plan has obtained from the Governmental Entity having jurisdiction
with respect to such Foreign Plan any required determinations, if any, that such Foreign Plan is in
compliance with the Legal Requirements of the relevant jurisdiction if such determinations are
required in order to give effect to such Foreign Plan, (iv) such Foreign Plan has been administered
in all material respects at all times in accordance with its terms and applicable Legal
Requirements, (v) to the knowledge of the Company, there are no pending investigations by any
governmental body involving such Foreign Plan, and no pending claims (except for claims for
benefits payable in the normal operation of such Foreign Plan), suits or proceedings against such
Foreign Plan or asserting any rights or claims to benefits under such Foreign Plan, (vi) the
consummation of the transactions contemplated by this Agreement will not by itself create or
otherwise result in any liability with respect to such Foreign Plan, and (vii) except as required
by applicable Legal Requirements, no condition exists that would prevent the Company from
terminating or amending any
23
Foreign Plan at any time for any reason in
accordance with the terms of each such Foreign Plan without the
payment of any fees, costs or expenses (other than the payment of
benefits accrued through the date of termination and any normal and
reasonable expenses typically incurred in a termination event). The
benefits available under all Foreign Plans in the aggregate do not
provide materially greater benefits to employees of the Company
participating in such plans than the benefits available under the
Company Employee Plans for employees of the Company in the United
States. No Foreign Plan has unfunded liabilities that will not be
offset by insurance or that are not fully accrued on the financial
statements of the Company in accordance with GAAP.
3.15.8. Schedule 3.15.8 of the Disclosure Schedule lists as of
the date hereof each employee of the Company who is not fully
available to perform work because of disability or other leave and
also lists, with respect to each such employee, the basis of such
disability or leave and the anticipated date of return to full
service.
3.15.9. None of the execution and delivery of this Agreement or
the consummation of the transaction contemplated hereby or any
termination of employment or service in connection therewith or
subsequent thereto will, individually or together with the occurrence
of some other event, (i) result in any payment (including severance,
unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any Person, (ii) materially increase or otherwise
enhance any benefits otherwise payable by the Company, (iii) result
in the acceleration of the time of payment or vesting of any such
benefits, except as required under Section 411(d)(3) of the Code,
(iv) increase the amount of compensation due to any Person, or (v)
result in the forgiveness in whole or in part of any outstanding
loans made by the Company to any Person.
3.15.10. The Company is in compliance in all material respects
with all currently applicable Legal Requirements respecting
employment, discrimination in employment, terms and conditions of
employment, worker classification (including the proper
classification of workers as independent contractors and
consultants), wages, hours and occupational safety and health and
employment practices, including the Immigration Reform and Control
Act, and is not engaged in any unfair labor practice. All employees
of the Company who reside in the United States of America are
authorized for employment by the Company in accordance with all
United States immigration laws (including the Immigration and
Naturalization Act, the Immigration Reform and Control Act and the
Illegal Immigration Reform and Responsibility Act, each as amended)
and the regulations promulgated thereunder.
The Company has completed and retained in accordance with
Immigration and Naturalization Service regulations a Form I-9 for all
employees hired on or after November 7, 1986. The Company has
withheld all amounts required by law or by agreement to be withheld
from the wages, salaries, and other payments to employees; and is not
liable for any arrears of wages, compensation, Taxes, penalties or
other sums for failure to comply with any of the foregoing. The
Company has paid in full to all employees, independent contractors
and consultants all wages, salaries, commissions, bonuses, benefits
and other compensation due to or on behalf of such employees,
independent contractors and consultants. The Company is liable for
any payment to any trust or other fund or to any Governmental Entity,
with respect to unemployment compensation benefits, social security
or other benefits or obligations for employees (other than routine
payments to be made in the normal course of business and consistently
with past practice). There are no pending claims against the Company
under any workers compensation plan or policy or for long term
disability. The Company has no obligations under COBRA with respect
to any former employees or qualifying beneficiaries thereunder,
except for obligations that are not material in amount. There are no
controversies pending or, to the knowledge of the Company,
threatened, between the Company and any its employees, which
controversies have or would reasonably be expected to result in an
action, suit, proceeding, claim, arbitration or investigation before
any Governmental Entity.
24
3.15.11. Schedule 3.15.11 of the Disclosure Schedule sets forth a
true, correct and complete list of all severance Contracts and
employment Contracts to which the Company is a party or by which the
Company is bound. The Company has no obligation to pay any amount or
provide any benefit to any former employee or officer, other than
obligations (i) for which Company has established a reserve for such
amount on the Company Balance Sheet and (ii) pursuant to Contracts
entered into after the Company Balance Sheet Date and disclosed on
Schedule 3.15.11 of the Disclosure Schedule. The Company is not a
party to nor bound by any collective bargaining agreement or other
labor union Contract, no collective bargaining agreement is being
negotiated by the Company and the Company has no duty to bargain with
any labor organization. There is no pending demand for recognition
or any other request or demand from a labor organization for
representative status with respect to any Person employed by the
Company. The Company has no knowledge of any activities or
proceedings of any labor union or to organize their respective
employees. There is no labor dispute, strike or work stoppage
against the Company pending or, to the knowledge of the Company,
threatened, which may interfere with the respective business
activities of the Company. Neither the Company, nor to the knowledge
of the Company, any of its representatives or employees, has
committed any unfair labor practice in connection with the operation
of the respective businesses of the Company, and there is no charge or complaint
against the Company by the National Labor Relations Board or any
comparable Governmental Entity pending or to the knowledge of the
Company, threatened. No employee of the Company has resigned or been
dismissed in the 12 month period ending on the date hereof, for any
reason (including disability or death).
3.15.12. No employee of the Company is in violation of any term of
any employment agreement, patent disclosure agreement,
non-competition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by
the Company because of the nature of the business conducted or
presently proposed to be conducted by the Company or to the use of
trade secrets or proprietary information of others. Except as set
forth on Schedule 3.15.12 of the Disclosure Schedule, no employee of
the Company has given notice to the Company, nor does the Company
otherwise has knowledge, that any such employee intends to terminate
his or her employment with the Company. The employment of each of
the employees of the Company is “at will” (except for non-U.S.
employees of the Company located in a jurisdiction that does not
recognize the “at will” employment concept) and the Company does not
have any obligation to provide any particular form or period of
notice prior to terminating the employment of any of their respective
employees, except as set forth on Schedule 3.15.12 of the Disclosure
Schedule. As of the date hereof, the Company has not, and to the
knowledge of Company, no other Person has, (i) entered into any
Contract that obligates or purports to obligate Purchaser to make an
offer of employment to any present or former employee or consultant
of the Company and/or (ii) promised or otherwise provided any
assurances (contingent or otherwise) to any present or former
employee or consultant of the Company of any terms or conditions of
employment with Purchaser following the Closing.
3.15.13. The Company has provided to Purchaser a true, correct and
complete list of the names, positions and rates of compensation of
all officers, managers (or directors, as the case may be), and
employees of the Company showing each such person’s name, position,
annual remuneration, status as exempt/non-exempt, bonuses and fringe
benefits for the current fiscal year and the most recently completed
fiscal year. The Company has provided to Purchaser the additional
following information for each of its international employees:
city/country of employment, citizenship, date of hire, manager’s name
and work location, date of birth, any material special circumstances
(including pregnancy, disability or military service), and whether
the employee was recruited from a previous employer.
3.15.14. The Company has provided to Purchaser a true, correct and
complete list of all of its consultants and independent contractors
and for each the initial date of the engagement and whether the
engagement has been terminated by written notice by either party.
25
3.15.15. The Company has provided to Purchaser true, correct and
complete copies of each of the following: all forms of offer letters;
all forms of employment agreements and severance agreements; all
forms of services agreements and agreements with current and former
consultants and/or advisory board members; all forms of
confidentiality, non-competition or inventions agreements between
current and former employees/consultants and the Company (and a true,
correct and complete list of employees, consultants and/or others not
subject thereto); the most current management organization chart(s);
all agreements and/or insurance policies providing for the
indemnification of any officers or managers (or directors, as the
case may be) of the Company; summary of liability for termination
payments to current and former managers (or directors, as the case
may be), officers and employees of the Company; and a schedule of
bonus commitments made to employees of the Company.
3.15.16. There are no performance improvement or disciplinary
actions contemplated or pending against any of the Company’s current
employees.
3.15.17. The Worker Adjustment Retraining Notification Act of
1988, as amended, or any similar state or local law is not, and was
never, applicable to the Company.
3.15.18. The Company has delivered to Purchaser true and complete
copies of all election statements under Section 83(b) of the Code
that are in the Company’s possession or subject to its control with
respect to any unvested securities or other property issued by the
Company or any ERISA Affiliate to any of their respective employees,
non-employee managers (or directors, as the case may be), consultants
and other service providers.
3.15.19. Schedule 3.15.19 to the Disclosure Schedule lists all
“nonqualified deferred compensation plans” (within the meaning of
Section 409A of the Code) to which the Company is a party. Each
“nonqualified deferred compensation plan” to which the Company is a
party complies with the requirements of paragraphs (2), (3) and (4)
of Section 409A(a) by its terms and has been operated in accordance
with such requirements, and has been operated since January 1, 2005
in good faith compliance with Section 409A of the Code and IRS Notice
2005-1. No such nonqualified deferred compensation plan has been
materially modified (as determined under Notice 2005-1) after October
3, 2004. No event has occurred that would be treated by Section
409A(b) as a transfer of property for purposes of Section 83 of the
Code.
3.16. Interested Party Transactions. None of the Sellers, managers
(or directors, as the case may be), officers, employees or Members of the
Company, nor any immediate family member of any of the foregoing or of the
Sellers (each, an “Interested Party”), has any direct or indirect ownership,
participation, royalty or other interest in, or is an officer, director,
employee of or consultant or contractor for any firm, partnership, entity or
corporation that competes with, or does business with, or has any contractual
arrangement with, the Company (except with respect to any interest in less than
5% of the stock of any corporation whose stock is publicly traded). No
Interested Party is a party to, or to the knowledge of the Company, otherwise
directly or indirectly interested in, any Contract to which the Company is a
party or by which the Company or any of its assets or properties may be bound or
affected, except for normal compensation for services as an officer, manager (or
director, as the case may be) or employee thereof. To the knowledge of the
Company, no Interested Party has any interest in any property, real or personal,
tangible or intangible (including any Intellectual Property) that is used in, or
that relates to, the business of the Company, except for the rights of Members
under applicable Legal Requirements.
3.17. Insurance. The Company maintains the policies of insurance
and bonds set forth in Schedule 3.17 of the Disclosure Schedule, including all
legally required workers’ compensation insurance and errors and omissions,
casualty, fire and general liability insurance. Schedule 3.17 of the
26
Disclosure Schedule sets forth the name of the insurer under each such policy and bond, the
type of policy or bond, the coverage amount and any applicable deductible and
any other material provisions as of the date hereof as well all material claims
made under such policies and bonds since January 1, 2005. The Company has
provided to Purchaser true, correct and complete copies of all such policies of
insurance and bonds issued at the request or for the benefit of the Company.
There is no claim pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such policies and
bonds have been timely paid and the Company is otherwise in compliance with the
terms of such policies and bonds. All such policies and bonds remain in full
force and effect, and the Company has no knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies.
3.18. Books and Records. The Company has provided to Purchaser
true, correct and complete copies of each document that has been requested by
Purchaser or its counsel in connection with their legal and accounting review of
the Company (other than any such document that does not exist or is not in the
Company’s possession or subject to its control). Without limiting the
foregoing, the Company has provided to Purchaser complete and correct copies of
(a) all documents identified on the Disclosure Schedule, (b) the minute books
containing records of all proceedings, consents, actions and meetings of the
management committee (if any) and Members of the Company, (d) the list of
Members, journal and other records reflecting all Membership Interests and
transfers and all option and warrant grants and agreements of the Company, and
(e) all permits, orders and consents issued by any regulatory agency with
respect to the Company, or any securities of the Company, and all applications
for such permits, orders and consents. The minute books of the Company provided
to Purchaser contain a complete and accurate summary of all meetings of
management committee (if any) and Members of the Company or actions by written
consent since the time of incorporation of the Company through the date of this
Agreement, and reflect all transactions referred to in such minutes accurately in all material respects. The books, records and
accounts of the Company (i) are true, correct and complete in all material
respects, (ii) have been maintained in accordance with reasonable business
practices on a basis consistent with prior years, (iii) are stated in reasonable
detail and accurately and fairly reflect the transactions and dispositions of
the assets and properties of the Company, and (iv) accurately and fairly reflect
the basis for the Financial Statements.
3.19. Material Contracts.
3.19.1. Except for this Agreement, the Trust Agreement and the
Contracts specifically identified in Schedule 3.19 of the Disclosure
Schedule, the Company is not a party to nor is it bound by any of the
following Contracts (each a “Material Contract”):
3.19.1.1. any distributor, original equipment
manufacturer, reseller, value added reseller,
sales, advertising, agency or manufacturer’s
representative Contract;
3.19.1.2. any continuing Contract for the
purchase, sale or license of content, materials,
supplies, equipment, services, software,
Intellectual Property or other assets involving in
the case of any such Contract more than $10,000
over the life of the Contract;
3.19.1.3. any Contract that expires or may be
renewed at the option of any Person other than the
Company so as to expire more than one year after
the date of this Agreement;
3.19.1.4. any trust indenture, mortgage,
promissory note, loan agreement or other Contract
for the borrowing of money, any currency exchange,
commodities or other hedging arrangement or any
leasing transaction of the type required to be
capitalized in accordance with GAAP;
27
3.19.1.5. any Contract for capital expenditures
in excess of $10,000 in the aggregate;
3.19.1.6. any Contract limiting the freedom of
the Company to engage or participate, or compete
with any other Person, in any line of business,
market or geographic area, or to make use of any
Intellectual Property, or any Contract granting
most favored nation pricing, exclusive sales,
distribution, marketing or other exclusive rights,
rights of refusal, rights of first negotiation or
similar rights and/or terms to any Person, or any Contract otherwise limiting the
right of the Company to sell, distribute or
manufacture any products or services or to purchase
or otherwise obtain any software, components,
parts, subassemblies or services;
3.19.1.7. any Contract pursuant to which the
Company is a lessor or lessee of any real property
or any machinery, equipment, motor vehicles, office
furniture, fixtures or other personal property
involving in excess of $25,000 per annum;
3.19.1.8. any Contract with an Interested Party
(other than contracts with employees which are
terminable by the Company on notice of thirty (30)
days or less without penalty or further payment) or
with any Person with whom the Company does not deal
at arms’ length;
3.19.1.9. any Contract of guarantee, support,
indemnification, assumption or endorsement of, or
any similar commitment with respect to, the
obligations, liabilities (whether accrued,
absolute, contingent or otherwise) or indebtedness
of any other Person;
3.19.1.10. all licenses, sublicenses and other
Contracts as to which the Company is a party and
pursuant to which any Person is authorized to use
any Company IP Rights;
3.19.1.11. other than “shrink wrap” and similar
generally available commercial end-user licenses to
software that is not redistributed with the Company
Products that have an individual acquisition cost
of $10,000 or less, all licenses, sublicenses and
other Contracts to which the Company is a party and
pursuant to which the Company acquired or is
authorized to use any Third Party Intellectual
Property Rights;
3.19.1.12. all licenses, sublicenses and other
Contracts pursuant to which the Company has agreed
to any restriction on the right of the Company to
use or enforce any Company-Owned IP Rights or
pursuant to which the Company agrees to encumber,
transfer or sell rights in or with respect to any
Company-owned IP Rights;
3.19.1.13. any Contract providing for the
development or provision of any software, content, technology or Intellectual
Property, independently or jointly, by or for or to
the Company;
3.19.1.14. any Contract to license or authorize
any third party to manufacture or reproduce any of
the products, services, technology or Intellectual
Property of the Company;
3.19.1.15. (A) any joint venture Contract, (B)
any Contract that involves a sharing of revenues,
profits, cash flows, expenses or losses with other
Persons or (C) any Contract that involves the
payment of royalties to any other Person;
3.19.1.16. any agreement of indemnification or
warranty or any Contract
28
containing any support, maintenance or service obligation or cost on the
part of the Company (other than under its
unmodified form of standard customer or distributor
agreement, the form of which has been made
available to Purchaser);
3.19.1.17. any Contract for the employment of
any manager (or director, as the case may be),
officer, employee or consultant of the Company or
any other type of Contract with any officer,
employee or consultant of the Company that is not
immediately terminable by the Company without cost
or liability, including any Contract requiring it
to make a payment to any manager (or director, as
the case may be), officer, employee or consultant
on account of any transaction contemplated by this
Agreement or any Contract that is entered into in
connection with this Agreement;
3.19.1.18. any Contract or plan (including any
stock option, merger and/or stock bonus plan)
relating to the sale, issuance, grant, exercise,
award, purchase, repurchase, forfeiture or
redemption of Membership Interests or any other
securities of the Company or any options, warrants,
convertible notes or other rights to purchase or
otherwise acquire any Membership Interests other
securities or options, warrants or other rights
therefor;
3.19.1.19. any Contract under which the Company
provides any advice or services to any third party,
including any consulting Contract, professional
Contract or software implementation, deployment or
development services Contract, or support services
Contract (including, for each such contract, a
description of the percentage of completion and
expected additional hours, resources and costs
necessary to complete such services);
3.19.1.20. any Contract with any labor union or
any collective bargaining agreement or similar
contract with its employees;
3.19.1.21. any Contract with any investment
banker, broker, advisor or similar party, or any
accountant, legal counsel or other Person retained
by the Company, in connection with this Agreement
and the transactions contemplated hereby;
3.19.1.22. any Contract pursuant to which the
Company has acquired a business or entity, or
assets of a business or entity, whether by way of
merger, consolidation, purchase of stock, purchase
of assets, license or otherwise, or any contract
pursuant to which it has any material ownership
interest in any other Person;
3.19.1.23. any Contract with any Governmental
Entity or any Company Authorization;
3.19.1.24. any confidentiality, secrecy or
non-disclosure Contract other than any such
Contract entered into with customers and
distributors in the ordinary course of business
pursuant to the Company’s standard unmodified form
(a copy of which has been provided to Purchaser);
3.19.1.25. any settlement agreement;
3.19.1.26. any Contract pursuant to which
rights of any third party are triggered or become
exercisable, or under which any other consequence,
result or effect arises, in connection with or as a
result of the execution of this Agreement or the
consummation of the transactions contemplated
hereunder, either alone or in combination with any
other event; or
29
3.19.1.27. any other oral or written Contract
or obligation not listed in the above clauses that
individually had or has a value or payment
obligation in excess of $25,000 over the life of
the Contract or is otherwise material to the Company or its business, operations,
financial condition, properties or assets.
3.19.2. All Material Contracts are in written form. The Company
has performed all of the obligations required to be performed by it
and is entitled to all benefits under, is not alleged to be in
default in respect of, any Material Contract. Each of the Material
Contracts is in full force and effect, subject only to the effect, if
any, of applicable bankruptcy and other similar laws affecting the
rights of creditors generally and rules of law governing specific
performance, injunctive relief and other equitable remedies. There
exists no default or event of default or event, occurrence, condition
or act, with respect to the Company or, to the Company’s Subsidiary’s
knowledge, with respect to any other contracting party, which, with
the giving of notice, the lapse of time or the happening of any other
event or condition, would reasonably be expected to (i) become a
default or event of default under any Material Contract or (ii) give
any third party (A) the right to declare a default or exercise any
remedy under any Material Contract, (B) the right to a rebate,
chargeback, refund, credit, penalty or change in delivery schedule
under any Material Contract, (C) the right to accelerate the maturity
or performance of any obligation of the Company under any Material
Contract, or (D) the right to cancel, terminate or modify any
Material Contract. The Company has not received any notice or other
communication regarding any actual or possible violation or breach
of, default under, or intention to cancel or modify any Material
Contract. The Company has no liability for renegotiation of
government Contracts. True, correct and complete copies of all
Material Contracts have been provided to Purchaser prior to the date
hereof.
3.20. Export Control Laws. The Company has conducted its export
transactions in accordance in all respects with applicable provisions of United
States and applicable foreign export control laws and regulations, including but
not limited to the Export Administration Act and implementing Export
Administration Regulations. There are no pending or, to the knowledge of the
Company, threatened claims against the Company with respect to such export
licenses or other approvals, and there are no actions, conditions or
circumstances pertaining to the Company’s export transactions that would
reasonably be expected to give rise to any future claims.
3.21. Customers and Suppliers.
3.21.1. The Company has no outstanding material disputes
concerning its products and/or services with any customer or
distributor who, in the year ended December 31, 2006 or the 3 months
ended March 31, 2007, was one of the 5 largest sources of revenues
for the Company, based on amounts paid or payable (each, a
"Significant Customer”), and the Company has no knowledge of any
material dissatisfaction on the part of any Significant Customer.
Each Significant Customer is listed on Schedule 3.21.1 of the
Disclosure Schedule. The Company has not received any information
from any Significant Customer that such customer shall not continue as a customer of the Company (or
Purchaser) after the Closing or that such customer intends to
terminate or materially modify existing Contracts with the Company
(or Purchaser). The Company has not had any of its products returned
by a purchaser thereof except for normal warranty returns consistent
with past history and those returns that would not result in a
reversal of any revenue by the Company.
3.21.2. The Company has no outstanding material dispute
concerning products and/or services provided by any supplier
(including, without limitations, content providers) who, in the year
ended December 31, 2006 or the 3 months ended March 31, 2007, was one
of the 5 largest suppliers of products and/or services to the
Company, based on amounts paid or payable (each, a “Significant
Supplier”), and the Company has no knowledge of any material
dissatisfaction on the part of any Significant Supplier. Each
Significant Supplier is listed on Schedule 3.21.2 of the Disclosure
Schedule.
30
The Company has not received any information from any
Significant Supplier that such supplier shall not continue as a
supplier to the Company (or Purchaser) after the Closing or that such
supplier intends to terminate or materially modify existing Contracts
with the Company (or Purchaser). The Company has access, on
commercially reasonable terms, to all products and services
reasonably necessary to carry on its business, and the Company has no
knowledge of any reason why they will not continue to have such
access on commercially reasonable terms.
3.22. Broker’s and Finder’s Fees. Except as set forth in Schedule
3.19 of the Disclosure Schedule with respect to Section 3.19.1.21 (provided,
that any fees or other payments due thereunder are borne solely by the Sellers),
neither the Sellers, the Company nor any Affiliate thereof is obligated for the
payment of any fees or expenses of any investment banker, broker, advisor,
finder or similar party in connection with the origin, negotiation or execution
of this Agreement or in connection with the transactions contemplated by this
Agreement.
3.23. Representations Complete. None of the representations or
warranties made by the Company herein or in any exhibit or schedule hereto,
including the Disclosure Schedule, or in any certificate furnished by the
Company pursuant to this Agreement, when all such documents are read together in
their entirety, contains or will contain at the Closing any untrue statement of
a material fact, or omits or will omit at the Closing to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading. No information
furnished to Purchaser by the Company or the Sellers to be included in the
Registration Statement will contain any untrue statement of a material fact, or
will omit to state any material fact necessary in order to make the statements
contained therein, in the light of the circumstances under which made, not
misleading.
4. Representations and Warranties of Purchaser.
Purchaser represents and warrants to the Company as follows:
4.1. Organization and Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Purchaser is not in violation of any of the
provisions of its Certificate of Incorporation.
4.2. Authority; Non-contravention.
4.2.1. Purchaser has all requisite corporate power and authority
to enter into this Agreement and each of the Transaction Agreements
to which it is a party, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and each of the Transaction Agreements to which they are a
party, and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate
action on the part of Purchaser. This Agreement and each of the
Transaction Agreements to which they are a party has been duly
executed and delivered by Purchaser and constitutes the valid and
binding obligation of Purchaser enforceable against Purchaser, in
accordance with its terms, subject only to the effect, if any, of (i)
applicable bankruptcy and other similar laws affecting the rights of
creditors generally and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
4.2.2. The execution and delivery of this Agreement and each of
the Transaction Agreements to which they are a party by Purchaser do
not, and the consummation of the transactions contemplated hereby and
thereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or
give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under (i) any provision of its
Certificate of
31
Incorporation, or (ii) any Contract to which Purchaser
is a party or applicable Legal Requirement, except where such
conflict, violation, default, termination, cancellation or
acceleration, individually or in the aggregate, would not be material
to the ability of Purchaser to perform its obligations under this
Agreement.
4.2.3. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is
required by or with respect to Purchaser in connection with the
execution and delivery of this Agreement, each of the Transaction
Agreements to which they are a party, or the consummation of the
transactions contemplated hereby and thereby, except for (i) the
filing of the Registration Statement and any filings required by
applicable securities laws and NASDAQ rules in connection with the
execution of this Agreement, (ii) such filings and notifications as
may be required to be made by Purchaser in connection with this
Agreement under Antitrust Laws and the expiration or early
termination of applicable waiting periods under such laws, and (iii)
such other consents, authorizations, filings, approvals, notices and
registrations which, if not obtained or made, would not be material
to the ability of Purchaser to perform its
obligations under this Agreement.
4.2.4. Financing. Purchaser does not currently have the
sufficient financing resources to pay the Purchase Price and the
Employee Bonus Amount, however, subject to and conditional upon the
successful completion of the financing pursuant to the Registration
Statement by which Purchaser shall have raised net proceeds (after
deducting fees, expenses and commissions) in an amount sufficient in
order to pay the Purchase Price and the Employee Bonus Amount at
Closing, Purchaser will have the cash on hand to pay the Purchase
Price and the Employee Bonus Amount at Closing.
5. Conduct Prior to the Closing
5.1. Conduct of Business of the Company and Subsidiaries. During
the period from the date hereof and continuing until the earlier of the
termination of this Agreement and the Closing:
5.1.1. The Company shall, and shall cause each Subsidiary to,
conduct its business in the usual, regular and ordinary course in the
same manner as heretofore conducted and in material compliance all
applicable Legal Requirements (except to the extent expressly
provided otherwise in this Agreement or as consented to in writing by
Purchaser);
5.1.2. The Company shall, and shall cause each Subsidiary to,
(A) pay all of its debts and Taxes when due, subject to good faith
disputes over such debts or Taxes, (B) pay or perform its other
obligations when due, (C) use commercially reasonable efforts
consistent with past practice and policies to collect accounts
receivable when due and not extend credit outside of the ordinary
course of business consistent with past practice, (D) sell Company
Products consistent with past practice as to license, service and
maintenance terms, incentive programs, and in accordance with GAAP
requirements as to revenue recognition, and (E) use its commercially
reasonable efforts consistent with past practice and policies to
preserve intact its present business organizations, keep available
the services of its present officers and key employees and preserve
its relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, to the end
that its goodwill and ongoing businesses shall be unimpaired at the
Closing;
5.1.3. The Company shall promptly notify Purchaser of any
change, occurrence or event not in the ordinary course of its or any
Subsidiary’s business, or of any change, occurrence or event which,
individually or in the aggregate with any other changes, occurrences
and events, would reasonably be expected to be materially adverse to
the Company and its Subsidiaries taken together or cause any of the
conditions to closing set forth in Section 7 not to be satisfied;
32
5.1.4. The Company shall, and shall cause
each Subsidiary to, assure that each of its Contracts entered
into after the date hereof will not require the procurement of any
consent, waiver or novation or provide for any change in the
obligations of any party in connection with, or terminate as a result
of the consummation of the transaction contemplated hereby, and shall
give reasonable advance notice to Purchaser prior to allowing any
Material Contract or right thereunder to lapse or terminate otherwise
in accordance with its terms; and
5.1.5. The Company shall, and shall cause each Subsidiary to,
maintain each of its leased premises in accordance with the terms of
the applicable lease.
5.2. Restrictions on Conduct of Business of the Company and
Subsidiaries. Without limiting the generality or effect of the provisions
of Section 5.1, during the period from the date hereof and continuing until the
earlier of the termination of this Agreement or Closing, the Sellers and the
Company shall not, and shall cause each Subsidiary not to, do, cause or permit
any of the following (except to the extent expressly provided otherwise in this
Agreement, or each of the Transaction Agreements to which they are a party, or
as consented to in writing by Purchaser):
5.2.1. Charter Documents. Cause or permit any
amendments to its Charter Documents or equivalent organizational or
governing documents;
5.2.2. Dividends; Changes in Equity. Declare or pay any
dividends on or make any other distributions (whether in cash, equity
or property) in respect of any of its Membership Interest or
reclassify any of its equity interests or issue or authorize the
issuance of any other equity interests in respect of, in lieu of or
in substitution for Membership Interest, except pursuant to Section
1.2.2.2 hereof;
5.2.3. Material Contracts. Enter into any Contract that
would constitute a Material Contract, other material Contract or a
Contract requiring a novation or consent in connection with the
transaction contemplated hereby, or violate, terminate, amend, or
otherwise modify (including by entering into a new Contract with such
party or otherwise) or waive any of the terms of any of its Material
Contracts;
5.2.4. Issuance of Securities. Admit any new Members to
the Company, issue, deliver or sell or authorize or propose the
issuance, delivery or sale of, or purchase or propose the purchase
of, any Company Voting Debt or any equity interest or securities
convertible into, or subscriptions, rights, warrants or options to
acquire, or other Contracts of any character obligating it to issue
any such shares or other convertible securities;
5.2.5. Employees; Consultants; Independent Contractors.
(i) Hire any additional officers or other employees, or any
consultants or independent contractors, (ii) terminate the
employment, change the title, office or position, or materially
reduce the responsibilities of any management, supervisory or other key
personnel of the Company or any Subsidiary, (iii) enter into, amend
or extend the term of any employment or consulting agreement with any
officer, employee, consultant or independent contractor, or (iv)
enter into any Contract with a labor union or collective bargaining
agreement (unless required by applicable Legal Requirements);
5.2.6. Loans and Investments. Make any loans or
advances (other than routine expense advances to employees of the
Company or any Subsidiary consistent with past practice) to, or any
investments in or capital contributions to, any Person or from any
Subsidiary (other than ordinary course funding to its existing
Subsidiaries in order to fund operations in amounts consistent with
past practice), or forgive or discharge in whole or in part any
outstanding loans or advances, or prepay any indebtedness for
borrowed money;
33
5.2.7. Intellectual Property. Transfer or license from any Person any rights to any
Intellectual Property, or transfer or license to any Person any rights to any Company IP Rights
(other than non-exclusive end-user licenses in connection with the sale of Company Products in the
ordinary course of business consistent with past practice), or transfer or provide a copy of any
Company Source Code to any Person (other than providing access to Company Source Code to current
employees and consultants of the Company or its Subsidiaries involved in the development of the
Company Products on a need to know basis, consistent with past practice);
5.2.8. Exclusive Rights and Most Favored Party Provisions. Enter into or amend any
agreement pursuant to which any other party is granted exclusive rights or “most favored party”
rights of any type or scope with respect to any of its products, technology, Intellectual Property
or business, or containing any non-competition covenants or other restrictions relating to its or
Purchaser’s business activities;
5.2.9. Dispositions. Sell, lease, license or otherwise dispose of or encumber (other
than Permitted Encumbrances) any of its properties or assets, other than sales and nonexclusive
licenses of Company Products in the ordinary course of business consistent with its past practice,
or enter into any Contract with respect to the foregoing;
5.2.10. Indebtedness. Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt securities of others;
5.2.11. Leases. Enter into any operating lease in excess of $10,000 or any leasing
transaction of the type required to be capitalized in accordance with GAAP;
5.2.12. Payment of Obligations; Collection of Receivables. Pay, discharge or
satisfy, (i) any amounts due under any promissory note issued by the Company to any Person who is
an officer or manager (or director, as the case may be) of the Company or any Subsidiary, or (ii)
any amount in excess of $10,000 in any one case or $25,000 in the aggregate, any claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise) arising
otherwise than in the ordinary course of business pursuant to Contracts made available to
Purchaser, other than the payment, discharge or satisfaction of liabilities reflected or reserved
against in the Financial Statements or defer payment of any accounts payable other than in the
ordinary course of business consistent with past practice, or in an amount in excess of $10,000, or
give any discount, accommodation or other concession other than in the ordinary course of business
consistent with past practice, in order to accelerate or induce the collection of any receivable;
5.2.13. Capital Expenditures. Make any capital expenditures, capital additions or
capital improvements in excess of $10,000 individually or $25,000 in the aggregate;
5.2.14. Insurance. Materially change the amount of any insurance coverage;
5.2.15. Termination or Waiver. Terminate or waive any right of substantial value;
5.2.16. Employee Benefit Plans; Pay Increases. (i) Adopt or amend any Company
Employee Plan, or amend any compensation, benefit, entitlement, grant or award provided or made
under any such plan, except in each case as required under ERISA, applicable Legal Requirements or
as necessary to maintain the qualified status of such plan under the Code; (ii) materially amend
any deferred compensation plan within the meaning of Section 409A of the Code and Internal Revenue
Service Notice 2005-1, except to the extent necessary to meet the requirements of such Section or
Notice; (iii) pay any special bonus or special remuneration to any employee or non-employee manager
(or director, as the case
34
may be) or consultant or increase the salaries, wage rates or fees of its employees or
consultants, other than pursuant to preexisting plans, policies or Contracts which have been
disclosed to Purchaser and are set forth on Schedule 5.2.16 of the Disclosure Schedule; or (iv)
establish or add any new members to the management committee or board of directors, as the case may
be, of the Company or any Subsidiary;
5.2.17. Severance Arrangements. Grant or pay, or enter into any Contract providing
for the granting of any severance, retention or termination pay, or the acceleration of benefits,
to any Person, other than payments or acceleration made pursuant to preexisting plans, policies or
Contracts which have been disclosed to Purchaser and are set forth on Schedule 5.2.17 of the
Disclosure Schedule;
5.2.18. Lawsuits; Settlements. (i) Commence a lawsuit or legal proceeding, other than
(A) for the routine collection of bills, (B) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable aspect of its
business (provided that it consults with Purchaser prior to the filing of such a suit), or (C) for
a breach of this Agreement; or (ii) settle or agree to settle any pending or threatened lawsuit,
legal proceeding or other dispute;
5.2.19. Acquisitions; Subsidiaries. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to its and its Subsidiaries’ business, or enter into any Contract
with respect to a joint venture, strategic alliance or partnership, or establish any Subsidiary;
5.2.20. Taxes. Make or change any election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, file any Tax Return or any amendment to a Tax Return, enter
into any Tax sharing or similar agreement or closing agreement, settle any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes, or enter into intercompany transactions giving rise to
deferred gain or loss of any kind;
5.2.21. Accounting. Change accounting methods or practices (including any change in
depreciation or amortization policies) or revalue any of its assets (including writing down the
value of inventory or writing off notes or accounts receivable otherwise than in the ordinary
course of business), except in each case as required by changes in GAAP as concurred with its
independent accountants and after notice to Purchaser;
5.2.22. Real Property. Enter into any agreement for the purchase, sale or lease of
any real property or owned tenant improvements;
5.2.23. Encumbrances. Place or allow the creation of any Encumbrance (other than a
Permitted Encumbrance) on any of its properties, and, in the respect of the Sellers, on the
Interest;
5.2.24. Warranties, Discounts. Materially change the manner in which it provides
warranties, discounts or credits to customers;
5.2.25. Interested Party Transactions. Enter into any Contract in which any
Interested Party has an interest under circumstances that, if entered immediately prior to the date
hereof, would require that such Contract be listed on Schedule 3.16 of the Disclosure Schedule;
5.2.26. Grants. Apply for, progress or obtain funds under any grant, incentives, tax
benefits and subsidies filed with any Governmental Entity;
35
5.2.27. Web Site. Engage in any action that will be of detriment to the validity or
value of the domain names or URLs included in the Company Registered Intellectual Property, or
change the “look and feel” of any Company Web Site at any such URLs; and
5.2.28. Other. Take or agree in writing or otherwise to take, any of the actions
described in clauses 5.2.1 through 5.2.26, or any action which would reasonably be expected to make
any of the Company’s representations or warranties contained in this Agreement untrue or incorrect
such that the condition set forth in Section 7.3.1 or 7.3.4 would not be satisfied, or prevent the
Company from performing or cause the Company not to perform one or more covenants required
hereunder to be performed by the Company such that the condition set forth in Section 7.3.1 would
not be satisfied.
5.3. Point of Contact. All notices, request for consents and other communications
pursuant to this 5 shall be in writing, delivered in accordance with Section 10.2 and shall be sent
by Sellers Representative, as the Company’s point of contact to Purchaser’s point of contact as
detailed in Section 10.2.
6. Additional Agreements
6.1. Access to Information.
6.1.1. During the period commencing on the date hereof and continuing until the earlier of the
termination of this Agreement or the Closing, (i) the Company and the Sellers shall afford
Purchaser and its accountants, counsel and other representatives, reasonable access during business
hours to (A) all of the Company’s and each of its Subsidiaries’ properties, books, Contracts and
records, and (B) all other information concerning the business, properties and personnel of the
Company or any of its Subsidiaries as Purchaser may reasonably request, and (ii) the Company and
Sellers shall provide to Purchaser and its accountants, counsel and other representatives true,
correct and complete copies of the Company’s and each of its Subsidiaries’ (A) internal financial
statements, (B) Tax Returns, Tax elections and all other records and workpapers relating to Taxes,
(C) a schedule of any deferred intercompany gain or loss with respect to transactions to which the
Company or any Subsidiary has been a party, and (D) receipts for any Taxes paid to foreign Tax
Authorities.
6.1.2. From the date hereof until the earlier of the termination of this Agreement and the
Closing, the Company shall confer from time to time as requested by Purchaser with one or more
representatives of Purchaser to discuss any material changes or developments in the operational
matters of the Company and each of its Subsidiaries and the general status of the ongoing
operations of the Company and each of its Subsidiaries.
6.1.3. Unless this Agreement terminated, Sellers agree to cooperate with the Purchaser and its
representatives, and if so reasonably requested, to provide for copies of, the books and records of
the Sellers, insofar as they relate to the Company, during regular business hours and at no expense
to the Sellers, in order for the Purchaser to obtain information relevant to the Company’s Tax
Returns, or as otherwise reasonably required for the conduct of the Company’s business.
6.1.4. No information or knowledge obtained in any investigation pursuant to this Section 6.1
shall affect or be deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties hereto to consummate the transactions contemplated
hereby.
6.2. Confidentiality; Public Disclosure.
6.2.1. The parties hereto acknowledge that Purchaser, the Sellers and the Company
36
have previously executed a Mutual Non-Disclosure Agreement dated April 10, 2007 (the
“Confidentiality Agreement”), which shall continue in full force and effect in accordance with its
terms.
6.2.2. The Sellers and the Company shall not, and the Company shall cause each Subsidiary and
each Company Representative not to, directly or indirectly, issue any press release or other public
statement relating to the terms of this Agreement or the transactions contemplated hereby,
including, if applicable, the termination of this Agreement, or use Purchaser’s name or refer to
Purchaser directly or indirectly in connection with Purchaser’s relationship with the Company in
any media interview, advertisement, news release, press release or professional or trade
publication, or in any print media, whether or not in response to an inquiry, without the prior
written approval of Purchaser, unless required by law (in which event a satisfactory opinion of
outside counsel to that effect shall be first delivered to Purchaser prior to any such disclosure)
and except as reasonably necessary for the Company to obtain the consents and approvals of third
parties contemplated by this Agreement. Notwithstanding anything herein or in the Confidentiality
Agreement, Purchaser may issue such press releases or make such other public statements regarding
this Agreement or the transactions contemplated hereby as Purchaser may, in its reasonable
discretion, determine, including in order to comply with Purchaser’s obligations under applicable
securities laws and the NASDAQ rules.
6.2.3. This section shall survive the consummation, termination or expiration of this
Agreement and the transactions contemplated hereby.
6.3. No Solicitation.
6.3.1. From and after the date of this Agreement until the Closing or termination of this
Agreement, neither the Sellers, the Company nor any of its Subsidiaries will, nor will any of them
authorize or permit any of their respective officers, managers (or directors, as the case may be),
affiliates, members (or stockholders, as the case may be) or employees or any investment advisor or
banker, attorney or other advisor or representative retained by any of them (all of the foregoing
collectively being the “Company Representatives”) to, directly or indirectly, (i) solicit,
initiate, seek, entertain, encourage, facilitate, support or induce the making, submission or
announcement of any inquiry, expression of interest, proposal or offer that constitutes, or would
reasonably be expected to lead to, an Acquisition Proposal, (ii) enter into, participate in,
maintain or continue any communications (except solely to provide written notice as to the
existence of these provisions) or negotiations regarding, or deliver or make available to any
Person any non-public information with respect to, or take any other action regarding, any inquiry,
expression of interest, proposal or offer that constitutes, or would reasonably be expected to lead
to, an Acquisition Proposal, (iii) agree to, accept, approve, endorse or recommend (or publicly
propose or announce any intention or desire to agree to, accept, approve, endorse or recommend) any
Acquisition Proposal, (iv) enter into any letter of intent or any other Contract contemplating or
otherwise relating to any Acquisition Proposal, or (v) submit any Acquisition Proposal to the vote
of any Members (or securityholders, as the case may be) of Company or any Subsidiary. Each of the
Company and its Subsidiaries will immediately cease and cause to be terminated any and all existing
activities, discussions or negotiations with any Persons conducted prior to or on the date of this
Agreement with respect to any Acquisition Proposal. If any Company Representative, whether in his
or her capacity as such or in any other capacity, takes any action that the Company is obligated
pursuant to this Section 6.3 to cause such Company Representative not to take, then the Company
shall be deemed for all purposes of this Agreement to have breached this Section 6.3.
6.3.2. The Sellers and the Company shall immediately (and in no event later than 24 hours)
notify Purchaser orally and in writing after receipt by the Sellers, the Company and/or any
Subsidiary (or, to the knowledge of the Company, by any of the Company Representatives), of (i) any
Acquisition Proposal, (ii) any inquiry, expression of interest, proposal or offer that constitutes,
or would
37
reasonably be expected to lead to, an Acquisition Proposal, (iii) any other notice that any
Person is considering making an Acquisition Proposal, or (iv) any request for nonpublic information
relating to the Company or any Subsidiary or for access to any of the properties, books or records
of the Company or any Subsidiary by any Person or Persons other than Purchaser. Such notice shall
describe (A) the material terms and conditions of such Acquisition Proposal, inquiry, expression of
interest, proposal, offer, notice or request, and (B) the identity of the Person or Group making
any such Acquisition Proposal, inquiry, expression of interest, proposal, offer, notice or request.
The Sellers and the Company shall keep Purchaser fully informed of the status and details of, and
any modification to, any such inquiry, expression of interest, proposal or offer and any
correspondence or communications related thereto and shall provide to Purchaser a true, correct and
complete copy of such inquiry, expression of interest, proposal or offer and any amendments,
correspondence and communications related thereto, if it is in writing, or a reasonable written
summary thereof, if it is not in writing. The Sellers and the Company shall provide Purchaser with
48 hours prior notice (or such lesser prior notice as is provided to the members of its management)
of any meeting of the Members of the Company at which it is reasonably expected to discuss any
Acquisition Proposal.
6.4. Non-Competition; Non-Disclosure.
6.4.1. In order to induce Purchaser to purchase the Interest pursuant to this Agreement,
Sellers covenant and agree that during the period commencing on the Closing Date and ending on the
second (2nd) anniversary thereof (the “Non-Competition Period”), neither Sellers nor any
of their respective Affiliates shall directly or indirectly, whether as an officer, director,
stockholder, investor, partner, proprietor, business associate, employee, representative or
otherwise, (i) promote, market, become or be financially interested in, consult with or for, or
associate in a business relationship with, any other person, corporation, firm, partnership or
other entity whatsoever (other then the Company) whose business is a Competitive Business (as
defined below); (ii) solicit or otherwise encourage any customers or vendors of the Company to
cease doing business with the Company or undertake any action, either directly or indirectly, that
would reasonably be expected to cause any customer or vendors of the Company to cease, terminate or
materially adversely change its relationship with the Company, or (iii) solicit the services of any
of the Company’s employees, consultants or independent contractor, or otherwise encourage any such
employees, consultants or independent contractor to terminate their employment with, or services
to, the Company or to become an employee, consultant or independent contractor or otherwise provide
services to any Person other than the Company. Notwithstanding the foregoing, this Section shall
not prohibit a Seller or its Affiliates from owning up to 5% of the equity of any publicly traded
company, whether or not such company is engaged in whole, or in part, in a Competitive Business.
The term “Competitive Business” shall mean any business (or any component thereof) that is
competitive with the business conducted by the Company during the twelve (12) months period prior
to the Closing Date, including, without limitations, Internet reference content related business
and any business associated with language reference, general reference or question and answer
information delivered over the Internet. For the purpose of this Section 6.4, the term “Company”
shall include the Company, Purchaser and their respective Affiliates.
6.4.2. Without limiting the generality of Section 6.4.1, during the Non-Competition Period,
neither Sellers nor any of their respective Affiliates shall register, cause to be registered,
claim, cause to be claimed or take any action to register or claim any rights in and to any
trademark, service xxxx or any marks that are confusingly similar to any Company Web Site, domain
names or URLs included (or which should have been included) in the Company Registered Intellectual
Property, and shall not register any domain name that contains the word “Reference”, “Dictionary”,
“Thesaurus” or any word which is a misspelling of, or potentially confusingly similar name to, any
Company Web Site, domain names or URLs included (or which should have been included) in the Company
Registered Intellectual Property. In addition, neither Sellers nor any of their respective
Affiliates shall register or challenge any
38
rights of the Company in any Company-Owned IP Rights.
6.4.3. Each of the Sellers expressly acknowledges that damages alone will be an inadequate
remedy for any breach or violation of any of the provisions of this Section 6.4, and Purchaser, in
addition to all other remedies available at law or hereunder, shall be entitled, as a matter of
right, to injunctive relief, including specific performance, with respect to any such breach or
violation, in any court of competent jurisdiction. If any of the provisions of this Section 6.4
are held to be in any respect an unreasonable restriction upon any party restricted hereby, then
they shall be deemed to extend only over the maximum period of time, geographic area or range of
activities as to which they may be enforceable. In the event that a Seller shall be in violation
of the provisions of this Section 6.4, then the running of the Non-Competition Period with respect
to such Seller shall be automatically suspended upon the date of such violation and shall resume on
the date such violation ceases, and accordingly the Non-Competition Period shall be extended for a
period of time equal to the period of time during which such breach shall occur; and, in the event
that Purchaser should be required to seek relief from such breach in any court, board of
arbitration or other tribunal, then the Non-Competition Period shall be extended for the period of
time required for the pendency of such proceedings, including all appeals.
6.4.4. Each of the Sellers acknowledges that he has had access to, and became familiar with,
Proprietary Information of the Company (as defined in the Confidentiality Agreement) and that such
Proprietary Information is a valuable and unique asset of the Company and is and will remain the
exclusive property of the Company. Therefore, each of the Sellers agrees and undertakes that he (i)
will maintain securely and hold in strict confidence all Proprietary Information received, acquired
or developed by him whether following or prior to the Closing, (ii) will not, in whole or in part,
disclose Proprietary Information to any Person under any circumstances, and (iii) will not, in
whole or in part, use any Proprietary Information for any purpose (other than for and as authorized
in writing by the Company). Each Seller agrees to instruct his Representatives who obtain
Proprietary Information to comply with the terms and conditions of this Agreement. The obligation
of non-disclosure and non-use imposed shall not apply to information that (a) appears in issued
patents or other printed publications; (b) received by Seller not in connection with his
relationship to the Company and from a source that was not prohibited from disclosing such
information to Seller by a confidentiality obligation or other fiduciary or legal duty, (c) is or
becomes generally known to the public through no wrongful act or breach of Seller or any of his
Representatives. Each Seller shall not be prohibited from disclosing Proprietary Information to
the extent required by a court order or applicable law, provided that he shall notify the Company
of such disclosure and shall use reasonable efforts to (and cooperate with Company in seeking to)
seal, redact, or otherwise minimize such disclosure. The obligations contained in this Section
6.4.4 shall survive the Closing of the transactions contemplated by this Agreement and remain in
force and effect in accordance with their respective terms.
6.4.5. Each Seller agrees that documents, copies, records and other property or materials made
or received by Seller that pertain to the business and affairs of the Company or its Affiliates,
including all Proprietary Information, which is in Seller’s possession or under his control, are
the property of the Company and that the Seller will return same and any copies of same to the
Company promptly after the Closing and shall not retain any copy, summary or reproduction of same.
6.5. Financials; Metric Reports. From and after the date of this Agreement until the
earlier of Closing or termination of this Agreement:
6.5.1. The Sellers and the Company shall cause the Company’s employees, auditors and other
representatives to cooperate with and assist Purchaser, as Purchaser may reasonably request, to
enable Purchaser to prepare and file with the SEC, in connection with the transaction contemplated
hereby, the Current Report on Form 8-K and any additional amendments or supplements that may be
39
required by the Exchange Act of 1934 and/or the Securities Act (and, in each case, the rules
and regulations promulgated thereunder). The Company shall use its commercially reasonable efforts
to cause its auditors to deliver any opinions or consents necessary for Purchaser to file the
Company’s financials statements, to the extent necessary. Any financial statements of the Company
prepared pursuant to this paragraph shall be prepared in accordance with GAAP.
6.5.2. The Sellers and the Company shall promptly prepare and deliver to Purchaser the
unaudited consolidated financial statements of the Company prepared in accordance with GAAP
(including, in each case, balance sheets, income statements, statement of changes in shareholders
equity and statement of cash flows, and comparative financial information for the periods specified
therein), reviewed by independent auditors associated with one of the “Big 4” accounting firms, for
the fiscal quarter ended March 31, 2007 (in no event later than July 27, 2007) and for the fiscal
quarter ended June 30, 2007 (in no event later than August 15, 2007).
6.5.3. The Sellers and the Company shall promptly prepare at the end of each calendar month
and promptly deliver to Purchaser, but in no event later than ten (10) calendar days after the end
of each calendar month, an internal management accounts of income, balance sheet, retained earnings
and cash flows of the Company and its Subsidiaries, on a consolidated basis, for the preceding
month. In addition, the Company shall promptly prepare at the end of each fiscal quarter and
promptly deliver to Purchaser, but in no event later than twenty (20) calendar days after the end
of each fiscal quarter, unaudited, consolidated balance sheets and related unaudited consolidated
statements of income, shareholders’ equity and cash flows of the Company as of the end of such
fiscal quarter, including comparative financial information for the periods specified therein with
the corresponding periods of the preceding fiscal year, reviewed by independent auditors associated
with one of the “Big 4” accounting firms. The Company hereby represents and warrants that such
unaudited consolidated balance sheets and related unaudited consolidated statements of income,
shareholders’ equity and cash flows of the Company shall (i) be complete in all material respects
except for the omission of notes and schedules contained in annual financial statements; (ii)
present fairly in all material respects the consolidated financial position of the Company as of
the date thereof and the consolidated results of its operation, cash flows and changes in financial
position for the periods then ended (except for normal year-end adjustments which are, individually
or in the aggregate, not material); and (iii) have been prepared in accordance with the GAAP
applied on a consistent basis. In addition, the Company shall promptly prepare and deliver to
Purchaser such other financial information reasonably requested by Purchaser. Purchaser hereby
agrees that the financial information provided to Purchaser pursuant to this Section 6.5.3 shall be
governed by the terms of the Confidentiality Agreement, provided however that Purchaser is
permitted to disclose any such information in connection with the Offering.
6.5.4. The Sellers and the Company shall promptly prepare at the end of each calendar month
and promptly deliver to Purchaser, but in no event later than ten (10) calendar days after the end
of each calendar month, updated traffic metrics information on each Company Web Site, individually
and in the aggregate, according to the parameters requested by Purchaser in connection with
Schedule 3.12.32(i) of the Disclosure Schedule, and the updated number of registered users of each
Company Web Site, as of the end of each such month.
6.6. Regulatory Approvals.
6.6.1. The Sellers and the Company shall, and shall cause each Subsidiary to, promptly after
the date hereof, execute and file, or join in the execution and filing of, any application,
notification (including any notification or provision of information, if any, that may be required
under the Antitrust Laws) or other document that may be necessary in order to obtain the
authorization, approval or consent of any Governmental Entity, whether federal, state, local or
foreign, which may be reasonably
40
required, or which Purchaser may reasonably request, in connection with the consummation of
the transactions contemplated by this Agreement. The Sellers and the Company shall use
commercially reasonable efforts to obtain, and to cooperate with Purchaser to promptly obtain, all
such authorizations, approvals and consents. Sellers shall pay any associated filing fees payable
by the Company with respect to such authorizations, approvals and consents. The Sellers and the
Company shall promptly inform Purchaser of any material communication between the Company and any
Governmental Entity regarding any of the transactions contemplated hereby. If Sellers and the
Company or any affiliate of the Company receives any formal or informal request for supplemental
information or documentary material from any Governmental Entity with respect to the transactions
contemplated hereby, then the Sellers and Company shall make, or cause to be made, as soon as
reasonably practicable, a response in compliance with such request. The Sellers and the Company
shall direct, in its sole discretion, the making of such response, but shall consider in good faith
the views of Purchaser.
6.6.2. Purchaser shall promptly after the date hereof execute and file, or join in the
execution and filing of, any application, notification (including any notification or provision of
information, if any, that may be required under the Antitrust Laws) or other document that may be
necessary in order to obtain the authorization, approval or consent of any Governmental Entity,
whether foreign, federal, state, local or municipal, which may be reasonably required in connection
with the consummation of the transactions contemplated by this Agreement. Purchaser shall use
commercially reasonable efforts to obtain all such authorizations, approvals and consents.
Purchaser shall pay any associated filing fees payable by Purchaser with respect to such
authorizations, approvals and consents. Purchaser shall promptly inform the Sellers of any
material communication between Purchaser and any Governmental Entity regarding any of the
transactions contemplated hereby. If Purchaser or any affiliate of Purchaser receives any formal
or informal request for supplemental information or documentary material from any Governmental
Entity with respect to the transactions contemplated hereby, then Purchaser shall make, or cause to
be made, as soon as reasonably practicable, a response in compliance with such request. Purchaser
shall direct, in its sole discretion, the making of such response, but shall consider in good faith
the views of the Sellers and the Company.
6.6.3. Notwithstanding anything in this Agreement to the contrary, if any administrative or
judicial action or proceeding is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement as violative of any Antitrust Laws, it is expressly
understood and agreed that: (i) Purchaser shall not have any obligation to litigate or contest any
administrative or judicial action or proceeding or any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent; and (ii) Purchaser shall be under no obligation to
make proposals, execute or carry out agreements or submit to orders providing for (A) the sale,
license or other disposition or holding separate (through the establishment of a trust or
otherwise) of the Interest or any assets or categories of assets of Purchaser or any of its
affiliates or the Company or its Subsidiaries, (B) the imposition of any limitation or regulation
on the ability of Purchaser or any of its affiliates to freely conduct their business or own such
assets, or (C) the holding separate of the Interests or any limitation or regulation on the ability
of Purchaser or any of its affiliates to exercise full rights of ownership of the Interest (any of
the foregoing, an “Antitrust Restraint”). Nothing in this Section 6.6 shall limit a party’s right
to terminate this Agreement pursuant to Section 8.1.2 if such party has, until such date, complied
in all material respects with its obligations under this Section 6.6.
6.7. Third Party Consents; Notices.
6.7.1. The Sellers and the Company shall use their commercially reasonable efforts to obtain
or deliver prior to the Closing all consents, waivers and approvals or notices under each Contract
or from each Person listed or described on Schedule 3.5.2(ii)(B) of the Disclosure Schedule (and
any Contract entered into after the date hereof that would have been required to be listed or
described on
41
Schedule 3.5.2(ii)(B) of the Disclosure Schedule if entered into prior to the date hereof).
6.7.2. After prior coordination and consultation with Purchaser regarding the timing and
content thereof, the Sellers and Company shall give all notices and other information required to
be given to the employees of the Company or any Subsidiary, any collective bargaining unit
representing any group of employees of the Company or any Subsidiary, and any applicable government
authority under the National Labor Relations Act, as amended, the Code, COBRA and other applicable
Legal Requirements in connection with the transactions contemplated by this Agreement.
6.8. Litigation. The Sellers and the Company will (i) notify Purchaser in writing
promptly after learning of any action, suit, arbitration, mediation, proceeding, claim, or
investigation by or before any Governmental Entity or arbitrator initiated by or against any of
them or any of the Company’s Subsidiaries, or known by any of them to be threatened against any of
them, any of the Company’s Subsidiaries or any of their respective mangers (or directors, as the
case may be) officers, employees or members (or stockholders, as the case may be) in their capacity
as such (a “New Litigation Claim”), (ii) notify Purchaser of ongoing material developments in any
New Litigation Claim and (iii) consult in good faith with Purchaser regarding the conduct of the
defense of any New Litigation Claim.
6.9.
Purchaser’s Financing. Purchaser shall prepare and file or cause to be prepared
and filed with the SEC within 45 days after the date hereof, a registration statement on Form S-3
or another appropriate registration statement for the purpose of an offering to be made in order to
raise net proceeds (after deducting fees, expenses and commissions) in an amount sufficient in
order to pay the Purchase Price and the Employee Bonus Amount at Closing (the “Offering”). Sellers
and the Company shall furnish to the Purchaser, Purchaser’s advisors, the underwriters of such
offering and such underwriters’ advisors, such relevant information, in oral and written form,
regarding the Sellers and the Company as the Purchaser may reasonably request and as shall be
reasonably required in connection with the preparation and filing of the Registration Statement and
any amendments thereto and in connection with the Offering. In addition, the Sellers and the
Company shall, and shall cause the Company’s employees, auditors and other representatives to
cooperate with and assist Purchaser, as Purchaser may reasonably request, to enable Purchaser to
prepare and file with the SEC the Registration Statement, including by participating in drafting
sessions and conference calls regarding the Registration Statement and the contents thereof and by
signing such documents as may be reasonably requested by Purchaser, the underwriters of the
Offering and their respective advisors in connection with the closing of the Offering.
6.10. Termination of Affiliated Agreements. The Sellers and the Company undertake
that all Contracts between the Company, on the one hand, and Sellers or any of their Affiliates, on
the other hand, if any, that require, or could require with the passage of time, the payment by the
Company of any amounts or other consideration to any Seller or its Affiliate shall have been
terminated on or before the Closing Date, without any further liability or obligation whatsoever
thereunder on the part of the Company, and Purchaser may request to received reasonably
satisfactory written evidence thereof.
6.11. Reasonable Efforts. Subject to the limitations set forth in Section 6.3, each
of the parties hereto agrees to use its commercially reasonable efforts, and to cooperate with each
other party hereto, to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, appropriate or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated hereby, including the satisfaction of
the respective conditions set forth in Article VI, and including to execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or reasonably
desirable for effecting completely the consummation of the transactions contemplated hereby.
42
7. Conditions to the Closing
7.1. Conditions to Obligations of Each Party to Effect the Closing. The obligations
of each party hereto to consummate the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions:
7.1.1. No Order. No temporary restraining order, preliminary or permanent injunction
or other order issued by any Governmental Entity which has or could have the effect of making the
transaction contemplated hereby illegal or otherwise prohibiting or preventing the consummation of
the transactions contemplated by this Agreement or the Offering shall be in effect, nor shall any
action have been taken by any Governmental Entity seeking or threatening any of the foregoing, and
no statute, rule, regulation or order shall have been enacted, entered, enforced or deemed
applicable to the transaction contemplated, which makes the consummation of the transactions
contemplated by this Agreement illegal.
7.1.2. Governmental Approvals. Purchaser, Sellers and the Company shall have timely
obtained from each Governmental Entity all approvals, waivers and consents, if any, necessary for
consummation of, or in connection with, the transactions contemplated hereby. All applicable
waiting periods under the Antitrust Laws shall have expired or early termination of such waiting
periods shall have been granted by both the Federal Trade Commission and the United States
Department of Justice (or, with respect to foreign antitrust laws, the applicable foreign
Governmental Entity).
7.2. Additional Conditions to Obligations of the Sellers. The obligations of the
Sellers to consummate the transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Closing of each of the following conditions (it being understood that each such
condition is solely for the benefit of the Sellers and may be waived by the Sellers Representative
in writing in its sole discretion without notice, liability or obligation to any Person):
7.2.1. Representations, Warranties and Covenants. The representations and warranties
of Purchaser in this Agreement shall be true and correct in all material respects (except for such
representations and warranties that are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be true and correct in all respects) on
and as of the date hereof and on and as of the Closing Date as though such representations and
warranties were made on and as of such date (except for representations and warranties which
specifically relate to another date, which representations and warranties shall be true and correct
with respect to such date). Purchaser shall have performed and complied in all material respects
with all covenants, obligations and conditions of this Agreement required to be performed and
complied with by it at or prior to the Closing.
7.3. Additional Conditions to the Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated hereby shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions (it being understood that each such
condition is solely for the benefit of Purchaser and may be waived by Purchaser in writing in its
sole discretion without notice, liability or obligation to any Person):
7.3.1. Representations, Warranties and Covenants. The representations and
warranties of the Sellers and the Company in this Agreement shall be true and correct in all material
respects (except for such representations and warranties that are qualified by their terms by a reference to
materiality, which representations and warranties as so qualified shall be true and correct in all respects)
on and as of the date hereof and on and as of the Closing Date as though such representations and
warranties were made on and as of such date (except for representations and warranties which specifically
relate to another earlier, which representations and warranties shall be true and correct with respect to
43
such date). The Sellers and the Company shall have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement required to be performed
and complied with by the Sellers and Company at or prior to the Closing.
7.3.2. Receipt of Closing Deliveries. Purchaser shall have received each of the
deliveries agreements, instruments and other documents set forth in Section 2.2; provided, however,
that such receipt shall not be deemed to be an agreement by Purchaser that the amounts set forth on
any of agreements, instruments or documents set forth in Section 2.2 is accurate and shall not
prejudice Purchaser’s remedies hereunder if any of the foregoing documents is not accurate.
7.3.3. No Injunctions or Restraints on Conduct of Business. No temporary restraining
order, preliminary or permanent injunction or other order issued by any Governmental Entity which
has or could have the effect of limiting or restricting Purchaser’s ownership, conduct or operation
of the business of the Company and/or any Subsidiary following the Closing shall be in effect, nor
shall there be pending or threatened any suit, action or proceeding seeking any of the foregoing or
any other Antitrust Restraint.
7.3.4. No Material Adverse Effect. There shall not have occurred a Material Adverse
Effect with respect to the Company.
7.3.5. Employees. Each employee set forth on Schedule 7.3.5 hereto shall have
remained continuously employed with the Company from the date of this Agreement through the
Closing, and no action shall have been taken by any such individual to rescind such employee’s
employment agreements and/or the a non-competition, non-solicitation and assignment of proprietary
information and inventions agreement.
7.3.6. Third Party Consents. All consents, waivers, approvals or notices under each
Contract or from each Person listed or described on Schedule 3.5.1(ii)(B) of the Disclosure
Schedule (or that would have been required to be listed or described thereon) shall have been
obtained or delivered, as the case may be.
7.3.7. Financing. The Offering shall have successfully closed and the net proceeds to
Purchaser therefrom deposited in the back accounts of Purchaser.
8. Termination
8.1. Termination. At any time prior to the Closing, this Agreement may be terminated
and the transactions contemplated hereby abandoned by authorized action taken by the terminating
party:
8.1.1. by mutual written of the Sellers and Purchaser;
8.1.2. by either Purchaser or the Sellers, if the Closing shall not have occurred by a date
being 180 days from the initial filing date of the registration statement in respect of the
Offering by the Purchaser with the SEC or such other date that Purchaser and the Sellers
Representative may agree upon in writing (the “Termination Date”); provided, however, that (i) in
case the registration statement in respect of the Offering is still under the SEC review at such
date, then the Termination Date shall be extended by such additional period; and (ii) in case that
the review of the Company’s financial statements for the first and second fiscal quarters shall not
have been completed within 30 days following the date hereof, then the Termination Date shall be
extended by such additional period); and provided, further, that the right to terminate this
Agreement under this Section 8.1.2 shall not be available to any party whose
44
breach of this Agreement has resulted in the failure of the Closing to occur on or before the
Termination Date;
8.1.3. by either Purchaser or the Sellers, if any permanent injunction or other order of a
Governmental Entity of competent authority preventing the consummation of the transactions
contemplated hereby shall have become final and non-appealable; provided, however, that the right
to terminate this Agreement under this Section 8.1.3 shall not be available to any party
whose breach of this Agreement has been the cause of or resulted in such injunction or other order;
8.1.4. by Purchaser, if (i) the Sellers shall have breached any representation, warranty,
covenant or agreement of the Sellers or the Company contained herein, which breach shall not have
been cured within five Business Days after receipt by the Sellers of written notice of such breach
(provided, however, that no such cure period shall be available or applicable to any such breach
which by its nature cannot be cured), and if Closing were to occur on the date of such termination
such breach would result in the failure of any of the conditions set forth in Section 7.1 or
Section 7.3 to be satisfied, (ii) Section 6.3 has been breached prior to the Termination Date,
(iii) the circumstances or events described in Section 7.3.3 shall have occurred, or (iv) there
shall have been a Material Adverse Effect with respect to the Company; or
8.1.5. by the Sellers, if Purchaser shall have breached any representation, warranty, covenant
or agreement contained herein, which breach shall not have been cured within five Business Days
after receipt by Purchaser of written notice of such breach (provided, however, that no such cure
period shall be available or applicable to any such breach which by its nature cannot be cured) and
such breach would result in the failure of any of the conditions set forth in Section 7.1 or
Section 7.2 to be satisfied.
8.2. Effect of Termination. In the event of termination of this Agreement as provided
in Section 8.1, this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Purchaser, Sellers, the Company or their respective officers, managers
(or directors, as the case may be), stockholders or affiliates; provided, however, that (i) the
provisions of Section 2.3 (Expenses), 6.2 (Confidentiality; Public Disclosure), this Sections 8.2
(Effect of Termination), Section 8.3 (Termination Fees and Expenses), Section 10 (General
Provisions) and the Confidentiality Agreement shall remain in full force and effect and survive any
termination of this Agreement and (ii) the termination of this Agreement shall not relieve any
party from any liability for any material breach of any covenant or obligation or for any
intentional and material breach of any representation or warranty contained in this Agreement.
8.3. Termination Fees and Expenses.
8.3.1. Purchaser shall reimburse Sellers for direct out-of-pocket expenses for counsel and
accountants that the Sellers have incurred in connection with the preparation, negotiation,
execution and delivery of this Agreement and the transactions contemplated hereby, not to exceed
$400,000, as Sellers’ sole and exclusive remedy upon termination of this Agreement pursuant to
Section 8.1.2 in the event that Closing does not occur due to failure to satisfy the conditions set
forth in Section 7.3.7. Such payment shall be paid within 10 Business Days following such
termination and upon the receipt by Purchaser of an invoice from Sellers setting forth such
expenses in reasonable detail, accompanied by reasonable documentation.
8.3.2. Sellers shall pay Purchaser a fee in the amount of $2,000,000, as Purchaser’s sole and
exclusive remedy upon termination of this Agreement pursuant to Section 8.1.4. Such payment shall
be paid within 10 Business Days following the date of such termination.
45
8.3.3. Purchaser shall pay Sellers (in the same allocation as the allocation of the Purchase
Price) a fee in the amount of $2,000,000, as Sellers’ sole and exclusive remedy upon termination of
this Agreement pursuant to Section 8.1.5. Such payment shall be paid within 10 Business Days
following the date of such termination.
8.3.4. The parties acknowledges that the agreements contained in this Section 8.3
are an integral part of the transactions contemplated by this Agreement, and that if this Agreement
is terminated as provided in the applicable sub-sections of Section 8.1, that the amounts payable
pursuant to Sections 8.3.1 through 8.3.3 are reasonable forecasts of the
actual damages which may be incurred by such party under such circumstances and constitute
liquidated damages and not a penalty, and further that, without these agreements, the parties would
not enter into this Agreement.
8.3.5. All payments to be made under this Section 8.3 shall be paid in U.S. Dollars by wire
transfer in immediately available funds to such bank accounts the details of which shall be
provided by the relevant payee(s) to the relevant payor upon the time of payment.
8.4. Nothing in this Section 8 is intended to nor shall it derogate from or limit the rights
and/or remedies any party may have pursuant to this Agreement, by law or equity at any time prior
to termination of this Agreement, including, without limitation, the right to seek injunctive
relief or specific performance in any court of competent jurisdiction.
9. Escrow Fund and Indemnification
9.1. Escrow Fund. The Escrow Amount shall be deposited with the Escrow Agent, such
deposit, together with any interest that may be earned thereon, to constitute an escrow fund (the
“Escrow Fund”) and to be governed by the provisions set forth herein and in the Indemnity Escrow
Agreement. The Escrow Fund shall be available to compensate Purchaser on behalf of itself or any
other Indemnified Person or Sellers, as the case may be, for Indemnifiable Damages pursuant to the
indemnification obligations of the applicable Indemnifying Party hereunder.
9.2. Indemnification by Sellers. Subject to the limitations set forth in this Section
9, the Sellers shall, jointly and severally, indemnify and hold harmless Purchaser, its Affiliates
and their respective officers, directors, agents and employees, and each person, if any, who
controls or may control Purchaser within the meaning of the Securities Act from and against any and
all losses, liabilities, damages, reductions in value, costs and expenses, including costs of
investigation and defense and reasonable fees and expenses of lawyers, experts and other
professionals (collectively, “Indemnifiable Damages”) directly or indirectly arising out of,
resulting from or in connection with:
9.2.1. any failure of any representation or warranty made by the Sellers or the Company in
this Agreement or the Disclosure Schedule (including any exhibit or schedule to the Disclosure
Schedule), and any certificate to be delivered pursuant to this Agreement, to be true and correct
as of the date of this Agreement and as of the Closing Date as though such representation or
warranty were made as of the Closing Date (except in the case of representations and warranties
which specifically relate to another date, which representations and warranties shall be true and
correct as of such date);
9.2.2. any breach of or default in connection with any of the covenants or agreements made by
the Sellers or the Company in this Agreement or the Disclosure Schedule (including any exhibit or
schedule to the Disclosure Schedule) and any certificate to be delivered pursuant to this
Agreement;
46
9.2.3. imposition, assessment or assertion of any Taxes of the Company or any Subsidiary or
any Taxes for which the Company or Subsidiary is or may become liable (including, without
limitation, by reason of non-recognition of deductions, changes in accounting methods, failure to
fully comply with applicable laws or failure to qualify in any foreign jurisdiction and including
those incurred in a contest of good faith by appropriate proceedings of the imposition, assessment
or assertion of any such Taxes) on account of (A) any taxable periods that ends on or before the
Closing Date, and (B) any taxable period that both includes and ends after the Closing Date, for
the portion of such taxable period that ends on the Closing Date;
9.2.4. any amounts determined following the Closing that should have been deducted from the
Purchase Price pursuant to the adjustments in accordance with the provisions of Section 1.2.2.1 but
were not so deducted or any amount determined following the Closing that should not have been
deducted from the Purchase Price or permitted to be paid as dividend pursuant in accordance with
the provisions of Section 1.2.2.2 but were so deducted or paid.
9.2.5. any Transaction Expenses paid by the Company prior to the Closing or which were not
assumed and paid by the Sellers after the Closing.
9.2.6. any obligations of the Sellers to make contributions as provided in Chapter 5 of the
Corporations Code (commencing with Section 17200), to return any unlawful distributions made under
Chapter 6 (commencing with Section 17250) or Chapter 8 (commencing with Section 17350).
In determining the amount of any Indemnifiable Damages in respect of the failure of any
representation or warranty to be true and correct as of any particular date, any materiality
standard or qualification contained in such representation or warranty shall be disregarded.
9.3. Indemnification by Purchaser. Subject to the limitations set forth in this
Section 9, Purchaser shall indemnify and hold harmless Sellers from and against any Indemnifiable
Damages directly arising out of, resulting from or in connection with any failure of any
representation or warranty made by the Purchaser in this Agreement to be true and correct as of the
date of this Agreement and as of the Closing Date as though such representation or warranty were
made as of the Closing Date (except in the case of representations and warranties which
specifically relate to another date, which representations and warranties shall be true and correct
as of such date), up to an amount equal to the Escrow Amount, as the sole and exclusive remedy for
the indemnity obligations hereunder.
9.4. Indemnifiable Damage Threshold; Other Limitations.
9.4.1. No Indemnified Person shall be entitled to indemnification pursuant to Sections 9.2.1
or 9.2.2 (and that does not involve fraud, willful breach or intentional misrepresentation by the
Sellers, the Company or any Subsidiary, any inaccuracy or breach of any of the representations and
warranties in Section 3.3 (Capital Structure), Section 3.4 (Title to Interest), 3.5 (Authority;
Non-Contravention), Section 3.12 (Intellectual Property and Internet Practices) or Section 3.14
(Tax Matters), or breach of Section 6.4), or pursuant to Section 9.3, unless and until an Officer’s
Certificate describing Indemnifiable Damages in an aggregate amount greater than $100,000 (the
“Threshold”) has been delivered, in which case the Indemnified Person shall be entitled to
indemnification for all Indemnifiable Damages in excess of the Threshold, subject to the
limitations set forth in this Section 9.
9.4.2. If the Closing occurs, recovery from the Escrow Fund shall be the sole and exclusive
remedy for the indemnity obligations under this Agreement for the matters listed in Sections 9.2.1
or 9.2.2, except in the case of (i) fraud, willful breach or intentional misrepresentation by the
Sellers, the Company or any Subsidiary, (ii) any failure of any of the representations and
warranties
47
contained in Section 3.3 (Capital Structure), Section 3.4 (Title to Interest), 3.5 (Authority;
Non-Contravention), Section 3.12 (Intellectual Property and Internet Practices) or Section 3.14
(Tax Matters) to be true and correct as aforesaid, and (iii) any breach of or default in connection
with any covenant or agreement to the extent such covenant or agreement is to survive or be
performed also after the Escrow Period (including, without limitation, pursuant to Section 6.4);
with respect to each the Sellers shall be liable for any Indemnifiable Damages resulting therefrom
after Indemnified Persons have exhausted or made claims upon all amounts in the Escrow Fund (after
taking into account all other claims for indemnification from the Escrow Fund made by Indemnified
Persons). Notwithstanding anything to the contrary, this Section 9 shall in no way limit an
Indemnified Party’s right to seek injunctive relief or specific performance.
9.4.3. The amount of Indemnifiable Damages for which indemnification is provided under this
Agreement will be (i) increased to take account of any Tax cost incurred (grossed up for such
increase) by the Indemnified Persons arising from the receipt of indemnity payments hereunder and
(ii) reduced to take account of any Tax benefit realized by the Indemnified Persons arising from
the incurrence or payment of any such Indemnifiable Damages. In computing the amount of any such
Tax cost or Tax benefit, the Indemnified Persons will be deemed to be subject to the applicable
federal, state, local and/or local country income Taxes at the maximum statutory rate then in
effect.
9.5. Period for Claims Against Escrow Fund. The period during which indemnification
claims for Indemnifiable Damages may be made (the “Claims Period”) shall commence at the Closing
and terminate on the date that is 12 months following the Closing Date (the “Escrow Period”),
provided, however, that the Claims Period for Indemnifiable Damages pursuant to Section 9.2 (i)
resulting from or in connection with fraud, willful breach or intentional misrepresentation by the
Company or any Subsidiary, (ii) arising from any breach of the representations and warranties
contained in Section 3.3 (Capital Structure), Section 3.4 (Title to Interest), 3.5 (Authority;
Non-Contravention), Section 3.12 (Intellectual Property and Internet Practices) or Section 3.14
(Tax Matters), (iii) arising from any breach of or default in connection with any covenant or
agreement to the extent such covenant or agreement is to survive or be performed also after the
Escrow Period (including, without limitation, pursuant to Section 6.4), or (iv) arising pursuant to
either of Sections 9.2.3 through 9.2.6, shall terminate upon the date that is 30 days after
expiration of the applicable statute of limitations with respect to any theretofore unasserted
claims arising out of or otherwise in respect of the items covered by Sections (i) through (iv)
above. Notwithstanding anything contained herein to the contrary, such portion of the Escrow Fund
at the conclusion of the Escrow Period as may be necessary to satisfy any unresolved or unsatisfied
claims for Indemnifiable Damages specified in any Officer’s Certificate delivered to the Sellers
Representative prior to expiration of the Escrow Period shall remain in the Escrow Fund until such
claims for Indemnifiable Damages have been resolved or satisfied. The remainder of the Escrow
Fund, if any, shall be paid to the Sellers promptly after the expiration of the Escrow Period in
the same allocation as that of the Purchase Price.
9.6. Claims.
9.6.1. On or before the last day of the Escrow Period, Purchaser may deliver to the Escrow
Agent a certificate signed by any officer of Purchaser (in case of an indemnification claim
pursuant to Section 9.2), or Sellers Representative may deliver to the Purchaser a certificate (in
case of an indemnification claim pursuant to Section 9.3) (an “Officer’s Certificate”):
9.6.1.1. stating that an Indemnified Person has incurred, paid, reserved or accrued, or
reasonably anticipates that it may incur, pay, reserve or accrue, Indemnifiable Damages (or
that with respect to any Tax matters, that any Tax Authority may raise such matter in audit
of Purchaser or its Affiliates, which could give rise to Indemnifiable Damages);
48
9.6.1.2. stating the amount of such Indemnifiable Damages (which, in the case of
Indemnifiable Damages not yet incurred, paid, reserved or accrued, may be the amount
reasonably anticipated by Purchaser to be incurred, paid, reserved or accrued); and
9.6.1.3. specifying in reasonable detail (based upon the information then possessed by
Purchaser) the individual items of such Indemnifiable Damages included in the amount so
stated and the nature of the claim to which such Indemnifiable Damages are related.
No delay in providing such Officer’s Certificate within the Escrow Period shall affect an
Indemnified Person’s rights hereunder, unless (and then only to the extent that) the Indemnifying
Person is materially prejudiced thereby.
9.6.2. In case of an indemnification claim pursuant to Section 9.2, at the time of delivery of
any Officer’s Certificate to the Escrow Agent, a duplicate copy of such Officer’s Certificate shall
be delivered to the Sellers Representative by or on behalf of Purchaser (on behalf of itself or any
other Indemnified Person) and for a period of 20 days after such delivery to the Escrow Agent of
such Officer’s Certificate, the Escrow Agent shall make no payment pursuant to this Section 9.6
unless the Escrow Agent shall have received written authorization from the Sellers Representative
to make such delivery. After the expiration of such 20-day period, the Escrow Agent shall make
delivery of cash from the Escrow Fund to Purchaser in accordance with this Section 9.6; provided,
however, that no such delivery may be made if and to the extent the Sellers Representative shall in
good faith object in a written statement to any claim or claims made in the Officer’s Certificate,
and such statement shall have been delivered to the Escrow Agent and to Purchaser prior to the
expiration of such 20-day period.
9.7. Resolution of Objections to Claims.
9.7.1. In case of an indemnification claim pursuant to Section 9.2, if the Sellers
Representative in good faith objects in writing to any claim or claims by Purchaser made in any
Officer’s Certificate within such 20-day period, Purchaser and the Sellers Representative shall
attempt in good faith for 20 days after Purchaser’s receipt of such written objection to resolve
such objection. If Purchaser and the Sellers Representative shall so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties and delivered to the Escrow
Agent. The Escrow Agent shall be entitled to conclusively rely on any such memorandum and the
Escrow Agent shall distribute cash from the Escrow Fund in accordance with the terms of such
memorandum.
9.7.2. In case of an indemnification claim pursuant to Section 9.3, Purchaser and the Sellers
Representative shall attempt in good faith for 20 days after Purchaser’s receipt of an Officer’s
Certificate to resolve such objection. If Purchaser and the Sellers Representative shall so agree,
a memorandum setting forth such agreement shall be prepared and signed by both parties.
9.7.3. If no such agreement pursuant to Sections 9.7.1 or 9.7.2, as the case may be, can be
reached during the 20-day period for good faith negotiation, but in any event upon the expiration
of such 20-day period, either Purchaser or the Sellers Representative may refer the matter to
arbitration in accordance with Section 10.10 hereof to resolve the matter. The decision of the
arbitrator as to the validity and amount of any claim in such Officer’s Certificate shall be
non-appealable, binding and conclusive upon the parties to this Agreement and the Escrow Agent or
Purchaser, as the case may be, shall be entitled to act in accordance with such decision and the
Escrow Agent shall distribute cash from the Escrow Fund in accordance therewith.
9.7.4. Judgment upon any award rendered by the arbitrator may be entered in any court having
jurisdiction. For purposes of this Section 9.7.4, in any suit hereunder in which any claim or
49
the amount thereof stated in the Officer’s Certificate is at issue, the Indemnified Person
shall be deemed to be the non-prevailing party unless the arbitration awards the Indemnified Person
more than one-half of the amount in dispute, in which case the Indemnifying Person shall be deemed
to be the non-prevailing party. The non-prevailing party to a suit shall pay its own expenses and
the expenses and the fees and expenses of the prevailing party, including attorneys’ fees and
costs, reasonably incurred in connection with such suit.
9.8. Sellers Representative.
9.8.1. By virtue of their signature on this Agreement, the Sellers have appointed the Sellers
Representative as the agent and attorney-in-fact for and on behalf of the Sellers to: (i) give and
receive notices and communications, as an Indemnified Person or an Indemnifying Person, to or from
Purchaser (on behalf of itself or any other Indemnified Person, or as an Indemnifying Person)
relating to this Agreement or any of the transactions and other matters contemplated hereby or
thereby (except to the extent that this Agreement expressly contemplates that any such notice or
communication shall be given or received by such Seller individually); (ii) authorize deliveries to
Purchaser of cash from the Escrow Fund in satisfaction of claims asserted by Purchaser (on behalf
of itself or any other Indemnified Person, including by not objecting to such claims); (iii) object
to claims made by or on behalf of an Indemnified Person, including pursuant to Section 9.6, or make
claims as or on behalf of an Indemnified Person; (iv) consent or agree to, negotiate, enter into
settlements and compromises of, and comply with orders of courts or arbitration awards with respect
to, such claims; (v) consent or agree to any amendment to this Agreement; and (vi) take all actions
necessary or appropriate in the judgment of the Sellers Representative for the accomplishment of
the foregoing, in each case without having to seek or obtain the consent of any Person under any
circumstance. The Person serving as the Sellers Representative may be replaced from time to time
by the Sellers upon not less than ten days’ prior written notice to Purchaser. The Sellers
Representative shall receive no compensation for its services.
9.8.2. The Sellers Representative shall not be liable to any Seller for any act done or
omitted hereunder as the Sellers Representative while acting in good faith (and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such good faith) and
without gross negligence or willful misconduct. The Sellers shall severally indemnify the Sellers
Representative and hold the Sellers Representative harmless against any loss, liability or expense
incurred without gross negligence, willful misconduct or bad faith on the part of the Sellers
Representative and arising out of or in connection with the acceptance or administration of the
duties of the Sellers Representative hereunder, including any out-of-pocket costs and expenses and
legal fees and other legal costs reasonably incurred by the Sellers Representative. If not paid
directly to the Sellers Representative by the Sellers, such losses, liabilities or expenses may be
recovered by the Sellers Representative from Escrow Fund otherwise distributable to the Sellers
(and not distributed or distributable to an Indemnified Person or subject to a pending
indemnification claim of an Indemnified Person) at the end of the Escrow Period pursuant to the
terms hereof and of the Indemnity Escrow Agreement, at the time of distribution, and such recovery
will be made from the Sellers according to their respective pro rata share of the Purchase Price.
9.8.3. Any notice or communication given or received by, and any decision, action, failure to
act within a designated period of time, agreement, consent, settlement, resolution or instruction
of, the Sellers Representative that is within the scope of the Sellers Representative’s authority
under Section 9.8.1 shall constitute a notice or communication to or by, or a decision, action,
failure to act within a designated period of time, agreement, consent, settlement, resolution or
instruction of all the Sellers and shall be final, binding and conclusive upon each such Sellers;
and each Indemnified Person shall be entitled to rely upon any such notice, communication,
decision, action, failure to act within a designated period of time, agreement, consent,
settlement, resolution or instruction as being a notice or communication to or by, or a decision,
action, failure to act within a designated period of time, agreement,
50
consent, settlement, resolution or instruction of, each and every such Seller.
9.9. Third-Party Claims. In the event an Indemnified Person becomes aware of a
third-party claim that it believes may result in an indemnification claim against the Escrow Fund
or the Indemnifying Person by or on behalf of an Indemnified Person, the Indemnified Person shall
promptly notify the Indemnifying Person in writing and in reasonable detail of such third-party
claim, provided however that no delay in providing such notice shall affect an Indemnified Person’s
rights hereunder, unless (and then only to the extent that) the Indemnifying Person is materially
prejudiced thereby. The Indemnifying Person shall have the right in its sole discretion to conduct
the defense of and to settle or resolve any such claim (and the costs and expenses incurred by it
in connection with such defense, settlement or resolution (including reasonable attorneys’ fees,
other professionals’ and experts’ fees and court or arbitration costs) shall be included in the
Indemnifiable Damages for which the Indemnifying Person may seek indemnification pursuant to a
claim made hereunder). The Sellers Representative or Purchaser, as the case may be, shall have the
right to receive copies of all pleadings, notices and communications with respect to the
third-party claim to the extent that receipt of such documents does not affect any privilege
relating to any Indemnified Person and shall be entitled, at its expense, to participate in, but
not to determine or conduct, any defense of the third-party claim or settlement negotiations with
respect to the third-party claim. However, except with the consent of the Sellers Representative
or Purchaser, as the case may be (which consent shall not be unreasonably withheld, conditioned or
delayed and which shall be deemed to have been given unless the Sellers Representative or
Purchaser, as the case may be, shall have objected within 15 days after a written request for such
consent by Purchaser or Sellers Representative, as the case may be), no settlement or resolution of
any such claim with any third-party claimant shall be determinative of the existence of or amount
of Indemnifiable Damages relating to such matter. In the event that the Sellers Representative has
consented to any such settlement or resolution, neither the Sellers Representative nor any Seller
shall have any power or authority to object (including pursuant to Section 9.6 or any other
provision of this Section 9) to the amount of any claim by or on behalf of any Indemnified Person
against the Escrow Fund for indemnity with respect to such settlement or resolution.
9.10. Sellers Claims Against the Company. If Closing occurs, the Sellers agree that
they will not seek, nor will they be entitled to, contribution from, or indemnification by, the
Company, under its Charter Document, this Agreement, applicable corporate laws or other laws or
otherwise, whether in respect of amounts due from the Sellers to the Purchaser under this Section 9
or otherwise under this Agreement, or for any other reason, and the Sellers will hold the Company,
Purchaser and or any Indemnified Person harmless in respect of all such amounts and shall not seek
to join the Company in connection with any suit arising under this Agreement or arising in
connection with their service as a mangers, directors, officers, employees or agents of the Company
prior to the Closing Date. Without limiting the foregoing, the Sellers, as Members of the Company,
shall not demand nor shall any of them be entitled to receive a return of its contribution to the
Company, and any such demand or right shall be deemed satisfied in full and waived by the payment
of the Purchase Price in accordance with the provisions of this Agreement. The Sellers also agrees
that they will not make claim against any directors and officers insurance policy maintained or to
be maintained by the Company in respect of amounts due by the Sellers to the Purchaser or any
Indemnified Person under this Section 9, this Agreement or otherwise, if the carrier of such
insurance policy would have any right of subrogation against the Company in respect of such claim
and shall indemnify and hold harmless the Purchaser from any such action. The provisions of this
Section 9.10 shall not be deemed a waiver by any of the Sellers for any indemnification or other
rights any of them may have by reason of their employment by, or services to, the Company (or any
successor thereto) following Closing.
9.11. Apportionment. In the case of any Taxes that are payable for a taxable period
that includes (but does not end on) the Closing Date, the portion of such Taxes that relates to the
portion of
51
such taxable period ending on the Closing Date shall (a) in the case of any real property,
personal property or other ad valorem Taxes be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction, the numerator of which is the number of days in the
taxable period ending on the Closing Date and the denominator of which is the number of days in the
entire taxable period, and (b) in the case of any other Tax be deemed equal to the amount that
would be payable if the relevant taxable period ended on the Closing Date based on a closing of the
books as of the close of business on the Closing Date.
10. General Provisions.
10.1. Survival of Representations, Warranties and Covenants. If the Closing occurs,
the representations and warranties of the Sellers and the Company contained in this Agreement, the
Disclosure Schedule (including any exhibit or schedule to the Disclosure Schedule), and the other
certificates contemplated hereby shall survive the Closing and remain in full force and effect,
regardless of any investigation or disclosure made by or on behalf of any of the parties to this
Agreement, until the end of the Escrow Period; provided, however, that (i) the representations and
warranties of the Company contained in Section 3.3 (Capital Structure), Section 3.4 (Title to
Interest), 3.5 (Authority; Non-Contravention), Section 3.12 (Intellectual Property and Internet
Practices) or Section 3.14 (Tax Matters) will remain operative and in full force and effect,
regardless of any investigation or disclosure made by or on behalf of any of the parties to this
Agreement, until the date that is 30 days after the expiration of the applicable statute of
limitations for claims against the Sellers, which seek recovery of Indemnifiable Damages arising
out of an inaccuracy or breach of such representations or warranties, and then expire with respect
to any theretofore unasserted claims arising out of or otherwise in respect of any breach of such
representations and warranties; (ii) no right to indemnification pursuant to Section 9 in respect
of any claim that is set forth in an Officer’s Certificate delivered to the Escrow Agent prior to
the expiration of the Escrow Period shall be affected by the expiration of such representations and
warranties; and (iii) such expiration shall not affect the rights of any Indemnified Person under
Section 9 or otherwise to seek recovery of Indemnifiable Damages arising out of any fraud, willful
breach or intentional misrepresentation by the Company or any Subsidiary until the date that is 30
days after the expiration of the applicable statute of limitations. If the Closing occurs, the
representations, warranties and convents of Purchaser contained in this Agreement and the other
certificates contemplated hereby shall expire and be of no further force or effect as of the
Closing. If the Closing occurs, all covenants of the parties shall expire and be of no further
force or effect as of the Closing, except to the extent such covenants provide that they are to
survive or be performed after the Closing; provided, however, that no right to indemnification
pursuant to Section 9 in respect of any claim based upon any breach of a covenant shall be affected
by the expiration of such covenant.
10.2. Notices. All notices and other communications hereunder shall be in writing and
shall be deemed given if as follows: (a) if sent by registered or certified mail return receipt
requested, upon receipt; (b) if sent designated for overnight delivery by nationally recognized
overnight air courier (such as DHL or Federal Express), three business days after delivery to such
courier; (c) if sent by facsimile transmission on a business day before 5:00 p.m. in time zone of
the recipient, when transmitted and full receipt is electronically confirmed; (d) if sent by
facsimile transmission on a business day after 5:00 p.m. in the time zone of the recipient or on a
non-business day and full receipt is electronically confirmed, on the following business day; and
(e) if otherwise actually personally delivered, when delivered, provided that such notices,
requests, demands and other communications are delivered to the address set forth below, or to such
other address as any party shall provide by like notice to the other parties to this Agreement:
52
| If to Purchaser, to: | Answers Corporation 000 Xxxx 00xx Xxxxxx Xxxxx 0000 Xxx Xxxx, XX 00000 Attention: Xxxxxx X. Xxxxxxxxxxx, Chief Executive Officer Facsimile No.: 000-000-0000 Telephone No.: 000-000-0000 |
|||
| with a copy (which shall not constitute notice) to: | ||||
| Meitar, Liquornik, Geva & Leshem, Xxxxxxxxx – Law Offices 00 Xxxx Xxxxxx Xxxxxx Xx. Xxxxx Xxx 00000, Israel Attention: Xxxxxxxx Xxxxx and Xxxxx Xxxxx Facsimile: x000-0-000-0000 |
||||
| If to the Sellers or the Company (prior to Closing), to: |
||||
| Xxxxxx Xxxxxx 000 X. Xxxxxxxx Xxxxx Xxxxx Xxxx XX 00000 Facsimile No.: ( ) Telephone No.: ( ) |
||||
| with a copy (which shall not constitute notice) to: | ||||
| DLA Piper US LLP 1251 Avenue of the Americas Xxx Xxxx, Xxx Xxxx 00000-0000 Attention: Xxxxx X. Xxxxxx Facsimile No.: (000) 000-0000 Telephone No.: (000) 000-0000 |
||||
| and | ||||
| Xxxxx Xxxxxxx 0000 X. 0xx Xxxxxx Xxxx Xxxxx Xxxxxxxxxx 00000 Facsimile No.: (000) 000-0000 Telephone No.: (000) 000-0000 |
||||
| with a copy (which shall not constitute notice) to: | ||||
| Xxxx Xxxxx, Xxxxx & Xxxxx, APC 000 Xxxxxxxxx, Xxxxx 0000 Xxxx Xxxxx, XX 00000 Attention: Xxxx X. Xxxxx, Esq. Facsimile No.: 000-000-0000 Telephone No.: 000-000-0000 |
||||
53
| If to the Sellers Representative, to: | ||||
| Xxxxx Xxxxxxx 0000 X. 0xx Xxxxxx Xxxx Xxxxx Xxxxxxxxxx 00000 Facsimile No.: (000) 000-0000 Telephone No.: (000) 000-0000 |
||||
| with a copy (which shall not constitute notice) to: | ||||
| Xxxx Xxxxx, Xxxxx & Xxxxx, APC 000 Xxxxxxxxx, Xxxxx 0000 Xxxx Xxxxx, XX 00000 Attention: Xxxx X. Xxxxx, Esq. Facsimile No.: 000-000-0000 Telephone No.: 000-000-0000 |
||||
10.3. Interpretation. When a reference is made in this Agreement to sections,
schedules or exhibits, such reference shall be to a section of, schedule or an exhibit to this
Agreement unless otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The
words “include,” “includes” and “including” when used herein shall be deemed in each case to be
followed by the words “without limitation”. The phrases “provided to,” “furnished to,” or “made
available” and phrases of similar import when used herein, unless the context otherwise requires,
shall mean that a true, correct and complete paper or electronic copy of the information or
material referred to has been provided to the party or its counsel to whom such information or
material is to be provided, and in case such information or material was made available
electronically by posting it on the Company’s virtual data room (provided it was (i) posted under
the relevant section of the due diligence request list calling for such disclosure and was
indicated in the Company’s written response to such list, or (ii) was requested by Purchaser or was
posted in such virtual data room pursuant to a request from Purchaser). Unless the context of this
Agreement otherwise requires: (i) words of any gender include each other gender; (ii) words using
the singular or plural number also include the plural or singular number, respectively; (iii) the
terms “hereof,” “herein,” “hereunder” and derivative or similar words refer to this entire
Agreement; (iv) all references to “$” shall be denominated in U.S. dollars; and (v) unless
indicated otherwise, all mathematical calculations contemplated hereby shall be rounded to the
hundredth decimal place.
10.4. Entire Agreement; Parties in Interest. This Agreement and the documents and
instruments and other agreements specifically referred to herein or delivered pursuant hereto,
including all the exhibits attached hereto, the Schedules, including the Disclosure Schedule, (a)
constitute the entire agreement among the parties hereto with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral, among the parties
hereto with respect to the subject matter hereof, except for the Confidentiality Agreement, which
shall continue in full force and effect, and shall survive any termination of this Agreement, in
accordance with its terms, and (b) are not intended to confer, and shall not be construed as
conferring, upon any Person other than the parties hereto any rights or remedies hereunder (except
that Section 9 is intended to benefit Indemnified Persons).
10.5. Amendment. Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular instance and either
retroactively
54
or prospectively) with the written consent of Purchaser and the Sellers Representative. Any
amendment or waiver effected in accordance with this Section shall be binding upon all parties of
this Agreement and their respective successors and assignees.
10.6. Extension; Waiver. Any party hereto may (a) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in
the representations and warranties made to such party contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. The Sellers Representative and Purchaser may, (i) extend the time
for the performance of any of the obligations or other acts of the other, (ii) waive any
inaccuracies in the representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions for the benefit of such Person contained herein. Any waiver effected in accordance with
the preceding sentence shall be binding upon all parties of this Agreement and their respective
successors and assignees. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing. Without limiting the
generality or effect of the preceding sentence, no delay in exercising any right under this
Agreement shall constitute a waiver of such right, and no waiver of any breach or default shall be
deemed a waiver of any other breach or default of the same or any other provision in this
Agreement.
10.7. Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of
law or otherwise by any of the parties hereto without the prior written consent of the other
parties hereto, and any such assignment without such prior written consent shall be null and void,
except that Purchaser may assign this Agreement to any of Purchaser’s Affiliates without the prior
consent of the Sellers or the Company; provided, however, that Purchaser shall remain liable for
all of its obligations under this Agreement. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their
respective successors and assigns.
10.8. Severability. In the event that any provision of this Agreement, or the
application thereof, becomes or is declared by a court of competent jurisdiction to be illegal,
void or unenforceable, the remainder of this Agreement shall continue in full force and effect and
shall be interpreted so as reasonably to effect the intent of the parties hereto. The parties
hereto shall use all reasonable efforts to replace such void or unenforceable provision of this
Agreement with a valid and enforceable provision that shall achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
10.9. Remedies Cumulative. Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party hereto shall be deemed cumulative with and not exclusive of
any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party
hereto of any one remedy shall not preclude the exercise of any other remedy and nothing in this
Agreement shall be deemed a waiver by any party of any right to specific performance or injunctive
relief.
10.10. Governing Law; Arbitration; Jurisdiction.
10.10.1. This Agreement shall be governed by and construed in accordance with the laws of the
State of New York without reference to such state’s principles of conflicts of law, provided,
however, that any matter involving the internal corporate affairs of the any party hereto shall be
governed by the provisions of the jurisdictions of its incorporation.
10.10.2. Any controversy or claim arising out of or relating to this Agreement, including,
without limitation, the breach or termination thereof, shall be settled by arbitration by a single
55
arbitrator administered by the American Arbitration Association in accordance with its
Commercial Arbitration Rules, including the Optional Rules for Emergency Measures of Protection,
to be held in New York, New York, USA. The award rendered by the arbitrator shall be final and
binding upon the parties. Judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The existence and resolution of the arbitration shall be kept
confidential by the parties and by the arbitrator. The award of the arbitrator shall be
accompanied by a reasoned opinion. Each party shall bear its own costs and expenses and an equal
share of the arbitrator’s and administrative fees of arbitration, unless otherwise determined by
the arbitrator. Notwithstanding the foregoing, the parties may apply to any court of competent
jurisdiction for a temporary restraining order, preliminary injunction, or other interim or
conservatory relief, as necessary.
10.10.3. Subject to Section 10.10.2, the parties hereto hereby irrevocably submit to the
exclusive jurisdiction (or, in the case of enforcement of or seeking remedies with respect to
Section 6.4, non-exclusive jurisdiction) of the courts of the New York, New York in connection
with any matter based upon or arising out of this Agreement or the matters contemplated herein
(including resolution of disputes under Section 9.7), agrees that process may be served upon them
in any manner authorized by the laws of such jurisdiction for such persons and waives and
covenants not to assert or plead any objection which they might otherwise have to such
jurisdiction, venue and such process.
10.11. Cooperation. The parties agrees to cooperate fully with each other and to
execute and deliver such further documents, certificates, agreements and instruments and to take
such other actions as may be reasonably requested by a party to evidence or reflect the
transactions contemplated hereby and to carry out the intent and purposes of this Agreement.
10.12. Rules of Construction. The parties hereto have been represented by counsel
during the negotiation, preparation and execution of this Agreement and, therefore, hereby waive,
with respect to this Agreement, each Schedule and each Exhibit attached hereto, the application of
any law, regulation, holding or rule of construction providing that ambiguities in an agreement or
other document shall be construed against the party drafting such agreement or document.
10.13. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY AND ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT,
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
10.14. Counterparts. This Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties hereto and delivered to the other parties
hereto; it being understood that all parties hereto need not sign the same counterpart. The
exchange of a fully executed Agreement (in counterparts or otherwise) by facsimile or by electronic
delivery in .pdf format shall be sufficient to bind the parties to the terms and conditions of this
Agreement, as an original.
- Signature Pages Follow -
56
IN WITNESS WHEREOF, the parties have caused this Purchase Agreement to be executed
and delivered by their respective officers thereunto duly authorized, all as of the date first
written above.
| Answers Corporation |
||||
| By: | /s/ Xxxxxx X. Xxxxxxxxxxx | |||
| Name: | Xxxxxx X. Xxxxxxxxxxx | |||
| Title: | Chief Executive Officer | |||
IN WITNESS WHEREOF, the parties have caused this Purchase Agreement to be executed
and delivered by their respective officers thereunto duly authorized, all as of the date first
written above.
| Xxxxx Xxxxxxx, as trustee of the Xxxxx Xxxxxxx Xxxxxxx
Charitable Remainder Unitrust Trust dated April 9, 2007 |
||||
| /s/ Xxxxx Xxxxxxx | ||||
| Xxxxx Xxxxxxx as trustee of the Xxxxx Xxxxxxx Xxxxxxx
Revocable Trust dated February 9, 2007 |
||||
| /s/ Xxxxx Xxxxxxx | ||||
| Xxxxxx Xxxxxx |
||||
| /s/ Xxxxxx Xxxxxx | ||||
| Lexico Publishing Group, LLC |
||||
| By: | /s/ Xxxxx Xxxxxxx and /s/ Xxxxxx Xxxxxx | |||
| Name: | Xxxxx Xxxxxxx and Xxxxxx Xxxxxx | |||
| Title: | Authorized Signatories and Members | |||
| Xxxxx
Xxxxxxx, as Sellers Representative |
||||
| /s/ Xxxxx Xxxxxxx | ||||
58
List of Exhibits
Exhibit A
|
— | Certain Definitions | ||
Exhibit B
|
— | Form of Indemnity Escrow Agreement | ||
Exhibit C
|
— | Form of Bonus Plan/Documents Escrow Agreement | ||
Exhibit D
|
— | Form of Legal Opinion of Counsel to the Company |
List of Schedules
Schedule A
|
— | List of Sellers and Interests | ||
Schedule 1.2.2
|
— | Estimated Closing Adjustments Certificate | ||
Schedule 2.2.1.1
|
— | Certificate of Sellers | ||
Schedule 2.2.1.2
|
— | Transaction Expenses Certificate | ||
Schedule 7.3.5
|
— | List of Employees | ||
| Disclosure Schedule | ||||
59
Schedule A
List of Sellers and Interests
| Seller’s Name | % of Membership Interest | |||
Xxxxx Xxxxxxx as trustee of the Xxxxx
Xxxxxxx Xxxxxxx Charitable Remainder
Unitrust Trust dated April 9, 2007 |
5 | % | ||
Xxxxx Xxxxxxx as trustee of the Xxxxx
Xxxxxxx Xxxxxxx Revocable Trust dated
February 9, 2007 |
70 | % | ||
Xxxxxx Xxxxxx |
25 | % | ||
60
Exhibit A
Certain Definitions
For purposes of the Agreement (including this Exhibit A):
1. Defined Terms. As used herein, the following terms have the following meanings:
1.1. “Acquisition Proposal” shall mean, with respect to the Company or any of its
Subsidiaries, any agreement, offer, proposal or bona fide indication of interest (other than this
Agreement or any other offer, proposal or indication of interest by Purchaser), or any public
announcement of intention to enter into any such agreement or of (or intention to make) any offer,
proposal or bona fide indication of interest, relating to, or involving: (i) any acquisition or
purchase from the Company or any of its Subsidiaries, or from the Member of the Company, by any
Person or Group of more than a 10% interest in the total Membership Interest, outstanding voting
interest or Economic Interest of Company or any of its Subsidiaries or any tender offer or exchange
offer that if consummated would result in any Person or Group beneficially owning 10% or more of
the total Membership Interest, outstanding voting interest or Economic Interest of the Company or
any of its Subsidiaries, or any merger, consolidation, business combination or similar transaction
involving the Company or any of its Subsidiaries; (ii) any sale, lease, mortgage, pledge, exchange,
transfer, license (other than in the ordinary course of business), acquisition, or disposition of
more than 10% of the assets of the Company and its Subsidiaries in any single transaction or series
of related transactions; or (C) any liquidation, dissolution, recapitalization or other significant
corporate reorganization of the Company or any of its Subsidiaries, or any extraordinary dividend,
whether of cash or other property.
1.2. “Affiliate” has the meaning set forth in Rule 145 promulgated under the US Securities
Act.
1.3. “Antitrust Laws” means the HSR Act and applicable foreign competition, antitrust or
investment or trade regulatory Legal Requirements.
1.4. “Bonus Plan/Documents Escrow Agreement” means an Escrow Agreement, substantially in the
form attached hereto as Exhibit C, entered into as of the date hereof by and among Purchaser, the
Escrow Agent, the Company, the Sellers and the Sellers Representative, in respect of the Employee
Bonus Amount and the instruments evidencing the transfer of Interests.
1.5. “Business Day” means each day that is not a Saturday, Sunday or other day on which
commercial banks located in New York, New York are not generally open for business.
1.6. “Charter Documents” means the Articles of Organization and the Operating Agreement, in
each case as in effect on the date hereof.
1.7. “Closing Net Working Capital” means the difference between (a) the sum of accounts
receivable, net, prepaid expenses and other current assets of the Company and its Subsidiaries, on
a consolidated basis, and (b) the sum of accounts payable, accrued compensation, accrued expenses
and deferred revenue and other current liabilities of the Company and its Subsidiaries, on a
consolidated basis; in each case calculated as of the close of business on the Closing Date in
accordance with GAAP applied on a consistent basis with the Company’s past practice.
1.8. “Code” shall mean the Internal Revenue Code of 1986, as amended.
1.9. “Company Web Site(s)” means Xxxxxxxxx.xxx, Xxxxxxxxxx.xxx (including
xxxxxxxxxx.xxxxxxxxx.xxx) and/or Xxxxxxxxx.xxx (including xxxxxxxxx.xxxxxxxxx.xxx), individually or
collectively, as the case may be.
61
1.10. “Contract” means any written or oral legally binding contract, agreement, instrument,
commitment or undertaking of any nature (including leases, licenses, mortgages, notes, guarantees,
sublicenses, subcontracts, letters of intent, term sheet and purchase orders) as of the date hereof
or as may hereafter be in effect.
1.11. “Corporations Code” means Title 2.5 Limited Liability Companies of the California
Corporations Code, as amended from time to time (or any corresponding provisions of succeeding
law).
1.12. “Disclosure Schedule” means the Disclosure Schedule delivered to Purchaser and Purchaser
concurrently with the parties’ execution of this Agreement, containing disclosures that, in order
to be effective, shall clearly indicate the Section and, if applicable, the subsection of Section 3
to which it relates and each of which disclosures shall also be deemed to be representations and
warranties made by the Sellers and the Company to Purchaser and the Purchaser under Section 3. Any
fact or item disclosed in any particular section of the Disclosure Schedule shall be deemed to have
been disclosed with respect to another section of this Agreement only if and only to the extent the
relevance to other representations and warranties is readily apparent from the actual text of the
disclosures.
1.13. “Economic Interest” means a Person’s right to share in the income, gains, losses,
deductions, credit, or similar items of, and to receive distributions from, the Company, but does
not include any other rights of a Member, including, without limitation, the right to vote or to
participate in management, or, except as provided in applicable Legal Requirements, any right to
information concerning the business and affairs of the Company.
1.14. “Encumbrance” means any lien, pledge, hypothecation, charge, mortgage, security
interest, encumbrance, adverse claim, interference, option, right of first refusal, preemptive
right or restriction or rights of third parties of any nature (including any spousal community
property rights, any restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income derived from any security
or other asset, any restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of a security or other asset).
1.15. “Entity” means any corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture, estate, trust,
company (including any company limited by shares, limited liability company or joint stock
company), firm, society or other enterprise, association, organization or entity.
1.16. “Environmental and Safety Laws” shall mean any federal, state or local laws, ordinances,
codes, regulations, rules, policies and orders that are intended to assure the protection of the
environment, or that classify, regulate, call for the remediation of, require reporting with
respect to, or list or define air, water, groundwater, solid waste, hazardous or toxic substances,
materials, wastes, pollutants or contaminants, or which are intended to assure the safety of
employees, workers or other persons, including the public.
1.17. “Employee Bonus Amount” means a gross amount of US$10,000,000 (which is inclusive of all
Taxes, whether to be borne by the employee or employer).
1.18. “Employee Bonus Plan” means a plan established by the Company (and approved by
Purchaser), for the payment of up to the Employee Bonus Amount as bonuses to certain employees of
the Company, upon the terms set forth therein.
1.19. “Escrow Agent” means American Stock transfer & Trust Co. or such other escrow agent as
shall be designated by Purchaser and reasonably agreed upon by Sellers Representative.
62
1.20. “Escrow Amount” means US$10,000,000.
1.21. “Facilities” shall mean all buildings and improvements on the Property.
1.22. “GAAP” means generally accepted accounting principles in the United States applied on a
consistent basis.
1.23. “Governmental Entity” shall mean any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state,
local or municipal or other government; (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission, instrumentality,
official, ministry, fund, foundation, center, organization, unit, body or Entity and any court or
other tribunal); or (d) self-regulatory organization.
1.24. “Group” shall have the definition ascribed to such term under Section 13(d) of the
Exchange Act of 1934, the rules and regulations thereunder, all as amended, and related case law.
1.25. “Hazardous Materials” shall mean any toxic or hazardous substance, material or waste or
any pollutant or contaminant, or infectious or radioactive substance, material or waste defined in
or regulated under any Environmental and Safety Laws, but excludes office and janitorial supplies
properly and safely maintained.
1.26. “HSR Act” means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended.
1.27. “Indemnified Person(s)” the Person(s) entitled to indemnification under Section 9.2 or
9.3, as the case may be.
1.28. “Indemnifying Person(s)” the Person(s) from whom indemnification is sought under Section
9.2 or 9.3, as the case may be.
1.29. “Indemnity Escrow Agreement” means the Indemnity Escrow Agreement, substantially in the
form attached hereto as Exhibit B, entered into as of the date hereof by and among Purchaser, the
Escrow Agent, the Sellers and the Sellers Representative.
1.30. “knowledge” or “known” shall mean, with respect to the Company and its Subsidiaries, the
knowledge of the Sellers and of certain employees of the Company as set forth on Schedule 1.27 of
the Disclosure Schedule; an individual shall be deemed to have “knowledge” of a particular fact or
other matter if (i) such individual is actually aware of such particular fact or other matter; (ii)
such individual has made, or reasonably should have made, reasonable inquiry of those other
employees of the Company and its Subsidiaries whom such individual reasonably believes would have
actual knowledge of the matters represented; or (iii) such individual, when taking into account his
or her position and responsibilities, could be reasonably expected to discover or otherwise become
aware of such fact or other matter in the course of conducting such reasonable inquiry concerning
the existence of such fact or other matter.
1.31. “Legal Requirement” means any law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, order, award, ruling or requirement
issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the
authority of any Governmental Entity.
1.32. “Material Adverse Effect” with respect to any entity means any change, event, violation,
inaccuracy, circumstance or effect (each, an “Effect”) that, individually or taken together with
all other Effects, and regardless of whether or not such Effect constitutes a breach of the
representations or warranties made by such entity in this Agreement, is, or is reasonably likely
to, (i)
63
be or become materially adverse in relation to the near-term or longer-term condition
(financial or otherwise), properties, assets (including intangible assets), liabilities, business,
prospects, capitalization, operations or results of operations of such entity and its Subsidiaries,
taken as a whole (including, without limitations, a material disruption in the operation of any
Company Web Site continuing for more than 12 consecutive hours); or (ii) materially impede or delay
such entity’s ability to consummate the transactions contemplated by this Agreement in accordance
with its terms.
1.33. “Members” means any Person who has been admitted as a member of the Company as provided
in the Corporations Code.
1.34. “Membership Interest” shall mean a Member’s rights in the Company, collectively,
including the Member’s Economic Interest, any right to vote or participate in management, and any
right to information concerning the business and affairs of the Company provided by the Charter
Documents and Legal Requirements.
1.35. “Permitted Encumbrances” means: (i) statutory liens for taxes that are not yet due and
payable or liens for taxes being contested in good faith by any appropriate proceedings for which
adequate reserves have been established; (ii) statutory liens to secure obligations to landlords,
lessors or renters under leases or rental agreements; (iii) deposits or pledges made in connection
with, or to secure payment of, workers’ compensation, unemployment insurance or similar programs
mandated by applicable law; (iv) statutory liens in favor of carriers, warehousemen, mechanics and
materialmen, to secure claims for labor, materials or supplies and other like liens; and (v) liens
in favor of customs and revenue authorities arising as a matter of Legal Requirements to secure
payments of customs duties in connection with the importation of goods.
1.36. “Person” means an individual, Entity or Governmental Entity.
1.37. “Property” shall mean all real property leased, sub-leased or owned by the Company or
any Subsidiary either currently or in the past.
1.38. “Registration Statement” means the registration statement referred to in Section 6.9,
including, any prospectus included therein, as amended or supplemented by any amendment or
prospectus supplement, including post-effective amendments, and all materials incorporated by
reference or explicitly deemed to be incorporated by reference in such prospectus.
1.39. “SEC” means the Securities and Exchange Commission.
1.40. “Securities Act” means the United States Securities Act of 1933, as amended.
1.41. “Subsidiary” of a Person is an Entity in which a Person directly or indirectly owns or
purports to own, beneficially or of record: (a) an amount of voting securities of or other
interests in such Entity that is sufficient to enable such Person to elect at least a majority of
the members of such Entity’s board of directors or other governing body; or (b) at least 50% of the
outstanding equity, voting or financial interests in such Entity.
1.42. “Tax Authority” means the Governmental Entity responsible for the imposition of any Tax
(domestic or foreign).
1.43. “Tax Return” means any return, statement, report or form (including estimated Tax
returns and reports, withholding Tax returns and reports, any schedule or attachment, any
declaration and claim for refund and information returns and reports) required to be filed with
respect to Taxes.
1.44. “Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means (i) any federal,
state, local or foreign income, capital gain, alternative or add-on minimum tax, gross income,
64
estimated, gross receipts, sales, use, ad valorem, value added, transfer, franchise, capital
stock, profits, license, registration, withholding, payroll, social security (or equivalent),
Federal Insurance Contributions Act (FICA) tax, employment, unemployment, disability, excise,
severance, stamp, occupation, premium, property (real, personal, tangible or intangible),
environmental or windfall profit tax, custom duty, business and occupation, or other tax,
governmental fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount (whether disputed or not) imposed by
any Tax Authority, (ii) any liability for the payment of any amounts of the type described in
clause (i) of this sentence as a result of being a member of an affiliated, consolidated, combined,
unitary or aggregate group for any Taxable period, and (iii) any liability for the payment of any
amounts of the type described in clause (i) or (ii) of this sentence as a result of being a
transferee of or successor to any Person or as a result of any express or implied obligation to
assume such Taxes or to indemnify any other Person.
1.45. “Transaction Agreements” means the Indemnity Escrow Agreement and the Bonus
Plan/Documents Escrow Agreement.
1.46. “Transaction Expenses” means the amounts of all fees, costs or expenses incurred or
expected to be incurred by the Company and the Subsidiaries in connection with the preparation,
negotiation, execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby (including any fees and expenses of legal counsel, accountants, financial
advisors and consultants, investment bankers and brokers, notwithstanding any contingencies for
escrows, etc., any bonuses, costs and fees for obtaining or securing required consents and
approvals for the transactions contemplated hereby, HSR Act filings fees, premiums or other
payments in connection with directors’ and officers’ liability insurance, and any such fees
incurred by Sellers and paid for or to be paid for by the Company), whether or not invoiced or
billed prior to the Closing, and whether incurred on behalf of the Company or on behalf of the
Sellers, in each case, which have not been assumed or paid (or reimbursed by the Sellers to the
Company, if paid by the Company) by the Sellers.
2. Each of the following terms is defined in the Section set forth opposite such term:
| ATerm | Section | |
Aggregate Purchase Price |
1.2.1 | |
Agreement |
preamble | |
Antitrust Restraint |
6.6.3 | |
Claims Period |
9.5 | |
Closing |
2.1 | |
Closing Date |
2.1 | |
COBRA |
3.15.3 | |
Company |
preamble | |
Company Authorizations |
3.10.2 | |
Company Balance Sheet |
3.6.3 | |
Company Balance Sheet Date |
3.6.3 | |
Company Debt |
3.6.6 | |
Company Employee Plan |
3.15.1 | |
Company Employee Plans |
3.15.1 | |
Company IP Rights |
3.12.1.2 | |
Company Products |
3.12.1.6 | |
Company Registered Intellectual property |
3.12.1.4 | |
Company Representatives |
6.3.1 |
65
| ATerm | Section | |
Company Source Code |
3.12.1.7 | |
Company Voting Debt |
3.3.3 | |
Company-Owned IP Rights |
3.12.1.3 | |
Confidential Agreement |
6.2.1 | |
Confidential Information |
3.12.20 | |
ERISA |
3.15.1 | |
ERISA Affiliate |
3.15.1 | |
Escrow Period |
9.5 | |
Estimated Closing Adjustments Certificate |
1.2.2 | |
Financial Statements |
3.6.1 | |
Foreign Plan |
3.15.7 | |
Forfeited Employee Bonus Amount |
1.4.2 | |
Indemnifiable Damages |
9.2 | |
Indemnified Person |
9.2 | |
Interest |
recitals | |
Interested Party |
3.16 | |
Material Contract |
3.19.1 | |
Open Source Materials |
3.12.21 | |
Purchase Price |
1.2.1 | |
Purchaser |
preamble | |
Second Installment |
1.2.1 | |
Seller(s) |
preamble | |
Sellers Representative |
preamble | |
Significant Customer |
3.21.1 | |
Significant Supplier |
3.21.2 | |
Third Party Intellectual Property Rights |
3.12.1.5 |
66
