EXECUTION COPY
STOCK PURCHASE AGREEMENT
BY AND AMONG
GREENFIELD ONLINE, INC.
XXXXXXXX.XXX, INC.
AND
THE SELLING SHAREHOLDERS
Dated as of January 25, 2005
TABLE OF CONTENTS
Article I : SALE AND PURCHASE OF SHARES...................................................... 1
1.1. Sale and Purchase of the Shares............................................ 1
1.2. Purchase Price, Payment and Adjustments.................................... 1
1.3. Deliveries at Closing; Stock Transfer Books................................ 4
Article II : CLOSING; CLOSING DATE........................................................... 4
Article III : REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.......................... 5
3.1. Organization and Qualification............................................. 5
3.2. Articles of Incorporation and Bylaws....................................... 5
3.3. Capitalization............................................................. 5
3.4. Authority.................................................................. 6
3.5. No Conflict; Required Filings and Consents................................. 6
3.6. Permits; Compliance........................................................ 6
3.7. Financial Statements....................................................... 7
3.8. No Undisclosed Liabilities................................................. 7
3.9. Absence of Certain Changes or Events....................................... 8
3.10. Absence of Litigation...................................................... 9
3.11. Brokers.................................................................... 10
3.12. Tax Matters................................................................ 10
3.13. Real Property.............................................................. 12
3.14. Intellectual Property...................................................... 13
3.15. Tangible Assets............................................................ 16
3.16. Inventory.................................................................. 16
3.17. Contracts and Policies..................................................... 16
3.18. Electronic Records; Powers of Attorney..................................... 18
3.19. Insurance.................................................................. 18
3.20. Employees.................................................................. 19
3.21. Employee Benefits.......................................................... 20
3.22. Guaranties................................................................. 21
3.23. Environment, Health and Safety............................................. 21
3.24. Certain Business Relationships with the Company............................ 21
3.25. Customers and Payors....................................................... 21
3.26. Product, Information and Service Warranties................................ 22
3.27. Product, Information and Service Liability................................. 22
3.28. Privacy, Security and Identity Theft Etc................................... 22
3.29. Panel...................................................................... 24
3.30. Disclosure................................................................. 25
Article IV : REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.................................. 26
4.1. Authorization of Transaction............................................... 26
4.2. Non-contravention.......................................................... 26
4.3. Brokers' Fees.............................................................. 26
4.4. Company Shares............................................................. 26
4.5. Delivery of Information.................................................... 27
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4.6. Spouse..................................................................... 27
Article V : REPRESENTATIONS AND WARRANTIES OF BUYER.......................................... 27
5.1. Organization and Qualification............................................. 27
5.2. Authority.................................................................. 27
5.3. No Conflict; Required Filings and Consents................................. 27
5.4. Absence of Certain Changes or Events....................................... 28
5.5. Disclosure................................................................. 28
Article VI : COVENANTS....................................................................... 28
6.1. Affirmative Covenants of the Company and the Shareholders.................. 28
6.2. Negative Covenants of the Company and the Shareholders..................... 29
6.3. Negative Covenants of Buyer................................................ 31
6.4. Access and Information..................................................... 31
Article VII : ADDITIONAL AGREEMENTS.......................................................... 31
7.1. Appropriate Action; Consents; Filings...................................... 31
7.2. Transfer and Disposal of Transferred Items Prior to the Closing Date....... 32
7.3. Preparation of Audited 2004 Financial Statements........................... 32
7.4. Retention of Employees..................................................... 32
7.5. Best Efforts............................................................... 32
7.6. Confidentiality; Public Announcements...................................... 32
7.7. Exclusivity; Acquisition Proposals......................................... 33
7.8. Breakup Fee................................................................ 33
7.9. Additional Tax Matters..................................................... 33
7.10. Trade and Domain Names..................................................... 35
7.11. Section 338(h)(10) Election................................................ 36
Article VIII : CLOSING CONDITIONS............................................................ 37
8.1. Conditions to Obligations of Each Party Under This Agreement............... 37
8.2. Additional Conditions to Obligations of Buyer.............................. 37
8.3. Additional Conditions to Obligations of the Company and the Shareholders... 39
Article IX : TERMINATION, AMENDMENT, WAIVER AND INDEMNIFICATION.............................. 40
9.1. Termination................................................................ 40
9.2. Amendment.................................................................. 40
9.3. Waiver..................................................................... 40
9.4. Fees, Expenses and Other Payments.......................................... 40
9.5. Indemnification............................................................ 40
9.6. Shareholder Representative................................................. 43
Article X : GENERAL PROVISIONS............................................................... 44
10.1. Effectiveness of Representations, Warranties and Agreements................ 44
10.2. Notices.................................................................... 44
10.3. Certain Definitions........................................................ 45
10.4. Construction............................................................... 49
10.5. Severability............................................................... 49
10.6. Reliance by Buyer.......................................................... 49
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10.7. Entire Agreement and Modification.......................................... 49
10.8. Assignment................................................................. 49
10.9. Parties in Interest........................................................ 49
10.10. Waiver; Remedies Cumulative................................................ 50
10.11. Further Assurances......................................................... 50
10.12. Governing Law.............................................................. 50
10.13. Venue; Service of Process.................................................. 50
10.14. Counterparts............................................................... 50
EXHIBITS DESCRIPTION
-------- -----------
Exhibit A Form of Escrow Agreement
Exhibit B Legal Opinion of Counsel to the Company
Exhibit C Form of Employment Agreement for Mebane, Xxxxxxx
Exhibit D Form of Restricted Stock Agreement for Mebane, Xxxxxxx
Exhibit E Form of Non-Competition Agreement for Shareholders
Exhibit F Legal Opinion of Counsel to Buyer
SCHEDULE
NUMBER DESCRIPTION
-------- -----------
1.2(a) Allocation of Purchase Price
1.2(b) Pre-Closing Transfers
1.2(c) Calculation of Adjusted Working Capital
3.3 Capitalization
3.5 Filings and Consents
3.6 Permits, Compliance
3.7 Financial Statements
3.9 Absence of Certain Changes or Events
3.12 Tax Matters
3.13(a) Real Property
3.14(c) Intellectual Property
3.15 Tangible Assets
3.16 Inventory
3.17 Contracts
3.19 Insurance Policies
3.20 Employees
3.21 Employee Benefit Plans
3.24 Certain Business Relationships with the Company
3.25 Customers and Payors
3.26 Product, Information and Service Warranties
3.27 Product, Information and Service Liability
3.28 Privacy, Security and Identity Theft
3.29 Panel
4.2 Non-Contravention
4.4 Company Shares
6.2 Negative Covenants
8.2(c) Contracts or Agreements Requiring Consents or Waivers
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INDEX OF DEFINED TERMS
PAGE
------
338(h)(10) Income.............................. 37
Affiliate...................................... 45
Agreement...................................... 1
Assets......................................... 45
Audited 2004 Financial Statements.............. 3
Audited Financial Statements................... 3
Authority...................................... 14
Base Consideration............................. 1
Baseline Data.................................. 25
Basis.......................................... 45
Buyer Material Adverse Effect.................. 45
Buyer Notice................................... 42
Buyer Representatives.......................... 31
Closing........................................ 4
Closing Date................................... 4
Closing Date Balance Sheet..................... 2
Closing Payment................................ 1
COBRA Coverage................................. 21
Code........................................... 46
Company........................................ 1
Company Common Stock........................... 1
Company Disclosure Schedule.................... 5
Company Employee Benefit Plans................. 20
Company Material Adverse Effect................ 46
Company Permits................................ 6
Contract....................................... 46
Control........................................ 46
Current Accounts Receivable.................... 2
EBITDA......................................... 3
EBITDA Adjustment.............................. 3
EBITDA Escrow.................................. 3
Employee Benefit Plan.......................... 46
Employee Pension Benefit Plan.................. 46
Employee Welfare Benefit Plan.................. 46
Employment Agreements.......................... 38
Encumbrances................................... 46
Environmental, Health and Safety Laws.......... 46
ERISA.......................................... 47
ERISA Affiliate................................ 47
Escrow Agreement............................... 3
Excepted Claims................................ 42
Exchange Act................................... 47
Executed Form 8023............................. 39
Executed State Election Forms.................. 39
Extremely Hazardous Substance.................. 47
GAAP........................................... 47
GLBA........................................... 22
Governmental Entities.......................... 6
Handling....................................... 23
HIPAA.......................................... 22
Incremental Tax Cost........................... 36
Incremental Tax Cost Amount.................... 37
Information.................................... 45
Information Assets............................. 45
Intellectual Property.......................... 47
IRS............................................ 10
know........................................... 48
knowledge...................................... 48
known.......................................... 48
Laws........................................... 6
Liabilities.................................... 7
Liability...................................... 7
Lien........................................... 48
Loss........................................... 41
Multiemployer Plan............................. 48
Ordinary Course of Business.................... 48
Panel.......................................... 24, 48
Panel Member................................... 25
Person......................................... 48
PII............................................ 23
Preliminary 2004 Balance Sheet................. 7
Preliminary 2004 Financial Statements.......... 7
Price Allocation............................... 36
Primary Escrow................................. 3
Proceeding Notice.............................. 42
Purchase....................................... 1
Purchase Price................................. 1
Purchase Price Adjustments..................... 1
PwC............................................ 3
Rapidata....................................... 1
Rejected Address(es)........................... 25
Restricted Stock Agreements.................... 38
Restricted Transaction......................... 33
Return Periods................................. 10
Returns........................................ 10
S Corporation.................................. 11
S Corporation Taxable Periods.................. 48
SEC............................................ 48
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Section 338(h)(10) Election........................ 36
Securities Act..................................... 48
Security Interest.................................. 48
Shareholder........................................ 1
Shareholder Disclosure Schedule.................... 26
Shareholder Representative......................... 43
Shareholders....................................... 1
Shares............................................. 1
Straddle Period.................................... 34
Sub................................................ 1
Sub-Panel(s)....................................... 24
Subsidiaries....................................... 48
Subsidiary......................................... 48
Surviving Obligations.............................. 42
Tax................................................ 11
Taxes.............................................. 11
Test Period........................................ 25
Third Party Claim.................................. 41
Transaction........................................ 49
Transaction Cost Adjustment........................ 3
Transaction Costs.................................. 3
Transfer Taxes..................................... 35
Transferred Items.................................. 2
Transgressed....................................... 13
Unaudited Historical Financial Statements.......... 7
Valid.............................................. 25
Validity Threshold................................. 25
Working Capital.................................... 2
Working Capital Adjustment......................... 2
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, is made and entered into on and as of
January 25, 2005 (this "AGREEMENT"), by and among Greenfield Online, Inc., a
Delaware corporation ("BUYER"), and Xxxxxxxx.xxx, Inc., a North Carolina
corporation ("RAPIDATA" or the "COMPANY"), and Xxxx Xxxxxx Xxxxxx, III, Xxxxxxxx
Xxxxxxx Xxxxxxx, Xxxxx Xxxxxx, and Xxxxxxxx Xxxxxx Towns, the shareholders of
the Company (collectively, the "SHAREHOLDERS", and each, a "SHAREHOLDER").
RECITALS:
1. The Shareholders are the sole owners of all the issued and
outstanding shares (the "SHARES") of the common stock, no par value per share,
of the Company (the "COMPANY COMMON STOCK"), and Buyer desires to purchase the
Shares from the Shareholders, all upon the terms and subject to the conditions
of this Agreement;
2. The Shareholders are willing to sell the Shares to Buyer upon the
terms and subject to the conditions of this Agreement; and
3. Certain capitalized terms used in this Agreement are defined in
Section 10.3.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties, intending to be legally bound, do hereby agree as
follows:
ARTICLE I : SALE AND PURCHASE OF SHARES
1.1. Sale and Purchase of the Shares. On the Closing Date, the
Shareholders agree to sell the Shares to Buyer and Buyer agrees to purchase the
Shares from the Shareholders (the "PURCHASE") for the Purchase Price set forth
in Section 1.2(a), subject to the terms and conditions and based upon the
representations and warranties contained herein.
1.2. Purchase Price, Payment and Adjustments.
(a)Purchase Price and Payment. The "PURCHASE PRICE" payable to
Shareholders consists of $5,500,000 cash (the "BASE CONSIDERATION"), as
adjusted by the Working Capital Adjustment, Transaction Cost Adjustment
and EBITDA Adjustment, each as defined and set forth in Section 1.2(c)
(and which together are referred to as "PURCHASE PRICE ADJUSTMENTS"). At
the Closing, the Shareholders will be paid in aggregate an amount equal to
the Base Consideration adjusted by the Working Capital Adjustment and the
Transaction Cost Adjustment, less the amounts withheld in escrow as set
forth at Section 1.2(d) (the "CLOSING Payment"). The Closing Payment will
be paid by Buyer by company check payable to each Shareholder according to
the allocation table set forth in Schedule 1.2(a). The balance of the
Purchase Price (if any becomes due) will be payable according to the terms
of the Working Capital Adjustment, EBITDA Adjustment and escrow provisions
set forth below. The portion of the Purchase Price allocated to the
covenants not to compete set forth in the Non-
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Competition Agreements deliverable pursuant to Section 8.2(j) will equal
one percent of the Closing Payment paid at Closing.
(b)Pre-Closing Transfers. Prior to the Closing Date in
accordance with Section 7.2, the Company will transfer, distribute,
settle, pay and/or dispose of all of the items listed below (the
"TRANSFERRED ITEMS"); with the effect that Transferred Items will not be
owned by or be a liability of the Company, nor assumed by Buyer, at the
Closing Date: (i) any notes or accounts receivable due to the Company from
its officers, directors or the Shareholders, or due from the Company to
its officers, directors or the Shareholders; (ii) any automobiles or
vehicles leased or owned by the Company that are used for personal
purposes by the Shareholders or any employee of the Company, and any
leases or indebtedness on or relating to such automobiles or vehicles for
which the Company is liable in any manner whatsoever; (iii) all life
insurance policies owned by the Company or paid for by the Company; (iv)
all Company debt (including any notes, accounts payable or other debt that
the Company has been notified under 15 USC Section 1681c-2 has resulted
from identity theft), other than Transaction Costs that are to paid in
connection with the Closing pursuant to Section 1.2(c)(ii); (v) pension
plan and profit sharing obligations of the Company; (vi) the Right of
First Refusal Agreement dated as of February 2, 2004 by and between Durham
Historic Properties and the Company; and (vii) $100,000 Promissory Note of
the Company to Wachovia Bank, N.A. dated June 7 2004. Schedule 1.2(b)
contains a complete and accurate list of all Transferred Items. Any Taxes
or other costs and expenses incurred or generated in connection with such
transfers, distributions, terminations or disposals will be deemed to be
Transferred Items borne solely by the Shareholders. To the extent the
Company or Buyer incurs any cost or expense relating to the Transferred
Items after Closing, Buyer will be reimbursed by such amount from the
Primary Escrow.
(c) Purchase Price Adjustments.
(i)Working Capital Adjustment. The Base Consideration
will (1) be reduced by the amount, if any, by which Working Capital of the
Company as of the date of the Closing is less than $150,000 and (2) be increased
by the amount, if any, by which Working Capital of the Company as of the date of
Closing exceeds $150,000 (such amount, the "WORKING CAPITAL ADJUSTMENT"). For
purposes of this Agreement, "WORKING CAPITAL" of the Company is defined as the
amount by which the Company's cash and Current Accounts Receivable exceed the
sum of its total liabilities on and as of the Closing Date. "CURRENT ACCOUNTS
RECEIVABLE" are only those accounts receivable that are fewer than 60 days old
and excluding those that the Company and the Shareholders, in good faith,
believe are unlikely to be collected within 180 days of Closing. The Working
Capital Adjustment will be based upon an unaudited balance sheet (the "CLOSING
DATE BALANCE SHEET") that the parties will cause to be prepared in accordance
with GAAP (except that footnotes may be omitted) consistent with the past
practices of the Company. Buyer may choose to have the Closing Date Balance
Sheet prepared by a nationally-recognized, independent certified public
accounting firm selected by Buyer. The calculation and determination of the
Working Capital Adjustment will be made by Buyer and the Company at Closing and
will be deemed conclusive and binding on the parties. To the extent any amount
reflected as a Current Account Receivable on the Closing Date Balance Sheet is
not actually collected by the Company on or prior to 180 days after the Closing
Date, Buyer shall be entitled to be reimbursed for the full amount of such
account receivable plus any costs incurred in the attempt to collect it from the
Primary Escrow. To the extent the Company receives
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payment within 180 days of the Closing on any Company accounts receivable that
existed prior to the Closing, but that were not included as Current Accounts
Receivable, such amount shall be deposited in the Primary Escrow and distributed
to the Shareholders in the same percentages as set forth on Schedule 1.2(a) at
the end of such 180 day period. Nothing herein shall require the Company or
Buyer to take any action to collect any accounts receivable other than those
actions taken in their Ordinary Course of Business.
(ii) Transaction Cost Adjustment. At the Closing, Buyer
agrees to pay (or cause the Company to pay) all of the costs and expenses
incurred by the Company in connection with the transactions contemplated
hereunder including all fees and expenses related to legal, accounting,
investment banking and financial advisory fees and expenses, and including the
fees and costs associated with auditing of any financials required hereunder
(the "TRANSACTION COSTS"). The Base Consideration will be reduced by the amount
of such reimbursed costs (the "TRANSACTION COST ADJUSTMENT"). Any Transaction
Costs that are presented to the Company or Buyer after Closing shall be paid by
Buyer and Buyer shall be entitled to be reimbursed for any such amounts from the
Primary Escrow.
(iii) EBITDA Adjustment. After Closing, Buyer will cause
to be prepared an audited balance sheet of the Company at and for the year ended
December 31, 2004, and the related statements of operations, statements of cash
flows and statements of stockholder equity for the period then ended, and the
notes and schedules thereto (the "AUDITED 2004 FINANCIAL STATEMENTS"), together
with the report thereon, of PricewaterhouseCoopers, LLP ("PWC"). For every
dollar that 2004 earnings before income taxes, depreciation and amortization
("EBITDA" reflected on the Audited 2004 Financial Statements is below $600,000,
the Purchase Price will be reduced by $9.16 (the "EBITDA ADJUSTMENT"). Buyer
shall be entitled to be reimbursed for the EBITDA Adjustment from the EBITDA
Escrow first, and to the extent it is depleted, the Primary Escrow. Upon receipt
of Audited 2004 Financial Statements that do not require an EBITDA Adjustment,
Buyer will promptly notify the Custodian under the Escrow Agreement defined in
the next section to release the EBITDA Escrow to the Shareholders.
(d)Escrows. The parties will enter into an escrow agreement
substantially in the form attached as EXHIBIT A (the "ESCROW AGREEMENT").
The Escrow Agreement will provide for (1) a "PRIMARY ESCROW" initially
consisting of $550,000 withheld from the Purchase Price at Closing, and
(2) an "EBITDA ESCROW" initially consisting of $500,000 withheld from the
Purchase Price at Closing. The amounts in escrow will be released
according to the terms and procedures in the Escrow Agreement.
(e)Preparation of Audited Financial Statements. As soon as
reasonably practicable, but in any event, on or before February 18, 2005,
the Company will deliver to Buyer an audited balance sheet of the Company
as of December 31, 2004, and the related statements of operations,
statements of cash flows and statements of stockholders equity for the
twelve month period then ended, and the notes and schedules thereto (the
"AUDITED 2004 FINANCIAL STATEMENTS"), together with the unqualified report
of PwC thereon. The Audited Financial Statements shall be in all respects
reasonably acceptable to Buyer in form and substance.
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(f)Cancellation of Options, Warrants, Convertible Securities
and Treasury Stock. Each share of Company Common Stock held in the
treasury of the Company, if any, will, immediately prior to the Closing
Date, be canceled and extinguished and no payment will be made with
respect thereto. Any outstanding option, warrant, right or other security
convertible into or exercisable for any equity securities of the Company
not exercised or converted prior to the Closing will expire and/or be
cancelled.
1.3. Deliveries at Closing; Stock Transfer Books.
(a)At the Closing, (i) the Shareholders will deliver to Buyer
the various certificates, instruments, and documents referred to in
Sections 8.1 and 8.2 hereof, (ii) Buyer will deliver to the Shareholders
the various certificates, instruments, and documents referred to in
Sections 8.1 and 8.3 hereof, (iii) the Shareholders will deliver to Buyer
stock certificates representing all of the outstanding shares of the
Company, endorsed in blank or accompanied by duly executed assignment
documents, and (iv) Buyer will deliver to Shareholders the Closing
Payment.
(b)On the date of this Agreement, the stock transfer books of
the Company will be closed and there will be no further registration of
transfers of shares of Company Common Stock thereafter on the records of
the Company. On and after the Closing Date, any certificates representing
shares of Company Common Stock will thereafter only represent the right to
receive a pro rata portion of the Purchase Price and such certificates,
upon presentation to Buyer, will be converted into the Purchase Price
consideration.
1.4 Withholding. Buyer shall be entitled to deduct and withhold from
the consideration otherwise payable to any Person pursuant to this Agreement
such amounts as it is required to deduct and withhold with respect to the making
of such payment under any provision of federal, state, local or foreign Tax law.
If Buyer so deducts and withholds amounts, such amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of Company Shares
in respect of which Buyer made such deduction and withholding.
ARTICLE II : CLOSING; CLOSING DATE
The closing of the transactions contemplated by this Agreement (the
"CLOSING") will take place through the delivery of executed documents and
schedules at the offices of Buyer's attorneys, Xxxxxxx Xxxxx & Xxxxx LLP, 000
Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx 00000-0000, on January 21, 2005,
or at such other location and on such other date as Buyer and the Shareholders
may mutually agree in writing (the "CLOSING DATE"). There will not be any
requirement for any party to attend the Closing in Seattle.
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ARTICLE III : REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
Except as disclosed in a document referring specifically to the
representations and warranties in this Agreement which identifies by section
number the section and subsection to which such disclosure relates and is
delivered by Company to Buyer prior to or simultaneous with the execution of
this Agreement (the "COMPANY DISCLOSURE SCHEDULE"), the Company and the
Shareholders hereby represent and warrant, jointly and severally, to Buyer as
follows as of the date of this Agreement and as of the Closing Date:
3.1. Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of North Carolina, has all requisite corporate or other power and
authority to own, lease and operate its Assets and to carry on its business as
it is now being conducted, electronically or non-electronically, and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature or level of the business conducted by it or the ownership or leasing or
its activities regarding its Assets or business makes such qualification
necessary. The Company has no Subsidiaries, and does not, directly or
indirectly, own or control any investment or interest (whether in the form of
debt or equity) in any other Person.
3.2. Articles of Incorporation and Bylaws. The Company has provided
to Buyer complete and correct copies of (i) the Company's Articles of
Incorporation and Bylaws or equivalent organizational documents, in each case as
amended or restated, as in effect as of the Closing Date, (ii) the minute books
relating to all meetings of stockholders, board of directors and committees of
the Company, (iii) stock certificate books of the Company, (iv) stock transfer
books of the Company, and (v) a list of the officers and directors of the
Company. The Company is not in violation of any of the provisions of its
Articles of Incorporation or Bylaws or equivalent organizational documents, in
each case as amended or restated. In addition, the minute books (containing the
record of meetings of the stockholders, the board of directors and any
committees of the board of directors), the stock certificate books and the stock
transfer books of the Company are correct and complete.
3.3. Capitalization. The authorized capital stock of the Company
consists of 10,000,000 shares of Company Common Stock, of which 100,000 shares
are issued and outstanding as of the date of this Agreement, and (i) all of
which Shares are duly authorized, validly issued, fully paid and non-assessable
and not subject to preemptive rights created by statute, the Company's Articles
of Incorporation or Bylaws or any agreement to which the Company is a party or
bound, and (ii) all of the issued and outstanding shares of Company Common Stock
are owned by and held of record and beneficially by the Shareholders. There are
no bonds, debentures, notes or other indebtedness, issued or outstanding having
the right to vote on any matters on which the Company's stockholders may vote.
There are no options, warrants, calls or other rights (including subscription
rights or registration rights), agreements, proxies, voting rights agreements,
voting trusts, arrangements or commitments of any character, presently
outstanding, which (i) obligate the Company to issue, deliver or sell shares of
its capital stock or debt securities, (ii) obligate the Company to grant, extend
or enter into any such option, warrant, call or other such right, agreement,
arrangement or commitment, (iii) obligate the Company to repurchase, redeem or
otherwise acquire any shares of Company Common Stock, or (iv) relate to the
issued or unissued capital stock of, or other equity interests in, the Company.
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3.4. Authority. The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
and no other corporate proceeding on the part of the Company non-electronically
is necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, non-electronic execution and
delivery thereof by the Shareholders and Buyer, constitutes the legal, valid and
binding obligation of the Company enforceable in accordance with its terms.
3.5. No Conflict; Required Filings and Consents.
(a)Except as set forth in Schedule 3.5, the execution and
delivery of this Agreement by the Company does not, and the performance of
this Agreement by the Company will not (i) conflict with or violate the
Company's Articles of Incorporation or Bylaws or equivalent organizational
documents, in each case as amended or restated, (ii) to the knowledge of
the Company and the Shareholders, conflict with or violate any federal,
state, foreign or local law, statute, ordinance, rule, regulation, order,
guidance, policy, judgment or decree (collectively, "LAWS") and applicable
to the Company or by which any of its properties is bound or subject to,
or (iii) result in any violation of or breach of or constitute a default
(or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration, suspension or cancellation of, or require payment under, or
result in the loss or impairment of, or result in the creation of an
Encumbrance on, any of the properties or Assets of the Company under or
pursuant to, any note, bond, mortgage, security agreement, indenture,
contract, agreement, lease, license, right, permit, franchise or other
instrument or obligation to which the Company is a party or by which the
Company or any of its Assets is bound or subject.
(b)The execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not,
require the Company to obtain any consent, approval, authorization or
permit of, or to make any filing with or notification to, any
governmental, regulatory or quasi-governmental authority, domestic or
foreign ("GOVERNMENTAL ENTITIES") based on Laws and other requirements of
Governmental Entities.
3.6. Permits; Compliance.
(a)The Company is in possession of all franchises, grants,
authorizations, licenses, permits and permissions, easements, variances,
exemptions, consents, certificates, approvals, orders and other rights and
authorities necessary to own, lease, operate, use, access, disclose, and
exercise intellectual property or other rights in its Assets and to carry
on its business as it is now being conducted electronically or
non-electronically (collectively, the "COMPANY PERMITS"), and there is no
notice, claim, action, proceeding or investigation pending or, to the
knowledge of the Company and the Shareholders, threatened regarding
modification, suspension or cancellation of any of the Company Permits or
any lack of rights or authority (or exceeding rights or authorities) under
any of them. The Company is not in conflict with, or in default or
violation of (a) to the knowledge of the Company and its
6
Shareholders, any Law applicable to the Company or which any of its Assets
is bound by or subject to or (b) any of the Company Permits. The Company
has not received from any Governmental Entity or any other Person any
notification in a record with respect to possible conflicts, defaults or
violations of Laws.
(b)The Company is in compliance with (a) all applicable Laws
that apply to or are for the protection of consumers or individuals; (b)
if applicable, licensing of money services business and the Bank Secrecy
Act (31 U.S.C. Section 5311 et. seq.) and all applicable laws relating to
the licensing of money services businesses, and (c) all applicable laws
regarding sweepstakes, incentives for Panel members or survey takers or
the like.
3.7. Financial Statements.
(a) Schedule 3.7 contains (i) true, correct and complete
copies of an unaudited balance sheet (the "PRELIMINARY 2004 BALANCE
SHEET") and income statement of the Company at and for the year ended
December 31, 2004 (together with the Preliminary 2004 Balance Sheet, the
"PRELIMINARY 2004 FINANCIAL STATEMENTS") and (ii) true, correct and
complete copies of the unaudited balance sheets of the Company as of
December 31, 2002 and 2003, and the related statements of operations,
statements of cash flows and statements of stockholders equity for the
twelve month periods then ended, and the notes and schedules thereto
(together with the Preliminary 2004 Financial Statements, the "UNAUDITED
HISTORICAL FINANCIAL STATEMENTS"). The Unaudited Historical Financial
Statements (i) are accurate and complete in all material respects, in
accordance with the assumptions and methodology set forth therein, (ii)
will have been prepared based on the books and records of the Company, and
present fairly the financial condition and results of operations of the
Company for the dates and periods indicated, and (iii) contain and reflect
all necessary adjustments, accruals, provisions and allowances for a fair
presentation of its financial condition and the results of its operations
for the periods covered. When delivered pursuant to Section 1.2(f), the
Audited 2004 Financial Statements (i) will be accurate and complete in all
material respects, in accordance with the assumptions and methodology set
forth therein, (ii) will have been prepared based on the books and records
of the Company in accordance with GAAP, and will present fairly the
financial condition and results of operations of the Company for the dates
and periods indicated and (iii) contain and reflect all necessary
adjustments, accruals, provisions and allowances for a fair presentation
of its financial condition and the results of its operations for the
periods covered.
(b)To the knowledge of the Company and the Shareholders, the
Current Accounts Receivable reflected on the Closing Date Balance Sheet
are valid receivables subject to no setoffs or counterclaims, have been
outstanding receivables on the Company's books and records for fewer than
60 days, and are likely to be collected at their full recorded amounts on
or prior to 180 days following the Closing Date. On the Closing Date,
there are no receivables due from the Shareholders or any of the Company's
officers or directors or anyone claiming that they have been the victim of
identity theft.
3.8. No Undisclosed Liabilities. The Company has no liabilities or
other obligations of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise including liabilities for Taxes
("LIABILITY" or "LIABILITIES"), and there is no existing condition, situation or
set of circumstances which could reasonably be expected to
7
result in such a Liability, other than Liabilities fully reflected or reserved
against on the face of the Preliminary 2004 Balance Sheet as adjusted for
Liabilities incurred in the Ordinary Course of Business since December 31, 2004
through the Closing Date and which will be reflected on the Closing Date Balance
Sheet.
3.9. Absence of Certain Changes or Events. Since December 31, 2004,
there has not been any adverse change in the business, financial condition,
operations, results of operations or future prospects of the Company. Without
limiting the generality of the foregoing, since that date:
(a)the Company has not entered in to any Transactions with
respect to its Assets or with its customers, other than for fair
consideration in the Ordinary Course of Business;
(b)the Company has not entered into any Transaction or any
agreement, contract, lease or license relating to same outside the
Ordinary Course of Business;
(c)no party (including the Company) has accelerated,
terminated, modified or canceled any agreement, contract, lease or license
(or series of related agreements, contracts, leases and licenses) to which
the Company is a party or by which the Company is bound;
(d)the Company has not imposed, granted, allowed or consented
to any Security Interest upon any of its Assets;
(e)the Company has not made any capital expenditure (or series
of related capital expenditures) either involving more than an aggregate
of $5,000 outside the Ordinary Course of Business, unless otherwise
approved in writing by Buyer;
(f)the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or Assets of, any other
Person (or series of related capital investments, loans, and
acquisitions);
(g)the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation;
(h)the Company has not delayed or postponed the payment of
Accounts Payable, Accrued Expenses or other Liabilities outside the
Ordinary Course of Business;
(i)the Company has not canceled, lost, compromised, waived, or
released any right or claim (or series of related rights and claims);
(j)the Company has not granted any license or sublicense of
any rights under or with respect to any Asset or Intellectual Property;
(k)there has been no change made or authorized in the
Company's Articles of Incorporation or Bylaws or equivalent organizational
documents, in each case as amended or restated and in effect as of
December 31, 2004;
8
(l)the Company has not issued, sold or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(m)the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise acquired
any of its capital stock;
(n)the Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance and whether tangible or
intangible) to its Assets;
(o)the Company has not made any loan to, or entered into any
other transaction with, any of its directors, officers and employees;
(p)the Company has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(q)the Company has not granted any increase in the
compensation of any of its directors, officers and employees;
(r)the Company has not adopted, amended, modified or
terminated any bonus, profit-sharing, incentive, severance or other plan,
contract or commitment for the benefit of any of its directors, officers
and employees (or taken any such action with respect to any other Employee
Benefit Plan) other than to comply with the terms of this Agreement;
(s)the Company has not made any other change in employment
terms for any of its directors, officers and employees outside the
Ordinary Course of Business;
(t)the Company has not made any political contribution or
pledged to make any charitable contribution;
(u)the Company has not done any act, or failed to do any act
which it had a duty or obligation to perform, which has or could result in
a breach of any obligation of the Company;
(v)there has not been any other occurrence, event, incident,
action, failure to act or transaction outside the Ordinary Course of
Business involving the Company; and
(w) the Company has not committed to any of the foregoing.
3.10. Absence of Litigation. There is no claim, action, suit,
litigation, proceeding, arbitration or investigation of any kind, at law, in rem
or in equity (including actions or proceedings seeking injunctive relief),
pending or, to the knowledge of the Company and the Shareholders, threatened
against the Company, any of its Assets or against any Shareholder relating so
such Shareholder's interest in or employment by the Company. The Company is not
subject to any continuing order of, consent decree, settlement agreement or
other similar written agreement with or continuing investigation by, any court
or Governmental Entity, or any judgment, order, writ, injunction, decree or
award of any court, Governmental Entity or
9
arbitrator. To the knowledge of the Company and the Shareholders there is no
fact, event, condition, circumstance or other matter which either has, or is
reasonably likely to have resulted in, an event or determination having a
Company Material Adverse Effect.
3.11. Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
3.12. Tax Matters.
(a) The Company has timely filed (or caused to be filed) all
federal, state, local and foreign Tax returns, reports, elections and
information statements ("RETURNS") required to be filed by it, which
Returns are true, correct and complete in all respects. All Taxes required
to be paid in respect of the periods covered by such Returns ("RETURN
PERIODS") have either been paid or fully accrued on the books of the
Company. The Closing Date Balance Sheet contains adequate accruals for all
unpaid Taxes, and all unpaid Taxes in respect of periods prior to Closing
will be fully accrued on the books and records of the Company prior to
Closing. The Company has no Liabilities for Taxes, other than Liabilities
which will be reflected on the Closing Date Balance Sheet. The Company has
not taken any position on any Tax Return or filing which is or would be
subject to penalties under Section 6662 of the Code. The Company has not
requested or been granted any extension of time to file any Return that
has not yet been filed. There is no difference between the amounts of the
book basis and the Tax basis of any asset of the Company that is not
reflected in an appropriate accrual of deferred Tax liability on the books
of the Company or fully reflected in the Closing Date Balance Sheet. All
material elections with respect to Taxes made by or with respect to the
Company are set forth on Schedule 3.12(a). The Company has provided or
made available to Buyer true and correct copies of all Returns, all
correspondence with any taxing authority, all tax work papers, any Tax
planning memoranda and other Tax data for taxable periods ending on or
after December 31, 2002.
(b) No deficiencies or adjustments for any Tax of the Company
have been claimed, proposed or assessed or threatened. No claim has ever
been made by an authority in a jurisdiction where the Company does not
file Returns that the Company is or may be subject to taxation by that
jurisdiction. Schedule 3.12(b) accurately sets forth the years for which
the Company's federal and state income tax returns, respectively, have
been audited and any years which are the subject of a pending audit by the
Internal Revenue Service ("IRS") and the applicable state taxing agencies.
The Company is not subject to any pending or, to the knowledge of the
Company and the Shareholders, threatened Tax audit or examination. The
Company has not entered into any agreements, waivers or other arrangements
in respect of the statute of limitations in respect of its Taxes or Tax
Returns. Schedule 3.12(b) sets forth as of the date hereof (i) the Tax
basis of the Company in its assets, (ii) the current and accumulated
earnings and profits of the Company, (iii) the amount of any net operating
loss carryover, net capital loss carryover, unused investment credit or
other credit carryover and charitable contribution carryover of the
Company, (iv) the amount of any deferred gain or loss allocable to the
Company or excess loss account of the Company, and (v) a list of all joint
ventures, partnerships, limited liability companies or other business
entities (within the meaning of Treasury Regulation Section 301.7701-3) in
which the Company has an interest.
10
(c) For the purposes of this Agreement, the terms "TAX" and
"TAXES" shall include all federal, state, local and foreign taxes,
assessments, duties, tariffs, registration fees, and other governmental
charges including all income, franchise, property, production, sales, use,
payroll, license, windfall profits, severance, withholding, excise, gross
receipts and other taxes, as well as any interest, additions or penalties
relating thereto and any interest in respect of such additions or
penalties.
(d) There are no liens for Taxes upon the assets of the
Company except for Taxes that are not yet payable. The Company has
withheld all Taxes required to be withheld in respect of wages, salaries
and other payments to all employees, officers and directors and any Taxes
required to be withheld from any other person and timely paid all such
amounts withheld to the proper taxing authority.
(e) The Company has made a valid election under Section 1362
of the Code and a corresponding state or local Tax election in all
applicable jurisdictions to be an S corporation effective as of its date
of incorporation. The Company is, has been at all times since
incorporation, and will be at all times through the Closing Date, an S
corporation (within the meaning of Section 1361(a)(1) of the Code) (an "S
CORPORATION") for purposes of the Code and for purposes of all
corresponding provisions of applicable state and local law. The Company
has no "net unrealized built-in gain" subject to the Tax imposed on
certain built-in gains under in Section 1374 of the Code.
(f) No Tax will be imposed on the Company solely as a result
of consummating the transaction contemplated by this Agreement, other than
Transfer Taxes (the economic burden of which will be borne as set forth in
Section 7.9(d) and Taxes resulting from the election described in Section
7.11 (the economic burden of which will be borne as set forth in Section
7.11). The basis for the imposition of any state or local Taxes, other
than Taxes based on income, will not be changed as a result of the
transaction contemplated hereby.
(g) The Company is not liable for any payment that would give
rise to the excise tax provided in Section 409A of the Code.
(h) The Shareholders are not subject to withholding under
Section 1445 of the Code with respect to any transaction contemplated
hereby.
(i) The Company has not engaged in any "reportable
transaction" as defined in Treasury Regulation Section 1.6011-4.
(j) No consent or agreement has been made under Section 341(f)
of the Code, by or on behalf of the Company or any predecessor thereof.
The Company is not and has not been a party to any Tax sharing or tax
allocation agreement. No item of income or gain reported by the Company
for financial accounting purposes in any pre-Closing period is required to
be included in taxable income in any post-Closing period. The Company has
never been a member of any affiliated group of corporations within the
meaning of Section 1504 of the Code. The Company has not participated in,
or cooperated with, an international boycott within the meaning of Section
999 of the Code. The Company is not required to include in income any
adjustment pursuant to Section 481(a) of the Code (or similar provisions
of other law or regulations) in its current or in any future taxable
period, by reason of a change in accounting method which has
11
taken place prior to the Closing Date; nor does the Company have any
knowledge that the IRS (or other taxing authority) has proposed, or is
considering, any such change in accounting method. The Company does not
have and has not had a "permanent establishment" (as defined in any
applicable income tax treaty) in any country other than the United States.
The Company has made no election under Section 13261(g)(2) of P.L. 103-66,
relating to the application of Section 197 of the Code. There are no
outstanding rulings or requests for rulings from any taxing authority with
respect to the Company.
(k) The use of any net operating loss carryover, net capital
loss carryover, unused investment credit or other credit carryover of the
Company is not subject to any limitation pursuant to Section 382 of the
Code or otherwise. The Company is not and has never been a real property
holding corporation within the meaning of Section 897 of the Code. None of
the assets of the Company is property that is required to be treated as
owned by any other person pursuant to the "safe harbor lease" provisions
of former Section 168(f)(8) of the Code and in effect immediately prior to
the enactment of the Tax Reform Act of 1986 and none of the assets of the
Company is "tax exempt use property" within the meaning of Section 168(h)
of the Code. None of the assets of the Company secures any debt the
interest on which is tax exempt under Section 103 of the Code. The Company
is not liable for Taxes under the provisions of Treasury Regulation
Section 1.1502-6(a).
(l) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code (i) in the
two (2) years prior to the date of this Agreement, or (ii) in a
distribution which could otherwise constitute part of a "plan" or "series
of related transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with the transactions contemplated hereby.
3.13. Real Property.
(a) The Company has never owned any real property.
(b)Schedule 3.13(b) lists and describes briefly all real
property leased or subleased to the Company. The Company has delivered to
Buyer correct and complete copies of the leases and subleases listed in
Schedule 3.13(b). With respect to each lease and sublease listed in
Schedule 3.13(b):
(i)the lease or sublease is legal, valid, binding,
enforceable and in full force and effect;
(ii) the consummation of the Purchase and the subsequent
merger of the Company with and into Buyer will not affect the terms or
enforceability of the lease or sublease;
(iii) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
12
(iv) no party to the lease or sublease has repudiated
any provision thereof;
(v)there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(vi) the Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold
or subleasehold;
(vii) to the knowledge of the Company and the
Shareholders, all facilities leased or subleased thereunder have received all
approvals of Governmental Entities (including licenses and permits) required in
connection with the operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations; and
(viii) all facilities leased or subleased thereunder are
supplied with functional utilities and other services necessary for the normal
and usual operation of said facilities.
3.14. Intellectual Property.
(a)The Company owns or has rights pursuant to license,
sublicense, agreement or permission, applicable law or otherwise, to all
Intellectual Property and Information Assets necessary for the operation
of the Company's business as presently conducted, proposed to be
conducted, and as required to be conducted in accordance with applicable
Law and Company obligations. Each Information Asset and each item of
Intellectual Property owned, leased or used by the Company is owned,
leased or available for use by the Company on identical terms and
conditions immediately subsequent to the Closing Date. The Company has
taken all reasonably necessary and desirable action to maintain and
protect each Information Asset and each item of Intellectual Property.
(b)The Company has not interfered with, infringed upon,
misappropriated, converted, violated, trespassed upon, exceeded authority
or consent with respect to, disclosed without authority, or otherwise come
into conflict with (collectively "TRANSGRESSED") any Intellectual Property
rights or rights in Information Assets of any third party. None of the
Shareholders, directors, officers, employees or agents of the Company has
ever received any oral or written charge, complaint, claim, demand or
notice alleging any such Transgression (including any claim that the
Company must license or refrain from using any Intellectual Property
rights of any third party). To the Company's knowledge, no third party has
Transgressed any Intellectual Property rights or Information Assets of the
Company.
(c)Schedule 3.14(c) identifies each patent or trademark,
domain name and copyright registration that has been issued to the Company
or any Affiliate of the Company with respect to any of its Intellectual
Property or Information Assets, identifies each pending application or
application for registration that the Company or any Affiliate of the
Company has made with respect to any of its Intellectual Property or
Information Assets, identifies all domain names that are used by,
registered to or held by the Company or any Affiliate of the Company, and
identifies each license, agreement, or other permission which the Company
or any Affiliate of the Company has granted to any third party with
respect to any of its Intellectual Property or Information Assets
(together with any exceptions). The Company has
13
delivered to Buyer correct and complete copies of all the items to be
listed on Schedule 3.14(c) (as such items are as amended to date).
Schedule 3.14(c) also identifies each trade name or unregistered trademark
used by the Company or any Affiliate of the Company in connection with any
of its businesses. With respect to each item of Intellectual Property or
Information Asset required to be identified in Schedule 3.14(c):
(i)the Company possesses all (x) right, title, and
interest in and to the item, or (y) possesses sufficient rights in the item such
that no other Person holds a rightful claim to, or interest in, the Intellectual
Property or Information Asset which could interfere with Company's enjoyment of
Company's interest, and the interest described in (x) or (y) is free and clear
of any Security Interest, license, or other restriction, and, if such item was
developed by an independent contractor, the Company has provided Buyer with an
agreement in a written record relating to such work, as identified in Schedule
3.14(c);
(ii) no royalty or other remuneration of any type is
payable with respect to any such item of Intellectual Property or Information
Asset;
(iii) such item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(iv) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or threatened which
challenges the legality, validity, enforceability, use or ownership of or
license or right in or to such item;
(v)no consents are required for the exercise of any
rights in the item by Buyer as a result of the Purchase;
(vi) the Company is not, nor as a result of the
execution or delivery of this Agreement, or performance of the Company's
obligations hereunder, will the Company be, in violation of any Transaction
relating to the Company's Intellectual Property or Information Assets to which
the Company is a party or otherwise bound; and
(vii) the Company has never agreed to indemnify any
Person for or against any interference, infringement, misappropriation,
trespass, violation of law or other conflict with respect to such item.
(d)Schedule 3.14(d) identifies each Information Asset and each
item of Intellectual Property that any third party owns or that the
Company or any Affiliate of the Company uses pursuant to license,
sublicense, agreement, consent or permission, applicable Laws or other
authority (collectively, "AUTHORITY"), other than shrink-wrap licenses for
personal computer software. The Company has delivered to Buyer correct and
complete copies of same (as amended to date). With respect to each item of
Intellectual Property and Information Asset required to be identified in
Schedule 3.14(d):
(i)the Authority covering such item is legal, valid,
binding, enforceable and in full force and effect;
(ii) the Authority will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the Closing Date;
14
(iii) no party to the Authority or other Person is in
violation of it or in breach or default, and no event has occurred which with
notice or lapse of time would constitute a violation, breach or default or
permit cancellation, modification or acceleration thereunder;
(iv) no party to the Authority or other Person has
repudiated any provision thereof;
(v)no royalty or other remuneration of any type is
payable with respect to any such item;
(vi) with respect to each sublicense, the
representations and warranties set forth in items (i) through (v) above are true
and correct with respect to the underlying license;
(vii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(viii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or threatened which
challenges the legality, validity or enforceability of the item;
(ix) no consents are required for the continued
existence or exercise of any rights in the item by Buyer as a result of the
Purchase; and
(x)the Company has not delegated any rights and has not
granted any sublicense or similar right with respect to the Authority.
(e)Neither the Shareholders nor any of the directors and
officers (nor any employees with responsibility for matters regarding
Intellectual Property or Information Assets) of the Company have any
knowledge of any new products, inventions, Information procedures or
methods that any competitors or other third parties have developed which
reasonably could be expected to supersede or make obsolete any service,
product, process, Information or aspect of the Company or its business.
(f)None of the Company's products, websites, services or
Information Assets use, embed or incorporate any software that (1) is
subject to any "open source," "copyleft," or other similar types of
license terms (including any GNU General Public License, Library GNU
General Public License, GNU Lesser General Public License, Mozilla
license, Berkeley Software Distribution license, Open Source Initiative
license, MIT, Apache, and Public Domain licenses, or similar licenses); or
(b) utilizes peer-to-peer file sharing technology.
(g) The Company has no obligations to provide maintenance or
technical support.
(h) The Company has obtained legally binding agreements in
non-electronic records from all employees and third parties with whom
Company has shared Information (i) of Company that is confidential, or
(ii) received from others that Company is obligated to treat, or has
stated it will treat, as confidential or as restricted under a privacy or
similar policy, which agreements require such employees and third parties
to keep such information confidential or to use it only in accordance with
said restrictions.
15
(i) The Company is not a member of any standards organization
(including any similar organizations, such as special interest groups or
associations).
(j) Schedule 3.14(j) lists any obligations of exclusivity,
non-competition, non-solicitation, right of first refusal, or right of
first negotiation or the like to which the Company is subject under any
agreement.
(k) No parties other than the Company possess any current or
contingent rights to any source code that is part of the Company's
Intellectual Property or Information Assets (including through any escrow
account).
3.15. Tangible Assets. Schedule 3.15 lists all the tangible Assets
of the Company. Except as set forth on Schedule 3.15, the Company owns and has
good and marketable title to all the tangible property and tangible Assets
necessary for the conduct of its business as presently conducted and as proposed
to be conducted, and as required to be conducted in accordance with applicable
Law and the Company's obligations, including, but not limited to, those Assets
listed on Schedule 3.15. The Company has paid all Taxes due or incurred upon the
purchase of such Assets. The Company has no knowledge of any defects in any of
the tangible Assets in accordance with normal industry practice, and the
tangible Assets are in good operating condition and repair. There are no
Security Interests on any of the Assets of the Company.
3.16. Inventory. The Company has no inventory.
3.17. Contracts and Policies. Schedule 3.17 lists the following
Contracts and other agreements to which the Company is a party and policies that
the Company has adopted or otherwise made available to third parties, including
the following:
(a)any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments of any amount or for a term of more than one year;
(b)any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products or
other personal property, or for the furnishing or receipt of services of
any amount or which has a term of any duration;
(c) any partnership or joint venture agreement;
(d)any agreement (or group of related agreements) under which
it has created, incurred, assumed or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in any amount, or
under which it has imposed a Security Interest on any of its Assets,
tangible or intangible;
(e)any agreement concerning confidentiality or
non-competition, exclusivity, non-solicitation, right of first refusal, or
right of first negotiation;
(f)any agreement with any of the Shareholders or Affiliates of
any of the Shareholders;
16
(g)any agreement to supply goods or services or Information to
any party, whether a related party or an unrelated third party, or to
receive goods or services or Information from any party, whether a related
party or an unrelated third party;
(h)any agreement concerning a change of control, including any
agreement to provide consideration or accelerate options to purchase
stock;
(i)any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other material plan or
arrangement (including any Employee Benefit Plan) for the benefit of its
current or former directors, officers and employees;
(j) any collective bargaining agreement;
(k)any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis;
(l)any agreement under which the consequences of a default or
termination could have a Company Material Adverse Effect;
(m)any agreement or policies regarding Company undertakings or
statements relating to privacy or security of Information, including
Information owned by third parties that is handled, controlled or
possessed by Company;
(n)any agreements regarding telephonic or electronic
(including without limitation, by telephone or cellular phone, email,
mobile services, Internet or otherwise) advertising, marketing or
promotions, linking, use of search engines or metatags or the like, or
insertion of any Information onto a device owned or operated by third
parties such as customers of Company or survey takers or Panel members;
(o)all agreements with and policies concerning current members
of the Panel, including but not limited to those regarding: online and
offline recruitment of Panel members and survey takers; Panel membership;
compensation or other reward of or incentives for Panel members, survey
takers or recruiters, including agreements with third parties for the
processing, clearing and delivery of same and for the reporting of
unclaimed property; all privacy and security policies, online terms of
use, incentive policies, sweepstakes rules and any other terms and
conditions used in connection with the Panel and the Company's websites in
effect as of the date of the Closing and applicable to current Panel
members; and all procedures (including online screens) relating to
obtaining agreement or consent to any of the foregoing, or
(p)any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
The Company has delivered to Buyer a correct and complete copy of
each written agreement or policy listed in Schedule 3.17 and a written summary
setting forth the terms and conditions of each oral agreement or policy referred
to in Schedule 3.17. With respect to each such agreement or policy: (i) such is
legal, valid, binding, enforceable and in full force and effect; (ii) such will
continue to be legal, valid, binding, enforceable and in full force and effect
17
on identical terms following the consummation of the transactions contemplated
hereby; (iii) no party or other Person is in noncompliance, breach or default,
and no event has occurred which with notice or lapse of time would constitute an
act of noncompliance, breach or default, or permit cancellation, modification or
acceleration, under such agreement or policy; and (iv) no party has repudiated
any provision of such agreement.
3.18. Electronic Records; Powers of Attorney.
(a)With respect to any Law requiring Company to retain a
contract or other record relating to a Transaction, and with respect to
any Law requiring any contract or record to be in a writing, if Company
meets that requirement by retaining an electronic record of the
information in the contract or other record, then such electronic record
(a) accurately reflects the information set forth in the contract or other
record; and (b) remains accessible to all persons who are entitled to
access (or to retain a copy) by Law, for the period required by such Law
and in a form that is capable of being accurately reproduced for later
reference, whether by transmission, printing, or otherwise.
(b)With respect to any contract or record formed
electronically by one or more electronic agents, Company can legally
attribute the act of that agent to the person to be bound.
(c)With respect to information that is subject to the consumer
disclosure rules of 15 U.S.C. Section 7001(c), Company has provided all
disclosures and has obtained all consents, required by said section, and
retains adequate records thereof.
(d)There are no outstanding powers of attorney executed on
behalf of the Company.
3.19. Insurance. Schedule 3.19 sets forth the following information
with respect to each current insurance policy (including but not limited to
policies providing property, casualty, liability and workers' compensation
coverage, bond and surety arrangements and coverage for Information Assets and
Intellectual Property) to which the Company has been a party, a named insured,
or otherwise the beneficiary of coverage:
(a) the name, address, and telephone number of the agent;
(b)the name of the insurer, the name of the policyholder and
the name of each covered insured;
(c)the policy number, the period of coverage and the amount of
the annual premiums payable;
(d)the scope (including an indication of whether the coverage
is on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(e)a description of any retroactive premium adjustments or
other loss-sharing arrangements.
18
With respect to each such insurance policy: (i) such policy is
legal, valid, binding, enforceable and in full force and effect; (ii) unless
changed by Buyer, such policy will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (iii) neither the Company
nor any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under such
policy; and (iv) no party to the policy has repudiated any provision thereof.
Since its incorporation, the Company has been covered by insurance in scope and
amount customary and reasonable for the business in which it has engaged.
Schedule 3.19 also describes any self-insurance arrangements affecting the
Company.
3.20. Employees. Schedule 3.20 sets forth a true and complete list
of all employees of the Company, their respective positions, locations, salaries
or hourly wages, accrued vacation (in days and monetary value), bonus or other
compensation arrangements and severance arrangements, each as of the date hereof
and as of the Closing Date. To the knowledge of the Shareholders and the
directors and officers (and employees with responsibility for employment
matters) of the Company, no executive, key employee or group of employees has
any plans to terminate employment with the Company. Except as set forth in
Schedule 3.20, each employee of the Company is employed on an "at will" basis
and has no right to any compensation following termination of employment except
for wages earned prior to termination. Each employee of the Company has executed
a proprietary information and inventions agreement in substantially the form
provided to counsel for Buyer. Except as set forth in Schedule 3.20, no employee
or former employee of the Company has had such employee's employment with the
Company terminated by the Company or has voluntarily terminated such employee's
employment with the Company during the 12-month period immediately preceding the
Closing. The Company and the Shareholders have not basis to believe that any
worker's compensation or other claims will be filed following the Closing by any
individuals who are, as of the Closing, former employees of the Company that
will, in the aggregate, cause the amount of the Company's periodic payments (or
the portion of Buyer's periodic payments reasonably allocable to the office
locations of the Company) to any worker's compensation insurance carrier(s) to
increase. All claims for benefits, whether insured or otherwise (including, but
not limited to, workers' compensation, life insurance, medical and disability
programs), under the Company's employee benefit programs brought by, or in
respect of, any employees or former employees of the Company, which claims arise
out of events occurring on or prior to the Closing Date, will be satisfied by
the insurance carriers who served as the Company's insurance carriers during the
periods prior to Closing, in accordance with the terms and conditions of such
programs or applicable workers' compensation statutes without interruption as a
result of the employment by Buyer of any such employees after the Closing Date.
The Company is and has been in full compliance with all Laws respecting
employment practices, and no grounds exist for the assertion of any claims or
initiation of any proceedings against the Company in connection therewith. The
Company is not a party to or bound by any collective bargaining agreement, nor
has it experienced any strikes, grievances, claims of unfair labor practices or
other collective bargaining disputes. The Company has not committed any unfair
labor practice. There is no organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of the
Company.
19
3.21. Employee Benefits.
(a)Except as set forth on Schedule 3.21, with respect to all
employees, former employees, directors and independent contractors of the
Company and their dependents and beneficiaries, neither the Company nor
any ERISA Affiliate presently maintains, contributes to or has any
Liability under or with respect to any Employee Benefit Plan. The plans,
programs and arrangements set forth on Schedule 3.21 are herein referred
to as the "COMPANY EMPLOYEE BENEFIT PLANS." Each Company Employee Benefit
Plan (and each related trust, insurance contract or other funding
arrangement) complies in form and in operation in all material respects
with the applicable requirements of ERISA, the Code, and other applicable
Laws and governing documents and agreements, and each Company Employee
Benefit Plan intended to be qualified under Section 401(a) or 423 of the
Code (and its related trust, if applicable) is so qualified and has been
tax-qualified since its creation. Each Company Employee Benefit Plan has
been maintained and administered in material compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules
and regulations, including ERISA and the Code, which are applicable to
such plans. With respect to each Company Employee Benefit Plan, there has
been no act or omission by the Company or any ERISA Affiliate that would
impair the right or ability of the Company or any ERISA Affiliate to
unilaterally amend in whole or part or terminate such Company Employee
Benefit Plan at any time, subject to the terms of any insurance contract
or other contractual arrangements with third parties, and the Company has
delivered to Buyer true and complete copies of: (i) the plan documents,
including any related trust agreements, insurance contracts or other
funding arrangements, or a written summary of the terms and conditions of
the plan if there is no written plan document; (ii) the most recent IRS
Form 5500, if any; (iii) the most recent financial statement and, if
applicable, actuarial valuation; (iv) all correspondence with the Internal
Revenue Service, the Department of Labor and other governmental agencies
with respect to the past three plan years other than IRS Form 5500
filings; and (v) the most recent summary plan description.
(b)Neither the Company nor any of its directors, officers or
employees has any Liability with respect to any Company Employee Benefit
Plan for failure to comply with ERISA, the Code, any other applicable Laws
or any governing documents or agreements. No non-exempt "prohibited
transaction," as defined in ERISA Section 406 or Code Section 4975, has
occurred with respect to any Company Employee Benefit Plan.
(c)No Company Employee Benefit Plan has any unfunded
Liability. With respect to the Company Employee Benefit Plans, all
applicable contributions and premium payments for all periods ending prior
to the Closing Date (including periods from the first day of the then
current plan year to the Closing Date) will be made prior to the Closing
Date in accordance with past practice.
(d)Neither the Company nor any ERISA Affiliate maintains,
maintained, contributes to, or has any Liability (including, but not
limited to, current or potential withdrawal Liability) with respect to any
current or former employee benefit plan which is or has been subject to
Title IV of ERISA, including any Multiemployer Plan. No Company Employee
Benefit Plan is a multiple employer welfare arrangement as defined in
Section 3(40) of ERISA.
20
(e)With respect to all employees and former employees of the
Company, neither the Company nor any ERISA Affiliate presently maintains,
contributes to or has any Liability under any funded or unfunded medical,
health or life insurance plan or arrangement for present or future
retirees or present or future terminated employees except as required by
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or
state continuation coverage laws. There has been no act or acts which
would result in a disallowance of a deduction or the imposition of a tax
pursuant to Section 4980B, or any predecessor provision, of the Code or
any related regulations. No event has occurred with respect to which the
Company or any Affiliates could be liable for a material Tax imposed by
any of Sections 4972, 4976, 4977, 4979 or 4980 of the Code, or for a
material civil penalty under Section 502(c) of ERISA.
(f)There is no pending, or to the knowledge of the Company,
threatened legal action, proceeding, audit, examination or investigation
against or involving any Company Employee Benefit Plan maintained by the
Company or any ERISA Affiliate (other than routine claims for benefits).
To the knowledge of the Company, there is no basis for, and there are no
facts which could give rise to, any such condition, legal action,
proceeding or investigation. Any bonding required with respect to any
Company Employee Benefit Plans in accordance with applicable provisions of
ERISA has been obtained and is in full force and effect.
(g)To the knowledge of the Company and the Shareholders, the
Company does not, and following the Closing the Company and Buyer will
not, have any obligation, or liability in connection with any obligation,
to provide health care continuation coverage under ERISA Section 608 and
Code Section 4980B ("COBRA COVERAGE") to any individuals whose qualifying
event (within the meaning of Code Section 4980B(f)(3)) occurred on or
prior to the Closing Date and who is, or whose qualifying event occurred
in connection with, a covered employee whose last employment prior to the
qualifying event was with the Company.
3.22. Guaranties. The Company is not a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any other
Person.
3.23. Environment, Health and Safety. To the knowledge of the
Company and the Shareholders, the Company is and has been in compliance with all
Environmental, Health and Safety Laws. The Company has never received any
written or oral notice, claim, subpoena, or summons, or been threatened orally
or in writing with any notice, claim, subpoena, or summons, from any Person
alleging (i) any Liability of the Company under any Environmental, Health and
Safety Laws or (ii) any violation by the Company of any Environmental, Health
and Safety Law.
3.24. Certain Business Relationships with the Company. Neither the
Shareholders nor any Affiliates of the Shareholders have been involved in any
business arrangement or relationship with the Company within the past 12 months
(other than employment by the Company), and neither the Shareholders nor any
Affiliates of the Shareholders own any Asset which is used in the business of
the Company.
3.25. Customers and Payors. Schedule 3.25 contains (a) a list of the
15 largest customers of the Company for the 12-month period immediately
preceding December 31, 2004
21
(determined on the basis of the total dollar amount of net sales) showing the
total dollar amount of net revenues from each such customer during such 12-month
period; and (b) a list of the 15 largest customers of the Company for the
12-month period immediately preceding December 31, 2003 (determined on the basis
of the total dollar amount of net revenues) showing the total dollar amount of
net sales from each such customer during such 12-month period. Neither the
Company nor the Shareholders have any knowledge or information of any facts
indicating, nor any other reason to believe, that any of the customers of the
Company will not continue to be customers of the business of the Company after
the Closing at substantially the same level of purchases as heretofore.
3.26. Product, Information and Service Warranties. Each product and
all Information licensed, sold, leased or delivered, and each service performed,
by the Company has been in conformity with all applicable Laws and contractual
commitments or policies and all express, implied or statutory warranties, and
the Company has no Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against any of them giving rise to any Liability) for: the replacement or
repair of any product, the inaccuracy or inadequacy of any Information, the
substandard performance of any service or Panel or selection or composition or
adequacy of a Panel, or other damages in connection with the product,
Information or services provided by the Company, subject only to the reserve for
product and service warranty claims set forth on the face of the Preliminary
2004 Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Company. No product or Information sold, licensed leased or
delivered, or service performed, by the Company is subject to any guaranty,
warranty or other indemnity beyond the applicable standard terms and conditions
of sale, license, lease, service or performance. Schedule 3.26 includes copies
of the standard terms and conditions of sale, license, lease, service or
performance for the Company (containing applicable guaranty, warranty and
indemnity provisions).
3.27. Product, Information and Service Liability. The Company has no
Liability and, to the knowledge of the Shareholders and the Company, there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against the Company giving
rise to any Liability) arising out of any injury or damages (whether actual or
alleged) to any Person or its property (including Intellectual Property),
Information, privacy or its personal affairs or its personal or business
operations or prospects as a result of the ownership, license, possession or use
of (i) any product or Information sold, licensed, leased, delivered or otherwise
provided (directly or indirectly) by the Company or (ii) any service performed
by the Company.
3.28. Privacy, Security and Identity Theft Etc.
(a)The Company represents and warrants that it is in full
compliance with all Laws applicable to its business, the Panel, survey
takers, users of Company websites and/or service providers regarding: (1)
privacy, data protection or the security of Information, including but not
limited to, as applicable, the U.S. Childrens Online Privacy Protection
Act, the U.S. Health Insurance Portability and Accountability Act of 1996
("HIPAA"), the U.S. Gramm Xxxxx Xxxxxx Act ("GLBA"), the European Union
Data Protection Directive, the Canadian Personal Information Protection
and Electronic Documents Act, and all other Laws relating to privacy, data
protection or security of Information; (2) disposal of Information; (3)
22
reporting or notice of actual or attempted breaches in security or
suspected criminal activity; (4) identity theft; (5) "consumer reporting
agencies," as defined in the U.S. Fair Credit Reporting Act (FCRA) as
amended by the Fair and Accurate Credit Transactions Act, or users of
consumer reports or furnishers of information to consumer reporting
agencies (all as defined in the FCRA); (6) the collection, transmission,
use, maintenance, storage, access to, disclosure, processing and disposal
(collectively "HANDLING" or variation) of personally identifying
information, including social security or other identification numbers and
account numbers; (7) telemarketing; (8) "spam," commercial email messages
and commercial mobile service messages; (9) direct marketing or sharing
Information for direct marketing purposes (with any third party, including
Affiliates); (10) advertising or other communications directed to
particular users based on Information about them; (11) "opt in or out"
requests relating to any of the foregoing, including providing required
opportunities to do so and honoring such requests; and (12) consents,
notices, disclosures, Internet postings, and reports relating to any of
the foregoing or Handling thereof.
(b) Regarding any subject matter referenced in Section 3.28(a), the
Company is in full compliance with all of its obligations and all its statements
wherever made (including without limitation, in policies, on websites or
electronically through P3P or other electronic settings that communicate with
browsers or the like) are consistent with each other, accurate, not misleading
and do not constitute an unfair act or practice, including (without limitation)
obligations or statements not required by Laws.
(c) Regarding any subject matter referenced in Section 3.28(a) and
(b), the Company has not been the subject of and has not received notice of any
assessment or audit indicating any noncompliance, any actual or attempted breach
of security, or any claim that could give rise to a Liability.
(d) The Company does not collect or use any personally identifiable
information from users of its or other websites, or insert (or cause to be
inserted) onto their computers or other access device, any Information that is
not described in a privacy policy posted on the site and that complies with
applicable Laws; the Company requires all users of its website, Panel members
and survey takers to agree to the privacy, security and/or identity theft policy
and terms of use or other agreements as relevantly listed in Schedule 3.17.
(e) The Company owns all right, title, and interest in and to all
data Company Handles regarding users of its website, Panel members and survey
takers, including all demographic data and other data supplied to the Company's
customers.
(f) The Company has not and does not Handle personally or
individually identifying information, including health information
(collectively, "PII") other than in a manner consistent with Company's posted
privacy policy and standard industry privacy practices, and in compliance with
Laws. The Company is not a "covered entity", as that term is defined by 45
C.F.R.Section 160.103, and the Company is not subject as a "covered entity" to
the Standards for Privacy of Individually Identifiable Health Information
promulgated by the U.S. Department of Health and Human Services in accordance
with the Administrative Simplification provisions of HIPAA. To the knowledge of
the Company and the Shareholders, the Company is either not subject to or is in
compliance in all respects with any similar privacy laws in existence in any
state or foreign jurisdiction. The Company is in compliance with all obligations
and
23
responsibilities under any and all agreements (including without limitation
business associate agreements to which the Company is a party that require the
Company to protect the confidentiality, integrity or security of health
information relating to an individual patient. The Company also complies with
requirements of the Fair Credit Reporting Act regarding medical information (as
defined therein).
(g) The Company: (i) has no knowledge of any event or circumstance that
would constitute a default by the Company under any business associate, limited
data use, or other agreement with an entity subject to HIPAA or other Laws
regarding the subject matter of Section 3.28(a) or (b); (ii) has no knowledge of
any use or disclosure of PII by the Company that is not permitted by the
applicable agreement with the data source or applicable Laws or that is not
required by Laws; (iii) has no knowledge or any outstanding or unresolved
complaint regarding Handling by Company or its agents, customers or any other
Persons, of PII or other information; (iv) has implemented appropriate and
reasonable safeguards to prevent use or disclosure of PII other than as provided
in applicable contracts with the data source or as required by Laws; (v) has not
disclosed or provided any subcontract or agent with access to PII without first
having obtained reasonable assurance, or contractual assurance where required by
Laws, that such subcontractor or agent will comply with the same restrictions
and conditions that apply to the Company with respect to the information; and
(vi) has (A) obtained or required data sources to obtain authorizations
compliant with requirements under HIPAA and other applicable Laws for the
disclosure of PII to the Company or (B) a system that maintains information
relating to the disclosure of PII appropriate to providing an accounting of
disclosures under HIPAA or other applicable Laws, including without limitation,
the date of the disclosure, the name and address (if known) of the entity or
person who received the information; a brief description of the protected health
information disclosed; and a brief statement of the purpose of the disclosure
that may reasonably informs an individual of the basis for the disclosure.
(h) The Company has developed and implemented (or is so doing where
applicable Laws allow delayed implementation) appropriate safeguards reasonably
and appropriately: (i) to protect the confidentiality, integrity and
availability of individually identifiable health information maintained in
electronic form, which safeguards will be in place and operational on or before
April 20, 2005 and continuously thereafter; and (ii) to protect all PII from
unauthorized access, destruction, use, modification, or disclosure as required
by Laws or by Company obligations or policies.
3.29. Panel.
(a)The Rapidata online panel of healthcare professionals
consists of the following sub-panels (i) the Pharmacist Panel consisting
of hospital pharmacists, retail pharmacists and managed care pharmacists
and decision makers, (ii) the Physician Panel consists of U.S. based
physicians actively engaged in patient care, and (iii) the Nurse Panel
consists of U.S. based nurses and nurse practitioners actively engaged in
patient care. The Pharmacist Panel, the Physician Panel and the Nurse
Panel are each referred to as a "SUB-PANEL(S)," and collectively referred
to as the "PANEL." Schedule 3.29 sets forth a complete and accurate list
of the number of panelists in each of the foregoing Sub-Panels.
(b)On the Closing Date: (1) the Panel and each Sub-Panel
consists and will consist of not less than the number of unique e-mail
addresses listed in Schedule 3.29, and
24
Valid addresses through the Test Period (as provided below) will not fall
below such number for each Sub-Panel in an amount greater than 5% (the
"VALIDITY THRESHOLD"); (2) each individual who is a member of the Panel
("PANEL MEMBER") and is listed in Schedule 3.29 under the column heading
"Double Opt-In" has joined voluntarily and has also double opted in by
either affirmatively responding to a confirmatory email sent by the
Company after joining or by participating in more than one survey; (3)
except as identified in Schedule 3.29, each Panel Member has agreed to a
Panel Member Acknowledgement and associated privacy policy listed in
Schedule 3.17 1. (l) or (m); (4) by joining, all Panel Members have agreed
to receive continuing e-mail solicitations from Company to participate in
online marketing research surveys, but members have no obligation to
participate in any particular survey and may elect to unsubscribe at any
time; and (5) all emails to Panel members comply with 15 U.S.C. Section
7701 et. seq. and all other Laws regarding "spam," and all requests to
"opt-out" of receipt of any or all emails are timely honored by Company
and no further commercial email messages are sent to members so
requesting. Buyer shall have 45 business days after the Closing Date to
test whether the e-mail addresses delivered at Closing are Rejected
Addresses (the "TEST PERIOD"), and shall notify the Company Shareholders
within 10 business days of the end of the Test Period if there are
Rejected Addresses that cause the Panel to fall below the Validity
Threshold, such notice to provide a complete list of each address that
tested as a Rejected Address.
(c)"VALID" addresses are email addresses that do not test as a
Rejected Address, and a "REJECTED ADDRESS(ES)" shall mean an email address
that when sent an email provides a bounce-back-message as follows (i) mail
box does not exist, (ii) user unknown, (iii) message undeliverable, (iv)
mailbox unavailable, (v) destination server could not be found, or (vi)
mailbox not found. If the Panel has Rejected Addresses that cause the
Panel to fall below the Validity Threshold as of the end of the Test
Period, Buyer shall have a claim against the Primary Escrow equal to $5.00
for each Rejected Address below the Validity Threshold.
(d)As of the date hereof, the demographic and statistical
information provided by the Company to Buyer regarding the Panel and the
members of each Sub-Panel as of such date as set forth on Schedule 3.29 is
true and accurate in all material respects (the "BASELINE DATA"). At the
Closing, the Company shall deliver a certification of its president
certifying that, as of a date not more than five days prior to the
Closing, the Company re-tested the Baseline Data in respect of the Panel
and each Sub-Panel as of such date and that there was not a decline of
more than 2% compared to the Baseline Data for each Sub-Panel.
3.30. Disclosure. No representation or warranty made by the Company
or the Shareholders, nor any document, written information, statement, financial
statement, certificate, schedule or exhibit prepared and furnished or to be
prepared and furnished by the Company or its representatives pursuant hereto or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements of facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished. There is no fact known to the Company or the Shareholders that has
not been disclosed to Buyer in the schedules or otherwise in writing (whether as
part of due diligence or otherwise) that was or is, or so far as the Company or
the Shareholders can reasonably foresee, will have a Company Material Adverse
Effect or was or
25
is or will have a material adverse effect on the ability of the Company or the
Shareholders to perform their respective obligations under this Agreement.
ARTICLE IV : REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Except as disclosed in a document referring specifically to the
representations and warranties in this Agreement which identifies by section
number the section and subsection to which such disclosure relates and is
delivered by Company to Buyer prior to or simultaneous with the execution of
this Agreement (the "SHAREHOLDER DISCLOSURE SCHEDULE"), the Shareholders hereby
represent and warrant, jointly and severally, to Buyer as follows as of the date
of this Agreement and as of the Closing Date:
4.1. Authorization of Transaction. Each Shareholder has full power
and authority to execute and deliver this Agreement and to perform all
obligations hereunder and thereunder required to be performed by such
Shareholder. This Agreement constitutes the valid and legally binding obligation
of each such Shareholders, enforceable in accordance with its terms and
conditions. Each of the Shareholders is a natural person over 21 years of age
who is domiciled in the State of North Carolina, other than Xxxxxxxx Xxxxxx, who
is domiciled in the Commonwealth of Virginia.
None of the Shareholders has had a legal representative appointed by
a court of law or otherwise to act in behalf of any of the Shareholders or with
respect to any property of any of the Shareholders. None of the Shareholders is
required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any Governmental Entity in order to
consummate the transactions contemplated by this Agreement.
4.2. Non-contravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated thereby,
will (a) violate any statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any government, Governmental
Entity, or court to which the Shareholders are subject or (b) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, contract, lease, license, instrument or
other arrangement to which any of the Shareholders is a party, by which any of
the Shareholders is bound or to which any Assets of the Shareholders are
subject.
4.3. Brokers' Fees. None of Shareholders has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
4.4. Company Shares. Shareholders hold of record and own
beneficially all the outstanding shares of Company Common Stock, free and clear
of any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Encumbrances, Security Interests,
options, warrants, purchase rights, contracts, commitments and/or other rights
whatsoever. None of the Shareholders is a party to any option, warrant, purchase
right or other contract or commitment whatsoever that could require any of the
Shareholders to sell, transfer or otherwise dispose of any capital stock of the
Company (other than this Agreement) or any securities convertible into or
exchangeable for capital stock of the Company. None of the
26
Shareholders is a party to any voting trust, proxy, voting rights agreement or
other agreement or understanding with respect to the voting of any capital stock
of the Company.
4.5. Delivery of Information. The Shareholders acknowledge the
receipt and review by the Shareholders of Buyer's Prospectus on Form 424(b)(4)
filed with the SEC on December 7, 2004 and Buyers Current Reports on Form 8-K
filed with the SEC on December 10, 2004, January 4, 2005 and January 19, 2005,
respectively.
4.6. Spouse. Each Shareholder represents that his or her spouse has
executed a Spousal Consent on the signature page hereto, or that he or she is
not married.
ARTICLE V : REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company and the
Shareholders that:
5.1. Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to own, lease and operate its
Assets and to carry on its business as it is now being conducted electronically
or non-electronically, and Buyer is duly qualified and in good standing to do
business in each jurisdiction in which the nature or level of the business
conducted by it or the ownership or leasing or its activities regarding its
Assets or business makes such qualification necessary, except for such failures
to be so qualified or licensed and in good standing as would not, individually
or in the aggregate, have a Buyer Material Adverse Effect.
5.2. Authority. Buyer has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its respective
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and no other corporate proceeding on the part of Buyer is
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Buyer and, assuming the due authorization, execution and delivery thereof by the
Shareholders and the Company, constitutes the legal, valid and binding
obligations of Buyer enforceable in accordance with its terms.
5.3. No Conflict; Required Filings and Consents.
(a)The execution and delivery of this Agreement by Buyer do
not, and the performance of this Agreement by Buyer will not, (i) conflict
with or violate the Certificate of Incorporation or Bylaws of Buyer, (ii)
conflict with or violate any Laws in effect as of the date of this
Agreement applicable to Buyer or by which any of their respective
properties is bound, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or require payment under, or
result in the creation of a lien or encumbrance on, any of the properties
or Assets of Buyer pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
or obligation to which Buyer is a party or by which Buyer or any of their
respective properties is bound by or subject to, except for breaches,
defaults, events, rights of
27
termination, amendment, acceleration or cancellation, payment obligations
or Liens or Encumbrances that would not have a Buyer Material Adverse
Effect.
(b)The execution and delivery of this Agreement by Buyer do
not, and the performance of this Agreement by Buyer will not, require
Buyer to obtain any consent, approval, authorization or permit of, or to
make any filing with or notification to, any Governmental Entities, except
(i) for applicable requirements, if any, of the Exchange Act and (ii)
where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not, either
individually or in the aggregate, prevent Buyer from performing its
obligations under this Agreement.
5.4. Absence of Certain Changes or Events. Except as and to the
extent disclosed in filings with the SEC prior to the date of this Agreement or
as contemplated in this Agreement, since the end of the calendar period for
which Buyer filed its most recent report, there has not been (a) a Buyer
Material Adverse Effect or (b) any significant change by Buyer in its accounting
methods, principles or practices.
5.5. Disclosure. No representation or warranty made by Buyer, nor
any document, written information, statement, financial statement, certificate,
schedule or exhibit prepared and furnished or to be prepared and furnished by
Buyer or its representatives pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements of facts contained herein or therein not misleading in light
of the circumstances under which they were furnished. All statements and
information contained in any certificate, instrument, schedule or document
delivered by or on behalf of Buyer to Company and/or the Shareholders will be
deemed representations and warranties by Buyer. There is no fact known to Buyer
that has not been disclosed in the schedules or otherwise in writing (whether as
part of due diligence or otherwise) that was or is, or so far as Buyer can
reasonably foresee, will have a Buyer Material Adverse Effect or was or is or
will have a material adverse effect on the ability of Buyer to perform its
obligations under this Agreement.
ARTICLE VI : COVENANTS
6.1. Affirmative Covenants of the Company and the Shareholders. The
Company and the Shareholders hereby covenant and agree that, prior to the
Closing Date, unless otherwise expressly contemplated by this Agreement or
consented to in writing by Buyer, the Company will: (a) operate only in the
Ordinary Course of Business; provided that the Company may distribute bonuses in
recognition of the Closing to employees (other than Shareholders) of no more
than $20,000 in the aggregate; (b) consult with Buyer on an on-going basis
regarding any business activities not undertaken in the Ordinary Course,
including without limitation, any license agreements (other than standard end
user license agreements), OEM agreements, "bundling" agreements, or other
material contracts into which the Company proposes to enter, (c) preserve and/or
maintain, in all material respects and consistent with past custom and practice,
its business and Assets, including its present Information Assets, Intellectual
Property, operations, physical facilities, working conditions and relationships
with its present employees and Persons having significant business relations
with it, including suppliers, referral sources, payors, Panel Members, and
customers, (d) maintain and keep its properties and Assets in as good order,
security, repair and condition as at present, ordinary wear and tear excepted,
(e) keep
28
in full force and effect insurance and bonds comparable in amount and scope of
coverage to that currently maintained, (f) at the request of Buyer, obtain
pre-clearance certificates and file such instruments and documents as are
necessary to permit Buyer to merge the Company with and into Buyer on the
Closing Date or immediately following the Closing Date; and (g) advise Buyer of
any event the occurrence or non-occurrence of which, so far as the Company or
the Shareholders can reasonably foresee, could have a Company Material Adverse
Effect, could have a material adverse effect on the ability of the Company or
the Shareholders to perform their respective obligations under this Agreement
or, following the Closing, could have a Buyer Material Adverse Effect; (h)
deliver the Audited 2004 Financials to Buyer as soon as reasonably practicable
but in any event on or prior to February 18, 2005; and (i) to use commercially
reasonable efforts to cause PwC to give its consent to Buyer to include its
audit reports for the Audited Financials in Buyers SEC filings.
6.2. Negative Covenants of the Company and the Shareholders. Except
as expressly contemplated by this Agreement, or otherwise consented to in
writing by Buyer, from December 31, 2004 until the Closing Date, the Company has
not and will not, directly or indirectly through any Affiliate or otherwise (and
the Shareholders will not and will not cause the Company to), and has not
permitted and will not permit any Affiliate to directly or indirectly, do any of
the following:
(a)(i) increase the compensation payable to, or to become
payable to, any employee, director or executive officer (provided that the
Company may distribute bonuses in recognition of the Closing to employees,
other than Shareholders, of no more than $20,000 in the aggregate); (ii)
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or employee; (iii)
establish, adopt, enter into, amend, modify or terminate any Employee
Benefit Plan or arrangement except as may be required by applicable Law;
or (iv) hire any person other than persons to replace existing employees
who cease to be employed with the Company prior to the Closing, with such
replacement persons being hired at the same total cost and salary as the
former whom they are replacing;
(b)declare or pay any dividend on or make any other
distribution in respect of, outstanding shares of its capital stock;
(c)(i) redeem, purchase or otherwise acquire any shares of its
capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options, warrants
or conversion or other rights to acquire any shares of its capital stock
or any such securities or obligations; (ii) effect any reorganization or
recapitalization; or (iii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock;
(d)(i) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale (including the grant
of any Security Interests, Liens, claims, pledges, limitations in voting
rights, charges or other Encumbrances) of, any shares of any class of its
capital stock (including shares held in treasury), any securities
convertible into or exercisable or exchangeable for any other shares, or
any rights, warrants or options to acquire,
29
any such shares; and (ii) amend or otherwise modify the terms of any such
rights, warrants or options the effect of which will be to make such terms
more favorable to the holders thereof;
(e)acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in, all or a portion of the Assets
of, or by any other manner, any corporation, partnership, association or
other business, organization or division thereof, or otherwise acquire or
agree to acquire any Assets of any other Person (other than the purchase
of Assets from suppliers or vendors in the Ordinary Course of Business)
which are material, individually or in the aggregate, to the Company;
(f)sell, lease, license, exchange, mortgage, pledge, transfer
or otherwise dispose of, or agree to sell, lease, license, exchange,
mortgage, pledge, transfer or otherwise dispose of, any of its material
Assets;
(g)propose or adopt any amendments to its Articles of
Incorporation or its Bylaws;
(h)(i) change any of its methods of accounting, or (ii) make,
change or rescind any material election relating to Taxes, settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, execute any waiver
of restrictions on assessment of any Tax, file any Tax Return (other than
any estimated, payroll, sales or immaterial information Tax Returns or
other Tax Returns due (taking into account duly obtained extensions under
applicable law) or any amendment to a Tax Return, or change in any
material respect any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of the
federal income Tax Return for the taxable year ended December 31, 2003,
except, in the case of clause (i) or clause (ii), as may be required by
Law or GAAP;
(i) enter into any Contract outside the Ordinary Course of
Business;
(j)create, or permit the creation of, any Lien upon any Assets
outside the Ordinary Course of Business;
(k)enter into any employment Contract or collective bargaining
agreement, or modify the terms of any existing such Contract or agreement;
(l) sell, lease, license, transfer or assign any Assets;
(m)make any capital expenditures other than in the Ordinary
Course of Business, or make any capital expenditures which in the
aggregate exceed $5,000.00, unless the Company has received the prior
written consent of Buyer;
(n)amend or renew, or enter into any Contract involving
operations outside of the United States; or
(o)take or agree to take any action that would or is
reasonably likely to result in any representations and warranties of the
Company or the Shareholders set forth in this Agreement being untrue or in
any of the conditions to the Purchase not being satisfied.
30
6.3. Negative Covenants of Buyer. Except as expressly contemplated
by this Agreement or otherwise consented to in writing by the Company, from the
date of this Agreement until the Closing Date, Buyer will not take or agree to
take any action that would or is reasonably likely to result in any
representations and warranties of Buyer set forth in this Agreement being untrue
or in any of the conditions to the Purchase not being satisfied.
6.4. Access and Information. The Company will provide Buyer and its
officers, directors, employees, agents, counsel, accountants, financial
advisors, consultants and other representatives (collectively, the "BUYER
REPRESENTATIVES"), with full access, upon reasonable prior notice, to all
officers, employees, accountants, referral sources, customers, patients and
suppliers of the Company and, with respect to the Company and its officers,
employees and accountants, to all of their electronic or non-electronic assets,
information, properties, Contracts, books, records and all such other
information and data concerning the business and operations of the Company as
Buyer or any of the Buyer Representatives reasonably may request in connection
with such investigation. Such investigation will involve, among other things,
Buyer's review and confirmation of the Financial Statements, the legal review of
the Company's Contracts and leases, the review of the Company's Information,
panel data, client and referral lists and reference checks of the Company.
ARTICLE VII : ADDITIONAL AGREEMENTS
7.1. Appropriate Action; Consents; Filings.
(a)The Company, the Shareholders and Buyer will each use
commercially reasonable efforts to: (i) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary,
proper or advisable under applicable Law or otherwise to consummate and
make effective the transactions contemplated by this Agreement; (ii)
obtain from any Governmental Entities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or
made by Buyer, the Shareholders or the Company in connection with the
authorization, execution and delivery of this Agreement and the
consummation of the transactions contemplated herein; (iii) if requested
by Buyer, make all necessary filings, and thereafter make any other
required submissions, with respect to this Agreement as of the Closing
Date or immediately following the Closing Date required under (a) the
federal securities laws and the rules and regulations thereunder, if any,
and any other applicable federal or state securities laws, and (b) any
other applicable Law; provided that Buyer and the Company will cooperate
with each other in connection with the making of all such filings,
including providing copies of all such documents to the non-filing party
and its advisors prior to filing and, if requested, accepting all
reasonable additions, deletions or changes suggested in connection
therewith. The Company, the Shareholders and Buyer will furnish all
information required for any application or other filing to be made
pursuant to the rules and regulations of any applicable Law in connection
with the transactions contemplated by this Agreement.
(b) Notices and Consents.
(i)Each of the Company, the Shareholders and Buyer will
give any notices to third parties, and use commercially reasonable efforts to
obtain any third party consents (a) necessary, proper or advisable to consummate
the transactions contemplated in this
31
Agreement, (b) disclosed or required to be disclosed in the schedules contained
herein, (c) otherwise required under any Contracts, licenses, leases or other
agreements in connection with the consummation of the transactions contemplated
herein, or (d) required to prevent a Company Material Adverse Effect from
occurring prior to or after the Closing Date or a Buyer Material Adverse Effect
from occurring prior to or after the Closing Date. Company will use commercially
reasonable efforts to obtain any third party consents necessary, proper or
advisable to amend its contracts or privacy or other policies with Panelists or
survey takers to harmonize those documents with current or proposed practices of
Company or Buyer or as otherwise reasonably requested by Buyer.
(ii) In the event that any party will fail to obtain any
third party consent described in the forgoing paragraph, it will use its
commercially reasonable efforts, and will take any such actions reasonably
requested by another party to this Agreement, to minimize any adverse effect
upon the Company, Buyer and their respective businesses resulting, or which
could reasonably be expected to result after the Closing Date, from the failure
to obtain such consent.
7.2. Transfer and Disposal of Transferred Items Prior to the Closing
Date. The Company and the Shareholders will do all acts necessary to transfer,
distribute, settle, pay and/or dispose of all Transferred Items on or prior to
the Closing Date in accordance with Section 1.2(b). The Shareholders hereby
assume all liabilities, costs and expenses, including Taxes, incurred or
generated in connection with such transfer, distribution, determination or
disposal of the Transferred Items.
7.3. Preparation of Audited 2004 Financial Statements. The Company
and the Shareholders covenant and agree to use all commercially reasonable
efforts (i) to assist in the preparation of the Audited 2004 Financial
Statements and to cause such statements to be delivered to Buyer as soon as
reasonably practicable, but in any event on or prior to February 18, 2005 and
(ii) to cause PwC to provide its consent to Buyer to include its audit report
with respect to the Audited 2004 Financial Statements in Buyer's filings with
the SEC.
7.4. Retention of Employees. The Company and Shareholders will use
their best efforts to insure a smooth transition of employees such that at least
two of three employees listed remain and accept offers of continued employment
from Company following the Purchase upon terms consistent with their current
position. The Company and Buyer will work together to developing appropriate
communications to Company employees regarding the transaction, and developing a
transition plan in contemplation of the Closing. All employee communications
pertinent to employment matters connected with the transaction shall be subject
to the approval of Buyer.
7.5. Best Efforts. The parties hereto will use their best efforts to
consummate the Purchase and the other transactions contemplated hereby as
promptly as practicable.
7.6. Confidentiality; Public Announcements. The parties hereto agree
that only Buyer may make any public announcement of the existence of this
Agreement and/or the transactions contemplated hereby, including but not limited
to the Purchase, except only that the Company may announce the Purchase to its
employees prior to or at the Closing, provided that each employee has executed a
written agreement requiring him or her to keep the terms of the
32
Purchase confidential until announced by Buyer. The parties hereto agree not to
make public any of the terms of this Agreement, the Purchase, all other
transactions contemplated hereunder and all other Exhibits executed in
connection herewith, unless otherwise required by law, regulations, rules,
judicial order or a directive from the SEC or the Nasdaq.
7.7. Exclusivity; Acquisition Proposals. Unless and until this
Agreement shall have been terminated by either party pursuant to Section 9.1
hereof, neither Company nor the Shareholders shall (and each shall use its best
efforts to ensure that none of its officers, directors, agents, representatives
or affiliates) take or cause or permit any person to take, directly or
indirectly, any of the following actions with any party other than Buyer and its
designees: (i) solicit, encourage, initiate or participate in any negotiations,
inquiries, or discussions with respect to any offer or proposal to acquire all
or any significant part of the Company, its business, Assets or capital shares,
but excluding non-exclusive licenses entered into in the ordinary course of
business, whether by merger, consolidation, other business combination, purchase
of capital stock purchase of assets, license, lease, tender or exchange offer or
otherwise (each of the foregoing, a "RESTRICTED TRANSACTION"), (ii) disclose, in
connection with a Restricted Transaction, any information not customarily
disclosed to any person other than Buyer or its representatives concerning
Company's business or Assets or afford to any person other than Buyer or its
representatives access to its properties, Assets, books, or records, except in
the ordinary course of business and as required by law or pursuant to a
governmental request for information, (iii) enter into or execute any agreement
relating to a Restricted Transaction, or (iv) make or authorize any public
statement, recommendation or solicitation in support of any Restricted
Transaction or any offer or proposal relating to a Restricted Transaction other
than with respect to the transactions contemplated by this Agreement. In the
event that Company is contacted by any third party expressing an interest in
discussing a Restricted Transaction, Company will promptly, but in no event
later than twenty-four hours following Company's knowledge of such contact,
notify Buyer in writing of such contact and the identity of the party so
contacting Company.
7.8. Breakup Fee. The Company agrees to pay Buyer a termination fee
in the amount of $350,000 if (i) this Agreement is terminated by Buyer pursuant
to Section 9.1(a) and (ii) on or prior to the date of such termination the
Company or Shareholders received a proposal with respect to a Restricted
Transaction and within 18 months following such date of termination the Company
or the Shareholders consummates a Restricted Transaction. In the event that this
agreement is terminated by Buyer pursuant to Section 9.1(b), the Company and the
Shareholders covenant and agree to notify the Company of the occurrence of any
event that would constitute a Restricted Transaction that occurs within 18
months following the date of termination. To the extent that the Company becomes
obligated to pay a termination fee hereunder, the Company agrees to pay such fee
to Buyer within 10 business days of the consummation of the Restricted
Transaction that triggers such obligation. In such event, Buyer shall, in
addition to the amount of such termination fee, be entitled to receive any
additional costs and expenses incurred to collect such amount, including
attorneys fees, and any unpaid amount shall bear interest at the maximum rate
permitted by law.
7.9. Additional Tax Matters.
(a) Tax Returns.
33
(i)Buyer will prepare or cause to be prepared and file
or cause to be filed, at Buyer's cost and expense, all Tax Returns other than
income Tax Returns for the Company described in Section 7.9(a)(ii) below for all
periods ending on or prior to the Closing Date which are filed after the Closing
Date. The Shareholders shall be liable and shall reimburse Buyer for any Taxes
of the Company with respect to such periods within fifteen (15) days after
payment by Buyer of such Taxes to the extent such Taxes are not taken into
account for purposes of the Working Capital Adjustment.
(ii) The Shareholders will prepare or cause to be
prepared and timely file or cause to be filed, at Shareholders' cost and
expense, all Tax Returns for the Company with respect to the federal, state, or
local income Taxes relating to the Company's final S Corporation Taxable Period
ending on the Closing Date, and shall pay all Taxes required to be paid as shown
on such Returns. All such Returns shall be prepared consistent with past
practice and, no later than thirty (30) days prior to the filing of any such Tax
Returns, provided to Buyer for review and approval, which approval shall not be
unreasonably withheld or delayed. The Shareholders shall be liable for any and
all income Taxes imposed on the Shareholders for the Company's S Corporation
Taxable Periods, subject to Section 7.11.
(iii) Buyer will prepare or cause to be prepared and
file or cause to be filed, at Buyer's cost and expense, all Tax Returns for
taxable periods beginning prior to but ending after the Closing Date (each a
"STRADDLE PERIOD"); provided, however, that the foregoing will not be construed
as imposing any obligation on Buyer to investigate whether any Tax Return has
been filed which the Company and the Shareholders represent to having filed in
Section 3.12, or as otherwise limiting or modifying in any way the rights of
Buyer to recover under Section 9.5 for breaches of Section 3.12. In the case of
Taxes with respect to a Straddle Period, the Shareholders shall be liable for
the portion of such Straddle Period that ends on the Closing Date to the extent
such Taxes are not taken into account for purposes of the Working Capital
Adjustment. For purposes of this Section 7.9(a)(iii), the portion of any such
Tax that is allocable to the portion of the period ending on the Closing Date
shall be: (x) in the case of Taxes that are either based upon or related to
income or receipts, or imposed in connection with any sale or other transfer or
assignment of property (real or personal, tangible or intangible), deemed equal
to the amount which would be payable if the taxable year ended with the Closing
Date (except that, solely for purposes of determining the marginal tax rate
applicable to income or receipts during such period in a jurisdiction in which
such tax rate depends upon the level of income or receipts, annualized income or
receipts may be taken into account if appropriate for an equitable sharing of
such Taxes); and (y) in the case of Taxes not described in clause (x) above that
are imposed on a periodic basis and measured by the level of any item, deemed to
be the amount of such Taxes for the entire period (or, in the case of such Taxes
determined on an arrears basis, the amount of such Taxes for the immediately
preceding period) multiplied by a fraction the numerator of which is the number
of calendar days in the period ending on the Closing Date and the denominator of
which is the number of calendar days in the entire period.
(iv) Buyer will prepare or cause to be prepared and file
or cause to be filed, at Buyer's cost and expense, any Tax Returns for the
Company for all periods beginning on or after the Closing Date.
34
(b) Cooperation on Tax Matters.
(i)Buyer, the Company and the Shareholders will
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Section 7.9 and
any audit, litigation or other proceeding with respect to the Taxes of the
Company. Such cooperation will include the retention and (upon the other party's
request) the provision of records and information, to the extent the Company and
the Shareholders have not already turned over such records and information to
Buyer pursuant to Section 7.9(c), which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder; provided however, that Buyer shall not provide
to the Shareholders any copies of the Buyer's Tax Returns. The Company and the
Shareholders agree to provide Buyer upon Closing with all books and records with
respect to Tax matters pertinent to the Company relating to any taxable period
before Closing (including any extensions thereof) and warrant that no such books
and records have been transferred, destroyed or discarded and that the Company
and the Shareholders have abided by all record retention agreements, if any,
entered into with any taxing authority.
(ii) Buyer and the Shareholders further agree, upon
request, to use their best efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(iii) The Shareholders shall assist the Company to
enable it to file with the IRS notification of termination of the Company's S
Corporation status.
(c)Within thirty (30) days following the Closing Date, the
Company and Shareholders will turn over to Buyer all workpapers,
documents, records and information used in connection with or which
support the completion of all Tax Returns for the Company, as well as all
original invoices memorializing the purchase of Assets (and other
documentation of any type memorializing the incurrence and payment of any
and all Taxes on the purchase of such Assets) in connection with the
purchase by the Company or Shareholders, as the case may be, of all Assets
used in the Company's operations, to the extent that such invoices and
documentation presently exists and is in the possession of the Company or
the Shareholders.
(d)All transfer, documentary, sales, use, value added, stamp,
registration and other such taxes and fees (including any penalties and
interest) ("TRANSFER TAXES") incurred in connection with this Agreement or
the transactions contemplated hereby shall be paid by the Shareholders
when due, and the Shareholders shall, at their own expense, file all
necessary Returns and other documentation with respect to all such
Transfer Taxes.
7.10. Trade and Domain Names. Following the Closing, neither the
Shareholders nor any Affiliate of the Shareholders will, without the prior
written consent of Buyer, make any use of the following trade names or domain
names: "Rapidata," "Xxxxxxxx.xxx" "xxx.xxxxxxxx.xxx," and "xxx.xxxxxxxxx.xxx"
which are all of the trade or domain names currently in use or previously
utilized by the Company or any predecessor thereto, or any other name
confusingly similar thereto, except as may be necessary for the Shareholders to
prepare tax returns and other reports.
35
7.11. Section 338(h)(10) Election.
(a) Buyer, the Company and the Shareholders will make or cause
to be made a timely, effective and irrevocable election under Section
338(h)(10) of the Code and under any comparable provision of applicable
state or local law with respect to the Company (the "SECTION 338(H)(10)
ELECTION"), in form and substance acceptable to Buyer, and will file such
election in the manner required by applicable rules and regulations
promulgated under the Code and any comparable provision of applicable
state or local law.
(b) Within sixty (60) days after the Closing Date and after
consultation with the Shareholders in good faith, Buyer shall deliver to
the Shareholders, their legal counsel and accountants, a statement (the
"PRICE ALLOCATION") allocating the "AGGREGATE DEEMED SALES PRICE" (as such
term is defined under applicable Treasury Regulations) among the Assets.
The Price Allocation shall be binding on Buyer, the Company, the
Shareholders and their Affiliates. Buyer shall complete the Executed Form
8023 and Executed State Election Forms in accordance with the Price
Allocation.
(c) Following review and approval (which shall not be withheld
(except to the extent a form has not been completed in accordance with
Price Allocation) or unreasonably delayed) by the Shareholders of the
completed Executed Form 8023 and the completed Executed State Election
Forms, Buyer will timely file the Executed Form 8023, and the Company will
file a copy of such form, in accordance with the instructions to the form
and the Treasury Regulations under Section 338(h)(10) of the Code, and
Buyer and (to the extent required under applicable law) the Company and
the Shareholders will cause the Executed State Election Forms to be filed
with the applicable Tax authorities in accordance with applicable law.
Buyer, the Company, and the Shareholders will, and will cause their
Affiliates to, take any and all other steps that are required under
federal or applicable state and local laws to assure the validity of the
elections described herein under such laws. Buyer, the Company and the
Shareholders agree to be bound by, file their Tax Returns in accordance
with, and not take any position during a Tax audit, examination or contest
that is inconsistent with, the Executed Form 8023 and Executed State
Election Forms as so completed by Buyer, unless otherwise required by a
determination by a Tax authority or court that is not subject to further
appeal, review or modification (including by reason of the expiration of
the applicable period for filing an appeal or other request for review
with respect to such determination). The Shareholders, the Company and
Buyer shall each provide promptly all information that may be required for
the purpose of preparing such forms. The Shareholders acknowledge and
agree that, by making or causing to be made the Section 338(h)(10)
Election, (a) the Company will be deemed for federal income Tax purposes
to have sold its Assets and the Company's final S Corporation federal
income Tax Return (and any corresponding state or local Tax Returns) shall
include the gain resulting from such deemed sale, and (b) the Shareholders
will include such gain in their individual federal and state income Tax
Returns.
(d) The Shareholders will bear the economic burden of and
indemnify and hold harmless Buyer, its Affiliates and the Company against
any and all Taxes triggered by or resulting solely from the elections
described herein, including without limitation any income Taxes imposed on
the Company; provided however, that Buyer shall, as a condition to making
the 338(h)(10) Election, reimburse the Shareholders for the Incremental
Tax Cost of the Section 338(h)(10) Election. For purposes of this
Agreement, the term "INCREMENTAL TAX COST" shall
36
mean a portion of the additional Tax paid or payable by the Shareholders
as a result of the recognition of income other than long-term capital gain
by the Shareholders as part of their gain resulting from the Section
338(h)(10) Election (the aggregate of such income for all the
Shareholders, the "338(h)(10) INCOME") to the extent that the amount of
the 338(h)(10) Income exceeds $500,000, assuming that the Shareholders are
subject to income Tax at the highest marginal ordinary income tax rate
applicable to individuals. The Shareholders shall provide to Buyer on or
before the fourteenth (14th) day after the delivery by Buyer of the Price
Allocation pursuant to Section 7.11(b) a calculation detailing the amount
of the Incremental Tax Cost (the "INCREMENTAL TAX COST AMOUNT"). Subject
to the review and approval of Buyer of the Incremental Tax Cost Amount,
the Incremental Tax Cost Amount shall be binding on Buyer, the Company,
the Shareholders and their Affiliates, and Buyer shall pay to the
Shareholders the Incremental Tax Cost Amount. Each Shareholder shall be
entitled to his, her or its pro rata share of the Incremental Tax Cost in
accordance with such Shareholder's Company Common Stock. Any payment of
the Incremental Tax Cost Amount pursuant to this Section 7.11(d) shall be
treated for all purposes of this Agreement as having been paid to the
Shareholders as additional consideration for the Company Shares. Other
than as provided in this Section 7.11(d), Buyer shall have no further
liability in respect of the Taxes of the Shareholders resulting from the
338(h)(10) Election.
ARTICLE VIII : CLOSING CONDITIONS
8.1.Conditions to Obligations of Each Party Under This Agreement.
The respective obligations of each party to effect the Purchase and the other
transactions contemplated herein will be subject to the satisfaction at or prior
to the Closing Date of the following conditions, any or all of which may be
waived, in whole or in part, to the extent permitted by applicable Law:
(a) No Order. No Governmental Entity or federal or state court
of competent jurisdiction will have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Purchase illegal
or otherwise prohibiting consummation of the Purchase.
(b) Consents and Approvals. All material consents, approvals
and authorizations legally required to be obtained to consummate the
Purchase will have been obtained from all required Governmental Entities.
8.2.Additional Conditions to Obligations of Buyer. The obligations
of Buyer to effect the Purchase and the other transactions contemplated herein
are also subject to the following conditions, each of which may be waived, in
whole or in part, to the extent permitted by applicable Law, by Buyer:
(a) Representations and Warranties. Each of the
representations and warranties of the Company and the Shareholders
contained in this Agreement will be true and correct when made and on and
as of the Closing Date, as if made on and as of such date, individually or
in the aggregate, and except that those representations and warranties
which address matters only as of a particular date will remain true and
correct as of such date. Buyer will have
37
received a certificate of the President of the Company and each
Shareholder to such effect; and
(b) Agreements and Covenants. The Company and the Shareholders
will have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or
complied with by them on or prior to the Closing Date. Buyer will have
received a certificate of the President or Chief Financial Officer of the
Company and the Shareholders to that effect.
(c) Third Party Consents and Waivers. The Company will have
obtained consents and waivers, in form and substance reasonably
satisfactory to Buyer, in respect of the material contracts set forth on
Schedule 8.2(c).
(d) Satisfactory Completion of Due Diligence. Buyer shall have
satisfactorily completed its legal, financial and technical due diligence
of Company.
(e) Company Material Adverse Effect. The Company will not have
become subject to any action or event which resulted in or may likely
result in a Company Material Adverse Effect.
(f) Closing Date Balance Sheet. Buyer shall have received the
Closing Date Balance Sheet that shall be in form and substance reasonably
acceptable to Buyer.
(g) Legal Opinion. Buyer will have received the legal opinion
of Xxxxxxx Xxxxxxx & Xxxxxxxx, P.A., counsel for the Company and the
Shareholders, covering the matters set forth on EXHIBIT B. Such opinion
shall be in form and substance reasonably acceptable to Buyer's legal
counsel.
(h) Employment and Non-Competition Agreements. Mebane and
Xxxxxxx will execute and deliver employment and non-competition agreements
(collectively, the "EMPLOYMENT AGREEMENTS") in the form attached as
EXHIBIT C.
(i) Restricted Stock Agreements. Mebane and Xxxxxxx will
execute and deliver restricted stock purchase agreements (collectively,
the "RESTRICTED STOCK AGREEMENTS") in the form attached as EXHIBIT D.
(j) Non-Competition Agreements. Towns and Xxxxxx will execute
and deliver to Buyer the non-competition agreements in the form attached
as EXHIBIT E.
(k) Retention of Employees. At least two out of three of the
Company's employees listed on Schedule 3.20 will have accepted offers of
continued employment from Company following the Purchase upon terms
consistent with their current position..
(l) UCC Forms. The Company and the Shareholders will execute
and deliver to Buyer such UCC forms and Intellectual Property registration
or other records as may be necessary in the opinion of the counsel for
Buyer to evidence that all the Assets of the Company are free and clear of
any Liens.
38
(m) Agreement by the Shareholders as to the Section 338(h)(10)
Election. Each Shareholder (i) shall have signed in blank an IRS Form 8023
with respect to the Company, which same form also will have been signed by
all the other Shareholders and will have been delivered to Buyer (the
"EXECUTED FORM 8023"), (ii) shall have signed in blank and delivered to
Buyer, with respect to the Company, all forms or other documents that are
similar to the IRS Form 8023 with respect to elections under state and
local law that correspond to the election under Section 338(h)(10) of the
Code (the "EXECUTED STATE ELECTION FORMS"), (iii) shall have acknowledged
and agreed in writing to be bound by the terms of Section 7.11, and (iv)
shall have agreed in writing to take all such further actions as are
deemed necessary or appropriate by Buyer for purposes of effectuating
Section 7.11. In no event, however, shall Buyer be authorized to file the
Executed Form 8023 or any Executed State Election Forms with the IRS or
any state taxing authority unless and until the Incremental Tax Cost has
been paid to the Shareholders.
(n) Evidence of satisfaction of $100,000 Promissory Note,
dated as of June 7, 2004, payable by the Company to Wachovia Bank, N.A.
8.3.Additional Conditions to Obligations of the Company and the
Shareholders. The obligations of the Company and/or the Shareholders to effect
the Purchase and the other transactions contemplated in this Agreement are
subject to the following conditions, each of which may be waived, in whole or in
part, to the extent permitted by applicable Law, by the Company or the
Shareholders on behalf of both such parties:
(a) Representations and Warranties. Each of the
representations and warranties of Buyer contained in this Agreement will
be true and correct when made and on and as of the Closing Date as if made
on and as of such date, except where the failure to be so true and correct
would not have a Buyer Material Adverse Effect, and except that those
representations and warranties which address matters only as of a
particular date will remain true and correct as of such date, except where
the failure to be so true and correct would not have a Buyer Material
Adverse Effect. Solely for purposes of this section and in determining
compliance with the conditions set forth herein, any representation and
warranty made by Buyer in this Agreement will be read and interpreted as
if the qualification stated therein with respect to materiality or Buyer
Material Adverse Effect were not contained therein. The Company will have
received a certificate of the President of Buyer to such effect.
(b) Agreements and Covenants. Buyer will have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it or them
on or prior to the Closing Date. The Company will have received a
certificate of the President of Buyer to that effect.
(c) Buyer Material Adverse Effect. Buyer will not have become
subject to any action or event which resulted in or may likely result in a
Buyer Material Adverse Effect.
(d) Legal Opinion. The Company will have received the legal
opinion of Xxxxxxx Xxxxx & Xxxxx LLP, counsel to Buyer, covering the
matters set forth on EXHIBIT F.
39
ARTICLE IX : TERMINATION, AMENDMENT, WAIVER AND INDEMNIFICATION
9.1. Termination. This Agreement may be terminated at any time prior
to the Closing Date:
(a) by mutual consent of Buyer and the Company;
(b)by Buyer, upon a material breach of any covenant or
agreement on the part of the Company or the Shareholders not cured within
10 days after receiving notice;
(c)by the Company, upon a material breach of any covenant or
agreement on the part of Buyer as set forth in this Agreement not cured
within 10 days after receiving notice;
(d)by either Buyer or the Company, if there will be any order
of a Governmental Entity which is final and non-appealable preventing the
consummation of the Purchase;
(e)by Buyer if it is not satisfied with the results of its
continuing due diligence review regarding the Company or if there has been
a Company Material Adverse Effect;
(f)by either Buyer or the Company, if the Closing will not
have occurred on or before March 31, 2005 (unless the failure to
consummate the Closing by such date will be due to the action of or
failure to act by the party seeking to terminate this Agreement).
9.2. Amendment. This Agreement may not be amended except by an
instrument signed by all the parties.
9.3. Waiver. At any time prior to the Closing Date, any party may
(a) extend the time for the performance of any of the obligations or other acts
of another party hereto, (b) waive any inaccuracies in the representations and
warranties of another party contained herein or in any document delivered
pursuant hereto and (c) waive compliance by another party with any of the
agreements or conditions contained herein. Any such extension or waiver will be
valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
9.4. Fees, Expenses and Other Payments. The operation of the
Transaction Cost Adjustment is intended to function such that Buyer, on the one
hand and the Shareholders on the other hand each bear their own costs and
expenses incurred in connection with the preparation, negotiation and
performance of this Agreement (including legal, accounting, investment banking
and financial advisory fees and expenses) and the transactions contemplated
hereby, including all due diligence expenses and fees and expenses of agents,
representatives, counsel and accountants. In the event that Buyer terminates
this Agreement for reasons other than pursuant to Sections 9.1(b) or (d), it
will reimburse the Company for actual, documented transaction costs incurred
prior to such termination, but in no event more than $75,000.
9.5. Indemnification.
(a)Claims of Buyer. The Shareholders will indemnify and defend
Buyer, and hold it harmless, from and against any and all losses, damages,
Liabilities, claims, demands,
40
judgments, settlements, costs and expenses of any nature whatsoever
(including without limitation any loss, damage, liability, claim, cost and
expense of any failure of the 338(h)(10) Election to be valid or effective
by reason of a breach of any representations set forth in Section 3.12(e)
and reasonable attorneys' fees) (collectively, "LOSS"), resulting from or
arising out of any: (i) breach of any representation or warranty or
agreement of the Company or the Shareholders contained herein; (ii) breach
of the terms of the Non-Competition Agreements; (iii) Liability of the
Company, whether or not addressed by a representation or warranty, which
was created, incurred or arose from facts, events, conditions or
circumstances existing on or before the Closing Date, to the extent that,
but only to the extent that, such Liability was not reflected or reserved
against on the face of the Preliminary 2004 Balance Sheet as adjusted for
Liabilities incurred in the Ordinary Course of Business since December 31,
2004; (iv) any claim for amounts due to Buyer with respect to Transferred
Items pursuant to Section 1.2(b); (v) any claim for amounts due to Buyer
with respect to uncollected Current Accounts Receivable pursuant to
Section 1.2(c)(i); (vi) any claim for amounts due to Buyer for Transaction
Costs in accordance with Section 1.2(c)(ii); and (vii) any amounts due to
Buyer with respect to the EBITDA Adjustment in accordance with Section
1.2(c)(iii). Except as otherwise provided under Section 10.1(b), no claim
for indemnification pursuant to this Section 9.5(a) may be made subsequent
to the date 18 months after the Closing Date or in respect of a Loss for
which Buyer has otherwise been previously reimbursed by the Shareholders.
(b) Third Party Claims.
(i)If any third party notifies Buyer with respect to any
third party claim (a "THIRD PARTY CLAIM") that may give rise to a Loss, then
Buyer will promptly notify the Shareholders in writing; provided, however, that
no delay on the part of Buyer in notifying the Shareholders will relieve the
Shareholders from any obligation hereunder unless (and then solely to the
extent) the Shareholders are prejudiced by such delay.
(ii) The Shareholders will have the right to defend
Buyer against the Third Party Claim with counsel selected by Shareholders and
reasonably satisfactory to Buyer, so long as: (A) the Shareholders so notify
Buyer in writing within 15 days of the Third Party Claim becoming known to the
Shareholders, acknowledging that such claim is in respect of a Loss described in
Section 9.5(a); (B) the Third Party Claim involves only money damages and does
not seek an injunction or other equitable relief; (C) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not, in the good
faith judgment of Buyer, likely to establish a precedential custom or practice
materially adverse to the continuing business interests of Buyer; and (D) the
Shareholders conduct the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Shareholders are conducting the
defense of the Third Party Claim in accordance with Section 9.5(b)(ii), (A)
Buyer may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim; (B) Buyer will not consent
to the entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Shareholders (which
consent will not be withheld unreasonably); and (C) the Shareholders will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of Buyer (which
consent will not be withheld unreasonably).
41
(iv) In the event that any of the conditions in Section
9.5(b)(ii) is or becomes unsatisfied, (A) Buyer may defend against the Third
Party Claim in any manner it reasonably may deem appropriate; provided, however,
that Buyer will not consent to the entry of any judgment or enter into any
settlement or agreement to settle a Third Party Claim without the prior written
consent of the Shareholders, which consent will not be unreasonably withheld;
(B) Buyer will be reimbursed by Shareholders, or Buyer may deduct such amounts
from the Primary Escrow, promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees and
expenses); and (C) the Shareholders will remain responsible for any Loss that
Buyer actually suffers resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent provided in
this Section 9.5.
(v)Notwithstanding the foregoing, in the event Buyer
receives a notice of any examination, claim, adjustment, or other proceeding (a
"PROCEEDING NOTICE") with respect to the liability for Taxes for any S
Corporation Taxable Periods of the Company for which the Shareholders are or may
be liable under Section 9.5(a), Buyer shall notify the Shareholders in writing
thereof (the "BUYER NOTICE") no later than the earlier of (i) thirty (30) days
after the receipt by Buyer of the Proceeding Notice, or (ii) ten (10) days prior
to the deadline for responding to the Proceeding Notice, but no failure to give
such Buyer Notice shall relieve the Shareholders of any liability hereunder
except to the extent, if any, that the rights of the Shareholders with respect
to such claim are actually prejudiced. In the event of any examination, claim,
adjustment, or other proceeding relating solely to income Taxes in respect of
any taxable period ending on or before the Closing Date, the Shareholders shall
control the contest of such claim, adjustment, or other proceeding. The
Shareholders shall keep Buyer advised of the status of such claim, adjustment or
other proceeding and may not, without the consent of Buyer, agree to any
settlement or compromise that could result in a potential Tax liability for
Buyer. Buyer shall control all other examinations, claims, adjustments, or other
proceedings. Buyer, the Company and the Shareholders shall cooperate with each
other, and will consult with each other, in the negotiation and settlement of
any proceeding described in this Section 9.5(b)(v).
(c)No Waiver. The occurrence of the Closing will not
constitute a waiver by Buyer of its rights to indemnification hereunder,
regardless of whether Buyer has knowledge of the breach, violation or
failure of the condition constituting the basis of the Loss at or before
the Closing, and regardless of whether such breach, violation or failure
is deemed to be "material" for purposes of Section 9.1.
(d)Remedies. The Primary Escrow is the sole remedy to satisfy
claims by Buyer for indemnification under this Section 9.5 (other than
claims arising from any EBITDA Adjustment, which the EBITDA Escrow may
also satisfy), except for claims ("EXCEPTED CLAIMS") arising out of or
based on (i) fraud or willful misstatements or willful omissions by the
Company or any of the Shareholders, or (ii) to the breach of any
representation, warranty, covenant or agreement set forth in Sections
1.2(b), 1.2(f), 3.3, 3.12, 7.2, 7.8, 7.9, 7.10, 7.11, and Article IV
(collectively, the "SURVIVING OBLIGATIONS") In each case of an Excepted
Claim, Buyer will have all available legal remedies.
(e)Basket. Buyer will not be entitled to seek indemnification
under this Section 9.5 unless and until the amount of all Losses has
accumulated to a threshold of
42
$100,000, after which Buyer will be entitled to the full amount of all
Losses, including amounts below such threshold.
9.6. Shareholder Representative.
(a)The Shareholders hereby appoint Xxxx Xxxxxx Xxxxxx, III as
"SHAREHOLDER REPRESENTATIVE". The Shareholder Representative will be agent
and attorney-in-fact for and on behalf of each of the Shareholders and
shall have full power and authority to represent all of the Shareholders
and their successors with respect to all matters arising under this
Agreement. All actions taken by the Shareholder Representative hereunder
shall be binding upon all Shareholders and their successors as if
expressly confirmed and ratified in writing by each of them, including,
but not limited to, resolving all claims relating the Escrow and any
indemnification claims and obligations. The Shareholder Representative
shall take any and all actions which he believes are necessary or
appropriate under this Agreement for and on behalf of the Shareholders, as
fully as if he were acting on his own behalf, including, without
limitation, consenting to, compromising or settling issues with respect to
the Escrow and all such indemnity claims with Buyer under this Agreement,
taking any and all other actions specified in or contemplated by this
Agreement, and engaging counsel, or accountants in connection with the
foregoing matters. Without limiting the generality of the foregoing, the
Shareholder Representative shall have full power and authority to
interpret all the terms and provisions of this Agreement and to consent to
any amendment hereof on behalf of all Shareholders and such successors.
The Person designated to serve as the Shareholder Representative may be
changed by the Shareholders who are entitled to receive a majority of the
Escrow when and if it becomes payable hereunder from time to time upon not
less than ten days prior written notice to Buyer. No bond shall be
required of the Shareholder Representative, and the Shareholder
Representative shall receive no compensation for services but shall be
entitled to be reimbursed by the Shareholders for reasonable expenses
incurred in the performance of his duties hereunder, including expenses of
legal counsel. All such expenses shall be payable from the Escrow, if
sufficient.
(b)The Shareholder Representative shall not be liable to
Shareholders for any act done or omitted hereunder as Shareholder
Representative while acting in good faith and in the exercise of
reasonable judgment, and any act done or omitted pursuant to the written
advice of counsel shall be conclusive evidence of such good faith. The
Shareholders shall severally indemnify the Shareholder Representative and
hold him harmless from and against any loss, liability or expense incurred
without gross negligence or bad faith on the part of the Shareholder
Representative and arising out of or in connection with the acceptance and
administration of his duties hereunder.
(c)The Shareholder Representative shall treat confidentially
and not disclose any nonpublic information from or about Buyer or the
Company to anyone (except on a need to know basis to individuals who agree
to treat such information confidentially).
(d)A decision, act, consent or instruction of the Shareholder
Representative shall constitute a decision of all the Shareholders and
shall be final, binding and conclusive upon each such Shareholder, and
Buyer may rely upon any decision, act, consent or instruction of the
Shareholder Representative as being the decision, act, consent or
instruction of each and every such Shareholder. The Custodian, Buyer and
the Company are hereby
43
relieved from any liability to any Person for any acts done by them in
accordance with such decision, act, consent or instruction of the
Shareholder Representative.
ARTICLE X : GENERAL PROVISIONS
10.1. Effectiveness of Representations, Warranties and Agreements.
(a)Except as set forth in Section 10.1(b), the
representations, warranties and agreements of each party hereto will
remain operative and in full force and effect regardless of any
investigation made by or on behalf of any other party hereto, any Person
controlling any such party or any of their officers or directors, whether
prior to or after the execution of this Agreement.
(b)The representations, warranties and agreements in this
Agreement, other than the Surviving Obligations and the provisions of
Articles IX and X, will terminate on the date which is 18 months after the
Closing Date. The Surviving Obligations and the provisions of Articles IX
and X will terminate on the expiration date of the period of limitation
under applicable Laws (as such period of limitation may be extended by
waiver).
10.2. Notices. All notices and other communications given or made
pursuant hereto will be in writing and will be deemed to have been duly given or
made as of the date delivered, mailed or faxed, and will be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested), or delivered by overnight delivery
service (e.g., Federal Express), to the parties at the following addresses (or
at such other address for a party as will be specified by like changes of
address) or sent by electronic transmission to the fax number specified below:
(a) If to Buyer:
Greenfield Online, Inc.
00 Xxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx, Corporate Secretary
Phone No.: (000) 000-0000
Fax No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx & Xxxxx LLP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxx Xxxxxx
Telephone (000) 000-0000
Fax: (000) 000-0000
(b) If to the Company:
Xxxxxxxx.xxx, Inc.
XX Xxx 00000
00
Xxxxxx, XX 00000
Phone No.: (000) 000-0000
Fax No.: (000) 000-0000
(c) If to any Shareholder:
Xxxx Xxxxxx Xxxxxx, III
Shareholder Representative
0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Phone No.: (000) 000-0000
Fax No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx, P.A.
0000 XX Xxxxxxx 00 Xxxx, Xxxxx 000
Xxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Phone No.:(000) 000-0000
Fax No.: (000) 000-0000
10.3. Certain Definitions. For purposes of this Agreement, the
following terms will have the following meanings:
"AFFILIATE" means a Person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned Person;
"ASSETS" means any and all: (1) properties, contract rights and
other assets; (2) Intellectual Property; (3) data, text, images, sounds, codes,
computer programs, software, databases, mask works or the like and including
collections and compilations of them (whether or not all or part of such is
Intellectual Property) and all other information (collectively, "INFORMATION");
(4) access or use rights; (5) all rights in Internet, worldwide web or similar
addresses, uniform resource locators, domain names or the like and all
applications and registrations therefor; and (6) other rights of every nature
whatsoever; of the Company or in which Company has rights, permissions or
possession or control of any nature, all whether proprietary, real, personal or
mixed, tangible or intangible. Nos. (3) through (5) are referenced herein as
"INFORMATION ASSETS."
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence;
"BUYER MATERIAL ADVERSE EFFECT" will mean any change or effect that,
individually or when taken together with all such other changes or effects, is
or is reasonably
45
likely to be materially adverse to the business, properties, Assets, condition
(financial or otherwise), liabilities, operations or prospects of Buyer and its
Subsidiaries, taken as a whole at the time of such change or effect. A Buyer
Material Adverse Effect will be deemed to exist if there will occur any event
which causes or may reasonably be expected to cause or result in estimable
monetary loss which, individually or when aggregated with all other events,
exceeds $5,000,000;
"CODE" means the Internal Revenue Code of 1986, as amended;
"COMPANY MATERIAL ADVERSE EFFECT" means any change or effect
relating to the time prior to the Closing Date that, individually or when taken
together with all other such changes or effects, is or is reasonably likely to
be materially adverse to the business, properties, Assets, condition (financial
or otherwise), liabilities, operations or prospects of the Company at the time
of such change or effect. A Company Material Adverse Effect will be deemed to
exist if there will occur any event which relates to the time prior to the
Closing Date and which causes or may reasonably be expected to cause or result
in estimable monetary loss which, individually or when aggregated with all other
events, exceeds $150,000;
"CONTRACT" of any Person means any contract, agreement, license or
instrument of any type whatsoever, whether written or oral, (i) to which such
Person is a party and by which such Person either has made a binding undertaking
to perform an obligation or is entitled to any property, information or right,
or (ii) by which any of the Assets of such Person is bound;
"CONTROL" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or as
trustee or executor, by Contract or credit arrangement or otherwise;
"EMPLOYEE BENEFIT PLAN" means (a) any bonus, incentive compensation,
profit sharing, retirement, pension, group insurance, death benefit, group
health, medical expense reimbursement, workers' compensation, dependent care,
flexible benefits or cafeteria, stock option, stock purchase, stock appreciation
rights, savings, deferred compensation, consulting, severance pay or termination
pay, vacation pay, life insurance, disability, welfare or other employee benefit
or fringe benefit plan, program or arrangement; or (b) any plan, program or
arrangement which is an Employee Pension Benefit Plan, Employee Welfare Benefit
Plan or Multiemployer Plan.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2);
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(1);
"ENCUMBRANCES" means any Security Interests, Liens, claims, pledges,
agreements, limitations on voting rights, charges or other encumbrances of any
nature whatsoever;
"ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation
46
and Recovery Act of 1976, and the Occupational Safety and Health Act of 1970,
each as amended, together with all other laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), concerning pollution or protection of the environment, disposal of
waste electronic materials and import or export of products containing materials
that will become subject to same upon disposal, public health and safety, or
employee health and safety, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic substances, materials or wastes into ambient
air, surface water, ground water, or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic substances, materials or wastes;
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended;
"ERISA AFFILIATE" means each person (as defined in Section 3(9) of
ERISA) that together with the Company (or any person whose liabilities the
Company has assumed or is otherwise subject to) would be considered or has been
a single employer under Section 4001(b) of ERISA or would be considered or has
been a member of the same "controlled group," under common control, a member of
the same affiliated service group or otherwise a single employer within the
meaning of Section 414(b), (c), (m) and (o) of the Code (provided, however, that
when the subject of the provision is a Multiemployer Plan only subsections (b)
and (c) of Section 414 of the Code will be taken into account).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended;
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended;
"GAAP" means United States generally accepted accounting principles
as in effect from time to time;
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service marks, trade
dress, logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith, (c) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith, (d) all mask
works and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) databases; (h) rights of
47
publicity, things in action and choses in action, (i) all copies and tangible
embodiments thereof (in whatever form or medium); and (j) all other rights of
like nature.
"KNOWLEDGE" "KNOW" or "KNOWN" means, with respect to a particular
fact or other matter, that (i) an individual is actually aware of such fact or
other matter or (ii) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a commercially reasonable investigation concerning the existence of such fact or
other matter; a Person (other than an individual) will be deemed to have
"knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor or trustee of such Person (or in any similar capacity) has, or at any
time had, knowledge of such fact or other matter;
"LIEN" means any lien, charge, encumbrance, mortgage, conditional
sale agreement, title retention agreement, financing lease, pledge or Security
Interest of any kind or type and whether arising by Contract or under Law;
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section
3(37);
"ORDINARY COURSE OF BUSINESS" with respect to any entity, means the
ordinary course of business consistent with past custom and practice (including
with respect to quantity and frequency) of that entity;
"PANEL" means that certain database of distinct email addresses
related to the business of the Company, as such addresses may be supplemented
and deleted from time to time in the Ordinary Course of Business and as more
fully described in Section 3.29(a) and Schedule 3.29.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, a Governmental Entity (or any
department, agency, or political subdivision thereof) or any other entity;
"S CORPORATION TAXABLE PERIODS" shall mean the taxable periods for
which the Company was a valid S corporation under Section 1361(a) of the Code,
including the taxable period ending on the Closing Date.
"SEC" means the U.S. Securities and Exchange Commission;
"SECURITIES ACT" means the Securities Act of 1933, as amended;
"SECURITY INTEREST" means any mortgage, pledge, Lien, Encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar Liens, (b) Liens for Taxes not yet due and payable, (c) purchase
money Liens and Liens securing rental payments under capital lease arrangements,
and (d) other Liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money;
"SUBSIDIARY" or "SUBSIDIARIES" of a Person, means any corporation,
partnership, joint venture or other legal entity of which the Person (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, fifty percent (50%) or more of the capital
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stock or other equity interests which the holders thereof are generally entitled
to vote for the election of the board of directors or other governing body of
such corporation or other legal entity;
"TRANSACTION" means an action or set of actions relating to the
conduct of business, consumer, commercial or governmental affairs between two or
more Persons, including but not limited to any of the following types of
conduct: (a) the sale, lease, exchange, licensing, or other disposition or
disclosure of (i) personal property, including goods and intangibles, (ii)
services, (iii) any Asset; and/or (iv) any combination thereof; and (b) the
sale, lease, license, exchange, or other disposition of any interest in real
property, or any combination thereof.
10.4. Construction. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
10.5. Severability. If any term or other provision of this Agreement
is determined to be invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Agreement
will nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
will negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.
10.6. Reliance by Buyer. Notwithstanding the right of Buyer to
investigate the business, Assets and financial condition of the Company, and
notwithstanding any knowledge obtainable by Buyer as a result of such
investigation, Buyer has the unqualified right to rely upon, and have relied
upon, each of the representations and warranties made by the Company and the
Shareholders in this Agreement, as modified by the Company Disclosure Schedule
and the Shareholder Disclosure Schedule.
10.7. Entire Agreement and Modification. This Agreement (together
with the exhibits and schedules) constitutes the entire agreement of the parties
and supersedes all prior agreements and undertakings, both written and oral,
between the parties hereto, or any of them, with respect to the subject matter
hereof. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
10.8. Assignment. This Agreement may not be assigned by operation of
law or otherwise, except that Buyer may, without the consent of the Company or
Shareholders, assign its rights hereunder to its Affiliates. Any assignment by
Buyer will not relieve it of its obligations hereunder.
10.9. Parties in Interest. This Agreement will be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or will confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
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10.10. Waiver; Remedies Cumulative. No failure or delay on the part
of any party hereto in the exercise of any right hereunder will impair such
right or be construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor will any single or partial
exercise of any such right preclude other or further exercise thereof or of any
other right. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement. All rights and remedies existing under this Agreement are in
addition to, and not exclusive of, any rights or remedies otherwise available.
10.11. Further Assurances. The parties hereto agree (a) to furnish
upon request to each other such further information, (b) to execute and deliver
to each other such other documents, and (c) to do such other acts and things,
all as another party hereto may reasonably request for the purpose of carrying
out the intent of this Agreement and the documents referred to in this
Agreement.
10.12. Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
10.13. Venue; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties hereto in the courts of the
State of Connecticut, County of Fairfield, or, if it has or can acquire
jurisdiction, in the United States District Court for District of Connecticut,
and each of the parties hereto consents to the jurisdiction of such courts (and
of the appropriate appellate courts) in any such action or proceeding and waives
any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party hereto anywhere
in the world.
10.14. Counterparts. This Agreement may be executed in counterparts,
each of which when executed will be deemed to be an original but all of which
taken together will constitute one and the same agreement.
(signature page follows)
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Stock Purchase Agreement to be executed as of the date first written above by
their respective officer thereunto duly authorized:
GREENFIELD ONLINE, INC. XXXXXXXX.XXX, INC.
By: ___________________________________ By: __________________________________
Xxxx Xxxxxx Xxxxxxxx Xxxxxxx Xxxxxxx
CEO CEO
SHAREHOLDERS
______________________________________ _____________________________________
Xxxx Xxxxxx Xxxxxx, III, Individually Xxxxxxxx Xxxxxxx Xxxxxxx, Individually
______________________________________ _____________________________________
Xxxxx Xxxxxx, Individually Xxxxxxxx Xxxxxx Towns, Individually
SHAREHOLDER REPRESENTATIVE CONSENT OF SPOUSE
By executing below the undersigned The undersigned spouse of Xxxxxxxx
agrees to accept appointment as, and to Xxxxxx Towns certifies that she has
perform the function of, Shareholder read this Stock Purchase Agreement and
Representative as set forth in this agrees to its terms in respect of the
Agreement. management or disposition of any
community or joint property interest
of hers.
______________________________________
Xxxx Xxxxxx Xxxxxx, III _________________________________
Print name:
CONSENT OF SPOUSE CONSENT OF SPOUSE
The undersigned spouse of Xxxx Xxxxxx The undersigned spouse of Xxxxxxxx
Xxxxxx, III certifies that she has read Xxxxxxx Xxxxxxx certifies that she has
this Stock Purchase Agreement and read this Stock Purchase Agreement and
agrees to its terms in respect of the agrees to its terms in respect of the
management or disposition of any management or disposition of any
community or joint property interest of community or joint property interest
hers. of hers.
______________________________________ _________________________________
Print name: Print name:
