EXHIBIT 2.1
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
▇▇▇▇▇▇▇▇.▇▇▇
WHO MERGER CORP.
A WHOLLY OWNED DIRECT SUBSIDIARY OF ▇▇▇▇▇▇▇▇.▇▇▇
AND
ESPOTTING MEDIA INC.
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger (this
"Agreement") is dated February 9, 2004 by and among ▇▇▇▇▇▇▇▇.▇▇▇, a Nevada
corporation ("FindWhat"), Who Merger Corp., a Delaware corporation and a wholly
owned subsidiary of FindWhat ("Subcorp"), and Espotting Media Inc., a Delaware
corporation ("Espotting").
PRELIMINARY STATEMENTS
A. This Agreement amends and restates in its entirety the Agreement and Plan of
Merger dated June 17, 2003 by and among the parties hereto, the First Amendment
to Agreement and Plan of Merger dated October 24, 2003 ("First Amendment"), and
the Second Amendment to Agreement and Plan of Merger dated December 19, 2003
(the "Second Amendment") by and among the parties hereto and any additional
amendments thereto prior to execution of this Agreement by each of FindWhat,
Subcorp and Espotting.
B. The board of directors of FindWhat has reaffirmed its determination that a
combination of its businesses with the businesses operated by Espotting through
the merger of Subcorp with and into Espotting, with Espotting as the surviving
corporation (the "Merger"), pursuant to which each share of Espotting Capital
Stock (as defined in Section 4.4) outstanding at the Effective Time (as defined
in Section 1.2) will be converted into the right to receive the Merger
Consideration (as defined in Section 2.1), is consistent with and in furtherance
of the long-term business strategy of FindWhat and the holders of shares of
FindWhat Common Shares (as defined in Section 3.3(a)) (the "FindWhat
Stockholders"), all as more fully provided herein.
C. The board of directors of Espotting has reaffirmed its determination that the
Merger is consistent with and in furtherance of the long-term business strategy
of Espotting. Espotting desires to combine its businesses with the businesses
operated by FindWhat and for the holders of shares of Espotting Capital Stock
(as defined in Section 4.4) (the "Espotting Stockholders") to have a continuing
equity interest in the combined FindWhat/Espotting businesses through the
ownership of FindWhat Common Shares.
D. The respective Boards of Directors of FindWhat, Subcorp and Espotting have
determined the Merger in the manner contemplated herein to be desirable and in
the best interests of their respective stockholders and, by resolutions duly
adopted, have approved and adopted this Agreement.
E. As a condition and inducement to FindWhat's willingness to enter into this
Agreement, certain stockholders of Espotting (the "Designated Espotting
Stockholders") are entering into an agreement dated as of the date hereof in the
form of Exhibit A (the "Espotting Stockholder Voting Agreement") pursuant to
which the Designated Espotting Stockholders have agreed, among other things, to
vote their shares of Espotting Capital Stock in favor of the adoption of this
Agreement.
F. As a condition and inducement to Espotting's willingness to enter into this
Agreement, certain stockholders of FindWhat (the "Designated FindWhat
Stockholders") are entering into an agreement dated as of the date hereof in the
form of Exhibit B (the "FindWhat Stockholder
Voting Agreement") pursuant to which the Designated FindWhat Stockholders have
agreed, among other things, to vote their shares of FindWhat Common Shares in
favor of the adoption of this Agreement.
AGREEMENT
Now, therefore, in consideration of these premises and the mutual and
dependent promises hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Subcorp shall be merged with and into Espotting at the Effective Time.
As a result of the Merger, the separate corporate existence of Subcorp shall
cease and Espotting shall continue its existence under the laws of the State of
Delaware. Espotting, in its capacity as the corporation surviving the Merger, is
hereinafter sometimes referred to as the "Surviving Corporation."
1.2 Effective Time. As promptly as possible on the Closing Date (as defined
below), the parties shall cause the Merger to be consummated by filing with the
Secretary of State of the State of Delaware (the "Delaware Secretary of State")
a certificate of merger (the "Certificate of Merger") in such form as is
required by and executed in accordance with the DGCL. The Merger shall become
effective (the "Effective Time") when the Certificate of Merger has been filed
with the Delaware Secretary of State or at such later time as shall be agreed
upon by FindWhat and Espotting and specified in the Certificate of Merger. Prior
to the filing referred to in this Section 1.2, a closing (the "Closing") shall
be held at the offices of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or such other place as the parties may
agree on, within 20 business days following the date upon which all conditions
set forth in Article VI that are capable of being satisfied prior to the Closing
have been satisfied or waived, or at such other date as FindWhat and Espotting
may agree; provided that the conditions set forth in Article VI have been
satisfied or waived at or prior to such date. 11:59:59 p.m. on the date on which
the Closing takes place is referred to herein as the "Closing Date." For all Tax
(as defined in Section 3.12(h) below) purposes, the Closing shall be effective
at the start of the day on the Closing Date.
1.3 Effects of the Merger. At and after the Effective Time, the Merger will have
the effect set forth in the DGCL.
1.4 Certificate of Incorporation and Bylaws. (i) The Restated Certificate of
Incorporation of Espotting, as in effect immediately prior to the Effective
Time, shall be the certificate of incorporation of the Surviving Corporation in
the Merger and (ii) the Bylaws of Espotting in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation; in each case,
until amended in accordance with the DGCL.
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1.5 Directors and Officers of the Surviving Corporation. From and after the
Effective Time, the officers of Espotting shall be the officers of the Surviving
Corporation and the directors of Subcorp shall be the directors of the Surviving
Corporation, in each case, until their respective successors are duly elected
and qualified. On the Closing Date, Espotting shall deliver to FindWhat evidence
satisfactory to FindWhat of the resignations of the directors of Espotting and
each Espotting Subsidiary, such resignations to be effective as of the Effective
Time. FindWhat shall cause the election of new directors, as determined by
FindWhat, for Espotting and each Espotting Subsidiary as soon as practicable
after the Effective Time.
1.6 Additional Actions. If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any further deeds, assignments or
assurances in law or any other acts are necessary or desirable to (a) vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of Espotting, or (b) otherwise carry out the provisions of this Agreement, the
officers and directors of the Surviving Corporation are authorized in the name
of Espotting or otherwise to take any and all such action.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Merger Consideration; Exchange Ratio; Conversion of Capital Stock. At the
Effective Time, by virtue of the Merger and without any action on the part of
FindWhat, Subcorp or Espotting or their respective stockholders:
(a) Each share of Espotting Capital Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be cancelled in
accordance with Section 2.1(d) hereof and Dissenting Shares (as defined in
Section 2.6 below)) will be converted into and represent the right to receive
cash and a number of FindWhat Common Shares equal to the Exchange Ratio (as
defined in Section 2.1(c)) (the aggregate value of the cash and FindWhat Common
Shares so received being the "Merger Consideration"). Notwithstanding anything
in this Agreement to the contrary, a portion of such cash and stock
consideration (i) shall be deposited in escrow by the Exchange Agent after the
Effective Time in accordance with Section 2.3, (ii) shall be subject to the
adjustment pursuant to Section 2.4 and the Escrow Agreement dated the date
hereof ("Escrow Agreement"), by and among FindWhat, Espotting, the Sellers'
Representative (as defined in Section 10.1) and the escrow agent which is party
thereto ("Escrow Agent"), and attached hereto as Exhibit 2.1(a), and (iii) may
be reduced from time to time in accordance with the purchase price adjustment
provisions of Article IX and the Escrow Agreement.
(b) The cash to be received for each share of Espotting Capital Stock,
exclusive of Espotting treasury shares, shall be equal to the Total Cash Amount
(as defined below) divided by the number of outstanding shares of Espotting
Capital Stock as of the Effective Time, exclusive of Espotting treasury shares
(as defined in Section 2.6). The Total Cash Amount shall equal the sum of
$20,000,000 plus the Net Adjustment Amount (as defined in Section 2.4(d)), which
may be a positive or negative number, and which shall be determined in
accordance with Section 2.4.
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(c) Each share of Espotting Capital Stock, exclusive of Espotting
treasury shares, shall also be entitled to receive such number of FindWhat
Common Shares equal to the Exchange Ratio. The Exchange Ratio shall equal the
quotient of (i) the Stock Consideration and (ii) the number of outstanding
shares of Espotting Capital Stock as of the Effective Time, exclusive of
Espotting treasury shares, expressed to four decimals.
The Stock Consideration shall be 7,000,000 FindWhat Common Shares as
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
FindWhat Common Shares), reorganization or recapitalization with respect to
FindWhat Common Shares, as the case may be, occurring after the date hereof and
prior to the Effective Time.
(d) Each share of Espotting Capital Stock held in the treasury of
Espotting shall be cancelled and retired and no payment shall be made in respect
thereof.
(e) Each issued and outstanding share of capital stock of Subcorp then
outstanding shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation.
2.2 Fractional Shares; Adjustments.
(a) No certificates for fractional FindWhat Common Shares shall be
issued as a result of the conversion provided for in Section 2.1(a) and such
fractional share interests will not entitle the owner thereof to vote or have
any rights of a holder of FindWhat Common Shares.
(b) In lieu of any such fractional FindWhat Common Shares, the holder
of a certificate or certificates (the "Certificates") that immediately prior to
the Effective Time represented outstanding shares of Espotting Capital Stock
whose shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.1(a), upon presentation of such fractional interest
represented by an appropriate certificate for Espotting Capital Stock to the
Exchange Agent (as defined in Section 2.3(a)) pursuant to Section 2.3, shall be
entitled to receive a cash payment therefor in an amount equal to the value (as
determined as part of the Exchange Ratio) of such fractional interest. Such
payment with respect to fractional shares is intended to avoid the expense and
inconvenience of issuing fractional shares and to provide a mechanical rounding
off of, and is not a separately bargained for, consideration. If more than one
Certificate shall be surrendered for the account of the same holder, the number
of shares of Espotting Capital Stock for which Certificates have been
surrendered shall be appropriately adjusted to provide to the holders of shares
of Espotting Capital Stock the same economic effect as contemplated by this
Agreement. The fractional share interests of each Espotting Stockholder will be
aggregated, and no Espotting Stockholder will receive cash in an amount greater
than the value of one full FindWhat Common Share for such fractional share
interest.
2.3 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, FindWhat shall deposit
with a bank, trust company or such other exchange agent as may be designated by
FindWhat (the "Exchange Agent") and which shall be reasonably acceptable to
Espotting, for the benefit of Espotting
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Stockholders, for exchange in accordance with this Section 2.3, for the Merger
Consideration comprised of (i) certificates representing FindWhat Common Shares
issuable pursuant to Section 2.1 in exchange, in part, for outstanding shares of
Espotting Capital Stock, and (ii) pursuant to Section 2.1, $20,000,000 in cash,
as increased or decreased pursuant to Section 2.4(b), in exchange, in part, for
outstanding shares of Espotting Capital Stock (together with any dividends or
distributions with respect to the cash portion thereof, the "Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a Certificate
(i) a letter of transmittal and (ii) instructions for effecting the surrender of
the Certificates in exchange for certificates representing such number of
FindWhat Common Shares to which such Espotting Stockholder is entitled. The
letter of transmittal shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent, and shall be in such form and have such
other customary provisions as FindWhat may reasonably specify, including,
without limitation, provisions pursuant to which, among other things, each
Espotting Stockholder agrees (A) that amounts payable to him or her are subject
to all of the terms of this Agreement (including, without limitation, Section
2.4 and Articles IX and X) and the Escrow Agreement, and (B) to irrevocably
confirm the appointment of the Sellers' Representative as the Espotting
Stockholders' representative, agent and attorney-in-fact with exclusive
authority to act on each Espotting Stockholders' behalf in connection with the
Merger Agreement and Escrow Agreement including, without limitation, the right
to dispute any Claims (as defined in Article IX) and retain legal counsel and
outside advisors at the Espotting Stockholders' expense.
Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with a duly executed letter of transmittal:
(i) the holder of such Certificate shall be entitled to receive
in exchange therefor (A) a certificate or certificates representing 90% (rounded
to the nearest share) of that whole number of FindWhat Common Shares which such
holder has the right to receive pursuant to Section 2.1 in such denominations
and registered in such names as such holder may request, and (B) payment by wire
transfer of funds in U.S. dollars representing 90% of (1) the amount of cash
which such holder has the right to receive pursuant to the provisions of this
Article II, and (2) the amount of cash in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, which such holder has the right to
receive pursuant to the provisions of this Article II, after giving effect to
any required withholding tax;
(ii) FindWhat will cause the Exchange Agent to (A) deposit with
the Escrow Agent a certificate or certificates representing 10% (rounded to the
nearest share) of that whole number of FindWhat Common Shares which such holder
has the right to receive pursuant to Section 2.1 in the name of such holder, and
(B) pay to the Escrow Agent by wire transfer of funds in U.S. dollars an amount
representing 10% of (1) the amount of cash which such holder has the right to
receive pursuant to the provisions of this Article II, and (2) the amount of
cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, which such holder has the right to receive pursuant to
the provisions of this Article II, after giving effect to any required
withholding tax; and
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(iii) FindWhat will cause the Exchange Agent, upon surrender to
the Exchange Agent of each Certificate or group of Certificates by a holder of
record, to promptly notify FindWhat and the Sellers' Representative of the
identity of the holder of record of each Certificate or Certificates so
surrendered, the total number of FindWhat Common Shares deposited with the
Escrow Agent, and the total value of cash wire transferred to the Escrow Agent.
The shares represented by all Certificates surrendered to the Exchange
Agent shall forthwith be cancelled. All cash transferred by the Exchange Agent
to the Escrow Agent shall be invested and may bear interest as described in the
Escrow Agreement.
In the event of a transfer of ownership of shares of Espotting Capital
Stock that is not registered on the transfer records of Espotting, a certificate
representing the proper number of FindWhat Common Shares, together with a check
for the cash to be paid as part of the Merger Consideration and for the cash to
be paid in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, may be issued to such transferee if the Certificate
representing such shares of Espotting Capital Stock held by such transferee is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.3, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon surrender a certificate representing
FindWhat Common Shares, cash as part of the Merger Consideration, and cash in
lieu of fractional shares, if any, and unpaid dividends and distributions, if
any, as provided in this Article II. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
FindWhat, the posting by such person of a bond in such reasonable amount as
FindWhat may direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will deliver in exchange
for such lost, stolen or destroyed Certificate, a certificate representing the
proper number of FindWhat Common Shares, together with a check for the cash to
be paid as part of the Merger Consideration, and for the cash to be paid in lieu
of fractional shares, if any, with respect to the shares of Espotting Capital
Stock formerly represented thereby, and unpaid dividends and distributions on
FindWhat Common Shares, if any, as provided in this Article II.
Subject entirely to the terms of the Escrow Agreement, 50% of the cash
and FindWhat Common Stock transferred to or deposited with the Exchange Agent to
the Escrow Agent for deposit in the Escrow Account may be released to the
Sellers' Representative both 1 year and 2 years after the Effective Time.
(c) Distributions with Respect to Unexchanged Shares. Notwithstanding
any other provisions of this Agreement, no dividends or other distributions
declared or made after the Effective Time with respect to FindWhat Common Shares
having a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate, no cash payment as part of the Merger Consideration
and no cash payment in lieu of fractional shares shall be paid to any such
holder, until the holder shall surrender such Certificate as provided in this
Section 2.3. Subject to the effect of Applicable Laws (as defined in Section
3.9), following surrender of any such Certificate, there shall be paid to the
holder of the certificates representing whole FindWhat Common Shares issued in
exchange therefor, without interest, (i) at the time of such surrender,
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the amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole FindWhat Common
Shares and not paid, less the amount of any withholding taxes that may be
required thereon, (ii) the amount of cash representing a portion of the Merger
Consideration, and (iii) at the appropriate payment date subsequent to
surrender, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole FindWhat Common Shares, less the
amount of any withholding taxes which may be required thereon.
(d) No Further Ownership Rights in Espotting Capital Stock. All Merger
Consideration issued and/or paid upon surrender of Certificates in accordance
with the terms hereof (including any cash paid pursuant to this Article II)
shall be deemed to have been issued and/or paid in full satisfaction of all
rights pertaining to such shares of Espotting Capital Stock represented thereby,
and, as of the Effective Time, the stock transfer books of Espotting shall be
closed and there shall be no further registration of transfers on the stock
transfer books of Espotting of shares of Espotting Capital Stock outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as provided in this Section 2.3.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to Espotting Stockholders six months after the date of the
mailing required by Section 2.3(b) shall be delivered to FindWhat, upon demand
thereby, and holders of Certificates who have not theretofore complied with this
Section 2.3 shall thereafter look only to FindWhat for payment of any claim to
FindWhat Common Shares, cash as a portion of the Merger Consideration or cash in
lieu of fractional shares thereof, or dividends or distributions, if any, in
respect thereof.
(f) No Liability. None of FindWhat, the Surviving Corporation or the
Exchange Agent shall be liable to any person in respect of any shares of
Espotting Capital Stock (or dividends or distributions with respect thereto) or
cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificates shall
not have been surrendered prior to seven years after the Effective Time (or
immediately prior to such earlier date on which any cash, any cash in lieu of
fractional shares or any dividends or distributions with respect to whole shares
of Espotting Capital Stock in respect of such Certificate would otherwise
escheat to or become the property of any Governmental Authority (as defined in
Section 3.4(c)), any such cash, dividends or distributions in respect of such
Certificate shall, to the extent permitted by Applicable Laws, become the
property of FindWhat, free and clear of all claims or interest of any person
previously entitled thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by FindWhat, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
FindWhat upon termination of the Exchange Fund pursuant to Section 2.3(e).
(h) Withholding Rights. Each of the Surviving Corporation and FindWhat
shall be entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of shares of Espotting Capital
Stock such amounts as it is required
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to deduct and withhold with respect to the making of such payment under the
Internal Revenue Code ("Code"), or any provision of state, local or foreign Tax
(as defined in Section 3.12(h)) law. To the extent that amounts are so withheld
by the Surviving Corporation or FindWhat, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Espotting Capital Stock in respect of which such
deduction and withholding was made by the Surviving Corporation or FindWhat, as
the case may be. Any Tax withheld by FindWhat or the Surviving Corporation shall
be paid by FindWhat or the Surviving Corporation, as the case may be, to the
appropriate Governmental Authority (as defined in Section 3.4(c)) when due in
accordance with Applicable Law (as defined in Section 3.9) and FindWhat or the
Surviving Corporation, as the case may be, shall within 30 days of the payment
of such Tax deliver to the holder of the shares of Espotting Capital Stock
evidence reasonably satisfactory to such holder that payment was duly remitted
to the appropriate Governmental Authority.
(i) Restrictive Legends. Except as provided in Section 5.1(g), each
Espotting Stockholder entitled to receive 400,000 or more FindWhat Common Shares
issued in connection with the Merger will receive certificates evidencing such
FindWhat Common Shares, or any replacements or substitutions therefor,
registered in the name of such Espotting Stockholder restricted as follows: (i)
a certificate evidencing 100,000 FindWhat Common Shares will be delivered to
such Espotting Stockholder without a legend restricting the transfer of such
shares, (ii) the certificate delivered to the Escrow Agent pursuant to Section
2.3(b)(ii) shall be delivered without a legend restricting the transfer of such
shares, provided such shares shall be subject to the terms of the Escrow
Agreement, and (iii) the certificate evidencing FindWhat Common Shares other
than as provided in (i) and (ii) above, shall be delivered to such Espotting
Stockholder with a legend stating in substance that such FindWhat Common Shares
may not be transferred by the Espotting Stockholder during the first 90 days
following the Closing Date and, thereafter, no more than 100,000 of such
FindWhat Common Shares may be transferred by the Espotting Stockholder in any
one of the three successive thirty day periods following the 90th day after the
Closing Date (the "Restrictive Period"). It is understood and agreed that stop
transfer instructions will be given to all transfer agents of FindWhat Common
Shares for purposes of this Section 2.3(i) and that the legend described herein
shall be removed by delivery of a substitute certificate without such legend as
of the first business day after the Restrictive Period.
2.4 Net Asset Value Adjustment Procedure.
(a) No later than the fifth (5th) business day before the Closing Date,
Espotting shall deliver to FindWhat an estimated unaudited consolidated balance
sheet (the "Preliminary Closing Date Balance Sheet") of Espotting as of the
Closing Date prepared by Ernst & Young, Espotting's independent, certified
public accountants, or an accounting firm acceptable to FindWhat, including a
calculation of Espotting's Closing Date Net Asset Value and an estimate of the
Adjustment Amount (the "Estimated Adjustment Amount"), which amount shall be
subject to FindWhat's review and agreement. The Estimated Adjustment Amount
shall be determined using the formula and defined terms set forth in Section
2.4(c).
(b) The Total Cash Amount payable to Espotting Stockholders pursuant to
Section 2.3(a) shall be increased if and to the extent that the Estimated
Adjustment Amount agreed upon
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by the parties is a positive number, or decreased if and to the extent that the
Estimated Adjustment Amount agreed upon by the parties is a negative number, and
such adjusted Total Cash Amount shall be deposited with the Exchange Agent
pursuant to Section 2.3(a).
(c) After the Closing Date, FindWhat shall prepare an unaudited
consolidated balance sheet (the "Closing Date Balance Sheet") of Espotting as of
the Closing Date, including a calculation of Espotting's Closing Date Net Assets
Value and the Adjustment Amount (as determined below).
"Closing Date Net Asset Value" shall mean Espotting's consolidated net
assets as of the Closing Date, determined in accordance with U.S. generally
accepted accounting principles applied in a manner consistent with the
preparation of the Espotting Audited Consolidated Financial Statements and the
pro forma financials submitted to the Commission (as defined in Section 2.5(f))
along with the Registration Statement (as defined in Section 3.7(b)), excluding
(i) the value of any Loan Notes or C Loan Notes (as defined in Section 4.4) that
have been converted into Espotting Common Stock on or before the Effective Time,
(ii) all charges relating to the acceleration of the vesting of any European
Options (as defined in Section 2.5(a)) or EMI Options (as defined in Section
2.5(b)) pursuant to Section 2.5, and (iii) any deferred tax assets.
The Adjustment Amount shall be determined according to the following
formula:
A = B + C - D, where
A = Adjustment Amount
B = Espotting's Closing Date Net Asset Value
C = US$1,500,000 + 50% of Espotting's investment banking
costs related to the Merger (not to exceed $850,000)
D = The aggregate amount of principal and interest owed
by Espotting to FindWhat as of the Effective Time.
(d) FindWhat shall deliver the Closing Date Balance Sheet to Sellers'
Representative and Escrow Agent within 45 days after the Closing Date ("FindWhat
Demand"). If within 30 days following the date on which the FindWhat Demand was
sent, Sellers' Representative does not deliver to FindWhat and the Escrow Agent
written notice of any objection to the Closing Date Balance Sheet (which notice
must contain a reasonably detailed statement of the basis of all objections of
Sellers' Representative), then the Closing Date Net Asset Value reflected in the
Closing Date Balance Sheet and the Adjustment Amount submitted by FindWhat to
Sellers' Representative in the FindWhat Demand will be conclusive and binding on
the parties, and Sellers' Representative or FindWhat, as appropriate, shall be
entitled to disbursement of the difference between the Adjustment Amount and the
Estimated Adjustment Amount pursuant to 2.4(f). For purposes of this Agreement,
the "Net Adjustment Amount" means the Adjustment Amount minus the Estimated
Adjustment Amount.
(e) FindWhat and Sellers' Representative shall act in good faith to
resolve between themselves any objections to the Closing Date Balance Sheet. If
they are unable to do so within
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30 days after FindWhat's receipt of Sellers' Representative's notice of
objection (the "Negotiation Period"), then the issues in dispute will
immediately be submitted to PriceWaterhouse Coopers independent certified public
accountants (the "Accountants"), for resolution. Within five (5) days of a
request, each party will furnish to the Accountants such work papers and other
documents and information relating to the disputed issues as the Accountants may
request and are available to that party (or its independent public accountants).
Each party will be afforded the opportunity to present to the Accountants any
material relating to the disputed issues and to discuss the issues with the
Accountants. The Accountants will deliver a notice to FindWhat and Sellers'
Representatives which contains a resolution of the issues in dispute by the
parties and this resolution of the disputed issues shall be conclusive and
binding on the parties within thirty (30) days of expiration of the Negotiation
Period. FindWhat shall deliver to Sellers' Representative a revised Closing Date
Balance Sheet which reflects the resolution of the issues in dispute and any
related changes to the Closing Date Net Asset Value and the Adjustment Amount
within ten (10) days of resolution by the Accountants.
If the Accountant does not modify the FindWhat Demand or determines
that a modification is required, but such modification is less than 10% of the
FindWhat Demand, Seller's Representative shall bear the Accountant's fees and
expenses and FindWhat's reasonable expenses for the dispute. If the Accountant
determines the FindWhat Demand should be modified 10% or more, FindWhat shall
bear the Accountant's fees and expenses and the Selling Stockholder's reasonable
expenses for the dispute.
(f) On the tenth business day following (i) the expiration of the
objection period in Section 2.4(d), if Sellers' Representative makes no
objection, (ii) the resolution of all objections by FindWhat and Sellers'
Representative pursuant to Section 2.4(e) or (iii) the date of the Accountants'
notice pursuant to Section 2.4(e) (as the case may be), then:
(i) if the Net Adjustment Amount is greater than zero, FindWhat
shall pay the Net Adjustment Amount to the Sellers' Representative; or
(ii) if the Net Adjustment Amount is less than zero, FindWhat and
the Sellers' Representative shall provide the Escrow Agent with a joint notice
("Joint Demand") instructing the Escrow Agent to pay the Net Adjustment Amount
to FindWhat in accordance with the terms of the Escrow Agreement.
2.5 Treatment of Stock Options and Warrants.
(a) European Options. Prior to the Effective Time, the board of
directors of Espotting shall take such action as is necessary to effect the
vesting of all unexpired and unexercised outstanding warrants and options
granted or issued by Espotting to an Espotting Employee (as defined in Section
4.15(a)) or Espotting Consultant (as defined in Section 4.17(b)) pursuant to the
European Plan (as defined in Section 5.3(d)(xxiii) and in effect on the date
hereof (each, a "European Option"), so that all unvested European Options become
fully vested immediately prior to the Effective Time and, for purposes of
Section 6.3(e) of this Agreement, the failure of the board of directors of
Espotting to take such action shall be a Material Adverse Effect with respect to
Espotting. FindWhat and Espotting shall take all such actions as may be
necessary to cause the European Options held by each holder of European Options
(a "European Option
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Holder") to be converted as soon as reasonably practicable following Closing
into an option or warrant, as applicable (a "FindWhat European Exchange
Option"), for such European Option Holder to purchase such number of FindWhat
Common Shares as have a total market value equal to the market value of the
Espotting Common Shares under the European Option being converted (rounded down
to the nearest whole share as necessary). The aggregate exercise price of each
such replacement option shall be equal to the aggregate exercise price of the
European Option it replaces. Each FindWhat European Exchange Option will be
vested and exercisable to the same extent that the European Option from which
such FindWhat European Exchange ptions was converted was vested and exercisable
under the European Plan. For purposes of this paragraph (a), the market value of
an Espotting Common Share shall equal the quotient of (i) the Merger
Consideration (expressed as a cash sum with the Stock Consideration being given
its value by reference to the closing price of a FindWhat Common Share on the
NASDAQ on the last day prior to Closing and the Total Cash Amount as adjusted by
the Estimated Adjustment Amount, but not as adjusted by the Adjustment Amount),
and (ii) the number of outstanding shares of Espotting Capital Stock as of the
Effective Time, exclusive of Espotting Treasury Shares, expressed to four
decimal places.
(b) EMI Options. Prior to the Effective Time, the board of directors of
Espotting shall take such action as is necessary to effect the acceleration of
vesting of any unexpired and unexercised options issued to any Espotting
Employee pursuant to the Espotting Share Option Plan (the "EMI Plan") and in
effect on the date hereof (the "EMI Options"), so that all unvested EMI Options
become fully vested immediately prior to the Effective Time and, for purposes of
Section 6.3(e) of this Agreement, the failure of the board of directors of
Espotting to take such action shall be a Material Adverse Effect with respect to
Espotting. Following the Effective Time and as soon as reasonably practicable
following Closing, FindWhat shall contact each holder of EMI Options (an "EMI
Option Holder"), at the last known address by Espotting, to obtain their consent
for the release of their EMI Options in consideration for the grant by FindWhat
of an option to purchase such number of FindWhat Common Shares as have a total
market value equal to the market value of the Espotting Common Shares under the
EMI Option being released (rounded down to the nearest whole share as
necessary), with the intention that the options granted will be "replacement
options" within the meaning of paragraph 41 of Schedule 5 to the U.K. Income Tax
(Earnings and ▇▇▇▇▇▇▇▇) ▇▇▇ ▇▇▇▇ (it being acknowledged that conversion on a
total market value basis may result in such replacement options being in respect
of a different number of shares of common stock, and/or having a different
exercise price, than those currently pertaining to the EMI Options). The
aggregate exercise price of each such replacement option shall be equal to the
aggregate exercise price of the EMI Option it replaces. Each such replacement
option will be vested and exercisable to the same extent that the EMI Option
that it replaces was converted was vested and exercisable under the EMI Plan.
For purposes of this paragraph (b), the market value of an Espotting Common
Share shall be determined by agreement between the U.K. Inland Revenue and
FindWhat. Should the agreement with an EMI Option Holder not be obtained to the
release of his or her EMI Options in accordance with this Section 2.5(b), such
EMI Option Holder's EMI Options shall be converted into an option for such EMI
Option Holder to purchase such number of FindWhat Common Shares with an
aggregate exercise price equal to the aggregate exercise price of the EMI Option
it replaces and which is no less valuable overall than the EMI Options being so
converted, and with other terms and conditions that are substantially similar to
the terms and conditions of such EMI Options immediately before the Effective
Time.
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(c) FindWhat Exchange Options. Espotting agrees to issue treasury
shares of Espotting, to the extent available, upon the exercise of Espotting
Options prior to the Effective Time. Any options to be issued for purchase of
FindWhat Common Shares pursuant to paragraphs (a) and (b) above shall, for the
remaining provisions of this Agreement, be referred to as "FindWhat Exchange
Options."
(d) Limitation on FindWhat Exchange Options. Notwithstanding paragraphs
(a) and (b) above or anything else in this Agreement to the contrary, in no case
shall FindWhat be obligated to issue FindWhat Exchange Options to purchase more
than 2,138,014 FindWhat Common Shares. If adhering to the obligations required
by paragraphs (a) or (b) above were to cause the issuance of FindWhat Exchange
Options to purchase more than 2,138,014 FindWhat Common Shares, then each
Espotting Employee or Consultant eligible to receive FindWhat Exchange Options
shall have the number of FindWhat Common Shares subject to his or her FindWhat
Exchange Options reduced by multiplying that number by a fraction equal to
2,138,014 divided by the number of FindWhat Common Shares subject to FindWhat
Exchange Options to be issued pursuant to paragraphs (a) and (b) above.
(e) Reserve of FindWhat Common Shares. In connection with the issuance
of FindWhat Exchange Options, FindWhat shall (i) reserve for issuance the number
of FindWhat Common Shares that will become subject to the FindWhat Exchange
Options pursuant to this Section 2.4 and (ii) from and after the Effective Time,
upon exercise of FindWhat Exchange Options, make available for issuance all
FindWhat Common Shares covered thereby, subject to the terms and conditions
applicable thereto.
(f) Covered Persons. Prior to the Effective Time, the board of
directors of FindWhat, or an appropriate committee of non-employee directors
thereof, shall adopt a resolution consistent with the interpretive guidance of
the Securities and Exchange Commission (the "Commission") so that the
acquisition by any officer or director of Espotting who may become a covered
person of FindWhat for purposes of Section 16 (together with the rules and
regulations thereunder, "Section 16") of the Securities Exchange Act of 1934, as
amended (together with the rules and regulations thereunder, the "Exchange Act")
of FindWhat Common Shares pursuant to this Agreement and the Merger or FindWhat
options or warrants as contemplated by this Agreement shall be an exempt
transaction for purposes of Section 16. Following the Closing Date, FindWhat
shall assist each such officer or director of Espotting who becomes a covered
person of FindWhat for purposes of Section 16 in filing a Form 4 with the SEC.
(g) Registration Statement. As soon as practicable but no later than 10
days after the Effective Time, FindWhat shall file a registration statement on
Form ▇-▇, ▇▇▇▇ ▇-▇ or Form S-8 as the case may be (or any successor or other
appropriate forms), with respect to FindWhat Common Shares subject to such
FindWhat Exchange Options, and shall maintain the effectiveness of such
registration statement and the current status of the prospectus or prospectuses
contained therein, for so long as such FindWhat Exchange Options remain
outstanding. Following the Effective Time, FindWhat shall use its reasonable
best efforts to provide that holders of FindWhat Exchange Options do not
experience delays in exercising and settling their FindWhat Exchange Options,
subject to FindWhat's corporate policies on ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, which, from time to
time, prohibit certain selling of FindWhat Common Shares acquired upon the
exercise of employee options.
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2.6 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Espotting Capital Stock outstanding immediately prior to the
Effective Time and held by an Espotting Stockholder who has not voted in favor
of the Merger or consented thereto in writing and who has demanded appraisal for
such shares in accordance with Section 262 of the DGCL, if such Section 262
provides for appraisal rights for such shares in the Merger ("Dissenting
Shares"), shall not be converted into the right to receive the Merger
Consideration as provided in Section 2.1(a) and instead such holder of
Dissenting Shares shall be entitled to receive payment of the appraised value of
such Dissenting Shares in exchange for the Dissenting Shares in accordance with
the provisions of such Section 262 unless and until such holder fails to perfect
or withdraws or otherwise loses his right to appraisal and payment under the
DGCL. If, after the Effective Time, any such holder fails to perfect or
withdraws or loses his right to appraisal, such Dissenting Shares shall
thereupon be treated as if they had been converted as of the Effective Time into
the right to receive the Merger Consideration, if any, to which such holder is
entitled, without interest or dividends thereon, upon the surrender in the
manner provided in Section 2.3 of the certificate(s) which formerly represented
shares of Espotting Capital Stock. Espotting shall give FindWhat prompt notice
of any demands received by Espotting for appraisal of shares of Espotting
Capital Stock and, prior to the Effective Time, FindWhat shall have the right to
participate in all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, Espotting shall not, except with the prior written
consent of FindWhat, make any payment with respect to, or settle or offer to
settle, any such demands.
2.7 Board of Directors of FindWhat. At the Effective Time or as soon as
practicable thereafter, FindWhat shall use its commercially reasonable efforts
to cause the board of directors of FindWhat to include ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and
either ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or an individual nominated by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ who
will qualify as an "independent director" as defined in Rule 4200 of the NASD,
as amended and approved by the Commission on November 4, 2003.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FINDWHAT AND SUBCORP
In order to induce Espotting to enter into this Agreement, FindWhat and Subcorp
hereby represent and warrant to Espotting that the statements contained in this
Article III are true, correct and complete. The representations and warranties
contained herein are made as of December 19, 2003, unless otherwise noted.
3.1 Organization and Standing. Each of FindWhat, Subcorp and each other
subsidiary of FindWhat is a corporation duly organized, validly existing and,
where applicable, in good standing under the laws of its state of incorporation
with full corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted. Each of FindWhat, Subcorp and each other subsidiary of
FindWhat is duly qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the property
it owns, leases or operates, requires it to so qualify, except where the failure
to be so qualified or in good standing in such jurisdiction would not have a
Material Adverse Effect (as defined in Section 8.2(b)) on FindWhat and its
subsidiaries, taken as a whole. FindWhat is not in default in the performance,
observance or
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fulfillment of any provision of the FindWhat Articles of Incorporation, as
amended (the "FindWhat Articles"), or the FindWhat Amended and Restated Bylaws,
as amended, as in effect on the date hereof (the "FindWhat Bylaws"), and Subcorp
and each other subsidiary of FindWhat is not in default in the performance,
observance or fulfillment of any provisions of its Certificate of Incorporation
or Bylaws. FindWhat has heretofore furnished to Espotting complete and correct
copies of the FindWhat Articles and the FindWhat Bylaws and the Certificate of
Incorporation and Bylaws of Subcorp and each other subsidiary of FindWhat.
Listed in Section 3.1 in the disclosure schedule delivered by FindWhat to
Espotting and dated the date hereof (the "FindWhat Disclosure Schedule"), and
incorporated herein by reference, is each jurisdiction in which FindWhat,
Subcorp and each other subsidiary of FindWhat is qualified to do business and
whether FindWhat, Subcorp or such subsidiary is in good standing as of the date
of this Agreement.
3.2 Corporate Power and Authority. Each of FindWhat and Subcorp has all
requisite corporate power and authority to enter into and deliver this
Agreement, to perform its obligations hereunder and, subject to approval of the
Merger and the transactions contemplated hereby by FindWhat Stockholders, to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by FindWhat and Subcorp have been duly authorized by all necessary
corporate action on the part of each of FindWhat and Subcorp, subject to
approval of the Merger and the transactions contemplated hereby by FindWhat
Stockholders. This Agreement has been duly executed and delivered by each of
FindWhat and Subcorp, and constitutes the legal, valid and binding obligation of
each of Subcorp and FindWhat enforceable against each of them in accordance with
its terms.
3.3 Capitalization of FindWhat and Subcorp.
(a) The authorized capital stock of FindWhat consists of 50,000,000
common shares (the "FindWhat Common Shares") and 500,000 preferred shares
("FindWhat Preferred Shares"). At the close of business on October 31, 2003, (i)
21,392,203 FindWhat Common Shares, par value of $.001, were issued and
outstanding, (ii) 7,000 FindWhat Common Shares were held as treasury stock
(which does not include FindWhat Common Shares reserved for issuance as set
forth in clause (a)(iii) below), (iii) 295,000 FindWhat Common Shares were
reserved for issuance upon the exercise or conversion of options, warrants or
convertible securities granted or issuable by FindWhat, not including FindWhat's
1999 Stock Incentive Plan or the FindWhat Stock Option Plan (as defined in
Section 5.2(g)), (iv) 3,693,438 FindWhat Common Shares reserved for issuance
under FindWhat's 1999 Stock Incentive Plan, not including the FindWhat Stock
Option Plan, and (v) no FindWhat Preferred Shares, par value of $.001 were
issued and outstanding. All FindWhat Common Shares are, and all FindWhat Common
Shares to be issued in connection with the Merger will be, duly authorized and
validly issued, fully paid and nonassessable, and each outstanding share of
FindWhat Common Shares has not been, and all FindWhat Common Shares to be issued
in connection with the Merger will not be, issued in violation of any preemptive
or similar rights. As of the date hereof, other than as set forth in the second
sentence hereof or in Section 3.3(a) in the FindWhat Disclosure Schedule, there
are no outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale, repurchase, transfer or registration by FindWhat of any
equity securities of FindWhat, nor are there outstanding any
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securities that are convertible into or exchangeable for any shares of FindWhat
capital stock and neither FindWhat nor any subsidiary of FindWhat has any
obligation of any kind to issue any additional securities or to pay for or
repurchase any securities of FindWhat or any predecessor. The issuance and sale
of all of the FindWhat Common Shares described in this Section 3.3(a) have been
in compliance in all material respects with federal and state securities laws.
Set forth in Section 3.3(a) in the FindWhat Disclosure Schedule is an accurate
and complete list of the names of all holders of options to purchase FindWhat
Common Shares, the number of shares issuable to each such holder upon exercise
of such option, and the exercise price and vesting schedule with respect
thereto. Except as set forth in Section 3.3(a) in the FindWhat Disclosure
Schedule, as of the date hereof, FindWhat has not agreed to register any
securities under the Securities Act or under any state securities law or granted
registration rights to any person or entity (which rights are currently
exercisable); complete and correct copies of all such agreements have previously
been provided to Espotting.
(b) Subcorp's authorized capital stock consists solely of 1,000 shares
of Subcorp Common Stock, of which, as of the date hereof, 100 were issued and
outstanding and none were reserved for issuance. As of the date hereof, all of
the outstanding shares of Subcorp Common Stock are owned free and clear of any
liens, claims or encumbrances by FindWhat.
(c) FindWhat does not own, directly or indirectly, any equity or other
ownership interest in any corporation, partnership, joint venture or other
entity or enterprise, except for the subsidiaries set forth in Section 3.3(c) in
the FindWhat Disclosure Schedule. Except as set forth in Section 3.3(c) in the
FindWhat Disclosure Schedule, FindWhat is not subject to any obligation or
requirement to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any such entity or any other person.
Except as set forth in Section 3.3(c) in the FindWhat Disclosure Schedule,
FindWhat owns, directly or indirectly, each of the outstanding shares of capital
stock (or other ownership interests having by their terms ordinary voting power
to elect a majority of directors or others performing similar functions with
respect to such subsidiary) of each of FindWhat's subsidiaries. Each of the
outstanding shares of capital stock of each of FindWhat's subsidiaries is duly
authorized, validly issued, fully paid and nonassessable, and is owned, directly
or indirectly, by FindWhat free and clear of all Encumbrances ("Encumbrances"
means any charge, claim, mortgage, servitude, easement, right of way, covenant,
equitable interest, lease or other possessory interest, conditional sale or
other title retention arrangement, lien, option, pledge, security interest,
preference, priority, right of first refusal or similar restriction). The
following information for each subsidiary of FindWhat is set forth in Section
3.3(c) in the FindWhat Disclosure Schedule, as applicable: (i) its name and
jurisdiction of incorporation or organization; (ii) its authorized capital stock
or share capital; and (iii) the number of issued and outstanding shares of
capital stock or share capital and the record owner(s) thereof. Other than as
set forth in Section 3.3(c) in the FindWhat Disclosure Schedule, there are no
outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale or transfer of any securities of any subsidiary of FindWhat,
nor are there outstanding any securities that are convertible into or
exchangeable for any shares of capital stock of any subsidiary of FindWhat, and
neither FindWhat nor any subsidiary of FindWhat has any obligation of any kind
to issue any additional securities of any subsidiary of FindWhat or to pay for
or repurchase any securities of any subsidiary of FindWhat or any predecessor
thereof.
-15-
3.4 Conflicts; Consents and Approvals. Except as set forth in Section 3.4 in the
FindWhat Disclosure Schedule, neither the execution and delivery of this
Agreement by FindWhat or Subcorp nor the consummation of the transactions
contemplated hereby or thereby will:
(a) conflict with, or result in a breach of any provision of, the
FindWhat Articles or the FindWhat Bylaws, the Subcorp Certificate of
Incorporation or Bylaws or the governing documents of any other subsidiary of
FindWhat;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event that, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or entitle any
party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate, modify or call a default under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the properties
or assets of FindWhat or any of its subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, contract, undertaking, agreement, lease or other instrument or
obligation to which FindWhat or any of its subsidiaries is a party, including
without limitation any Contract required to be listed in Section 3.16 in the
FindWhat Disclosure Schedule;
(c) violate any (i) order, writ, injunction, decree, statute, ruling,
assessment, or arbitration or award of any Governmental Authority ("Governmental
Authority" means any (A) nation, region, state, county, city, town, village,
district or other jurisdiction, (B) federal, state, local, municipal, foreign or
other government, (C) federal, state, local municipal, foreign or multi-national
court, arbitral tribunal, administrative agency or commission or (D) other
governmental, quasi-governmental, public, or regulatory body, agency,
instrumentality or authority of any nature; (E) multi-national organization; (F)
body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, policy, regulatory or taxing authority or power of any
nature or (G) official of any of the foregoing) or arbitrator and any Contract
with any Governmental Authority pertaining to compliance with any law; or (ii)
Applicable Law relating to FindWhat or any of its subsidiaries or their
respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by FindWhat or any of its affiliates with, any third
party or any Governmental Authority, other than (i) approval of the Merger and
the transactions contemplated hereby by FindWhat Stockholders, (ii)
authorization for inclusion of the FindWhat Common Shares to be issued in the
Merger and the transactions contemplated hereby on the Nasdaq National Market
(the "NASDAQ"), subject to official notice of issuance, (iii) registrations or
other actions required under federal and state securities laws as are
contemplated by this Agreement, (iv) the filing of notification and report forms
with the United States Federal Trade Commission and the United States Department
of Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder and the expiration
or termination of any applicable waiting period thereunder (collectively, the
"HSR Act"), or (v) consents or approvals of any Governmental Authority set forth
in Section 3.4 in the FindWhat Disclosure Schedule; except, in the case of
clause (b) as set forth in Section 3.4 in the FindWhat Disclosure Schedule and
which would not, individually or in the aggregate, have a Material Adverse
Effect on FindWhat and its subsidiaries taken as a whole.
-16-
3.5 Brokerage and Finders' Fees. Except as set forth in Section 3.5 in the
FindWhat Disclosure Schedule, neither FindWhat nor any stockholder, director,
officer or employee thereof has incurred or will incur on behalf of FindWhat or
any of its affiliates any brokerage, finders' or similar fee in connection with
the transactions contemplated by this Agreement.
3.6 FindWhat SEC Documents. FindWhat has timely filed with the Commission all
forms, reports, schedules, statements and other documents (including exhibits
and other information incorporated therein) required to be filed by it since
January 1, 2000 under the Exchange Act or the Securities Act (such documents, as
supplemented and amended since the time of filing, collectively, the "FindWhat
SEC Documents"). No subsidiary of FindWhat is required to file any form, report,
registration statement, prospectus or other document with the Commission. The
FindWhat SEC Documents, including, without limitation, any financial statements
or schedules included in the FindWhat SEC Documents, at the time filed (and, in
the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively and, in the case of any
FindWhat SEC Document amended or superseded by a filing prior to the date of
this Agreement, then on the date of such amending or superseding filing) (a) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be. The
financial statements of FindWhat (including the related notes) included in the
FindWhat SEC Documents at the time filed (and, in the case of registration
statements and proxy statements, on the dates of effectiveness and the dates of
mailing, respectively, and, in the case of any FindWhat SEC Document amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such amending or superseding filing) complied in all material respects with
applicable accounting requirements and with the published rules and regulations
of the Commission with respect thereto, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-QSB of the Commission),
and fairly present (subject, in the case of unaudited statements, to normal,
recurring audit adjustments not material in amount) in all material respects the
consolidated financial position of FindWhat and its consolidated subsidiaries as
at the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended. Except as set forth in Section 3.6 in the
FindWhat Disclosure Schedule, from the date of incorporation FindWhat has
maintained its books of account in accordance in all material respects with
Applicable Law and all books and records are complete and correct in all
material respects, fairly and accurately reflect the income, expenses, assets
and liabilities of FindWhat and its subsidiaries in all material respects,
including the nature thereof and the transactions giving rise thereto, and
provide a fair and accurate basis for the preparation of the financial
statements of FindWhat included in the FindWhat SEC Documents.
3.7 Books and Records; Registration Statement.
(a) Except as set forth in Section 3.7(a) in the FindWhat Disclosure
Schedule, from its date of incorporation FindWhat and its subsidiaries have, in
all material respects, maintained their books of account, minute books, stock
books, stock ledgers, quota registers and other local equivalents in accordance
in all material respects with Applicable Law, sound business practices
-17-
and the requirements of Section 13(b)(2) of the Exchange Act, including the
maintenance of an adequate system of internal controls. The minute books of
FindWhat and its subsidiaries contain accurate and complete records of all
proceedings, consents and meetings held of, and corporate action taken by, their
stockholders, the boards of directors, and committees of the boards of
directors, and other governing bodies, as applicable, and no meeting of any such
stockholders, board of directors, committee or other governing body has been
held for which minutes have not been prepared and are not contained in such
minute books. The books of account of FindWhat and its subsidiaries are complete
and correct in all material respects, have been maintained in accordance with
Applicable Law, fairly and accurately reflect the income, expenses, assets and
liabilities of FindWhat and its subsidiaries, including the nature thereof and
the transactions giving rise thereto, and provide a fair and accurate basis for
the preparation of the FindWhat financial statements set forth in the FindWhat
SEC Documents. The signatures appearing on all documents contained in such books
of account are the true signatures of the persons purporting to have signed the
same, and copies thereof have been provided to Espotting.
(b) None of the registration statement on Form S-4 (such registration
statement as amended, supplemented or modified, the "Registration Statement") to
be filed with the Commission by FindWhat under the Securities Act, including the
prospectus relating to FindWhat Common Shares to be issued in the Merger (as
amended, supplemented or modified, the "Prospectus") and the proxy statement and
form of proxies relating to the vote of FindWhat Stockholders with respect to
the Merger (as amended, supplemented or modified, the "Proxy Statement"), at the
time the Registration Statement becomes effective or, in the case of the Proxy
Statement, at the date of mailing and at the dates of the FindWhat Stockholders
Meeting (as defined in Section 5.2(a)) and the Espotting Stockholders Meeting
(as defined in Section 5.3(a)) to consider the Merger and the transactions
contemplated thereby, will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading, except that no representation or warranty is made
with respect to statements made (or incorporated by reference) therein based on
information provided in writing by Espotting specifically for inclusion therein.
The Registration Statement and Proxy Statement will each comply in all material
respects with the provisions of the Securities Act and the Exchange Act, except
that no representation or warranty is made with respect to statements made
therein based on information provided in writing by Espotting specifically for
inclusion or incorporation by reference therein.
3.8 Board Recommendation; Required Vote. The board of directors of FindWhat, at
a meeting duly called and held, has by majority vote of those directors present
and constituting a quorum of directors then in office (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
fair to and in the best interests of the FindWhat Stockholders, and (ii)
resolved to recommend that the FindWhat Stockholders approve this Agreement and
the transactions contemplated herein, including the Merger and the adoption of
the FindWhat Stock Option Plan (as defined in Section 5.2(g) and EMI Replacement
Option Plan (as defined in Section 5.2(a)) (the "FindWhat Board
Recommendation"). The affirmative vote of holders of a majority of the
outstanding shares of FindWhat Stockholders to approve the Merger is the only
vote of the holders of any class or series of FindWhat Capital Stock or third
parties (except Governmental Authorities in connection with the HSR Act filing
as described in Section 3.4(d)(iv)) necessary to adopt the Agreement and approve
the transactions contemplated hereby.
-18-
3.9 Compliance with Law. Except as set forth in Section 3.9 in the FindWhat
Disclosure Schedule, FindWhat and each of its subsidiaries is in compliance, in
all material respects, and at all times since January 1, 2002 has been in
compliance, in all material respects, with all applicable constitutions, laws,
statutes, treaties, orders, rules, regulations, ordinances, notices, approvals,
policies or guidelines promulgated, or judgments, decisions, decrees, or orders
of any Governmental Authority, and all Contracts with any Governmental Authority
relating to compliance with any of the foregoing (collectively, "Applicable
Laws") relating to it, its subsidiaries or their respective businesses or
properties except where the failure to be in compliance with such Applicable
Laws, individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect on FindWhat and its subsidiaries taken as a whole or
where such noncompliance has been cured and is reasonably expected to have no
material impact on the future business or operations of FindWhat and its
subsidiaries taken as a whole. Except as set forth in Section 3.9 in the
FindWhat Disclosure Schedule, no investigation or review by any Governmental
Authority with respect to FindWhat or any of its subsidiaries is pending, or, to
the knowledge of FindWhat, threatened, nor has any Governmental Authority
indicated in writing an intention to conduct the same, other than those the
outcome of which would not reasonably be expected to have a Material Adverse
Effect on FindWhat and its subsidiaries taken as a whole.
3.10 Litigation. Section 3.10 in the FindWhat Disclosure Schedule sets forth
each instance in which FindWhat or a subsidiary of FindWhat is subject to any
"Action" ("Action" means any action, arbitration, audit, examination, suit,
proceeding, hearing, or litigation, whether formal or informal, and whether
public or private commenced, brought, conducted or heard by or before, or
otherwise involving, any Governmental Authority or arbitrator) pending or, to
the knowledge of FindWhat, threatened against FindWhat. Since January 1, 2002,
neither FindWhat nor any of its subsidiaries has been subject to any order,
writ, injunction or decree relating to its method of doing business or its
relationship with past, existing or future users or purchasers of any goods or
services.
3.11 No Material Adverse Change. Except as set forth in Section 3.11 in the
FindWhat Disclosure Schedule, since January 1, 2002, there has been no material
adverse change in the assets, liabilities, business prospects, results of
operations or financial condition of FindWhat and its subsidiaries taken as a
whole or any event, occurrence or development that would reasonably be expected
to have a Material Adverse Effect on FindWhat and its subsidiaries taken as a
whole.
3.12 Taxes.
(a) Except as set forth in Section 3.12(a) in the FindWhat Disclosure
Schedule, and except as would not have a Material Adverse Effect on FindWhat and
its subsidiaries taken as a whole, FindWhat and its subsidiaries have timely
filed all Tax Returns (as defined below) and reports (including, but not limited
to, those filed on a consolidated, combined or unitary basis) required to have
been filed by FindWhat or its subsidiaries prior to the date hereof. All such
Tax Returns and reports are true and correct (except for such inaccuracies which
are individually, and in the aggregate, not material), and FindWhat and its
subsidiaries have within the time and manner prescribed by Applicable Law paid
or, prior to the Effective Time, will pay all Taxes, interest and penalties
required to be paid in respect of the periods covered by such returns or
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reports or otherwise due to any federal, state, foreign, local or other taxing
authority. Except as disclosed on Section 3.12(a) in the FindWhat Disclosure
Schedule, neither FindWhat nor any of its subsidiaries have any liability for
Taxes that is materially in excess of the amount reserved on its most recent
balance sheet. Neither FindWhat nor any subsidiary has requested or filed any
document having the effect of causing any extension of time within which to file
any returns in respect of any fiscal year which have not since been filed.
Neither FindWhat nor any of its subsidiaries has received notice of any
deficiencies for any material Tax from any taxing authority, against FindWhat or
any of its subsidiaries. Except as set forth in Section 3.12(a) in the FindWhat
Disclosure Schedule, neither FindWhat nor any of its subsidiaries is the subject
of any currently ongoing Tax audit. As of the date of this Agreement, there are
no pending requests for waivers of the time to assess any material Tax, other
than those made in the ordinary course and for which payment has been made.
Neither FindWhat nor any of its subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency. There are no liens with respect to Taxes upon
any of the properties or assets, real or personal, tangible or intangible of
FindWhat or any of its subsidiaries (other than liens for Taxes not yet due).
Except as set forth in Section 3.12(a) in the FindWhat Disclosure Schedule, no
claim has ever been made in writing by a Governmental Authority in a
jurisdiction where none of FindWhat or its subsidiaries files Tax Returns that
FindWhat or any of its subsidiaries is or may be subject to taxation by that
jurisdiction.
(b) Except as set forth in Section 3.12(b) in the FindWhat Disclosure
Schedule, neither FindWhat nor any of its subsidiaries is obligated by any
contract, agreement or other arrangement to indemnify any other person with
respect to material Taxes. Neither FindWhat nor any of its subsidiaries are now
or have ever been a party to or bound by any agreement or arrangement (whether
or not written and including, without limitation, any arrangement required or
permitted by law) binding FindWhat or any of its subsidiaries that (i) requires
FindWhat or any of its subsidiaries to make any Tax payment to or for the
account of any other person, (ii) affords any other person the benefit of any
net operating loss, net capital loss, investment Tax credit, foreign Tax credit,
charitable deduction or any other credit or Tax attribute which could reduce
Taxes (including, without limitation, deductions and credits related to
alternative minimum Taxes) of FindWhat or any of its subsidiaries, or (iii)
requires or permits the transfer or assignment of income, revenues, receipts or
gains to FindWhat or any of its subsidiaries, from any other person, in each
case other than with respect to each other.
(c) FindWhat and its subsidiaries have withheld and paid over all
material Taxes required to have been withheld and paid over in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
(d) Neither FindWhat nor any of its subsidiaries has agreed to or is
required to make any adjustments pursuant to Sections 263A or 481(a) of the Code
or any similar provision of state, local or foreign law by reason of a change in
accounting method initiated by FindWhat or any of its subsidiaries or has any
knowledge that the Internal Revenue Service has proposed any such adjustment or
change in accounting method, or has any application pending with any
Governmental Authority requesting permission for any changes in accounting
methods that relate to the business or operations of FindWhat or any of its
subsidiaries.
-20-
(e) Neither FindWhat nor any of its subsidiaries is subject to any
private letter ruling of the Internal Revenue Service or comparable ruling of
other Governmental Authorities.
(f) Neither FindWhat nor any of its subsidiaries is or has been a party
to any joint venture, partnership, or other agreement that is treated as a
partnership for U.S. federal income tax purposes.
(g) As used in this Agreement, "Tax Returns" means all federal, state,
local and foreign Tax returns, declarations, schedules, information returns,
reports and forms, and any amendments to any of the foregoing relating to Taxes,
required to be filed with any Governmental Authority responsible for the
imposition or collection of Taxes.
(h) As used in this Agreement, "Taxes" means any federal, state,
county, local or foreign taxes, charges, fees, levies or other assessments,
including all net income, gross income, premium, sales and use, ad valorem,
transfer, gains, profit, windfall profits, excise, franchise, real and personal
property, gross receipts, capital stock, production, business and occupation,
employment, disability, payroll, license, estimated, customs duties, severance
or withholding taxes, other taxes or similar charges of any kind imposed by a
Governmental Authority and includes any interest and penalties (civil or
criminal) on or additions to any such taxes or in respect of a failure to comply
with any requirement relating to any Tax Return and any expenses incurred in
connection with the determination, settlement or litigation of any tax
liability.
3.13 Intellectual Property.
(a) Set forth in Section 3.13(a) in the FindWhat Disclosure Schedule is
an accurate and complete list of (i) all material foreign and domestic patents,
patent applications, invention disclosures, trademarks, service marks, trade
names, internet domain names (and any registrations or applications for
registration for any of the foregoing trademarks, service marks, trade names and
internet domain names) and all material copyright applications and registrations
and all other material Intellectual Property rights owned or used by FindWhat or
any of its subsidiaries and (ii) all agreements to which FindWhat or any of its
subsidiaries is a party which concern any of their material Intellectual
Property ("Intellectual Property" means all intellectual property or other
proprietary rights of every kind, including, without limitation, all domestic or
foreign patents, patent applications, inventions (whether or not patentable),
processes, products, technologies, discoveries, copyrightable and copyrighted
works, apparatus, trade secrets, trademarks, logos, know-how, internet domain
names, copyrights, trademark registrations and applications, service marks,
service ▇▇▇▇ registrations and applications, trade names, trade dress, copyright
registrations, customer lists, marketing and customer information, licenses,
technical information (whether confidential or otherwise), software, and all
documentation thereof) owned by or licensed to the party or related to or
necessary for the business of such party, as such business is presently
conducted. Other than the Intellectual Property set forth in Section 3.13(a) in
the FindWhat Disclosure Schedule (the "FindWhat Intellectual Property"), no
name, material internet domain name, know-how, patent, invention, trade secret,
proprietary right, computer software, trademark, service ▇▇▇▇, trade name, logo,
copyright, franchise, license, sublicense, or other such right is necessary for
the operation of the business of FindWhat and its subsidiaries in substantially
the same manner as such business is presently conducted). Except as set forth in
Section 3.13(a) in the FindWhat Disclosure Schedule (i) FindWhat or one of its
subsidiaries
-21-
owns, free and clear of any Encumbrances, including without limitation the moral
rights of any third party (including without limitation any FindWhat Employees,
as defined in Section 3.15(a)) or has sufficient rights to, the FindWhat
Intellectual Property; (ii) no written claim of invalidity or ownership with
respect to the FindWhat Intellectual Property has been made by a third party and
such FindWhat Intellectual Property is not the subject of any pending or, to the
knowledge of FindWhat, threatened Action; (iii) no person or entity has asserted
in writing that, with respect to the FindWhat Intellectual Property, FindWhat or
a subsidiary or licensee of FindWhat is infringing or has infringed any domestic
or foreign patent, trademark, service ▇▇▇▇, trade name, or copyright or design
right, or has misappropriated or improperly used or disclosed any trade secret,
confidential information or know-how; (iv) all fees, annuities, royalties,
honoraria and other payments which are due from FindWhat or one of its
subsidiaries on or before the date of this Agreement for any of the FindWhat
Intellectual Property and agreements related to the FindWhat Intellectual
Property have been paid; (v) to the knowledge of FindWhat, except as limited by
the terms of any license relating thereto, the making, using, selling,
manufacturing, marketing, licensing, reproduction, distribution, disposal,
modification, display, transmission or publishing of any process, machine,
manufacture, composition of matter, or material related to any part of the
FindWhat Intellectual Property, does not and will not infringe in any material
respect any domestic or foreign patent, trademark, service ▇▇▇▇, trade name,
copyright, moral right or other intellectual property right of any third party,
and does not and will not involve the misappropriation or improper use or
disclosure of any trade secrets, confidential information or know-how of any
third party; (vi) to the knowledge of FindWhat, no unexpired foreign or domestic
patents or patent applications exist that are adverse to the material interests
of FindWhat and its subsidiaries; (vii) to the knowledge of FindWhat there
exists no (A) prior act that would void or invalidate any of the FindWhat
Intellectual Property or (B) conduct or use by FindWhat or any of its
subsidiaries or any third party that would void or invalidate any of the
FindWhat Intellectual Property; and (viii) the execution, delivery and
performance of this Agreement by FindWhat, and the consummation of the
transactions contemplated hereby, will not breach, violate or conflict with any
instrument or agreement governing or contained within any of the FindWhat
Intellectual Property, will not cause the forfeiture or termination or give rise
to a right of forfeiture or termination of any of the FindWhat Intellectual
Property or in any way impair the right of FindWhat or any of its subsidiaries,
subject to Section 3.13(a)(v), to make, use, sell, license or dispose of,
distribute, modify, display or transmit or to bring any action for the
infringement of, any FindWhat Intellectual Property.
(b) FindWhat and its subsidiaries have taken reasonable and appropriate
steps to safeguard and maintain the secrecy and confidentiality of all material
trade secrets and, to the extent required by Applicable Law, material patent
applications and their related inventions prior to the issuance of a patent
registration contained in the FindWhat Intellectual Property (including entering
into appropriate confidentiality, nondisclosure and noncompetition agreements
with all appropriate officers, directors, employees and third-party consultants
of FindWhat and its subsidiaries). FindWhat has taken reasonable and appropriate
steps to safeguard and maintain ownership of all material trade secrets,
copyrights and patents contained in the FindWhat Intellectual Property which it
owns (including entering into appropriate agreements with all officers,
directors, employees and third party consultants of FindWhat as necessary to
safeguard, maintain and vest ownership of such rights in FindWhat).
-22-
3.14 Title to and Condition of Properties. Except as set forth in Section 3.14
in the FindWhat Disclosure Schedule, FindWhat or one of its subsidiaries owns or
has the right to use under valid leases, subleases and licenses all real
property, plants, machinery and equipment necessary for the conduct of the
business of FindWhat and its subsidiaries as presently conducted, except where
the failure to own or hold such property, plants, machinery and equipment would
not have a Material Adverse Effect on FindWhat and its subsidiaries taken as a
whole.
3.15 Employee Benefit Plans.
(a) As used in this Agreement, the following terms have the meanings
given below:
"Benefit Obligation" means the employer's aggregate financial liability
to provide all current, projected and contingent benefits to an employee, or his
beneficiaries or dependents, as the case may be, under the terms of any of the
FindWhat Plans (as defined below) or the Espotting Plans (as defined in Section
4.15(a) below), regardless of whether an amount less than such aggregate
financial liability is reflected on the employer's financial statements under
applicable Tax and accounting rules.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, with respect to any entity, trade or business,
any other entity, trade or business that is a member of a group described in
Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that
includes the first entity, trade or business, or that is a member of the same
"controlled group" as the first entity, trade or business pursuant to Section
4001(a)(14) of ERISA.
"FindWhat Employee" means a person who is, as of the Effective Time,
an active or inactive employee of FindWhat or any of its subsidiaries.
"FindWhat Controlled Group Liability" means any and all liabilities (i)
under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections
412 and 4971 of the Code, (iv) resulting from a violation of the continuation
coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the
Code or the group health plan requirements of Section 701 et seq. of ERISA, and
(v) under corresponding or similar provisions of foreign laws or regulations, in
each case other than pursuant to the FindWhat Plans.
"FindWhat Plans" means all employee benefit plans, programs and other
arrangements providing benefits to any current or former employee, officer,
director or consultant (or any beneficiary or dependent thereof) in respect of
services provided to FindWhat or to any of its subsidiaries, and whether
covering one person or more than one person, sponsored or maintained by FindWhat
or any of its subsidiaries or to which FindWhat or any of its subsidiaries
contributes (or is obligated to contribute) or has any liability. Without
limiting the generality of the foregoing, the term "FindWhat Plans" includes
each "employee pension benefit plan" as defined in Section 3(2) of ERISA, each
"employee welfare benefit plan" as defined in Section 3(1) of ERISA, and each
agreement, plan, program, fund, policy, contract or arrangement (whether written
or unwritten) providing compensation, benefits, pension, retirement,
superannuation, profit sharing, stock bonus, stock option, stock purchase,
phantom or stock equivalent, bonus, thirteenth month, incentive, deferred
compensation, hospitalization, medical,
-23-
dental, vision, vacation, life insurance, death benefit, sick pay, disability,
severance, termination, indemnity, redundancy pay, educational assistance,
holiday pay, housing assistance, moving expense reimbursement, fringe benefit or
similar employee benefits covering any employee, former employee, or the
beneficiaries and dependents of any employee or former employee, regardless of
whether it is mandated under local law, voluntary, private, funded, unfunded,
financed by the purchase of insurance, contributory or non-contributory.
"Multiemployer Plan" means a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a plan that has two or more contributing
sponsors at least two of whom are not under "common control" within the meaning
of Section 4063 of ERISA.
"Qualified Plan" means a "qualified plan" within the meaning of Section
401(a) of the Code.
(b) Section 3.15(b) in the FindWhat Disclosure Schedule lists all
FindWhat Plans. With respect to each FindWhat Plan, FindWhat has made available
to Espotting a true, correct and complete copy of the following (where
applicable): (i) each writing constituting a part of such FindWhat Plan,
including without limitation all plan documents (including amendments), benefit
schedules, trust agreements, and insurance contracts and other funding vehicles;
(ii) the three most recent Annual Reports (Form 5500 Series) and accompanying
schedules, if any; (iii) the current summary plan description, if any; (iv) the
most recent annual financial report, if any; and (v) the most recent
determination letter from the Internal Revenue Service, if any. Except as
specifically provided in the documents made available to FindWhat pursuant to
the preceding sentence, there are no amendments to any FindWhat Plan that have
been adopted or approved nor has FindWhat or any of its subsidiaries undertaken
to make any such amendments or to adopt or approve any new FindWhat Plan.
(c) The Internal Revenue Service has issued a favorable determination
letter with respect to each FindWhat Plan that is intended to be a Qualified
Plan and, to the knowledge of FindWhat, there are no existing circumstances nor
any events that have occurred that could adversely affect the qualified status
of any FindWhat Plan that is a Qualified Plan or the related trust.
(d) All material contributions required to be made by FindWhat or any
of its subsidiaries or any of their respective ERISA Affiliates to any FindWhat
Plan by Applicable Laws or by any plan document or other contractual
undertaking, and all material premiums due or payable with respect to insurance
policies funding any FindWhat Plan, for any period through the date hereof have
been timely made or paid in full and through the Closing Date will be timely
made or paid in full.
(e) Except as set forth in Section 3.15(e) in the FindWhat Disclosure
Schedule, each FindWhat Plan has been maintained and administered in material
compliance with its terms and Applicable Law, including ERISA and the Code.
There is not now, and there are no existing circumstances that could reasonably
be expected to give rise to, any requirement for the posting
-24-
of security with respect to a FindWhat Plan or the imposition of any lien on the
assets of FindWhat or any of its subsidiaries or any of their respective ERISA
Affiliates under ERISA or the Code with respect to a FindWhat Plan. Any Benefit
Obligations under any FindWhat Plan as of the Closing Date have been
appropriately reflected on the books and records of the FindWhat Plan sponsor in
accordance with Applicable Law, past practices and generally accepted accounting
principles in the local jurisdiction. Except as set forth in Section 3.15(e) in
the FindWhat Disclosure Schedule, all Benefit Obligations under any FindWhat
Plans as of the Closing Date will, to the extent required by Applicable Law, be
fully covered by cash, insurance contracts, or other assets set aside for this
purpose, the fair market value of which shall be no less than the amount of such
Benefit Obligations.
(f) No FindWhat Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code. No FindWhat Plan is a Multiemployer Plan or a
Multiple Employer Plan, nor has FindWhat or any of its subsidiaries or any of
their respective ERISA Affiliates, at any time within six years before the date
hereof, maintained, contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan or any plan covered by Section 412
of the Code or Title IV of ERISA.
(g) There does not now exist, and there are no existing circumstances
that could reasonably be expected to result in any material FindWhat Controlled
Group Liability that would be a liability of FindWhat or any of its subsidiaries
following the Closing. Without limiting the generality of the foregoing, neither
FindWhat nor any of its subsidiaries nor any of their respective ERISA
Affiliates has engaged in any transaction described in Section 4069 or Section
4204 of ERISA.
(h) Except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA (or other Applicable Law) and
except as set forth in Section 3.15(h) in the FindWhat Disclosure Schedule,
neither FindWhat nor any of its subsidiaries has any material liability for
life, health, medical or other welfare benefits to former employees or
beneficiaries or dependents thereof. To the knowledge of FindWhat, there has
been no communication to employees of FindWhat or its subsidiaries that would
reasonably be expected or interpreted to promise or guarantee such employees
retiree health or life insurance benefits or other retiree death benefits.
(i) Except as disclosed in Section 3.15(i) in the FindWhat Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in, cause the
accelerated vesting or delivery of, or increase the amount or value of, any
payment or benefit to any employee, officer, director or consultant of FindWhat
or any of its subsidiaries. Without limiting the generality of the foregoing,
except as set forth in Section 3.15(i) in the FindWhat Disclosure Schedule, no
amount paid or payable by FindWhat or any of its subsidiaries in connection with
the transactions contemplated hereby, either solely as a result thereof or as a
result of such transactions in conjunction with any other events, will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(j) Except as disclosed in Section 3.15(j) in the FindWhat Disclosure
Schedule, there are no pending or to the knowledge of FindWhat threatened claims
(other than claims for benefits in the ordinary course), lawsuits or
arbitrations that have been asserted or instituted against the
-25-
FindWhat Plans, any fiduciaries thereof with respect to their duties to the
FindWhat Plans or the assets of any of the trusts under any of the FindWhat
Plans that would reasonably be expected to result in any material liability of
FindWhat or any of its subsidiaries to the Pension Benefit Guaranty Corporation,
the Department of Treasury, the Department of Labor or any Multiemployer Plan.
(k) Section 3.15(k) in the FindWhat Disclosure Schedule sets forth the
names of all directors and officers of FindWhat or any of its subsidiaries, and
the total current salary, bonus eligibility, and fringe benefits and perquisites
(to the extent such fringe benefits or perquisites would have to be disclosed
under Rule 402(b) of Regulation S-K assuming each such person was a named
executive officer) for the FindWhat fiscal year ending December 31, 2003.
Section 3.15(k) in the FindWhat Disclosure Schedule also lists and describes the
current compensation of any other employee of FindWhat or any of its
subsidiaries whose total current salary and maximum bonus opportunity exceeds
$150,000 annually. Section 3.15(k) in the FindWhat Disclosure Schedule also sets
forth the liability of FindWhat and its subsidiaries for deferred compensation
under any deferred compensation plan, excess plan or similar arrangement (other
than pursuant to Qualified Plans) to each such director, officer and employee
and to all other employees as a group, together with the value, as of the date
specified thereon, of the assets (if any) set aside in any grantor trust(s) to
fund such liabilities. Except as disclosed in Section 3.15(k) in the FindWhat
Disclosure Schedule, there are no other material forms of compensation paid to
any such director, officer or employee of FindWhat. Except as set forth in
Section 3.15(k) in the FindWhat Disclosure Schedule, no officer, director, or
employee of FindWhat or any other affiliate of FindWhat, or any immediate family
member of any of the foregoing, provides or causes to be provided to FindWhat
any material assets, services or facilities and FindWhat does not provide or
cause to be provided to any such officer, director, employee or affiliate, or
any immediate family member of any of the foregoing, any material assets,
services or facilities.
(l) Except as set forth in Section 3.15(l) in the FindWhat Disclosure
Schedule, no FindWhat Plan is subject to the laws of any jurisdiction outside of
the United States.
3.16 Contracts. Section 3.16 in the FindWhat Disclosure Schedule lists as of the
date hereof, and FindWhat has provided Espotting with complete and accurate
copies of, each Contract ("Contract" means all written or oral contracts,
agreements, guarantees, leases, licenses and executory commitments), other than
FindWhat Plans, to which FindWhat or any of its subsidiaries is a party and
which falls within any of the following categories:
(a) Contracts not entered into in the ordinary course of FindWhat's
business and that involve expenditures or receipts by FindWhat or its
subsidiaries of US$20,000 per month (or the equivalent foreign currency);
(b) Joint venture, partnership, strategic alliances and other Contracts
(however named) involving a sharing of profits, losses, costs or liabilities;
(c) portal and like agreements which involve payments of more than
US$20,000 in any one month during the past 6 months (or the equivalent foreign
currency);
-26-
(d) Contracts which are service contracts, (including without
limitation outsourcing agreements, application service provider agreements,
hosting agreements and data center management agreements) software license
agreements or equipment leases or which require the delivery of goods or
materials and which involve payments of more than US$20,000 in any one month
during the past 6 months (or the equivalent foreign currency);
(e) Contracts containing covenants purporting to limit the freedom of
FindWhat or its subsidiaries to compete in any line of business or in any
geographic area or to hire any individual or group of individuals (including
without limitation any software license agreements that authorize or permit
FindWhat or any subsidiary to use the applicable software only in particular
business lines, languages or geographic areas);
(f) Contracts which after the Effective Time would have the effect of
limiting the freedom of Espotting or its subsidiaries (other than FindWhat and
its subsidiaries) to compete in any line of business or in any geographic area
or to hire any individual or group of individuals;
(g) Contracts providing for the payments based on sales, revenue
sharing, purchases or profits, other than direct payments for goods or services
in excess of US$20,000 per month (or the equivalent foreign currency);
(h) powers of attorney that are currently outstanding;
(i) Contracts entered into other than in the ordinary course of
business that contain or provide for an express undertaking to be responsible
for consequential damages;
(j) Contracts which contain minimum purchase conditions in excess of US
$100,000 (or the equivalent in foreign currency) or requirements or other terms
that restrict or limit the purchasing relationships of FindWhat or its
affiliates, or any customer, licensee or lessee thereof;
(k) Contracts relating to any outstanding commitment for capital
expenditures in excess of US$250,000 (or the equivalent foreign currency);
(l) Contracts relating to the lease, sublease, occupancy, license,
installment or conditional sale affecting the ownership of, leasing of, title
to, use of, or any leasehold or other interest in, any real property or personal
property involving any annual expense or price in excess of $100,000 and not
cancelable by FindWhat or its subsidiaries (without premium or penalty) within
one month;
(m) Contracts with any labor organization, union, employee
representative or group of employees;
(n) indentures, mortgages, promissory notes, loan agreements,
guarantees of borrowed money, letters of credit or other agreements, instruments
or commitments for the borrowing or the lending of money;
(o) Contracts providing for the creation of any Encumbrances upon any
of the assets of FindWhat or its subsidiaries;
-27-
(p) Contracts involving annual revenues to the business of FindWhat or
its subsidiaries in excess of 2.5% of FindWhat's annual revenues during any of
their respective past two fiscal years;
(q) Contracts providing for "earn-outs", "savings guarantees",
"performance guarantees", or other contingent payments involving more than
US$100,000 per year or US$500,000 over the term of the Contract (or the
equivalent in foreign currency);
(r) Contracts with or for the benefit of any affiliate of FindWhat or
immediate family member of any shareholder, director or officer thereof;
(s) Contracts involving payments by FindWhat or its subsidiaries of
more than US$20,000 in any one month during the past 6 months (or the equivalent
foreign currency);
(t) to FindWhat's knowledge, any Contracts that purport to limit the
ability of the directors, officers, agents or employees of FindWhat or its
subsidiaries to engage in or continue any conduct, activity or practice relating
to the business of FindWhat or its subsidiaries, or assign to FindWhat or its
subsidiaries any rights to any invention, improvement or discovery;
(u) any cost-sharing, tax sharing or transfer pricing agreements
between and among FindWhat and/or any FindWhat subsidiary and/or any related or
unrelated party; and
(v) each amendment, supplement and modification with respect to any of
the foregoing.
Except as set forth in Section 3.16 in the FindWhat Disclosure
Schedule, all such Contracts and all other contracts that are individually
material to the business or operations of FindWhat or its subsidiaries are valid
and binding obligations of FindWhat and, to the knowledge of FindWhat, the valid
and binding obligation of each other party thereto except such Contracts which
if not so valid and binding would not, individually or in the aggregate, have a
Material Adverse Effect on FindWhat or any of its subsidiaries taken as a whole.
Neither FindWhat nor, to the knowledge of FindWhat, any other party thereto is
in violation of or in default in respect of, nor has there occurred an event or
condition which with the passage of time or giving of notice (or both) would
constitute a default under or permit the termination of, any such Contract or of
any other Contract that is individually material to the business or operations
of FindWhat except such violations or defaults under or terminations which,
individually or in the aggregate, would not have a Material Adverse Effect on
FindWhat or its subsidiaries taken as a whole. As of the date hereof, except as
set forth in Section 3.16 in the FindWhat Disclosure Schedule, there are no
renegotiations of, attempts to renegotiate or outstanding rights to renegotiate
any material amounts paid or payable under such Contracts.
3.17 Labor Matters.
(a) Section 3.17(a) in the FindWhat Disclosure Schedule sets forth an
accurate and complete list of each works council, union or other labor
organization which has to be notified or consulted or with which negotiations
need to be conducted in connection with the transaction contemplated by this
Agreement and each collective bargaining agreement which has any impact on the
terms and conditions of employment with respect to FindWhat Employees. Where
required by Applicable Laws, FindWhat or any of its subsidiaries, will have,
prior to the Closing
-28-
Date, properly and timely notified, or where appropriate, consulted or
negotiated with, the local works council, union, labor board or relevant
Governmental Authority concerning the transactions contemplated by the
Agreement.
(b) Except as set forth in Section 3.17(b) in the Disclosure Schedule,
FindWhat does not have any labor contracts, collective bargaining agreements or
consulting agreements providing for compensation of any individual in excess of
$100,000 with any persons employed by FindWhat or any persons otherwise
performing services primarily for FindWhat. FindWhat and its subsidiaries have
furnished or made available to Espotting complete and correct copies of all such
agreements, contracts, commitments and understandings, whether written or oral
(the "FindWhat Employment and Labor Agreements") covering the FindWhat
Employees. Neither FindWhat nor any of its subsidiaries has materially breached
or otherwise materially failed to comply with any provisions of any FindWhat
Employment or Labor Agreement, and, to the knowledge of FindWhat and each of its
subsidiaries, there are no grievances outstanding thereunder. There is no labor
strike, dispute or stoppage pending or, to the knowledge of FindWhat, threatened
against FindWhat or any of its subsidiaries, and FindWhat and each of its
subsidiaries has not experienced any labor strike, dispute or stoppage or other
material labor difficulty involving its employees. To the knowledge of FindWhat,
no campaign or other attempt for recognition has been made by any labor
organization or employees with respect to employees of FindWhat or any of its
subsidiaries.
(c) FindWhat and its subsidiaries are in material compliance with
Applicable Laws and its own policies respecting employment and employment
practices, terms and conditions of employment, wages and hours, equal
opportunity, equal pay, civil rights, labor relations, immigration, occupational
health and safety and payroll and wage taxes, and any federal or local human
rights act.
(d) As of the date of this Agreement or, except as set forth in Section
3.17(d) in the FindWhat Disclosure Schedule or as required by Applicable Laws,
(i) neither FindWhat nor any of its subsidiaries is a party to any outstanding
employment agreements or contracts with officers or FindWhat Employees that are
not terminable at will, or that provide for the payment of any bonus or
commission; and (ii) neither FindWhat nor any of its subsidiaries is a party to
any agreement, policy or practice that requires it to pay termination or
severance pay to salaried, non-exempt or hourly FindWhat Employees.
3.18 Undisclosed Liabilities. Except (i) as and to the extent disclosed or
reserved against on the audited balance sheet of FindWhat as of December 31,
2002, (ii) as incurred after the date thereof in the ordinary course of business
consistent with prior practice and not prohibited by this Agreement or (iii) as
set forth in Section 3.18 in the FindWhat Disclosure Schedule, to FindWhat's
knowledge, FindWhat and its subsidiaries do not have any liabilities or
obligations of any nature, whether absolute, accrued, contingent, ▇▇▇▇▇▇,
inchoate or otherwise and whether due or to become due.
3.19 Operation of FindWhat's Business; Relationships. Except as set forth in
Section 3.19(b) in the FindWhat Disclosure Schedule, since December 31, 2002,
and as of the date of this Agreement, no material customer of FindWhat or any of
its subsidiaries has indicated that it will stop or materially decrease
purchasing materials, products or services from FindWhat or any of
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its subsidiaries and no material supplier of FindWhat or any of its subsidiaries
has indicated that it will stop or materially decrease the supply of materials,
products or services to FindWhat or any of its subsidiaries.
3.20 Permits. FindWhat and each of its subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary in each
jurisdiction to own, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the "FindWhat Permits"),
except where the failure to be in possession of such FindWhat Permits would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on FindWhat and its subsidiaries taken as a whole, and there is
no Action pending or, to the knowledge of FindWhat, threatened regarding any of
the FindWhat Permits which, if successful, would reasonably be expected to have
a Material Adverse Effect on FindWhat and its subsidiaries taken as a whole.
Neither FindWhat nor any of its subsidiaries is in conflict with, or in default
or violation of any of the FindWhat Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on FindWhat and its
subsidiaries taken as a whole.
3.21 Environmental Matters. Except for matters disclosed in Section 3.21 in the
FindWhat Disclosure Schedule, (a) the properties, operations and activities of
FindWhat and its subsidiaries are in compliance in all material respects with
all applicable Environmental Laws (as defined below) and all past noncompliance
of FindWhat or any FindWhat subsidiary with any Environmental Laws or
Environmental Permits (as defined below) has been resolved without any pending,
ongoing or future obligation, cost or liability; (b) FindWhat and its
subsidiaries and the properties and operations of FindWhat and its subsidiaries
are not subject to any existing, pending or, to the knowledge of FindWhat,
threatened Action by or before any court or Governmental Authority under any
Environmental Law; (c) there has been no release, discharge or emission of any
Hazardous Material (as defined below) into the environment in violation of
applicable Environmental Law by FindWhat or its subsidiaries or in connection
with their currently leased or formerly leased properties or operations that
would have a Material Adverse Effect on FindWhat or its subsidiaries taken as a
whole and there has been no release, discharge or emission of any Hazardous
Material into the environment in violation of applicable Environmental Law in
connection with their currently owned or formerly owned properties or
operations; and (d) to the knowledge of FindWhat, there has been no material
exposure in violation of applicable Environmental Law of any person or property
to any hazardous substance, pollutant or contaminant in connection with the
currently owned or leased, or formerly owned or leased, properties, operations
and activities of FindWhat and its subsidiaries that could have a Material
Adverse Effect on FindWhat and its subsidiaries taken as a whole. For purposes
of this Agreement, the term "Environmental Laws" means all federal, state, local
or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or industrial, toxic or hazardous
substances or wastes as those terms are defined or identified in any
Environmental Law or regulated by any Environmental Permit, including but not
limited to petroleum products or by-products, asbestos, and polychlorinated
materials (collectively, "Hazardous Materials") into the environment, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal,
-30-
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices, orders, permits, plans or regulations issued, entered, promulgated or
approved thereunder. For purposes of this Agreement, the term "Environmental
Permit" means any permit, approval, license or other authorization required
under or issued pursuant to any applicable Environmental Law.
3.22 Takeover Laws. Prior to the execution of this Agreement, the board of
directors of FindWhat has taken all action necessary to exempt under or make not
subject to any state or foreign takeover law or state or foreign law that
purports to limit or restrict business combinations or the ability to acquire or
vote shares regarding: (i) the execution of this Agreement and the FindWhat
Stockholder Voting Agreement, (ii) the Merger, (iii) the FindWhat Stock Option
Plan (as defined in Section 5.2(g)), and (iv) the transactions contemplated
hereby and by the FindWhat Stockholder Voting Agreement.
3.23 Accounts Receivable. All accounts and notes receivable of FindWhat and its
subsidiaries have arisen in the ordinary course of business and the accounts
receivable reserve reflected in the balance sheet of FindWhat as of March 31,
2003 is as of such date adequate and established in accordance with generally
accepted accounting principles consistently applied. Since March 31, 2003, there
has been no event or occurrence which would cause such accounts receivable
reserve to be inadequate and which would reasonably be expected to have a
Material Adverse Effect on FindWhat and its subsidiaries taken as a whole.
3.24 Insurance. Section 3.24 in the FindWhat Disclosure Schedule lists all
insurance policies (including information on the premiums payable in connection
therewith and the amount of coverage provided thereunder) pursuant to which
FindWhat and its subsidiaries are presently insured, and during each of the past
three calendar years has been insured against such risks as companies engaged in
a similar business would, in accordance with good business practice, customarily
be insured. FindWhat's and its subsidiaries' insurance policies are in all
material respects in full force and effect in accordance with their terms, all
premiums to date have been paid in full, no notice of cancellation has been
received, and there is no existing default or event which, with the giving of
notice or lapse of time or both, would constitute a default thereunder. Such
policies are in all material respects in amounts which are customary, adequate
and suitable in relation to the business, assets and liabilities of FindWhat and
its subsidiaries and all premiums to date have been paid in full. FindWhat or
its covered subsidiary is a "named insured" or an "insured" under such insurance
policies. FindWhat and its subsidiaries have not been refused any insurance, nor
has the coverage of FindWhat or any of its subsidiaries been limited, by any
insurance carrier to which it has applied for insurance or with which it has
carried insurance during the past three years. Except as set forth in Section
3.24 in the FindWhat Disclosure Schedule, the policies of fire, theft, liability
and other insurance maintained with respect to the assets or businesses of
FindWhat and its subsidiaries provide adequate coverage against loss and may be
continued by FindWhat without modification or premium increase after the
Effective Time and for the duration of their current terms which terms expire as
set forth in Section 3.24 in the FindWhat Disclosure Schedule. Set forth in
Section 3.24 in the FindWhat Disclosure Schedule is the amount of the annual
premium currently paid by FindWhat for its directors' and officers' liability
insurance.
-31-
3.25 Opinion of Financial Advisor. FindWhat has received the opinion of its
financial advisors, dated the date hereof, to the effect that, as of such date,
the Merger Consideration is fair from a financial point of view to FindWhat.
3.26 Foreign Corrupt Practices Act.
(a) FindWhat and its subsidiaries have not, to secure any improper
advantage in order to obtain or retain business, directly or indirectly offered,
paid, given, or promised to pay, or authorized the payment of, any money, offer,
gift, or other thing of value, to:
(i) an officer or employee of any Governmental Authority, or any
person acting in an official capacity for or on behalf of any Governmental
Authority;
(ii) any political party or official thereof;
(iii) any candidate for political or political party office; or
(iv) any other individual or entity;
while knowing or having reason to believe that all or any portion of
such money or thing of value would be offered, given, or promised,
directly or indirectly, to any person or entity in items (i) - (iv).
(b) Except as set forth in Section 3.26(b) of the FindWhat Disclosure
Schedule, FindWhat and its subsidiaries have made all payments to third parties
by check mailed to such third parties' principal place of business or by wire
transfer to a bank located in the same jurisdiction as such party's principal
place of business.
(c) Each transaction is properly and accurately recorded on the books
and records of FindWhat and its subsidiaries, and each document on which entries
in FindWhat's and its subsidiaries' books and records are based is complete and
accurate in all material respects. FindWhat and its subsidiaries maintain a
system of internal accounting controls adequate to insure that they maintain no
off-the-books accounts and that their assets are used only in accordance with
their respective management's directives.
(d) No product sold or service provided by FindWhat or its subsidiaries
has been, directly or indirectly, sold to or performed on behalf of Cuba, Iraq,
Iran, Libya, or Sudan.
3.27 Subcorp. Subcorp was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement. Subcorp has not, and at the
Effective Time will not have, engaged in any activities or incurred any
obligations or liabilities, except the activities relating to the transactions
contemplated by this Agreement and obligations and liabilities incurred in
connection with those activities and with the transactions contemplated by this
Agreement.
-32-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ESPOTTING
In order to induce Subcorp and FindWhat to enter into this Agreement, Espotting
hereby represents and warrants to FindWhat and Subcorp that the statements
contained in this Article IV are true, correct and complete. Only for purposes
of this Article IV and the covenants of Espotting set forth in Article V, any
amount expressed in Dollars shall for purposes of application to an Espotting
Subsidiary in its local jurisdiction be converted into the local currency at the
local rate of exchange on the date when a determination of such amount is being
made. The representations and warranties contained herein are made as of
December 19, 2003, unless otherwise noted.
4.1 Organization and Standing. Espotting is a corporation duly organized and
validly existing under the laws of the State of Delaware with full corporate
power and authority to own, lease, use and operate its properties and to conduct
its business as and where now owned, leased, used, operated and conducted. Each
of the Espotting Subsidiaries (as defined in Section 4.2(a)) is duly organized
and validly existing under the laws of its respective jurisdiction of
organization with full corporate power and authority to own, lease, use and
operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. Each of Espotting and the Espotting
Subsidiaries is duly qualified or licensed to do business and is in good
standing or the local law equivalent in each jurisdiction in which the nature of
the business conducted by it or the property it owns, leases, uses, or operates
requires it to so qualify, be licensed or be in good standing, except where the
failure to be so qualified, licensed or in good standing in such jurisdiction
would not have a Material Adverse Effect on Espotting or the Key Espotting
Subsidiaries (as defined in Section 4.2(c)). Espotting is not in default in the
performance, observance or fulfillment of any provision of its Amended and
Restated Certificate of Incorporation, as amended (the "Espotting Certificate"),
or its Bylaws, as in effect on the date hereof (the "Espotting Bylaws").
Espotting has heretofore furnished to FindWhat complete and correct copies of
the Espotting Certificate and the Espotting Bylaws and the certificate of
incorporation and bylaws (or other comparable organizational documents) for each
of the Espotting Subsidiaries ("Espotting Subsidiary Governing Documents"), each
as in effect on the date hereof. Listed in Section 4.1 in the disclosure
schedule delivered by Espotting to FindWhat and dated the date hereof (the
"Espotting Disclosure Schedule"), and incorporated herein by reference, is each
jurisdiction in which Espotting or an Espotting Subsidiary is qualified or
licensed to do business and, whether Espotting (or any Espotting Subsidiary) is
in good standing or the local law equivalent as of the date of the Agreement.
4.2 Subsidiaries.
(a) Espotting does not own, directly or indirectly, any equity or other
ownership interest in any corporation, partnership, joint venture or other
entity or enterprise, except for the Espotting Subsidiaries set forth in Section
4.2(a) in the Espotting Disclosure Schedule. "Espotting Subsidiary" means any
subsidiary of Espotting, which, for purposes of this Agreement, also includes
Espotting Media Ireland Limited. Except as set forth in Section 4.2(a) in the
Espotting Disclosure Schedule, Espotting is not subject to any obligation or
requirement to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any Espotting Subsidiary or any other
person. Except as set forth in Section 4.2(a) in the Espotting Disclosure
Schedule, Espotting owns, directly or indirectly, 100% of the capital stock (or
other ownership interests having by their terms ordinary voting power to elect a
majority of directors or others performing similar functions with respect to
such Espotting
-33-
Subsidiary) of each of the Espotting Subsidiaries. Each of the outstanding
shares of capital stock or other equity interests of the Espotting Subsidiaries
is (in so far as is applicable) duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by Espotting free and clear
of all Encumbrances.
(b) The following information for each Espotting Subsidiary is set
forth in Section 4.2(b) in the Espotting Disclosure Schedule, as applicable: (i)
its name and jurisdiction of incorporation or organization; (ii) its authorized
capital stock or capital; and (iii) the number of issued and outstanding shares
of capital stock or capital and the record (legal) or beneficial owner(s)
thereof. Other than as set forth in Schedule 4.2(b) in the Espotting Disclosure
Schedule, the ledgers, articles of association, stock records, share
certificates or local equivalent for each Espotting Subsidiary are complete and
up to date and reflect the persons listed in Schedule 4.2(b) in the Espotting
Disclosure Schedule as the record (legal) or beneficial owner(s) of the
outstanding shares of capital stock or capital of the relevant Espotting
Subsidiaries. Other than as set forth in Section 4.2(b) in the Espotting
Disclosure Schedule, there are no outstanding subscriptions, options, warrants,
puts, calls, agreements, understandings, claims or other commitments or rights
of any type relating to the issuance, sale or transfer of any securities of any
Espotting Subsidiary, nor are there outstanding any securities that are
convertible into or exchangeable for any shares of capital stock of any
Espotting Subsidiary, and neither Espotting nor any Espotting Subsidiary has any
obligation of any kind to issue any additional securities of any Espotting
Subsidiary or to pay for or repurchase any securities of any Espotting
Subsidiary or any predecessor thereof.
(c) The "Key Espotting Subsidiaries" are the Espotting Subsidiaries in
France, Germany and the United Kingdom.
(d) Except as set forth in Schedule 4.2(d) in the Espotting Disclosure
Schedule, (i) none of the Espotting Subsidiaries has granted powers of attorney
or delegations of power or other local law equivalents to any persons, (ii) each
Espotting Subsidiary is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation and has
full power, authority and legal right to conduct its business as it is currently
being conducted, (iii) each Espotting Subsidiary is duly qualified to do
business, and is in good standing, in the respective jurisdictions where the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary and (iv) all of the powers of each Espotting Subsidiary
have been duly authorized by the directors or shareholders of the relevant
Espotting Subsidiary and registered with the necessary Governmental Authorities,
as required under local law or the governing documents of the Espotting
Subsidiary.
(e) Except as set forth in Section 4.2(e) in the Espotting Disclosure
Schedule, (i) Espotting Scandinavia AB is not a party to any agreements with
third parties in Denmark and Norway with respect to the advertising, marketing
and referral of Espotting business in Denmark and Norway, (ii) the agreements
listed in Schedule 4.2(e) in the Espotting Disclosure Schedule comprise the only
arrangements in place regarding Espotting's business in Denmark and Norway,
(iii) there are no other arrangements in place regarding Espotting's business in
Denmark and Norway, including but not limited to, lease agreements, employees or
governmental registration and (iv) Espotting Sweden AB is not subject to direct
taxation in Denmark and Norway.
-34-
(f) Except as set forth in Section 4.2(f) in the Espotting Disclosure
Schedule, (i) Espotting Media (DE) GmbH is not a party to any agreements with
third parties in Switzerland, including without limitation, with respect to the
advertising, marketing and referral of Espotting business in Switzerland, (ii)
the agreements listed in Schedule 4.2(f) in the Espotting Disclosure Schedule
comprise the only arrangements in place regarding Espotting's business in
Switzerland, (iii) there are no other arrangements in place regarding
Espotting's business in Switzerland, including but not limited to, lease
agreements, employees or governmental registrations, and (iv) Espotting Media
(DE) GmbH is not subject to direct taxation in Switzerland.
4.3 Corporate Power and Authority. Except as set forth in Section 4.3 of the
Espotting Disclosure Schedule, Espotting has all requisite corporate power and
authority to enter into and deliver this Agreement, to perform its obligations
hereunder and, subject to approval of the Merger and the transactions
contemplated hereby by Espotting Stockholders, to consummate the transactions
contemplated by this Agreement. Except as set forth in Section 4.3 of the
Espotting Disclosure Schedule, the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby by Espotting have been
duly authorized by all necessary corporate action on the part of Espotting,
subject to approval of the Merger and the transactions contemplated hereby by
Espotting Stockholders and the consents described in Section 4.22 below. This
Agreement has been duly executed and delivered by Espotting and constitutes the
legal, valid and binding obligation of Espotting enforceable against it in
accordance with its terms.
4.4 Capitalization of Espotting. The authorized capital stock of Espotting
consists of 35,000,000 common shares (the "Espotting Common Stock") and
5,000,000 preferred shares (the "Espotting Preferred Stock"). At the date of
this Agreement, (i) 11,501,692 shares of Espotting Common Stock, par value of
$.01, are issued and outstanding, (ii) no shares of Espotting Common Stock are
held as treasury stock (which does not include shares of Espotting Common Stock
reserved for issuance as set forth in clause (iii) below), (iii) 9,785,683
shares of Espotting Common Stock are reserved for issuance upon the exercise or
conversion of options, warrants or convertible securities (including the Loan
Notes) granted or issuable by Espotting, and (iv) 60 shares of Espotting
Preferred Stock designated Series A Preferred Stock, par value of $.01 are
issued and outstanding. The Espotting Common Stock and the Espotting Preferred
Stock are referred to herein collectively as the "Espotting Capital Stock." Each
outstanding share of Espotting Capital Stock is duly authorized and validly
issued, fully paid and nonassessable, and has not been issued in violation of
any preemptive or similar rights. As of the date hereof, and other than as set
forth in the first sentence hereof, in the Option Schedule (as defined below),
or in Section 4.4 in the Espotting Disclosure Schedule, there are no outstanding
subscriptions, options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to the issuance,
sale, repurchase or transfer by Espotting of any securities of Espotting, nor
are there outstanding any securities which are convertible into or exchangeable
for any shares of Espotting Capital Stock, and neither Espotting nor any
Espotting Subsidiary has any obligation of any kind to issue any additional
securities or to pay for or repurchase any securities of Espotting or any
predecessor. The issuance and sale of all of the shares of Espotting Capital
Stock described in this Section 4.4 have been in compliance in all material
respects with applicable securities laws. Set forth in Section 4.4 in the
Espotting Disclosure Schedule is an accurate and complete list of the names of
all holders of issued and outstanding stock in the capital of Espotting, and the
number and class of shares held by each such Espotting
-35-
Stockholder. Set forth in Section 4.4 in the Espotting Disclosure Schedule is an
accurate and complete list (the "Option Schedule") of the names of all holders
of options or warrants to purchase Espotting Capital Stock, the number of shares
issuable to each such holder upon exercise of such option or warrant, and the
exercise price and vesting schedule with respect thereto. Espotting Media (UK)
Limited ("Espotting UK") has issued redeemable secured loan notes in an
aggregate principal amount of GBP 8,848,996 (the "Loan Notes") and 15%
Convertible Secured Loan Notes in the aggregate principal amount of USD
$4,950,000 (the "C Loan Notes"). Upon conversion of all the Espotting Loan Notes
immediately prior to the Effective Time, the number of Espotting Common Stock to
be issued by Espotting as a result of such conversion will be 7,596,836. Section
4.4 of the Espotting Disclosure Schedule sets forth a summary of the terms of
all convertible debentures, notes and all other debt and security instruments to
which Espotting has become a party since June 17, 2003. Except as set forth in
Section 4.4 in the Espotting Disclosure Schedule, Espotting has not agreed to
register any securities of Espotting or of any of the Espotting Subsidiaries
under the Securities Act or under any applicable securities law or granted
registration rights to any person or entity (other than agreements with respect
to registration rights that are no longer in effect as of the date of this
Agreement); complete and correct copies of all such agreements have previously
been provided to FindWhat.
4.5 Conflicts; Consents and Approvals. Except as set forth in Section 4.5 in the
Espotting Disclosure Schedule, neither the execution and delivery of this
Agreement by Espotting, nor the consummation of the transactions contemplated
hereby or thereby will:
(a) conflict with, or result in a breach of any provision of, the
Espotting Certificate or the Espotting Bylaws or the Espotting Subsidiary
Governing Documents;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event that, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or entitle any
party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate, modify or call a default under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the properties
or assets of Espotting or any of the Espotting Subsidiaries under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, contract, undertaking, agreement, lease or other instrument or
obligation to which Espotting or any of the Espotting Subsidiaries is a party,
including without limitation any Contract;
(c) violate any (i) order, writ, injunction, decree, ruling,
assessment, arbitration, or award of any Governmental Authority or arbitrator
and any Contract with any Governmental Authority pertaining to compliance with
any law; or (ii) Applicable Law relating to Espotting or any of the Espotting
Subsidiaries or any of their respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by Espotting or any of its affiliates with, any third
party or any Governmental Authority, other than (i) approval of the Merger and
the transactions contemplated hereby by Espotting Stockholders, (ii)
registrations or other actions required under federal and state securities laws
as are contemplated by this Agreement, (iii) the filing of notification and
report forms under the HSR Act and the expiration or termination of any
applicable waiting period thereunder, and (iv)
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consents or approvals of any Governmental Authority set forth in Section 4.5 in
the Espotting Disclosure Schedule; except, in the case of clause (b), as set
forth in Section 4.5 in the Espotting Disclosure Schedule or which would not be
material to the business and operations of Espotting or any Key Espotting
Subsidiary, and in the case of clauses (c) and (d) for any of the foregoing that
would not, individually or in the aggregate, have a Material Adverse Effect on
Espotting or any Key Espotting Subsidiary.
4.6 Brokerage and Finders' Fees. Except as set forth in Section 4.6 in the
Espotting Disclosure Schedule, neither Espotting nor any stockholder, director,
officer or employee thereof, has incurred or will incur on behalf of Espotting
or any of its affiliates, any brokerage, finders' or similar fee in connection
with the transactions contemplated by this Agreement.
4.7 Registration Statement; Proxy Statement. None of the information provided or
to be provided in writing by Espotting for inclusion or incorporation by
reference in the Registration Statement at the time it becomes effective or, in
the case of the Proxy Statement, at the date of mailing and at the date of the
FindWhat Stockholders Meeting, will contain any untrue statement of any material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representation or warranty
is made with respect to statements made or incorporated by reference therein
based on information provided by FindWhat specifically for inclusion or
incorporation by reference therein.
4.8 Espotting Financial Statements.
(a) Except as set forth in Section 4.8(a) in the Espotting Disclosure
Schedule, from its date of incorporation Espotting and the Espotting
Subsidiaries have, in all material respects, maintained their minute books,
stock books, stock ledgers, quota registers and other local equivalents in
accordance with Applicable Law and sound business practices. The minute books of
Espotting and the Espotting Subsidiaries contain accurate and complete records
of all proceedings, consents and meetings held of, and corporate action taken
by, their stockholders, the boards of directors, and committees of the boards of
directors, and other governing bodies, as applicable, and no meeting of any such
stockholders, board of directors, committee or other governing body has been
held for which minutes have not been prepared and are not contained in such
minute books. None of the Espotting Subsidiaries has taken any actions or
engaged in any activities that required a shareholder or quotaholder resolution
with respect to such Espotting Subsidiary approving the same under relevant
local law. From April 1, 2003 Espotting and the Espotting Subsidiaries have, in
all material respects, maintained their books of account in accordance with
Applicable Law and sound business practices and have maintained an adequate
system of internal controls. Such books of account of Espotting and the
Espotting Subsidiaries are complete and correct in all material respects, and
fairly and accurately reflect the income, expenses, assets and liabilities of
Espotting and the Espotting Subsidiaries, including the nature thereof and the
transactions giving rise thereto, and provide a fair and accurate basis for the
preparation of the Espotting Financial Statements. The signatures appearing on
all documents contained in such books of account are the true signatures of the
persons purporting to have signed the same, and copies thereof have been
provided to FindWhat.
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(b) Each of the Espotting Audited Consolidated Financial Statements
were prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis throughout the periods indicated and
fairly present the financial condition and results of operations of Espotting
and the Espotting Subsidiaries as of the dates thereof and for the periods
indicated therein. The Espotting Audited Consolidated Financial Statements are
attached on Schedule 4.8(b). For purposes of this Agreement, the term "Espotting
Audited Consolidated Financial Statements" means (i) the consolidated audited
balance sheets of Espotting and the Espotting Subsidiaries for the fiscal years
ending as of March 31, 2001, 2002, and 2003, and the related audited statements
of income, expenses, retained earnings and cash flow, and changes in
stockholders' equity, (ii) the consolidated audited balance sheet and statement
of operations for the nine months ending December 31, 2003.
(c) Except as set forth in Section 4.8(c) in the Espotting Disclosure
Schedule (i) none of the Espotting Subsidiaries suffers from capital impairment
or local law equivalent and none of the Espotting Subsidiaries has any liability
for any fees, penalties or fines resulting from its capital impairment, (ii) all
of the Espotting Subsidiaries have, or will have prior to the Effective Time,
taken such steps to cure their capital impairment or made such filings or
notices to the relevant Governmental Authorities as required under local law,
and (iii) none of the Espotting Subsidiaries will require a capital infusion
under Applicable Law prior to the Effective Time with respect to their capital
impairment.
4.9 Compliance with Law. Except as set forth in Section 4.9 in the Espotting
Disclosure Schedule, Espotting and each of the Espotting Subsidiaries are in
compliance, in all material respects, and at all times since January 1, 2002
have been in compliance, in all material respects, with all Applicable Laws
relating to Espotting, the Espotting Subsidiaries or their respective businesses
or properties, except where the failure to be in compliance with such Applicable
Laws (individually or in the aggregate) would not reasonably be expected to have
a Material Adverse Effect on Espotting or any Key Espotting Subsidiary or where
such noncompliance has been cured and is reasonably expected to have no material
impact on the future business or operations of Espotting or any Key Espotting
Subsidiary. Except as disclosed in Section 4.9 in the Espotting Disclosure
Schedule, no investigation or review by any Governmental Authority with respect
to Espotting or any of the Espotting Subsidiaries is pending, or, to the
knowledge of Espotting, threatened, nor has any Governmental Authority indicated
in writing an intention to conduct the same, other than those the outcome of
which would not reasonably be expected to have a Material Adverse Effect on
Espotting or any Key Espotting Subsidiary.
4.10 Litigation. Section 4.10 in the Espotting Disclosure Schedule sets forth
each instance in which Espotting or an Espotting Subsidiary is subject to an
Action pending, or to the knowledge of Espotting, threatened against Espotting
or an Espotting Subsidiary. Since January 1, 2002, neither Espotting nor any of
the Espotting Subsidiaries has been subject to any order, writ, injunction or
decree relating to its method of doing business or its relationship with past,
existing or future users or purchasers of any goods or services.
4.11 No Material Adverse Change. Except as set forth in Section 4.11 in the
Espotting Disclosure Schedule, since January 1, 2002, there has been no material
adverse change in the assets, liabilities, results of operations, business
prospects, or financial condition of Espotting or
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any Key Espotting Subsidiary or any event, occurrence or development that would
reasonably be expected to have a Material Adverse Effect on Espotting or any Key
Espotting Subsidiary.
4.12 Taxes.
(a) Except as set forth in Section 4.12(a) in the Espotting Disclosure
Schedule, and except as would not have a Material Adverse Effect on Espotting or
any Key Espotting Subsidiary, Espotting and the Espotting Subsidiaries have
timely filed all Tax Returns and reports (including, but not limited to, those
filed on a consolidated, combined or unitary basis) required to have been filed
by Espotting or the Espotting Subsidiaries prior to the date hereof. All such
Tax Returns and reports are true and correct (except for such inaccuracies which
are individually, and in the aggregate, not material), and Espotting and the
Espotting Subsidiaries have within the time and manner prescribed by Applicable
Law paid or, prior to the Effective Time, will pay all Taxes, interest and
penalties required to be paid in respect of the periods covered by such returns
or reports or otherwise due to any federal, state, foreign, local or other
taxing authority. Except as disclosed in Section 4.12(a) in the Espotting
Disclosure Schedule, neither Espotting nor any of the Espotting Subsidiaries
have any liability for Taxes that is materially in excess of the amount reserved
on its March 31, 2003 unaudited balance sheet, or any more recent balance sheet.
Neither Espotting nor any Espotting Subsidiary has requested or filed any
document having the effect of causing any extension of time within which to file
any returns in respect of any fiscal year which have not since been filed.
Neither Espotting nor any of the Espotting Subsidiaries has received notice of
any deficiencies for any material Tax from any taxing authority, against
Espotting or any of the Espotting Subsidiaries. Except as set forth in Section
4.12(a) in the Espotting Disclosure Schedule, neither Espotting nor any of the
Espotting Subsidiaries is the subject of any currently ongoing Tax audit. As of
the date of this Agreement, there are no pending requests for waivers of the
time to assess any material Tax, other than those made in the ordinary course
and for which payment has been made. Neither Espotting nor any of the Espotting
Subsidiaries has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency. There
are no liens with respect to Taxes upon any of the properties or assets, real or
personal, tangible or intangible of Espotting or any of the Espotting
Subsidiaries (other than liens for Taxes not yet due). Except as set forth in
Section 4.12(a) in the Espotting Disclosure Schedule, no claim has ever been
made in writing by a Governmental Authority in a jurisdiction where none of
Espotting or the Espotting Subsidiaries files Tax Returns that Espotting or any
of the Espotting Subsidiaries is or may be subject to taxation by that
jurisdiction.
(b) Except as set forth in Section 4.12(b) in the Espotting Disclosure
Schedule, neither Espotting nor any of the Espotting Subsidiaries is obligated
by any contract, agreement or other arrangement to indemnify any other person
with respect to material Taxes. Neither Espotting nor any of the Espotting
Subsidiaries are now or have ever been a party to or bound by any agreement or
arrangement (whether or not written and including, without limitation, any
arrangement required or permitted by law) binding Espotting or any of the
Espotting Subsidiaries that (i) requires Espotting or any of the Espotting
Subsidiaries to make any Tax payment to or for the account of any other person,
(ii) affords any other person the benefit of any net operating loss, net capital
loss, investment Tax credit, foreign Tax credit, charitable deduction or any
other credit or Tax attribute which could reduce Taxes (including, without
limitation, deductions and credits related to alternative minimum Taxes) of
Espotting or any of the Espotting Subsidiaries,
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or (iii) requires or permits the transfer or assignment of income, revenues,
receipts or gains to Espotting or any of the Espotting Subsidiaries, from any
other person, in each case other than with respect to each other.
(c) Except as set forth in Section 4.12(c) of the Espotting Disclosure
Schedule, Espotting and the Espotting Subsidiaries have withheld and paid over
all material Taxes required to have been withheld and paid over in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
(d) Neither Espotting nor any of the Espotting Subsidiaries has agreed
to or is required to make any adjustments pursuant to Sections 263A or 481(a) of
the Code or any similar provision of state, local or foreign law by reason of a
change in accounting method initiated by Espotting or any of the Espotting
Subsidiaries or has any knowledge that the Internal Revenue Service has proposed
any such adjustment or change in accounting method, or has any application
pending with any Governmental Authority requesting permission for any changes in
accounting methods that relate to the business or operations of Espotting or any
of the Espotting Subsidiaries.
(e) Neither Espotting nor any of the Espotting Subsidiaries is subject
to any private letter ruling of the Internal Revenue Service or comparable
ruling of other Governmental Authorities.
(f) Neither Espotting nor any of the Espotting Subsidiaries is or has
been, a United States real property holding corporation (as defined in section
897(c)(2) of the United States Internal Revenue Code of 1986, as amended) during
the applicable period specified in section 897(c)(1)(A)(ii) of the Code.
(g) Neither Espotting nor any of the Espotting Subsidiaries is or has
been a party to any joint venture, partnership, or other agreement that would be
treated as a partnership for U.S. federal income tax purposes.
(h) Section 4.12(h) in the Espotting Disclosure Schedule lists (i) each
Espotting Subsidiary which has a Tax loss, (ii) with respect to such Espotting
Subsidiary, the validity of the deductions giving rise to such Tax loss for Tax
purposes, and (iii) the amount of each Tax loss in each jurisdiction.
(i) Except for the group for which Espotting is presently a member,
Espotting has never been a member of an affiliated group of corporations, within
the meaning of Section 1504 of the Code, other than as a common parent
corporation, and each of the Espotting Subsidiaries has never been a member of
an affiliated group of corporations, within the meaning of Section 1504 of the
Code (or any similar provision of state, local or foreign law), except where
Espotting was the common parent corporation of such affiliated group.
(j) Neither Espotting nor any Espotting Subsidiary has any liability
for the Taxes of any person other than any of Espotting or any Espotting
Subsidiary, under Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign law), as a transferee or successor, by contract or
otherwise.
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(k) All material elections with respect to Taxes affecting Espotting or
any Espotting Subsidiary as of the date of this Agreement are set forth in
Section 4.12(k) in the Espotting Disclosure Schedule.
(l) Neither Espotting nor any Espotting Subsidiary has any excess loss
account (as defined in Treasury Regulation Section 1.1502-19 or any similar
provision of state, local or foreign law) with respect to the stock of any
Espotting Subsidiary.
(m) Neither Espotting nor any Espotting Subsidiary has participated in
an international boycott as defined in Section 999 of the Code (or any similar
provision of state, local or foreign law).
(n) Espotting and each Espotting Subsidiary is in compliance with the
terms and conditions of any applicable Tax exemptions, Tax agreements or Tax
orders of any government to which it may be subject or which it may have
claimed, and the Merger and the other transactions contemplated by this
Agreement will not have any adverse effect on such compliance.
4.13 Intellectual Property.
(a) Set forth in Section 4.13(a) in the Espotting Disclosure Schedule
is an accurate and complete list of (i) all material foreign and domestic
patents, patent applications, invention disclosures, trademarks, service marks,
trade names, internet domain names (and any registrations or applications for
registration for any of the foregoing trademarks, service marks, trade names and
internet domain names) and all material copyright applications and registrations
and all other material Intellectual Property rights owned or used by Espotting
or any of the Espotting Subsidiaries and (ii) all agreements to which Espotting
or any of the Espotting Subsidiaries is a party which concern any of their
material Intellectual Property. Other than the Intellectual Property set forth
in Section 4.13(a) in the Espotting Disclosure Schedule (the "Espotting
Intellectual Property"), no name, material internet domain name, know-how,
patent, invention, trade secret, proprietary right, computer software,
trademark, service ▇▇▇▇, trade name, logo, copyright, franchise, license,
sublicense, or other such right is necessary for the operation of the business
of Espotting and the Espotting Subsidiaries in substantially the same manner as
such business is presently conducted. Except as set forth in Section 4.13(a) in
the Espotting Disclosure Schedule (i) Espotting or one of the Espotting
Subsidiaries owns, free and clear of any Encumbrances, including without
limitation the moral rights of any third party (including without limitation any
Espotting Employees or Espotting Consultants (as defined in Section 4.17(b)), or
has sufficient rights to, the Espotting Intellectual Property; (ii) no written
claim of invalidity or ownership with respect to the Espotting Intellectual
Property has been made by a third party and such Espotting Intellectual Property
is not the subject of any pending or, to the knowledge of Espotting, threatened
Action; (iii) no person or entity has asserted in writing that, with respect to
the Espotting Intellectual Property, Espotting or an Espotting Subsidiary or
licensee of Espotting is infringing or has infringed any domestic or foreign
patent, trademark, service ▇▇▇▇, trade name, or copyright or design right, or
has misappropriated or improperly used or disclosed any trade secret,
confidential information or know-how; (iv) all fees, annuities, royalties,
honoraria and other payments which are due from Espotting or one of the
Espotting Subsidiaries on or before the date of this Agreement for any of the
Espotting
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Intellectual Property and agreements related to the Espotting Intellectual
Property have been paid; (v) to the knowledge of Espotting, except as limited by
the terms of any license relating thereto, the making, using, selling,
manufacturing, marketing, licensing, reproduction, distribution, disposal,
modification, display, transmission or publishing of any process, machine,
manufacture, composition of matter, or material related to any part of the
Espotting Intellectual Property, does not and will not infringe in any material
respect any domestic or foreign patent, trademark, service ▇▇▇▇, trade name,
copyright, moral right or other intellectual property right of any third party,
and does not and will not involve the misappropriation or improper use or
disclosure of any trade secrets, confidential information or know-how of any
third party; (vi) to the knowledge of Espotting, no unexpired foreign or
domestic patents or patent applications exist that are adverse to the material
interests of Espotting and the Espotting Subsidiaries; (vii) to the knowledge of
Espotting there exists no (A) prior act that would void or invalidate any of the
Espotting Intellectual Property or (B) conduct or use by Espotting or any of the
Espotting Subsidiaries or any third party that would void or invalidate any of
the Espotting Intellectual Property; and (viii) the execution, delivery and
performance of this Agreement by Espotting, and the consummation of the
transactions contemplated hereby, will not breach, violate or conflict with any
instrument or agreement governing or contained within any of the Espotting
Intellectual Property, will not cause the forfeiture or termination or give rise
to a right of forfeiture or termination of any of the Espotting Intellectual
Property or in any way impair the right of Espotting or any of the Espotting
Subsidiaries, subject to Section 4.13(a)(v), to make, use, sell, license or
dispose of, distribute, modify, display or transmit or to bring any action for
the infringement of, any Espotting Intellectual Property.
(b) Espotting and the Espotting Subsidiaries have taken reasonable and
appropriate steps to safeguard and maintain the secrecy and confidentiality of
all material trade secrets, and to the extent required by Applicable Law,
material patent applications and their related inventions prior to the issuance
of a patent registration contained in the Espotting Intellectual Property
(including entering into appropriate confidentiality, nondisclosure and
noncompetition agreements with all appropriate officers, directors, employees
and third-party consultants of Espotting and the Espotting Subsidiaries).
Espotting has taken reasonable and appropriate steps to safeguard and maintain
ownership of all material trade secrets, copyrights and patents contained in the
Espotting Intellectual Property which it owns (including entering into
appropriate agreements with all officers, directors, employees and third-party
consultants of Espotting as necessary to safeguard, maintain and vest ownership
of such rights in Espotting).
4.14 Title to and Condition of Properties. Except as set forth in Section 4.14
in the Espotting Disclosure Schedule, Espotting or one of the Espotting
Subsidiaries owns or has the right to use under valid leases, subleases and
licenses all real property, plants, machinery and equipment necessary for the
conduct of the business of Espotting and the Espotting Subsidiaries as presently
conducted, except where the failure to own or hold such property, plants,
machinery and equipment would not have a Material Adverse Effect on Espotting or
any of the Key Espotting Subsidiaries.
4.15 Employee Benefit Plans.
(a) As used in this Agreement, the following terms have the meanings
given below:
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"Espotting Controlled Group Liability" means any and all liabilities
(i) under Title IV of ERISA, (ii) under section 302 of ERISA, (iii) under
sections 412 and 4971 of the Code, (iv) resulting from a violation of the
continuation coverage requirements of section 601 et seq. of ERISA and section
4980B of the Code or the group health plan requirements of Section 701 et seq.
of ERISA, and (v) under corresponding or similar provisions of foreign laws or
regulations, in each case other than pursuant to the Espotting Plans.
"Espotting Employee" means a person who is, as of the Effective Time,
an active or inactive employee of Espotting or any of its subsidiaries.
"Espotting Plans" means all employee benefit plans, programs and other
arrangements providing benefits to any current or former employee, officer,
director or consultant (or any beneficiary or dependent thereof) in respect of
services provided to Espotting or to any of the Espotting Subsidiaries, and
whether covering one person or more than one person, sponsored or maintained by
Espotting or any the Espotting Subsidiaries or to which Espotting or any of the
Espotting Subsidiaries contributes (or is obligated to contribute) or has any
liability. Without limiting the generality of the foregoing, the term "Espotting
Plans" includes each "employee pension benefit plan" as defined in Section 3(2)
of ERISA, each "employee welfare benefit plan" as defined in Section 3(1) of
ERISA, and each agreement, plan, program, fund, policy, contract or arrangement
(whether written or unwritten) providing compensation, benefits, pension,
retirement, superannuation, profit sharing, stock bonus, stock option, stock
purchase, phantom or stock equivalent, bonus, thirteenth month, incentive,
deferred compensation, hospitalization, medical, dental, vision, vacation, life
insurance, death benefit, sick pay, disability, severance, termination,
indemnity, redundancy pay, educational assistance, holiday pay, housing
assistance, moving expense reimbursement, fringe benefit or similar employee
benefits covering any employee, former employee, or the beneficiaries and
dependents of any employee or former employee, regardless of whether it is
mandated under local law, voluntary, private, funded, unfunded, financed by the
purchase of insurance, contributory or non-contributory.
(b) Section 4.15(b) in the Espotting Disclosure Schedule lists all
Espotting Plans. With respect to each Espotting Plan, Espotting has made
available to FindWhat a true, correct and complete copy of the following (where
applicable): (i) each writing constituting a part of such Espotting Plan,
including without limitation all plan documents (including amendments), benefit
schedules, trust agreements, and insurance contracts and other funding vehicles;
(ii) the three most recent Annual Reports (Form 5500 Series) and accompanying
schedules, if any; (iii) the current summary plan description, if any; (iv) the
most recent annual financial report, if any; and (v) the most recent
determination letter from the Internal Revenue Service, if any. Except as
specifically provided in the documents made available to FindWhat pursuant to
the preceding sentence and subject to the amendment to the EMI Plan specified in
Section 5.3(e) and the European Plan specified in Section 5.3(f), there are no
amendments to any Espotting Plan that have been adopted or approved nor has
Espotting or any of the Espotting Subsidiaries undertaken to make any such
amendments or to adopt or approve any new Espotting Plan.
(c) The Internal Revenue Service has issued a favorable determination
letter with respect to each Espotting Plan that is intended to be a Qualified
Plan and, to the knowledge of Espotting, there are no existing circumstances nor
any events that have occurred that could adversely affect the qualified status
of any Espotting Plan that is a Qualified Plan or the related trust.
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(d) All material contributions required to be made by Espotting or any
of the Espotting Subsidiaries or any of their respective ERISA Affiliates to any
Espotting Plan by Applicable Laws or by any plan document or other contractual
undertaking, and all material premiums due or payable with respect to insurance
policies funding any Plan, for any period through the date hereof have been
timely made or paid in full and through the Closing Date will be timely made or
paid in full.
(e) Except as set forth in Section 4.15(e) in the Espotting Disclosure
Schedule, each Espotting Plan has been maintained and administered in material
compliance with its terms and Applicable Law, including ERISA and the Code.
There is not now, and there are no existing circumstances that could reasonably
be expected to give rise to, any requirement for the posting of security with
respect to an Espotting Plan or the imposition of any lien on the assets of
Espotting or any of the Espotting Subsidiaries or any of their respective ERISA
Affiliates under ERISA or the Code with respect to an Espotting Plan. Any
Benefit Obligations under any Espotting Plan as of the Closing Date have been
appropriately reflected on the books and records of the Espotting Plan sponsor
in accordance with Applicable Law, past practices and generally accepted
accounting principles in the local jurisdiction. Except as set forth in Section
4.15(e) in the Espotting Disclosure Schedule, all Benefit Obligations under any
Espotting Plans as of the Closing Date will, to the extent required by
Applicable Law, be fully covered by cash, insurance contracts, or other assets
set aside for this purpose, the fair market value of which shall be no less than
the amount of such Benefit Obligations.
(f) No Espotting Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code. No Espotting Plan is a Multiemployer Plan or a
Multiple Employer Plan, nor has Espotting or any of the Espotting Subsidiaries
or any of their respective ERISA Affiliates, at any time within six years before
the date hereof, maintained, contributed to or been obligated to contribute to
any Multiemployer Plan or Multiple Employer Plan or any plan covered by Section
412 of the Code or Title IV of ERISA.
(g) There does not now exist, and there are no existing circumstances
that could reasonably be expected to result in any material Espotting Controlled
Group Liability that would be a liability of Espotting or any of the Espotting
Subsidiaries following the Closing. Without limiting the generality of the
foregoing, neither Espotting nor any of the Espotting Subsidiaries nor any of
their respective ERISA Affiliates has engaged in any transaction described in
Section 4069 or Section 4204 of ERISA.
(h) Except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA (or other Applicable Law) and
except as set forth in Section 4.15(h) in the Espotting Disclosure Schedule,
neither Espotting nor any of the Espotting Subsidiaries has any material
liability for life, health, medical or other welfare benefits to former
employees or beneficiaries or dependents thereof. To the knowledge of Espotting,
there has been no communication to employees of Espotting or the Espotting
Subsidiaries that would reasonably be expected or interpreted to promise or
guarantee such employees retiree health or life insurance benefits or other
retiree death benefits.
(i) Except as disclosed in Section 4.15(i) in the Espotting Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions
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contemplated hereby will result in, cause the accelerated vesting or delivery
of, or increase the amount or value of, any payment or benefit to any employee,
officer, director or consultant of Espotting or any of the Espotting
Subsidiaries. Without limiting the generality of the foregoing, except as set
forth in Section 4.15(i) in the Espotting Disclosure Schedule, no amount paid or
payable by Espotting or any of the Espotting Subsidiaries in connection with the
transactions contemplated hereby, either solely as a result thereof or as a
result of such transactions in conjunction with any other events, will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(j) Except as disclosed in Section 4.15(j) in the Espotting Disclosure
Schedule, there are no pending or to the knowledge of Espotting threatened
claims (other than claims for benefits in the ordinary course), lawsuits or
arbitrations that have been asserted or instituted against the Espotting Plans,
any fiduciaries thereof with respect to their duties to the Espotting Plans or
the assets of any of the trusts under any of the Espotting Plans that would
reasonably be expected to result in any material liability of Espotting or any
of the Espotting Subsidiaries to the Pension Benefit Guaranty Corporation, the
Department of Treasury, the Department of Labor or any Multiemployer Plan.
(k) Section 4.15(k) in the Espotting Disclosure Schedule sets forth the
names of all directors and officers of Espotting or any of the Espotting
Subsidiaries, and the total current salary, bonus eligibility, and fringe
benefits and perquisites (to the extent such fringe benefits or perquisites
would have to be disclosed under Rule 402(b) of Regulation S-K assuming each
such person was a named executive officer) each will receive in the Espotting
fiscal year ending March 31, 2004. Section 4.15(k) in the Espotting Disclosure
Schedule also lists and describes the current compensation of any other employee
of Espotting or any of the Espotting Subsidiaries whose total current salary and
maximum bonus opportunity exceeds $150,000 annually. Section 4.15(k) in the
Espotting Disclosure Schedule also sets forth the liability of Espotting and the
Espotting Subsidiaries for deferred compensation under any deferred compensation
plan, excess plan or similar arrangement (other than pursuant to Qualified
Plans) to each such director, officer and employee and to all other employees as
a group, together with the value, as of the date specified thereon, of the
assets (if any) set aside in any grantor trust(s) to fund such liabilities.
Except as disclosed in Section 4.15(k) in the Espotting Disclosure Schedule,
there are no other material forms of compensation paid to any such director,
officer or employee of Espotting. Except as set forth in Section 4.15(k) in the
Espotting Disclosure Schedule, no officer, director, or employee of Espotting or
any other affiliate of Espotting, or any immediate family member of any of the
foregoing, provides or causes to be provided to Espotting any material assets,
services or facilities and Espotting does not provide or cause to be provided to
any such officer, director, employee or affiliate, or any immediate family
member of any of the foregoing, any material assets, services or facilities.
(l) Except as set forth in Section 4.15(l) of the Espotting Disclosure
Schedule, no Espotting Plan is subject to the laws of any jurisdiction outside
of the United States.
(m) Except as set forth in Section 4.15(m) of the Espotting Disclosure
Schedule, no Espotting Employee is a resident of the United States.
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4.16 Contracts. Section 4.16 in the Espotting Disclosure Schedule lists as of
the date hereof, and Espotting has provided FindWhat with complete and accurate
copies of, each Contract, other than Espotting Plans, to which Espotting or any
of the Espotting Subsidiaries is a party and which falls within any of the
following categories:
(a) Contracts not entered into in the ordinary course of Espotting's
business and that involve expenditures or receipts by Espotting or the Espotting
Subsidiaries of US$20,000 per month (or the equivalent in foreign currency);
(b) Joint venture, partnership, strategic alliances and other Contracts
(however named) involving a sharing of profits, losses, costs or liabilities;
(c) portal and like agreements which involve payments of more than
US$20,000 in any one month during the past 6 months (or the equivalent in
foreign currency);
(d) Contracts which are service contracts, (including without
limitation outsourcing agreements, application service provider agreements,
hosting agreements and data center management agreements) software license
agreements or equipment leases or which require the delivery of goods or
materials and which involve payments of more than US$20,000 in any one month
during the past 6 months (or the equivalent in foreign currency);
(e) Contracts containing covenants purporting to limit the freedom of
Espotting or the Espotting Subsidiaries to compete in any line of business or in
any geographic area or to hire any individual or group of individuals (including
without limitation any software license agreements that authorize or permit
Espotting or any Key Espotting Subsidiary to use the applicable software only in
particular business lines, languages or geographic areas);
(f) Contracts which after the Effective Time would have the effect of
limiting the freedom of FindWhat or its subsidiaries (other than Espotting and
the Espotting Subsidiaries) to compete in any line of business or in any
geographic area or to hire any individual or group of individuals;
(g) Contracts providing for the payments based on sales, revenue
sharing, purchases or profits, other than direct payments for goods or services
in excess of US$20,000 per month (or the equivalent in foreign currency);
(h) powers of attorney that are currently outstanding;
(i) Contracts entered into other than in the ordinary course of
business that contain or provide for an express undertaking to be responsible
for consequential damages;
(j) Contracts which contain minimum purchase conditions in excess of
US$100,000 (or the equivalent in foreign currency) or requirements or other
terms that restrict or limit the purchasing relationships of Espotting or its
affiliates, or any customer, licensee or lessee thereof;
(k) Contracts relating to any outstanding commitment for capital
expenditures in excess of US$250,000 (or the equivalent in foreign currency);
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(l) Contracts relating to the lease, sublease, occupancy, license,
installment or conditional sale affecting the ownership of, leasing of, title
to, use of, or any leasehold or other interest in, any real property or personal
property involving any annual expense or price in excess of US$100,000 (or the
equivalent in foreign currency) and not cancelable by Espotting or the Espotting
Subsidiaries (without premium or penalty) within one month;
(m) Contracts with any labor organization, union, employee
representative or group of employees;
(n) indentures, mortgages, promissory notes, loan agreements,
guarantees of borrowed money, letters of credit or other agreements, instruments
or commitments for the borrowing or the lending of money;
(o) Contracts providing for the creation of any Encumbrance upon any of
the assets of Espotting or the Espotting Subsidiaries;
(p) Contracts involving annual revenues to the business of Espotting or
the Espotting Subsidiaries in excess of 2.5% of Espotting's annual revenues
during any of their respective past two fiscal years;
(q) Contracts providing for "earn-outs", "savings guarantees",
"performance guarantees", or other contingent payments involving more than
US$100,000 per year or US$500,000 over the term of the Contract (or the
equivalent in foreign currency);
(r) Contracts with or for the benefit of any affiliate of Espotting or
immediate family member of any shareholder, director or officer thereof;
(s) Contracts involving payments by Espotting or the Espotting
Subsidiaries of more than US$20,000 in any one month during the past 6 months
(or the equivalent in foreign currency);
(t) to Espotting's knowledge, any Contracts that purport to limit the
ability of the directors, officers, agents or employees of Espotting or the
Espotting Subsidiaries to engage in or continue any conduct, activity or
practice relating to the business of Espotting or the Espotting Subsidiaries, or
assign to Espotting or the Espotting Subsidiaries any rights to any invention,
improvement or discovery;
(u) any cost-sharing, tax-sharing or transfer pricing agreements
between and among any of the Espotting Subsidiaries or any of the Espotting
Subsidiaries and any related or unrelated party; and
(v) each amendment, supplement and modification with respect to any of
the foregoing.
Except as set forth in Section 4.16 in the Espotting Disclosure
Schedule, all such Contracts and all other contracts that are individually
material to the business or operations of Espotting or the Espotting
Subsidiaries are valid and binding obligations of Espotting and, to the
knowledge of Espotting, the valid and binding obligation of each other party
thereto except such Contracts which if not so valid and binding would not have a
Material Adverse Effect on Espotting or any of the Key Espotting Subsidiaries..
Neither Espotting nor, to the knowledge of
-47-
Espotting, any other party thereto is in violation of or in default in respect
of, nor has there occurred an event or condition which with the passage of time
or giving of notice (or both) would constitute a default under or permit the
termination of, any such Contract or of any other Contract that is individually
material to the business or operations of Espotting except such violations or
defaults under or terminations which would not have a Material Adverse Effect on
Espotting or any Key Espotting Subsidiary. As of the date hereof, except as set
forth in Section 4.16 in the Espotting Disclosure Schedule, there are no
renegotiations of, attempts to renegotiate or outstanding rights to renegotiate
any material amounts paid or payable under such Contracts.
4.17 Labor Matters.
(a) Section 4.17(a) in the Espotting Disclosure Schedule sets forth an
accurate and complete list of each works council, union or other labor
organization which has to be notified or consulted or with which negotiations
need to be conducted in connection with the transaction contemplated by this
Agreement and each collective bargaining agreement which has any impact on the
terms and conditions of employment with respect to Espotting Employees. Where
required by Applicable Laws, Espotting or any of the Espotting Subsidiaries,
will have, prior to the Closing Date, properly and timely notified, or where
appropriate, consulted or negotiated with, the local works council, union, labor
board or relevant Governmental Authority concerning the transactions
contemplated by the Agreement.
(b) Except as set forth in Section 4.17(b) in the Espotting Disclosure
Schedule, neither Espotting nor any Espotting Subsidiary has any labor union
contracts, collective bargaining agreements or consulting agreements providing
for compensation of any individual in excess of $100,000 with any persons
employed by Espotting or any persons otherwise performing services primarily for
Espotting or any Espotting Subsidiary ("Espotting Consultants"). Espotting and
the Espotting Subsidiaries have furnished or made available to FindWhat complete
and correct copies of all such agreements, contracts, commitments and
understandings, whether written or oral (the "Espotting Employment and Labor
Agreements") covering the Espotting Employees or the Espotting Consultants.
Neither Espotting nor any of the Espotting Subsidiaries has materially breached
or otherwise materially failed to comply with any provisions of any Espotting
Employment or Labor Agreement, and, to the knowledge of Espotting or any
Espotting Subsidiary, there are no grievances outstanding thereunder. There is
no labor strike, dispute or stoppage pending or, to the knowledge of Espotting,
threatened against Espotting or any Espotting Subsidiary, and neither Espotting
nor any Espotting Subsidiary has experienced any labor strike, dispute or
stoppage or other material labor difficulty involving its employees. To the
knowledge of Espotting, no campaign or other attempt for recognition has been
made by any labor organization or employees with respect to employees of
Espotting or any of the Espotting Subsidiaries.
(c) Espotting and the Espotting Subsidiaries are in material compliance
with Applicable Law and their own policies respecting employment and employment
practices, terms and conditions of employment, wages and hours, equal
opportunity, equal pay, civil rights, labor relations, immigration, occupational
health and safety and payroll and wage taxes, and any foreign, federal or local
human rights act.
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(d) As of the date of this Agreement or, except as set forth in Section
4.17(d) in the Espotting Disclosure Schedule or as required by Applicable Laws,
(i) neither Espotting nor any of the Espotting Subsidiaries is a party to any
outstanding employment agreements or contracts with officers, managers and
directors (or foreign equivalent) or Espotting Employees that are not terminable
at will, or that provide for the payment of any bonus or commission; and (ii)
neither Espotting nor any of the Espotting Subsidiaries is a party to any
agreement, policy or practice that requires it to pay termination or severance
pay to salaried, non-exempt or hourly Espotting Employees.
4.18 Undisclosed Liabilities. Except (i) as and to the extent disclosed or
reserved against on the consolidated, unaudited balance sheet of Espotting as of
December 31, 2003, (ii) as incurred after the date thereof in the ordinary
course of business consistent with prior practice and not prohibited by this
Agreement or (iii) as set forth in Section 4.18 in the Espotting Disclosure
Schedule, to Espotting's knowledge, Espotting and the Espotting Subsidiaries do
not have any liabilities or obligations of any nature, whether absolute,
accrued, contingent, choate, inchoate or otherwise and whether due or to become
due.
4.19 Operation of Espotting's Business; Relationships.
(a) Since December 31, 2002, neither Espotting nor any Espotting
Subsidiaries has, except in the ordinary course of business consistent with past
practice, engaged in any transaction which, if done after execution of this
Agreement, would violate in any material respects Section 5.3(d) except as set
forth in Section 4.19(a) in the Espotting Disclosure Schedule.
(b) Except as set forth in Section 4.19(b) in the Espotting Disclosure
Schedule, since December 31, 2002, and as of the date of this Agreement, no
material customer of Espotting or any of the Key Espotting Subsidiaries has
indicated that it will stop or materially decrease purchasing materials,
products or services from Espotting or any of the Key Espotting Subsidiaries and
no material supplier of Espotting or any of the Key Espotting Subsidiaries has
indicated that it will stop or materially decrease the supply of materials,
products or services to Espotting or any of the Key Espotting Subsidiaries, in
each case, the effect of which would reasonably be expected to have a Material
Adverse Effect on Espotting or any Key Espotting Subsidiary.
4.20 Permits. Espotting and each of the Espotting Subsidiaries is in possession
of all franchises, grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, approvals and orders necessary in
each jurisdiction to own, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the "Espotting Permits"),
except where the failure to be in possession of such Espotting Permits would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Espotting or any Key Espotting Subsidiary, and there is no
Action pending or, to the knowledge of Espotting, threatened regarding any of
the Espotting Permits which, if successful, would reasonably be expected to have
a Material Adverse Effect on Espotting or any Key Espotting Subsidiary. Neither
Espotting nor any of the Key Espotting Subsidiaries is in conflict with, or in
default or violation of any of the Espotting Permits, except for any such
conflicts, defaults or violations
-49-
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on Espotting or any Key Espotting Subsidiary.
4.21 Environmental Matters. Except for matters disclosed in Section 4.21 in the
Espotting Disclosure Schedule, (a) the properties, operations and activities of
Espotting and the Espotting Subsidiaries are in compliance in all material
respects with all applicable Environmental Laws and all past noncompliance of
Espotting or any Espotting Subsidiary with any Environmental Laws or
Environmental Permits has been resolved without any pending, ongoing or future
obligation, cost or liability; (b) Espotting and the Espotting Subsidiaries and
the properties and operations of Espotting and the Espotting Subsidiaries are
not subject to any existing, pending or, to the knowledge of Espotting,
threatened Action by or before any court or Governmental Authority under any
Environmental Law; (c) there has been no release, discharge or emission of any
Hazardous Material into the environment in violation of applicable Environmental
Law by Espotting or the Espotting Subsidiaries or in connection with their
currently leased or formerly leased properties or operations that would have a
Material Adverse Effect on Espotting or any Key Espotting Subsidiary and there
has been no release, discharge or emission of any Hazardous Material into the
environment in violation of applicable Environmental Law in connection with
their currently owned or formerly owned properties or operations; and (d) to the
knowledge of Espotting, there has been no material exposure in violation of
applicable Environmental Law of any person or property to any hazardous
substance, pollutant or contaminant in connection with the properties,
operations and activities of Espotting and the Espotting Subsidiaries that could
have a Material Adverse Effect on Espotting or any Key Espotting Subsidiary.
4.22 Board Recommendation; Required Vote. The board of directors of Espotting,
at a meeting duly called and held, has by majority vote of those directors
present and constituting a quorum of the directors then in office (i) determined
that this Agreement and the transactions contemplated hereby, including the
Merger, are fair to and in the best interests of the Espotting Stockholders,
(ii) resolved to recommend that the holders of the shares of Espotting Capital
Stock approve this Agreement and the transactions contemplated herein, including
the Merger (the "Espotting Board Recommendation"), and (iii) approved and
directed the appropriate officers of Espotting to take the actions set forth in
Section 5.3(d)(vii) and Section 5.3(e). The affirmative vote of holders of a
majority of the outstanding shares of Espotting Capital Stock to approve the
Merger, the consent of Beringea or a majority of the outstanding principal
amount of the Loan Notes and the affirmative vote of the holders of a majority
of the outstanding shares of Series A Preferred Stock of Espotting are the only
votes of the holders of any class or series of Espotting Capital Stock or third
parties necessary to adopt the Agreement and approve the transactions
contemplated hereby.
4.23 Takeover Laws. Neither Espotting nor any Espotting Subsidiary is subject to
any state or foreign takeover law or state or foreign law that purports to limit
or restrict business combinations or the ability to acquire or vote shares
regarding: (i) the execution of this Agreement and the Espotting Stockholder
Voting Agreement, (ii) the Merger and (iii) the transactions contemplated hereby
and by the Espotting Stockholder Voting Agreement.
4.24 Accounts Receivable. All accounts and notes receivable of Espotting and the
Espotting Subsidiaries have arisen in the ordinary course of business and the
accounts receivable reserve reflected in the unaudited balance sheet of
Espotting as of December 31, 2003 is as of such date
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adequate and established in accordance with generally accepted accounting
principles consistently applied, subject to the absence of notes. Since December
31, 2003, there has been no event or occurrence which would cause such accounts
receivable reserve to be inadequate, and which would reasonably be expected to
have a Material Adverse Effect on Espotting or any Key Espotting Subsidiary.
4.25 Insurance. Section 4.25 in the Espotting Disclosure Schedule lists all
insurance policies (including information on the premiums payable in connection
therewith and the amount of coverage provided thereunder) pursuant to which
Espotting and the Espotting Subsidiaries are presently insured and during each
of the past three calendar years has been insured against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. Espotting's and the Espotting Subsidiaries'
insurance policies are in all material respects in full force and effect in
accordance with their terms, all premiums to date have been paid in full, no
notice of cancellation has been received, and there is no existing default or
event which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. Such policies are in all material respects in
amounts which are customary, adequate and suitable in relation to the business,
assets and liabilities of Espotting and the Espotting Subsidiaries and all
premiums to date have been paid in full. Espotting or its covered Espotting
Subsidiary is a "named insured" or an "insured" under such insurance policies.
Espotting and the Espotting Subsidiaries have not been refused any insurance,
nor has the coverage of Espotting or any of the Espotting Subsidiaries been
limited, by any insurance carrier to which it has applied for insurance or with
which it has carried insurance during the past three years. Except as set forth
in Section 4.26 in the Espotting Disclosure Schedule, the policies of fire,
theft, liability and other insurance maintained with respect to the assets or
businesses of Espotting and the Espotting Subsidiaries provide adequate coverage
against loss and may be continued by the Surviving Corporation without
modification or premium increase after the Effective Time and for the duration
of their current terms which terms expire as set forth in Section 4.25 in the
Espotting Disclosure Schedule. Set forth in Section 4.25 in the Espotting
Disclosure Schedule is the amount of the annual premium currently paid by
Espotting for its directors' and officers' liability insurance.
4.26 Employment Agreements. As of the date hereof, Espotting has entered into
conditional employment agreements with Messrs. ▇▇▇▇▇▇ ▇▇▇▇▇, Seb ▇▇▇▇▇▇, and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, which will become effective at the Effective Time and copies of
which are set forth as Exhibits 4.26(a), (b) and (c), and has terminated all
conditional employment agreements that it previously entered into with the
individual listed on Section 4.26 of the Espotting Disclosure Schedule.
4.27 Opinion of Financial Advisor. Espotting has received the opinion of its
financial advisors, dated the date hereof, to the effect that, as of such date,
the Merger Consideration to be received by the holders of Espotting Capital
Stock is fair from a financial point of view.
4.28 Data Protection Matters. Except for matters disclosed in Section 4.28 in
the Espotting Disclosure Schedule:
(a) the policies, operations and activities of Espotting and the
Espotting Subsidiaries are in compliance in all material respects with all
applicable Data Protection Laws and all past
-51-
noncompliance of Espotting or any Espotting Subsidiary with any Data Protection
Laws has been resolved without any pending, ongoing or future obligation, cost
or liability.
(b) Espotting and the Espotting Subsidiaries and the policies,
operations and activities of Espotting and the Espotting Subsidiaries are not
subject to any existing, pending or, to the knowledge of Espotting, threatened
Action by or before any court or Governmental Authority under any Data
Protection Law.
(c) Espotting and the Espotting Subsidiaries are permitted under all
applicable Data Protection Laws and written or oral contracts, agreements,
commitments, policies, or other obligations or representations, to transfer and
disclose any and all Personal Data (as defined below) to FindWhat and Subcorp as
necessary or relevant in connection with the execution and delivery of this
Agreement, or the consummation of the transactions contemplated hereby, without
obtaining any further consent or approval (whether explicit, unambiguous,
express or implied) from an individual, labor organization, Governmental
Authority, or other third party, without amending any filings or registrations
with Governmental Authorities, and without taking any other steps prior to such
disclosure, except that this Section 4.28(c) shall not apply to international
transfers of Personal Data by Espotting or any Espotting Subsidiary to FindWhat
and Subcorp unless FindWhat and Subcorp publicly declare compliance with the
Safe Harbor Privacy Principles, or otherwise provide "adequate safeguards," as
defined by the European Commission, for Personal Data.
(d) The term "Data Protection Laws" means all federal, state, local or
foreign laws, statutes, orders, rules, regulations, policies or guidelines, or
judgments, decisions or orders entered by any Governmental Authority, relating
to Personal Data. "Personal Data" means any and all information that Espotting
or the Espotting Subsidiaries maintain or otherwise process that relates to an
identified or identifiable natural person, including employees, stockholders,
customers, customers of customers, vendors, contractors, and other business
partners of Espotting or the Espotting Subsidiaries, and including any natural
persons who are employees of or contractors to any of the foregoing.
4.29 Foreign Corrupt Practices Act.
(a) Espotting and the Espotting Subsidiaries have not, to secure any
improper advantage in order to obtain or retain business, directly or indirectly
offered, paid, given, or promised to pay, or authorized the payment of, any
money, offer, gift, or other thing of value, to:
(i) an officer or employee of any Governmental Authority, or any
person acting in an official capacity for or on behalf of any Governmental
Authority;
(ii) any political party or official thereof;
(iii) any candidate for political or political party office; or
(iv) any other individual or entity;
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while knowing or having reason to believe that all or any portion of
such money or thing of value would be offered, given, or promised,
directly or indirectly, to any person or entity in items (i) - (iii).
(b) Except as set forth in Section 4.29(b) of the Espotting Disclosure
Schedule, Espotting and the Espotting Subsidiaries have made all payments to
third parties by check mailed to such third parties' principal place of business
or by wire transfer to a bank located in the same jurisdiction as such party's
principal place of business.
(c) Each transaction is properly and accurately recorded on the books
and records of Espotting and the Espotting Subsidiaries, and each document on
which entries in Espotting's and the Espotting Subsidiaries' books and records
are based is complete and accurate in all material respects. Espotting and the
Espotting Subsidiaries maintain a system of internal accounting controls
adequate to insure that they maintain no off-the-books accounts and that their
assets are used only in accordance with their respective management's
directives.
(d) No product sold or service provided by Espotting or the Espotting
Subsidiaries has been, directly or indirectly, sold to or performed on behalf of
Cuba, Iraq, Iran, Libya, or Sudan.
4.30 EMI Option Agreements. In respect of each option granted by Espotting under
the EMI Plan, Espotting and the option holder are parties to an option agreement
providing that (i) the board of directors of Espotting has absolute discretion
to accelerate the vesting of the option upon the option holder becoming entitled
to receive an exchange of options in the event of a transaction such as the
Merger, (ii) the option holder will accept and pay for any liability for UK
secondary Class 1 National Insurance Contributions ("Employer's NICs") which may
arise on the exercise, assignment, release or cancellation of the option, (iii)
Espotting may collect the Employer's NICs from salary payments due to the option
holder, directly from the option holder or by selling some of the shares which
the option holder is entitled to receive on the exercise of the option, and (iv)
the option holder will provide any additional consents or formal elections
required to accomplish the foregoing.
ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree that:
5.1 Mutual Covenants.
(a) Reasonable Efforts; Notification. Each of FindWhat and Espotting
shall cooperate with the other party in connection with any filing (including,
with respect to the party making a filing, providing copies of all such
documents to the non-filing party and its advisors prior to filing and, if
requested, to accept all reasonable additions, deletions or changes suggested in
connection therewith) and in connection with resolving any investigation or
other inquiry of any Governmental Authority under any Antitrust Laws (as defined
in Section 5.1(a)(ii)) with respect to any such filing or any such transaction.
If applicable, the parties shall make or cause to be made the filings required
of such party or any of its subsidiaries or affiliates under the ▇▇▇ ▇▇▇,
-▇▇-
with respect to the transactions contemplated hereby as promptly as practicable
and in any event within ten business days after the date of this Agreement, and
comply at the earliest practicable date with any request under the HSR Act for
additional information, documents, or other materials received by such party or
any of its subsidiaries from the Federal Trade Commission or the Department of
Justice or any other Governmental Authority in respect of such filings or such
transactions.
(i) Each party shall use all reasonable efforts to furnish to
each other all information required for any application or other filing to be
made pursuant to any Applicable Law in connection with the Merger and the other
transactions contemplated by this Agreement. Each party shall promptly inform
the other party of any communication with, and any proposed understanding,
undertaking, or agreement with, any Governmental Authority regarding any such
filings or any such transaction. Neither party shall independently participate
in any meeting with any Governmental Authority in respect of any such filings,
investigation, or other inquiry without giving the other party prior notice of
the meeting and, to the extent permitted by such Governmental Authority, the
opportunity to attend and/or participate. The parties hereto will consult and
cooperate with one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under any Antitrust Laws.
(ii) Each of FindWhat and Espotting shall use all reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Authority with respect to the transactions contemplated by this
Agreement under any Antitrust Laws and any other federal, state or foreign
statues, rules, regulations, orders, decrees, administrative or judicial
doctrines or other laws that are designed to prohibit, restrict or regulate
actions, including transactions, acquisitions and mergers, having the purpose or
effect of creating or strengthening a dominant position, monopolization,
lessening of competition or restraint of trade (collectively, "Antitrust Laws").
In connection therewith, if any administrative or judicial action or proceeding
is instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of
FindWhat and Espotting shall cooperate and use all reasonable efforts vigorously
to contest and resist any such action or proceeding, including any legislative,
administrative or judicial action, and to have vacated, lifted, reversed, or
overturned any decree, judgment, injunction or other order whether temporary,
preliminary or permanent (each an "Order"), that is in effect and that
prohibits, prevents, or restricts consummation of the Merger or any other
transactions contemplated by this Agreement, including, without limitation, by
vigorously pursuing all available avenues of administrative and judicial appeal
and all available legislative action, unless by mutual agreement FindWhat and
Espotting decide that litigation is not in their respective best interests.
Notwithstanding the foregoing or any other provision of this Agreement, nothing
in this Section 5.1(a) shall limit a party's right to terminate this Agreement
pursuant to Section 7.1, so long as such party has up to then complied in all
material respects with its obligations under this Section 5.1(a). Each of
FindWhat and Espotting shall use all reasonable efforts to take such action as
may be required to cause the expiration of the notice periods under any
Antitrust Laws with respect to such transactions as promptly as possible after
the execution of this Agreement.
(iii) Each of the parties agrees to use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other
-54-
parties in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Merger and the
other transactions contemplated by this Agreement, including (A) the obtaining
of all other necessary actions or nonactions, waivers, consents, licenses,
permits, authorizations, orders and approvals from Governmental Authorities and
the making of all other necessary registrations and filings (including other
filings with Governmental Authorities, if any), (B) the obtaining of all
consents, approvals or waivers from third parties related to or required in
connection with the Merger that are necessary to consummate the Merger and the
transactions contemplated by this Agreement or required to prevent a Material
Adverse Effect on FindWhat or Espotting from occurring prior to or after the
Effective Time, (C) the preparation of the Proxy Statement, the Prospectus and
the Registration Statement, and (D) the execution and delivery of any additional
instruments necessary to consummate the transaction contemplated by, and to
fully carry out the purposes of, this Agreement.
(iv) Notwithstanding anything to the contrary in this Agreement,
(A) neither FindWhat nor any of its subsidiaries shall be required to hold
separate (including by trust or otherwise) or to divest any of their respective
businesses or assets, or to take or agree to take any action or agree to any
limitation that could reasonably be expected to have a Material Adverse Effect
on FindWhat combined with the Surviving Corporation after the Effective Time,
(B) prior to the Effective Time, neither Espotting nor any of the Espotting
Subsidiaries shall be required to hold separate (including by trust or
otherwise) or to divest any of their respective businesses or assets, or to take
or agree to take any other action or agree to any limitation that could
reasonably be expected to have a Material Adverse Effect on Espotting or any
Espotting Subsidiary, (C) neither party nor their respective subsidiaries shall
be required to take any action that would reasonably be expected to
substantially impair the benefits expected, as of the date hereof, to be
realized from consummation of the Merger and (D) neither party shall be required
to waive any of the conditions to the Merger set forth in Article VI as they
apply to such party.
(b) Public Announcements. FindWhat and Espotting shall consult with
each other before issuing, and give each other the opportunity to review and
comment upon, any press release or public statements with respect to the
transactions contemplated by this Agreement, including the Merger. Espotting
shall not issue any press release or make any public statement without
FindWhat's prior written consent, except as may be required by Applicable Law or
court process.
(c) [Reserved]
(d) Access to Information; Confidentiality. Upon reasonable notice,
each party shall (and shall cause its subsidiaries to) afford to the officers,
employees, accountants, counsel, financial advisors and other representatives of
the other party reasonable access during normal business hours, during the
period prior to the Effective Time, to such of its properties, books, contracts,
commitments, records, all other information and data, officers and employees as
the other party may reasonably request and, during such period, such party shall
(and shall cause its subsidiaries to) furnish promptly to the other party (a) a
copy of each report, schedule, registration statement and other document filed,
published, announced or received by it during such period pursuant to the
requirements of Applicable Laws (other than documents which such party is not
permitted to disclose under Applicable Laws), and (b) consistent with its legal
obligations, all other
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information concerning it and its business, properties and personnel as such
other party may reasonably request; provided, however, that either party may
restrict the foregoing access to the extent that it reasonably concludes, after
consultation with outside counsel, that (i) any Applicable Law requires such
party or its subsidiaries to restrict access to any properties or information,
(ii) providing such access would result in the loss of the attorney-client
privilege, (iii) such document discusses the pricing or dollar value of the
transactions contemplated by this Agreement or (iv) the documents contain
competitively sensitive information, the sharing of which could constitute a
violation of any applicable Antitrust Laws. The parties shall hold any such
information in confidence to the extent required by, and in accordance with, the
provisions of the Reciprocal Nondisclosure Agreement dated as of January 22,
2003, between FindWhat and Espotting (as it may be amended from time to time,
the "Confidentiality Agreement") except as may be required by Applicable Law,
court process or by obligations pursuant to any listing agreement with any
national securities exchange or national securities quotation system. Each party
shall make all reasonable best efforts to minimize disruption to the business of
the other party and its subsidiaries which may result from the requests for data
and information hereunder. All requests for access and information shall be
coordinated through senior executives of the parties to be designated. Any
investigation by FindWhat or Espotting shall not affect the representations and
warranties of Espotting or FindWhat, as the case may be.
(e) Notices of Certain Events. Each party hereto shall promptly notify
the other parties orally and in writing of:
(i) the receipt by such party or any of such party's subsidiaries
of any notice or other communication from any person alleging that the consent
of such person is or may be required in connection with the transactions
contemplated by this Agreement;
(ii) subject to any applicable legal restrictions, the receipt by
such party or any of such party's subsidiaries of any notice or other
communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement;
(iii) such party's obtaining knowledge of any Actions commenced
or threatened against, relating to or involving or otherwise affecting any of
FindWhat, Subcorp or Espotting, as the case may be, or any of their respective
subsidiaries which relate to the consummation of the transactions contemplated
by this Agreement; and
(iv) such party's obtaining knowledge of the occurrence, or
failure to occur, of any event which occurrence or failure to occur will be
likely to cause the conditions set forth in Article VI not to be satisfied;
provided, however, that no such notification shall affect the representations,
warranties or obligations of the parties or the conditions to the obligations of
the parties hereunder, or limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
(f) Preparation of Registration Statement. FindWhat shall, as soon as
is reasonably practicable following the date of this Agreement, prepare and file
with the Commission the Registration Statement, in which the Proxy Statement
will be included as a prospectus. The Registration Statement shall register the
issuance of FindWhat Common Shares in connection with the Merger. Subject to
Section 5.1, FindWhat shall use its reasonable best efforts to: (i)
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have the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing, (ii) cause the Proxy Statement to be
mailed to the FindWhat Stockholders as promptly as practicable after the
Registration Statement is declared effective under the Securities Act, and (iii)
maintain the effectiveness of the Registration Statement through the Effective
Time. FindWhat shall also take any action (other than qualifying to do business
in any jurisdiction in which it is not now so qualified or to file a general
consent to service of process) required to be taken under any applicable state
securities laws in connection with the issuance of FindWhat Common Shares in the
Merger, upon the exercise of FindWhat Exchange Options, and upon the issuance of
such other FindWhat securities in connection with the transactions contemplated
by this Agreement. Subject to Section 5.1, Espotting shall use its reasonable
best efforts to cause the Proxy Statement to be mailed to the Espotting
Stockholders as promptly as practicable after the Registration Statement is
declared effective, along with such other information as it deems appropriate to
meet the requirements of Applicable Law in the solicitation of the approvals of
its stockholders pursuant to Section 5.3(a). FindWhat and Espotting shall, as
promptly as practicable after receipt thereof, provide the other party copies of
any written comments and advise the other party of any oral comments with
respect to, or requests for amendment of the Registration Statement received
from the Commission. FindWhat shall provide Espotting with a reasonable
opportunity to review and comment on any amendment or supplement to the
Registration Statement prior to filing such with the Commission, and shall
provide Espotting with a copy of all such filings made with the Commission.
Notwithstanding any other provision herein to the contrary, the Registration
Statement shall not be filed, and no amendment or supplement to the Registration
Statement or Proxy Statement shall be made without the approval of the
information included by the party that supplied that information. If at any time
prior to the Effective Time any information relating to FindWhat or Espotting,
or any of their respective affiliates, officers or directors, should be
discovered by FindWhat or Espotting which should be set forth in an amendment or
supplement to the Registration Statement or the Proxy Statement, so that any of
such documents would not include any misstatement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, the party which discovers
such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of FindWhat and Espotting.
(g) Rule 145. Prior to the Effective Time, Espotting shall deliver to
FindWhat a list identifying persons who would, in its opinion, be deemed
"affiliates" of Espotting for purposes of Rule 145 under the Securities Act (the
"Espotting Affiliates"). Espotting shall cause each person who is identified as
an Espotting Affiliate to deliver to FindWhat on or prior to the Effective Time
a written agreement, in such form as set forth in Exhibit C, that he or she will
not offer to sell, sell or otherwise dispose of any of the FindWhat Common
Shares issued to him or her in connection with the Merger, except pursuant to an
effective registration statement or in compliance with Rule 145 or pursuant to
an exemption from the registration requirements under the Securities Act.
FindWhat shall be entitled to place appropriate legends on the certificates
evidencing the FindWhat Common Shares to be received by Espotting Affiliates
pursuant to the terms of this Agreement, and to issue appropriate stock transfer
instructions to the transfer agent for the FindWhat Common Shares, to the effect
that the shares received or to be received by such Espotting Affiliate pursuant
to this Agreement may only be sold, transferred or otherwise conveyed, and the
holder thereof may only reduce his or her interest in or risks relating to such
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shares, pursuant to an effective registration statement under the Securities Act
or in accordance with the provisions of paragraph (d) of Rule 145 or pursuant to
an exemption from registration provided under the Securities Act. The foregoing
restrictions on the transferability of FindWhat Common Shares shall apply to all
purported sales, transfers and other conveyances of the shares received or to be
received by such Espotting Affiliate pursuant to this Agreement and to all
purported reductions in the interest in or risks relating to such shares,
whether or not such Espotting Affiliate has exchanged the certificates
previously evidencing shares of Espotting capital stock, into which such shares
were converted.
5.2 Covenants of FindWhat.
(a) FindWhat Stockholders Meeting. FindWhat shall take all action in
accordance with Applicable Law and the FindWhat Articles and the FindWhat Bylaws
necessary to duly call, give notice of, convene and hold a special meeting of
FindWhat Stockholders (the "FindWhat Stockholders Meeting") to be held on the
earliest practicable date determined in consultation with Espotting to consider
and vote upon approval of the Merger, this Agreement, the FindWhat Stock Option
Plan, a plan, providing for rights equivalent to those currently pertaining
under the EMI Plan, for the replacement options to be issued in respect of the
EMI Options, as set forth in Section 2.5(b) (the "EMI Replacement Option Plan")
and the transactions contemplated hereby. FindWhat shall take all lawful actions
to solicit the approval of the Merger, this Agreement, the Escrow Agreement, the
FindWhat Stock Option Plan, the EMI Replacement Option Plan, and the
transactions contemplated hereby and thereby, by the FindWhat Stockholders, and
the board of directors of FindWhat shall recommend approval of the Merger, this
Agreement, the Escrow Agreement, the FindWhat Stock Option Plan, EMI Replacement
Option Plan, and the transactions contemplated hereby by the FindWhat
Stockholders, which recommendation shall be included in the Proxy Statement.
(b) Indemnification, Exculpation and Insurance.
(i) FindWhat shall cause all rights to indemnification and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time now existing in favor of the current or former directors or
employees or officers of Espotting (each such person being an "Indemnified
Party") by reason of the fact that he or she is or was a director or employee of
Espotting as provided in Espotting's Certificate of Incorporation, Bylaws or any
indemnification agreement between such directors or officers and Espotting (in
each case, as in effect on the date hereof) to be assumed by the Surviving
Corporation in the Merger, without further action, as of the Effective Time and
such rights shall survive the Merger and shall continue in full force and effect
in accordance with clause (iv) of this Section 5.2(b). Without limiting the
foregoing, FindWhat shall indemnify and hold harmless, and provide advancement
of expenses to, all past and present directors, officers and employees of
Espotting and the Espotting Subsidiaries to the fullest extent permitted by
Espotting's or an Espotting's Subsidiary's Certificate of Incorporation, Bylaws
(or comparable governing document) or any indemnification agreement between such
directors, officers and employees for acts or omissions occurring at or prior to
the Effective Time (including for acts or omissions occurring in connection with
the approval of this Agreement and the transactions contemplated hereby) by
reason of the fact that he or she was a director, officer or employee of
Espotting or an Espotting Subsidiary. Nothing contained herein, however, shall
require FindWhat to indemnify any Indemnified Party if a court of competent
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jurisdiction shall have determined that such indemnification is unenforceable or
void as a matter of public policy, and such determination shall have become
final and nonappealable.
(ii) Any Indemnified Party wishing to claim indemnification under
paragraph (i) of this Section 5.2(b) shall promptly notify the Surviving
Corporation, upon learning of any such Action, but the failure to so notify
shall not relieve the Surviving Corporation of any liability it may have to such
Indemnified Party to the extent such failure does not materially prejudice the
Surviving Corporation. The Surviving Corporation may, at its own expense: (i)
participate in the defense of any Action; or (ii) at any time during the course
of any such Action, assume the defense thereof, unless the Indemnified Parties
(or any of them) determine in good faith (after consultation with legal counsel)
that there is, under applicable standards of professional conduct, a conflict or
any significant issue between the positions of FindWhat or the Surviving
Corporation and any of such Indemnified Parties, provided that the Surviving
Corporation's counsel shall be reasonably satisfactory to the Indemnified
Parties. If the Surviving Corporation assumes such defense, the Indemnified
Parties shall have the right (but not the obligation) to participate in the
defense thereof and to employ counsel, at their own expense, separate from the
counsel employed by the Surviving Corporation. Whether or not the Surviving
Corporation chooses to assume the defense of any such Action, the Surviving
Corporation and FindWhat shall cooperate in the defense thereof. If the
Surviving Corporation fails to so assume the defense thereof, the Indemnified
Parties may retain counsel reasonably satisfactory to the Surviving Corporation
and the Surviving Corporation shall pay the reasonable fees and expenses of such
counsel promptly after statements therefor are received; provided that the
Indemnified Parties on whose behalf expenses are advanced provide (x) a written
affirmation of their good faith belief that the standard of conduct necessary
for indemnification under Section 145 of the DGCL has been met, and (y) an
undertaking to repay such advances if it is ultimately determined that such
Indemnified Party is not entitled to indemnification under Section 145 of the
DGCL. Neither FindWhat nor the Surviving Corporation shall be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld, conditioned or delayed); provided that, in the event that
any claim or claims for indemnification are asserted or made within such a
period of six years after the Effective Time, all rights to indemnification in
respect of any such claim or claims (and the matters giving rise thereto) shall
continue until the disposition of any and all such claim or claims (and the
matters giving rise thereto). The Indemnified Parties as a group may retain only
one law firm (in addition to local counsel) to represent them with respect to a
single action unless any Indemnified Party determines in good faith (after
consultation with legal counsel) that there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more Indemnified Parties. In the event FindWhat or the Surviving
Corporation or any of their respective successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, to the extent necessary to effectuate
the purposes of this Section 5.2(b), proper provision shall be made so that the
successors and assigns of FindWhat and the Surviving Corporation assume the
obligations set forth in this Section 5.2(b), and none of the actions described
in clause (i) or (ii) shall be taken until such provision is made. Nothing in
this Section 5.2(b) is intended to modify adversely any existing rights to
indemnification of an Indemnified Party from Espotting.
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(iii) For six years after the Effective Time, FindWhat shall
cause the Surviving Corporation to maintain in effect Espotting's current
officers', directors' and employees' liability insurance in respect of acts or
omissions occurring at or prior to the Effective Time, covering each person
currently covered by Espotting's officers' and directors' liability insurance
policy (a copy of which has been heretofore delivered to FindWhat), on terms
with respect to such coverage and amount no less favorable than those of such
policy in effect on the date hereof; provided that FindWhat may substitute
therefor policies of FindWhat containing terms with respect to coverage and
amount no less favorable to such directors and officers; provided, however, that
in satisfying its obligation under this Section 5.2(b) FindWhat shall not be
obligated to pay annual premiums in excess of 300% of the amount per annum paid
by Espotting in its last full fiscal year; and provided further that if FindWhat
is not able to obtain such coverage for such 300% amount, FindWhat shall
nevertheless be obligated to provide such coverage as may be obtained annually
for such 300% amount and provided further that notwithstanding the foregoing,
the Surviving Corporation may satisfy its obligations under this Section 5.2(b)
by purchasing a "tail" policy under Espotting's existing directors' and
officers' insurance policy that (i) has an effective term of six years from the
Effective Time, (ii) covers those persons who are currently covered, or will be
covered on or prior to the Effective Time, by Espotting's directors' and
officers' insurance policy in effect on the date hereof for actions and
omissions occurring on or prior to the Effective Time and (iii) contains terms
and conditions (including without limitation coverage amounts) that are at least
as favorable in the aggregate as the terms and conditions of Espotting's
directors' and officers' insurance policy in effect on the date hereof.
(iv) The provisions of the Certificate of Incorporation and
Bylaws of the Surviving Corporation with respect to indemnification and
exculpation as set forth in Section 5.2(b)(i) above shall not be amended,
repealed or otherwise modified for a period of six years from the Effective Time
in any manner that would adversely affect the rights thereunder of any of the
Indemnified Parties.
(v) The obligations of FindWhat or the Surviving Corporation
under this Section 5.2(b) are subject to the conditions that each Indemnified
Party shall comply with the reasonable requests of the Surviving Corporation or
FindWhat in defending or settling any action hereunder and that any Indemnified
Party shall approve any proposed settlement of any such action if (i) such
settlement involves no finding or admission of any liability by any Indemnified
Party, and (ii) the sole relief provided in connection with such settlement is
monetary damages that are paid in full by the Surviving Corporation or FindWhat.
(vi) The provisions of this Section 5.2(b) are (i) intended to be
for the benefit of, and will be enforceable by, each Indemnified Party, his or
her heirs and his or her representatives and (ii) in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise. FindWhat hereby guarantees the
performance by Surviving Corporation of its obligations under this Section
5.2(b).
(c) Subcorp. Prior to the Effective Time, Subcorp shall not conduct any
business or make any investments other than as specifically contemplated by this
Agreement and will not have any assets (other than a de minimis amount of cash
paid to Subcorp for the issuance of its
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stock to FindWhat or a subsidiary of FindWhat) or any material liabilities. On
or before the Effective Time, FindWhat shall contribute all of the stock of
Subcorp to a wholly-owned subsidiary of FindWhat.
(d) NASDAQ Listing. FindWhat shall use its reasonable best efforts to
cause the FindWhat Common Shares issuable pursuant to the Merger, subject to the
FindWhat Exchange Options, and such other FindWhat Common Shares to be reserved
for issuance in connection with the Merger or the other transactions
contemplated by this Agreement to be approved for listing on the NASDAQ, subject
to official notice of issuance, prior to the Effective Time.
(e) Employees and Employee Benefits. From and after the Effective Time,
FindWhat shall cause the Surviving Corporation to honor the obligations of
Espotting and its subsidiaries incurred prior to the Effective Time under all
Espotting Plans. From and after the Effective Time, FindWhat shall treat all
service by Espotting Employees with Espotting (or any predecessor thereto) prior
to the Effective Time for all purposes as service with FindWhat (except for
purposes of benefit accrual under defined benefit pension plans or to the extent
such treatment would result in duplicative accrual on or after the Closing Date
of benefits for the same period of service), and, with respect to any medical or
dental benefit plan in which Espotting Employees participate after the Effective
Time, FindWhat shall waive or cause to be waived any pre-existing condition
exclusions and actively-at-work requirements (provided, however, that no such
waiver shall apply to a pre-existing condition of any Espotting Employee who
was, as of the Effective Time, excluded from participation in an Espotting Plan
by virtue of such pre-existing condition), and shall provide that any covered
expenses incurred on or before the Effective Time during the plan year of the
applicable Espotting Plan in which the Effective Time occurs by an Espotting
Employee or an Espotting Employee's covered dependent shall be taken into
account for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions after the Effective Time to the same extent as
such expenses are taken into account for the benefit of similarly situated
employees of FindWhat and subsidiaries of FindWhat.
(f) [Reserved].
(g) Stock Option Plan. FindWhat shall establish and submit to its
stockholders for approval at the FindWhat Stockholders Meeting, a new stock
option plan that shall be offered to certain FindWhat and Espotting directors,
officers and employees after the Closing Date (the "FindWhat Stock Option
Plan"), with such customary terms and conditions as shall allow FindWhat to meet
its obligations under Section 2.5 hereof.
(h) Notification. Between the date of this Agreement and the Closing
Date, FindWhat shall promptly notify Espotting in writing if FindWhat becomes
aware of any fact or condition that causes or constitutes a breach in any of its
representations and warranties (without regard to any Material Adverse Effect
qualifiers contained in any specific representation or warranty) as of the date
of this Agreement or any other date applicable to a representation or warranty
as set forth herein. Should any such fact or condition require any change in the
FindWhat Disclosure Schedule, FindWhat shall promptly deliver to Espotting a
supplement to the FindWhat
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Disclosure Schedule specifying such change. Such delivery will not affect any
rights of Espotting under any other provision of this Agreement. During the same
period, FindWhat shall promptly notify Espotting in writing of the occurrence of
any breach of any covenant of FindWhat in this Article V or the occurrence of
any event that may make the satisfaction of the conditions in Article VI
impossible or unlikely.
5.3 Covenants of Espotting.
(a) Espotting Stockholders Meeting. Subject to Section 5.3(c),
Espotting shall take all action in accordance with the DGCL and the Espotting
Certificate and the Espotting Bylaws necessary to duly call, give notice of,
convene and hold a special meeting of Espotting Stockholders (the "Espotting
Stockholders Meeting") to be held on the earliest practicable date determined in
consultation with FindWhat to consider and vote upon approval of (i) the Merger,
(ii) this Agreement, (iii) the Escrow Agreement, (iv) the appointment of the
Sellers' Representative, (v) the other transactions contemplated hereby and
thereby, and (vi) the actions to be taken by Espotting as set forth in Sections
5.3(e) and 5.3(f) below. Subject to Section 5.3(c), Espotting shall take all
lawful actions to solicit the approval of the Merger, this Agreement, the Escrow
Agreement and the transactions contemplated hereby and thereby, by the Espotting
Stockholders, and the board of directors of Espotting shall recommend approval
of the Merger, this Agreement, the Escrow Agreement and the transactions
contemplated hereby by the Espotting Stockholders (to the extent not previously
withdrawn pursuant to Section 5.3(c)).
(b) Information for the Registration Statement and Preparation of Proxy
Statement. Espotting shall promptly furnish FindWhat with all information
concerning it as may be required for inclusion in the Proxy Statement and the
Registration Statement, provided, Espotting shall use commercially reasonable
efforts to furnish to FindWhat the Espotting Financial Statements. For purposes
of this Agreement, the term "Espotting Financial Statements" means the audited
consolidated balance sheets of Espotting and the Espotting Subsidiaries as of
March 31, 2001, 2002, and 2003, and the related audited statements of income,
expenses, retained earnings, and cash flow and changes in stockholders' equity
for such periods, including notes thereto, together with an accurate and correct
copy of the reports on such information relating to Espotting and the Espotting
Subsidiaries by Ernst & Young LLP, and the audited balance sheet and statement
of operations for the nine month period ending December 31, 2003; provided,
further, that the Espotting Financial Statements shall comply as to form with
the applicable accounting requirements and rules and regulations of the
Commission and shall be prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis throughout the
period indicated (except as may be indicated in the notes thereto), and shall
fairly present the financial condition and results of operations of Espotting
and the Espotting Subsidiaries as at the date thereof and for the period
indicated therein in accordance with United States generally accepted accounting
principles. Espotting shall cooperate with FindWhat in the preparation of the
Proxy Statement and the Registration Statement in a timely fashion and shall use
its reasonable best efforts to assist FindWhat in having the Registration
Statement declared effective by the Commission as promptly as practicable after
its filing. Espotting shall use all reasonable efforts to cooperate with
FindWhat in the preparation and filing of the Proxy Statement with the
Commission. Consistent with the timing for the Espotting Stockholders Meeting as
determined by Espotting in consultation with FindWhat, Espotting shall use all
reasonable efforts to mail at the earliest practicable date to Espotting
Stockholders the Proxy
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Statement, which shall include the Espotting Board Recommendation to the extent
not previously withdrawn in compliance with Section 5.3(c).
(c) No Solicitation.
(i) Espotting agrees that, during the term of this Agreement, it
will not, and will not permit or cause any of its subsidiaries or any of the
directors, officers, employees, agents or representatives of it or any of its
subsidiaries, directly or indirectly, to solicit, initiate, encourage or
knowingly facilitate, or furnish or disclose non-public information in
furtherance of, or otherwise facilitate any inquiries that may be reasonably
expected to lead to, or the making of any proposal or offer with respect to
merger, reorganization, share exchange, consolidation, or similar transaction
involving, or any purchase of 5% or more of the assets or any equity of,
Espotting or any of its subsidiaries (except that such purchase percentage may
be increased by up to 20% of the assets or any equity securities of Espotting or
any of its subsidiaries solely for the limited purpose of satisfying or pursuing
such venture capital financing as is necessary to satisfy Espotting's or its
subsidiaries' current debt obligations, general operating requirements and/or
payments to distribution partners) (collectively, a "Competing Transaction"), or
negotiate, explore or otherwise engage in discussions with any person (other
than FindWhat) with respect to a Competing Transaction, or enter into any letter
of intent or similar document or any contract contemplating or otherwise
relating to any Competing Transaction or enter into any agreement, arrangement
or understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement.
(ii) Notwithstanding the foregoing, nothing shall prevent
Espotting or its board of directors from, at any time prior to the approval of
the Merger by the Espotting Stockholders, providing information in response to a
request therefor by entering into a discussion with, or entering into a
confidentiality agreement or non-disclosure agreement with, a person who has
made an unsolicited bona fide written proposal for a Competing Transaction if
and so long as:
(A) Espotting has not violated any of the restrictions set
forth in this Section 5.3(c);
(B) the board of directors of Espotting determines in good
faith by resolution duly adopted after consultation with its outside counsel
(who may be its regularly engaged outside counsel) that the failure to take such
action would reasonably be expected to constitute a breach of its fiduciary
duties under Applicable Law and determines that such a proposal is, after
consulting with a nationally recognized investment banking firm, more favorable
to the Espotting Stockholders from a financial point of view than the
transactions contemplated by this Agreement (including any adjustment to the
terms and conditions proposed by FindWhat in response to such Competing
Transaction) (a "Superior Proposal");
(C) prior to furnishing any information to, or entering into
discussions with, such person, Espotting gives FindWhat written notice of the
identity of such person and of Espotting's intention to furnish information to,
or enter into discussions with, such person, and Espotting shall have received
from such person an executed confidentiality agreement or non-disclosure
agreement containing customary limitations on the use and disclosure of all
written and oral information furnished to such person by or on behalf of
Espotting; and
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(D) prior to furnishing any information to such person,
Espotting furnishes such information to FindWhat (to the extent such information
has not been previously furnished by Espotting to FindWhat).
(iii) Espotting will immediately cease and will cause its
subsidiaries and the directors, officers, employees, agents or representatives
of it and its subsidiaries to immediately cease all existing activities,
discussions and negotiations with any parties conducted heretofore and before
the date of this Agreement with respect to any proposal for a Competing
Transaction and request the return of all confidential information regarding
such party provided to any such parties prior to the date hereof pursuant to the
terms of any confidentiality agreement or otherwise. In the event that prior to
the approval of the Merger by the Espotting Stockholders, the board of directors
of Espotting receives a Superior Proposal that was not solicited or encouraged
after the date of this Agreement and the board of directors of Espotting
determines in good faith by resolution duly adopted after consultation with its
outside counsel (who may be its regularly engaged outside counsel) that the
failure to take such action would reasonably be expected to constitute a breach
of its fiduciary duties under Applicable Law, the board of directors of
Espotting may (subject to this and the following sentences) fail to make,
withdraw, modify or change, in a manner adverse to FindWhat, the Espotting Board
Recommendation, provided that it gives FindWhat three business days prior
written notice of its intention to do so (provided that the foregoing shall in
no way limit or otherwise affect Espotting's right to terminate this Agreement
pursuant to Section 7.1, at such time as the applicable requirements of Section
7.1 have been met). Any such failure to make, withdraw, modify or change the
Espotting's Board Recommendation shall not change the approval of the board of
directors of Espotting for purposes of causing any state or foreign takeover
statute or other state or foreign law to be inapplicable to the transactions
contemplated hereby, including the Merger or the Espotting Stockholder Voting
Agreements or change the obligation of Espotting to present the Merger for
approval at a duly called Espotting Stockholders Meeting on the earliest
practicable date determined in consultation with FindWhat. From and after the
execution of this Agreement, Espotting shall promptly, but in any event within
one calendar day advise FindWhat in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations, or proposals relating
to a Competing Transaction (including the specific terms thereof and the
identity of the other party or parties involved) and promptly furnish to
FindWhat a copy of any such written proposal in addition to any information
provided to or by any third party relating thereto. In addition, Espotting shall
promptly, but in any event within one calendar day advise FindWhat, in writing,
if the board of directors of Espotting shall make any determination as to any
Competing Transaction as contemplated by this Section 5.3(c)(iii).
(d) Conduct of Espotting's Operations. During the period from the date
of this Agreement to the Effective Time, or the date, if any, on which this
Agreement is earlier terminated pursuant to Section 7.1, and except as may be
agreed in writing by the parties, Espotting shall, and Espotting shall cause
each of the Espotting Subsidiaries to, conduct its operations in the ordinary
course except as expressly contemplated by this Agreement and the transactions
contemplated hereby and shall use its commercially reasonable efforts to
maintain and preserve its business organization and its material rights and
franchises and to retain the services of its officers and key employees and
maintain relationships with customers, suppliers, lessees, licensees and other
third parties, and to maintain all of its operating assets in their current
condition (normal wear and tear excepted), to the end that their goodwill and
ongoing business
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shall not be impaired in any material respect. Without limiting the generality
of the foregoing, during the period from the date of this Agreement to the
Effective Time, or the date, if any, on which this Agreement is earlier
terminated pursuant to Section 7.1, Espotting shall not, and Espotting shall
cause each of the Espotting Subsidiaries to not, except as otherwise expressly
contemplated by this Agreement and the transactions contemplated hereby or as
set forth in Section 5.3(d) in the Espotting Disclosure Schedule, without the
prior written consent of FindWhat:
(i) do or effect any of the following actions with respect to its
securities: (A) adjust, split, combine or reclassify its capital stock, (B)
make, declare or pay any dividend or distribution on, or directly or indirectly
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, (C) grant any person any right or option to acquire any shares of
its capital stock (except grants of Espotting options to Espotting employees in
the ordinary course of business consistent with past practices (including the
grants of options to purchase such number of shares of capital stock of
Espotting as long as such grants are, in the aggregate, for no more than the
number of Espotting shares subject to currently outstanding Espotting options
that are exercised after the date hereof, and as long as such grants are made
after such an exercise) provided that Espotting shall consult with FindWhat
prior to making any such grants or making any recommendation to the Espotting
board of directors with respect to such grants,), (D) issue, deliver or sell or
agree to issue, deliver or sell any additional shares of its capital stock or
any securities or obligations convertible into or exchangeable or exercisable
for any shares of its capital stock or such securities (except pursuant to the
exercise of Espotting options that are outstanding as of the date hereof or
granted pursuant to Section 6.1(d)(i)(C)), or (E) enter into any agreement,
understanding or arrangement with respect to the sale, voting, registration or
repurchase of its capital stock;
(ii) directly or indirectly sell, transfer, lease, pledge,
mortgage, encumber or otherwise dispose of any of its property or assets other
than in the ordinary course of business;
(iii) make or propose any changes in the Espotting Certificate or
the Espotting Bylaws;
(iv) merge or consolidate with any other person;
(v) acquire a material amount of assets or capital stock of any
other person outside of the ordinary course of business consistent with past
practice;
(vi) except for borrowings under existing credit facilities in
the ordinary course of business consistent with past practices provided that
Espotting shall consult with FindWhat prior to making any borrowings, incur,
create, assume or otherwise become liable for any indebtedness for borrowed
money or assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual, corporation
or other entity, other than in the ordinary course of business, consistent with
past practice in excess of $100,000;
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(vii) create any subsidiaries; provided, prior to the Effective
Time, Espotting shall cause all of the capital stock of any Espotting Subsidiary
issued and outstanding to a nominee of Espotting and all of the capital stock of
Espotting Media Ireland Limited, a corporation organized under the laws of
Ireland, to be transferred to and owned by Espotting or a Key Espotting
Subsidiary;
(viii) enter into or modify any employment, severance,
termination or similar agreements or arrangements with, or grant any bonuses,
salary increases, severance or termination pay to, any officer, director,
consultant or employee other than pursuant to Applicable Law or contractual
commitments existing as of the date hereof in the ordinary course of business
consistent with past practice with respect to non-officer employees, or
otherwise increase the compensation or benefits provided to any officer,
director, consultant or employee, or grant, re-price, or accelerate the exercise
or payment of any Espotting options or other equity-based awards (except for
grants to the extent permitted by Section 5.3(d)(i));
(ix) enter into, adopt or amend any Espotting Plan, except as may
be required by Applicable Law or Section 5.3(e) or 5.3(f);
(x) take any action that could give rise to severance benefits
payable to any officer or director of Espotting as a result of consummation of
the transaction contemplated by this Agreement;
(xi) change any method or principle of accounting in a manner
that is inconsistent with past practice except as contemplated by this Agreement
and to the extent required by generally accepted accounting principles as
advised by Espotting's regular independent accountants;
(xii) settle any Actions, whether now pending or hereafter made
or brought involving, individually or in the aggregate, an amount in excess of
$250,000 other than settlement in the ordinary course of business or in
accordance with their terms, of liabilities disclosed, reflected or reserved
against in the most recent Espotting Financial Statements (or the notes thereto)
or incurred since the date of such financial statements in the ordinary course
of business;
(xiii) modify, extend, amend or terminate, or waive, release or
assign any rights or claims with respect to, any Contract set forth in Section
4.16 in the Espotting Disclosure Schedule including without limitation the
agreement between Espotting and Yahoo! Inc., any other material Contract to
which Espotting is a party or any confidentiality agreement to which Espotting
is a party in a manner that would reasonably be expected to have a Material
Adverse Effect on Espotting;
(xiv) enter into any confidentiality agreements or arrangements
other than in the ordinary course of business consistent with past practice
(other than as permitted, in each case, by Section 5.3(c));
(xv) write up, write down or write off the book value of any
assets, individually or in the aggregate, in excess of $100,000 except for
depreciation and amortization in accordance with generally accepted accounting
principles consistently applied;
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(xvi) incur or commit to any capital expenditures in excess of
$100,000 individually or $250,000 in the aggregate, excluding capital
expenditures provided for or contemplated by the capital budget approved by
Espotting's board of directors prior to the date hereof (copies of which have
been provided to FindWhat);
(xvii) make any payments in respect of policies of directors' and
officers' liability insurance (premiums or otherwise) other than premiums paid
in respect of its current or renewed or replacement policies;
(xviii) take any action to make Espotting or any Espotting
Subsidiary not exempt from or subject to (x) the provisions of section 203 of
the DGCL or any other state or foreign takeover law or state or foreign law that
purports to limit or restrict business combinations or the ability to acquire or
vote shares, any person or entity (other than FindWhat or its subsidiaries) or
any action taken thereby, which person, entity or action would have otherwise
been not subject to the restrictive provisions thereof and exempt therefrom;
(xix) take any action that could likely result in the
representations and warranties set forth in Article IV becoming false or
inaccurate in any material respect;
(xx) enter into or carry out any other transaction other than in
the ordinary and usual course of business;
(xxi) permit or cause any subsidiary to do any of the foregoing
or agree or commit to do any of the foregoing;
(xxii) make or revoke any Tax election, file any material amended
Tax Return, or settle any material audit or other proceeding with any material
Tax authority; or
(xxiii) serve notice on any individuals holding unexpired and
unexercised options under the EMI Plan within the terms of Rule 6.1.2 of the EMI
Plan, or under the Espotting European Share Option and Warrant Plan (the
"European Plan") within the terms of Rule 7.1.2 of the European Plan, or cause
that any such individuals are granted new rights in substitution for their
existing rights otherwise than in accordance with this Agreement; or
(xxiv) agree in writing or otherwise to take any of the foregoing
actions.
(e) Amendment of EMI Plan. Prior to the Effective Time, Espotting shall
amend the rules of the EMI Plan to clarify that options granted thereunder do
not lapse on completion of a change in control where a written notice of
intention has been served on option holders of Espotting's intention to procure
the grant of new rights in substitution for their existing rights, the terms of
such amendment to be subject to the prior approval of FindWhat. Further,
following such amendment and prior to the Effective Time, Espotting shall serve
notice on the option holders of Espotting's intention to procure the grant of
new rights in substitution for their existing rights, the terms of such notice
to be also subject to the prior approval of FindWhat.
(f) Amendment of European Plan. Prior to the Effective Time, Espotting
shall amend the rules of the European Plan to clarify that options granted
thereunder do not lapse on completion of a change in control where a written
notice of intention has been served on option
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holders of Espotting's intention to procure the grant of new rights in
substitution for their existing rights, the terms of such amendment to be
subject to the prior approval of FindWhat. Further, following such amendment and
prior to the Effective Time, Espotting shall serve notice on the option holders
of Espotting's intention to procure the grant of new rights in substitution for
their existing rights, the terms of such notice to be also subject to the prior
approval of FindWhat.
(g) Certificate Concerning Real Property Holding Company. On or before
the Closing Date, an officer of Espotting shall provide a certificate to
FindWhat, in a form that complies with Treas. Reg. 1.897-2(h) and Treas. Reg.
1.1445-2(c)(3), that it is not a U.S. real property holding corporation.
(h) Notification. Between the date of this Agreement and the Closing
Date, Espotting shall promptly notify FindWhat in writing if Espotting becomes
aware of any fact or condition that causes or constitutes a breach in any of its
representations and warranties (without regard to any Material Adverse Effect
qualifiers contained in any specific representation or warranty) as of the date
of this Agreement or any other date applicable to a representation or warranty
as set forth herein. Should any such fact or condition require any change in the
Espotting Disclosure Schedule, Espotting shall promptly deliver to FindWhat a
supplement to the Espotting Disclosure Schedule specifying such change. Such
delivery will not affect any rights of FindWhat under any other provision of
this Agreement. During the same period, Espotting shall promptly notify FindWhat
in writing of the occurrence of any breach of any covenant of Espotting in this
Article V or the occurrence of any event that may make the satisfaction of the
conditions in Article VI impossible or unlikely.
(i) Conversion of Loan Notes. Espotting shall use reasonable best
efforts to cause the holders of the Loan Notes to convert the Loan Notes into
shares of Espotting Common Stock in accordance with that certain (i) Option
Agreement, dated December 6, 2002, as amended by a Deed of Variation, dated
August 19, 2002, in each case by and among Espotting, Espotting UK and such
holders, and (ii) the B Loan Notes Option Agreement, dated August 19, 2002, by
and among the parties thereto. Espotting shall use its reasonable best efforts
to cause the holders of the certain 15% Convertible Secured Loan Notes under
which ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ serves as Security Trustee to convert their notes into
Espotting Common Stock in accordance with the terms of that instrument and
related documents and agreements.
(j) Delivery of 2004 Monthly Cumulative Operating Income Results.
Within 20 days after each 2004 month ending 20 days or more before the Closing
Date, Espotting shall deliver to FindWhat a consolidated income statement and
balance sheet for such month prepared in accordance with U.S. generally accepted
accounting principles (subject to the absence of notes) and a calculation of its
operating income results for such month and its cumulative operating income
results for 2004 through the end of such month. Such financial statements shall
include backup materials as reasonably requested by FindWhat regarding
Transaction Costs as defined on Section 6.3(h) of the Espotting Disclosure
Schedule.
(k) [Reserved]
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(l) Prior to Closing, Espotting shall have taken the actions described
in Schedule 5.3(l) hereto.
(m) Prior to Closing, Espotting shall have contributed capital
sufficient to eliminate the capital impairment of Espotting Media Espana, S.L.
described in Section 4.2(a) of the Espotting Disclosure Schedule, and shall have
fully paid and discharged all fines, penalties and other liabilities owed by
Espotting or Espotting Media Espana, S.L. with respect to such capital
impairment.
(n) Prior to Closing, Espotting shall have fully paid and, discharged,
or obtained a full and binding release and waiver of all fines, penalties and
other liabilities with respect to the matters described in Item 5 of Section 4.4
of the Espotting Disclosure Schedule.
(o) Prior to Closing, Espotting shall have either fully paid and
discharged or otherwise settled all fines, penalties and other liabilities
claimed against Espotting UK with respect to the matters described in Item 2 of
Section 4.9 of the Espotting Disclosure Schedule.
(p) Prior to Closing, Espotting shall have either fully paid and
discharged or otherwise settled all fines, penalties and other liabilities that
could be claimed against Espotting France with respect to the matters described
in Item 3 of Section 4.9 of the Espotting Disclosure Schedule, on terms and
conditions approved in writing by FindWhat.
(q) Prior to Closing, Espotting shall have either fully paid and
discharged or otherwise settled all fines, penalties and other liabilities
claimed against Espotting with respect to the matters described in Item 2 of
section 4.10 of the Espotting Disclosure Schedule, on terms and conditions
approved in writing by FindWhat.
(r) Prior to Closing, Espotting shall have fully paid and discharged
all fines, penalties and other liabilities claimed against Espotting with
respect to the matters disclosed in Section 4.12(a) of the Espotting Disclosure
Schedule, on terms and conditions approved in writing by FindWhat.
(s) Prior to Closing, Espotting shall have acquired all of the issued
and outstanding capital stock of Espotting Media Ireland Limited.
ARTICLE VI
CONDITIONS
6.1 Conditions to the Obligations of Each Party. The obligations of Espotting,
FindWhat and Subcorp to consummate the Merger shall be subject to the
satisfaction or waiver of the following conditions:
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(a) This Agreement, the Merger, and the transactions contemplated
hereby shall have been approved and adopted by Espotting Stockholders and the
FindWhat Stockholders, respectively, in the manner required by any Applicable
Law.
(b) Any applicable waiting periods under any Antitrust Laws, including
without limitation, the HSR Act, relating to the Merger and the transactions
contemplated by this Agreement shall have expired or been terminated and any
other approvals of any Governmental Authority shall have been obtained.
(c) No provision of any Applicable Law or regulation and no judgment,
injunction, order, decree, ruling, assessment or arbitration award of any
Governmental Authority or arbitrator and any Contract with any Governmental
Authority pertaining to compliance with Applicable Law shall prohibit or enjoin
the consummation of the Merger or the transactions contemplated by this
Agreement or limit the ownership or operation by FindWhat, Espotting or any of
their respective subsidiaries of any material portion of the businesses or
assets of FindWhat or Espotting.
(d) There shall not be pending any Action (i) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement, (ii) except to the extent
consistent with the obligations of Espotting and FindWhat under Section 5.1(a),
seeking to prohibit or limit the ownership or operation by FindWhat, Espotting
or any of their respective subsidiaries of, or to compel FindWhat, Espotting or
any of their respective subsidiaries to dispose of or hold separate, any
material portion of the business or assets of FindWhat, Espotting or any of
their respective subsidiaries, as a result of the Merger or any of the other
transactions contemplated by this Agreement, (iii) seeking to impose limitations
on the ability of FindWhat to acquire or hold, or exercise full rights of
ownership of, any shares of capital stock of the Surviving Corporation,
including the right to vote such capital stock on all matters properly presented
to the stockholders of the Surviving Corporation or (iv) seeking to prohibit
FindWhat or any subsidiary of FindWhat from effectively controlling in any
material respect the business or operations of FindWhat or the subsidiaries of
FindWhat.
(e) The Commission shall have declared the Registration Statement
effective under the Securities Act, and no stop order or similar restraining
order suspending the effectiveness of the Registration Statement shall be in
effect and no proceedings for such purpose shall be pending before or threatened
by the Commission or any state securities administrator.
(f) The FindWhat Common Shares to be issued in the Merger, FindWhat
Common Shares subject to FindWhat Exchange Options and such other shares of
FindWhat Common Shares to be reserved for issuance in connection with the Merger
shall have been approved for listing on the NASDAQ, subject to official notice
of issuance.
(g) The FindWhat Stock Option Plan and the EMI Replacement Plan shall
have been approved and adopted by the FindWhat Stockholders at the FindWhat
Stockholders Meeting in the manner required by any Applicable Law.
(h) The written consent of Beringea Ltd. ("Beringea") or a majority of
the outstanding principal amount of the Loan Notes and a majority of the
outstanding shares of
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Series A Preferred Stock of Espotting to adopt this Agreement and approve the
transactions contemplated by this Agreement shall have been obtained and not
revoked.
(i) All outstanding shares of Espotting Preferred Stock shall, by
virtue of consummation of the Merger and without any further action on the part
of Espotting or any holder of Espotting Preferred Stock, be cancelled
simultaneous with the consummation of the Merger at the Effective Time pursuant
to the terms of the Loan Notes and the corporate governing documents of
Espotting and to the reasonable satisfaction of FindWhat and its counsel.
(j) The parties shall have agreed to the Estimated Adjustment Amount.
6.2 Conditions to Obligations of Espotting. The obligations of Espotting to
consummate the Merger and the transactions contemplated hereby shall be subject
to the fulfillment of the following conditions unless waived by Espotting:
(a) Each of the representations and warranties of each of FindWhat and
Subcorp contained in this Agreement shall be true and correct in all respects
(but without regard to any materiality qualifications or references to Material
Adverse Effect contained in any specific representation or warranty), in each
case on the date of this Agreement and on and as of the Closing Date as though
made on and as of the Closing Date (except for representations and warranties
made as of some other specified date, in which case as of such specified date),
except where any such failure of the representations and warranties to be true
and correct, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect on FindWhat.
(b) Each of FindWhat and Subcorp (i) shall have performed or complied
with all agreements and covenants required to be performed by it under this
Agreement at or prior to the Effective Time that are qualified as to Material
Adverse Effect and (ii) shall have performed or complied in all material
respects with all agreements and covenants required to be performed by it under
this Agreement at or prior to the Effective Time that are not qualified as to
Material Adverse Effect.
(c) Each of FindWhat and Subcorp shall have furnished Espotting with a
certificate dated the Closing Date signed on behalf of it by the Chairman,
President or any Vice President to the effect that the conditions set forth in
Sections 6.2(a) and (b) have been satisfied.
(d) Since the date of this Agreement, except to the extent reflected in
Section 3.11 of the FindWhat Disclosure Schedule on the date of this Agreement,
there shall not have been any change in the assets, liabilities, results of
operations, business prospects, or financial condition of FindWhat and its
subsidiaries taken as a whole that, individually or in the aggregate, would
constitute a Material Adverse Effect on FindWhat.
(e) FindWhat shall have obtained each material consent and governmental
authorization and shall have provided each material notice to any third party or
Governmental Authority required to be obtained or provided in connection with
this Agreement, the Merger and the transactions contemplated hereby and each
such consent, authorization and notice shall be in full force and effect.
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(f) FindWhat shall deliver to Espotting an unaudited balance sheet of
FindWhat dated as of the Closing Date prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the period involved showing at least $20 million in cash.
(g) Immediately prior to the Effective Time, FindWhat shall enter into
a Registration Rights Agreement, in such form as set forth in Exhibit D, with
each Espotting Affiliate who is not an executive officer or director of FindWhat
after the Closing.
6.3 Conditions to Obligations of FindWhat and Subcorp. The obligations of
FindWhat and Subcorp to consummate the Merger and the other transactions
contemplated hereby shall be subject to the fulfillment of the following
conditions unless waived by FindWhat:
(a) Each of the representations and warranties of Espotting contained
in this Agreement shall be true and correct in all respects (but without regard
to any materiality qualifications or references to Material Adverse Effect
contained in any specific representation or warranty), in each case, on the date
of this Agreement and on and as of the Closing Date as though made on and as of
the Closing Date (except for representations and warranties made as of some
other specified date, in which case, as of such specified date), except where
any such failure of the representations and warranties to be true and correct
would not reasonably be expected to have a Material Adverse Effect on Espotting
or any Key Espotting Subsidiary.
(b) Espotting (i) shall have performed or complied with all agreements
and covenants required to be performed by it under this Agreement at or prior to
the Effective Time that are qualified as to Material Adverse Effect and (ii)
shall have performed or complied in all material respects with all agreements
and covenants required to be performed by it under this Agreement at or prior to
the Effective Time that are not qualified as to Material Adverse Effect.
(c) Espotting shall have furnished FindWhat with a certificate dated
the Closing Date signed on its behalf by its Chairman, President or any Vice
President to the effect that the conditions set forth in Sections 6.3(a) and (b)
have been satisfied.
(d) Since the date of this Agreement, except to the extent reflected in
Section 4.11 of the Espotting Disclosure Schedule on the date of this Agreement,
there shall not have been any change in the assets, liabilities, business
prospects, results of operations or financial condition of Espotting and or any
Key Espotting Subsidiary, that would constitute a Material Adverse Effect on
Espotting or any Key Espotting Subsidiary.
(e) Espotting shall have obtained each material consent and
governmental authorization and shall have provided each material notice to any
third party or Governmental Authority required to be obtained or provided in
connection with this Agreement, the Merger and the transactions contemplated
hereby and each such consent, authorization and notice shall be in full force
and effect.
(f) Beringea, as security trustee for the holders of the Loan Notes,
shall have executed and delivered to Espotting and Espotting UK deeds of
release, in form satisfactory to Espotting, evidencing the release and discharge
of all charges and security granted by Espotting or any Espotting Subsidiary to
Beringea as security trustee for the holders of the Loan Notes, and
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the termination of all shareholders agreements, registration rights agreements
and guarantees entered into by Espotting or by any Espotting Subsidiary with
Beringea and the other holders of the Loan Notes; provided that if any Loan
Notes issued pursuant to the instrument dated August 19, 2002 made by Espotting
and Espotting UK and constituting up to Pound Sterling5,000,000 Loan Notes (the
"B Loan Notes") remain in issuance after the Effective Time, it shall not be a
condition that Beringea shall have executed and delivered to Espotting UK deeds
of release in respect of those charges and security, and terminations of those
guarantees as relate to the B Loan Notes. The holders of certain 15% Convertible
Secured Loan Notes under which ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ serves as Security Trustee shall
have converted their notes into Espotting Common Stock in accordance with the
terms of that instrument and related documents and agreements.
(g) [Reserved].
(h) For each calendar year 2004 month (other than January) that ends 20
days or more before the Closing Date, Espotting shall have obtained 90% of the
consolidated, cumulative milestones for operating income set forth across from
that month in the table set forth in Section 6.3(h) of the Espotting Disclosure
Schedule on the date of this Agreement, as such operating income is determined
in accordance with U.S. generally accepted accounting principles and as
otherwise noted on Section 6.3(h) of the Espotting Disclosure Schedule.
(i) Espotting shall have performed or complied with all agreements and
covenants required to be performed by it under Sections 5.3(k), (l), (m), (n),
(o), (p), (q), and (r) of this Agreement at or prior to the Effective Time.
(j) Espotting shall have performed the covenants described on Schedule
6.3(j).
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of this Agreement by Espotting Stockholders or FindWhat Stockholders):
(a) by mutual written consent of FindWhat and Espotting;
(b) by either FindWhat or Espotting;
(i) if there shall be any law or regulation that makes
consummation of the Merger illegal or otherwise prohibited, or if any judgment,
injunction, order or decree of a court or other competent Governmental Authority
enjoining FindWhat or Espotting from consummating the Merger shall have been
entered and such judgment, injunction, order or decree shall have become final
and nonappealable; provided, that the party seeking to terminate this Agreement
pursuant to this Section 7.1(b)(i) shall have used reasonable best efforts to
prevent the entry of and to remove such impediment to the Merger; or
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(ii) if the Merger shall not have been consummated before July
31, 2004, provided, however, that the right to terminate this Agreement under
this Section 7.1(b)(ii) shall not be available to any party whose failure or
whose affiliate's failure to perform any material covenant or obligation under
this Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date;
(iii) if at the Espotting Stockholders Meeting (including any
adjournment or postponement thereof) the requisite vote of the Espotting
Stockholders to approve the Merger and the transactions contemplated hereby
shall not have been obtained;
(iv) if at the FindWhat Stockholders Meeting (including any
adjournment or postponement thereof) the requisite vote of the FindWhat
Stockholders to approve the Merger and the transactions contemplated hereby
shall not have been obtained; or
(v) if there shall have been a material breach by the other of
any of its covenants or agreements contained in this Agreement and, if such
breach (other than a breach of FindWhat's obligations in Section 2.3(a)) is
capable of being cured, such breach shall not have been cured within 30 days
after notice thereof shall have been received by the party alleged to be in
breach.
(c) By Espotting, if prior to the approval of the Merger by the
Espotting Stockholders, the board of directors of Espotting shall determine in
good faith, after consultation with its financial and legal advisors, that any
written proposal from a third party for a Competing Transaction received after
the date hereof that was not solicited or encouraged by Espotting or any
Espotting Subsidiaries or affiliates in violation of this Agreement is more
favorable to the Espotting Stockholders from a financial point of view than the
transactions contemplated by this Agreement (including any adjustment to the
terms and conditions of such transaction proposed in writing by FindWhat in
response to such Competing Transaction) and is in the best interest of the
Espotting Stockholders, and the board of directors of Espotting has determined
in good faith by resolution duly adopted after consultation with its outside
counsel (who may be its regularly engaged outside counsel) that the failure to
enter into such a Competing Transaction would constitute a breach of its
fiduciary duties under Applicable Law, Espotting may terminate this Agreement
and enter into a letter of intent, agreement-in-principle, acquisition agreement
or other similar agreement (each, an "Acquisition Agreement") with respect to,
and recommend to the Espotting Stockholders such Competing Transaction, provided
that, prior to any such termination, (i) Espotting has provided FindWhat written
notice that it intends to terminate this Agreement pursuant to this Section
7.1(c), identifying the Competing Transaction then determined to be more
favorable and the party thereto and delivering a copy of the Acquisition
Agreement for such Competing Transaction in the form to be entered into, and
(ii) at least five full business days after Espotting has provided the notice
referred to in clause (i) above, Espotting delivers to FindWhat (A) a written
notice of termination of this Agreement pursuant to this Section 7.1(c), (B) a
wire transfer of immediately available funds in the amount of the Termination
Fee (as defined in Section 7.2(b)), as liquidated damages and not as a penalty,
and (C) FindWhat's Costs in accordance with Section 7.2(d).
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(d) by FindWhat if Espotting has breached any of its representations
and warranties in Article IV of this Agreement and as a result thereof, the
condition set forth in Section 6.3(a) could not be satisfied;
(e) by Espotting if FindWhat and Subcorp shall have breached any of
their representations and warranties in Article III of this Agreement and as a
result thereof, the condition set forth in Section 6.2(a) could not be
satisfied;
(f) by Espotting, if (i) the directors of FindWhat shall have failed to
include in the Proxy Statement the FindWhat Board Recommendation, (ii) the
directors of FindWhat shall have withdrawn the FindWhat Board Recommendation,
(iii) the directors of FindWhat shall have modified or changed the FindWhat
Board Recommendation in a manner adverse to Espotting (it being agreed that any
disclosure of information required by Applicable Law regarding FindWhat's
operations shall not be deemed a modification or change of the FindWhat Board
Recommendation in a manner adverse to Espotting), provided that Espotting shall
not be entitled to terminate this Agreement pursuant to this clause (iii) unless
it has notified FindWhat in writing that it intends to terminate the Agreement
pursuant to this clause (iii) and FindWhat has not, within two business days
after receipt of Espotting's notice, revised the FindWhat Board Recommendation
in a manner not so adverse, (iv) the directors of FindWhat shall have approved
or recommended to the stockholders of FindWhat a Business Combination with
another person other than Espotting, (v) FindWhat shall have materially breached
its obligations under this Agreement by reason of a failure to call the FindWhat
Stockholders Meeting in accordance with Section 5.2(a), or (vi) the directors of
FindWhat shall have adopted a resolution to do any of the foregoing specified in
clauses (i), (ii), (iii), (iv) or (v); or
(g) by FindWhat, if: (i) the directors of Espotting shall have failed
to make the Espotting Board Recommendation, (ii) the directors of Espotting
shall have withdrawn the Espotting Board Recommendation, (iii) the directors of
Espotting shall have modified or changed the Espotting Board Recommendation in a
manner adverse to FindWhat (it being agreed that any disclosure of information
required by Applicable Law regarding FindWhat's operations shall not be deemed a
modification or change of the Espotting Board Recommendation in a manner adverse
to FindWhat), provided that FindWhat shall not be entitled to terminate this
Agreement pursuant to this clause (iii) unless it has notified Espotting in
writing that it intends to terminate the Agreement pursuant to this clause (iii)
and Espotting has not, within two business days after receipt of FindWhat's
notice, revised the Espotting Board Recommendation in a manner not so adverse,
(iv) the directors of Espotting shall have approved or recommended to the
stockholders of Espotting a Competing Transaction, (v) Espotting willfully
breaches any of its obligations under Section 5.3(c) of this Agreement, (vi)
Espotting shall have materially breached its obligations under this Agreement by
reason of a failure to call the Espotting Stockholders Meeting in accordance
with Section 5.3(a), (vii) the directors of Espotting shall have adopted a
resolution to do any of the foregoing specified in clauses (i), (ii), (iii),
(iv), (v), or (vi), (viii) the conditions set forth in Section 6.3(d) shall not
have been fulfilled and shall not have been cured within 30 days of notice from
FindWhat to Espotting of such non-fulfillment, or (ix) the conditions set forth
in Section 6.3(h) shall not have been fulfilled.
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7.2 Effect of Termination.
(a) Termination Fee and Costs. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement, except for the second
sentence of Section 5.1(d) and the provisions of Sections 7.2, 8.2, 8.3, 8.5,
8.6, 8.7, 8.9, 8.10, 8.11 and 8.12 shall become void and have no effect, without
any liability on the part of any party or its directors, officers or
shareholders. Notwithstanding the foregoing, nothing in this Section 7.2 shall
relieve any party to this Agreement of liability for a breach of any provision
of this Agreement and provided, however, that if it shall be judicially
determined that termination of this Agreement was caused by an intentional
breach of this Agreement, then, in addition to other remedies at law or equity
for breach of this Agreement, the party so found to have intentionally breached
this Agreement shall indemnify and hold harmless the other party for its
out-of-pocket costs, fees and expenses of its counsel, accountants, financial
advisors and other experts and advisors as well as fees and expenses incident to
negotiation, preparation and execution of this Agreement and related
documentation and shareholders' meetings and consents, up to an aggregate of
$5.0 million ("Costs").
(b) Payment of Termination Fee. In the event that
(1) a bona fide Competing Transaction shall have been publicly
disclosed or has been made directly to the Espotting Stockholders or any person
has announced an intention (whether or not conditional) to make a bona fide
proposal for a Competing Transaction and thereafter this Agreement is terminated
(x) by FindWhat pursuant to Section 7.1(b)(v) or 7.1(d) (provided that the
breach or failure to perform giving rise to FindWhat's right to terminate under
Section 7.1(b)(v) or Section 7.1(d) shall have been willful), or (y) by FindWhat
pursuant to Section 7.1(g)(v) and, in any case, within twelve months of
termination either Espotting enters into a definitive agreement with respect to
a Business Combination, or a Business Combination is consummated,
(2) a bona fide Business Combination shall have been publicly
disclosed or has been made directly to the FindWhat Stockholders or any person
has announced an intention (whether or not conditional) to make a bona fide
proposal for a Business Combination and thereafter this Agreement is terminated
by Espotting pursuant to Section 7.1(b)(v) or 7.1(e) (provided that the breach
or failure to perform giving rise to Espotting's right to terminate under
Section 7.1(b)(v) or Section 7.1(e) shall have been willful), and within twelve
months of termination either FindWhat enters into a definitive agreement with
respect to a Business Combination, or a Business Combination is consummated, or
(3) this Agreement is terminated (x) by Espotting pursuant to
Section 7.1(f) or (y) by FindWhat pursuant to Section 7.1(g) (other than Section
7.1(g)(v), 7.1(g)(viii) or 7.1(g)(ix))
then the party not terminating pursuant to clause (1), (2) or (3) above
(the "Competing Transaction Party") shall pay the other party (the "Terminating
Party") a fee equal to $7 million (the "Termination Fee"), payable by wire
transfer of immediately available funds, such payment to be made (A) in the case
of the termination contemplated by clause (1) or (2), on the earlier of the date
the Competing Transaction Party enters into a definitive agreement or a
Competing Transaction or Business Combination is consummated, (B) in the case of
a termination contemplated by clause (3), within five (5)
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business days of such termination. Within five (5) business days of the final
determination of Costs pursuant to Section 7.2(d) below, the Competing
Transaction Party shall reimburse the Terminating Party for all of its Costs.
The parties acknowledge that the agreements contained in this Section 7.2(b) are
an integral part of the transactions contemplated by this Agreement, and that,
without these agreements, the parties would not enter into this Agreement. If
either party shall successfully bring an action to enforce its rights under this
Section 7.2(b), the other party shall reimburse such party for its reasonable
fees and expenses in connection therewith and shall pay such party interest on
the Termination Fee and Costs from the date the Termination Fee becomes payable
to the date of payment at the publicly announced prime rate of Citibank, N.A. in
effect on the date the Termination Fee became payable.
(c) Business Combination. For the purposes of this Article VII,
"Business Combination" means (i) a merger, consolidation, share exchange,
business combination or similar transaction involving a party hereto as a result
of which that party's stockholders prior to such transaction in the aggregate
cease to own at least 50% of the voting securities of the entity surviving or
resulting from such transaction (or the ultimate parent entity thereof), (ii) a
sale, lease, exchange, transfer or other disposition of more than 50% of the
assets of a party and its subsidiaries, taken as a whole, in a single
transaction or a series of related transactions, or (iii) the acquisition, by a
person (other than the other party hereto or any affiliate thereof) or group (as
such term is defined under Section 13(d) of the Exchange Act) of beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of
the capital stock of such party whether by tender or exchange offer or
otherwise.
(d) Costs Determination. The Terminating Party will submit to the
Competing Transaction Party, within 30 days after notice of termination is
delivered to the Competing Transaction Party which termination would obligate
the Competing Transaction Party to pay the Terminating Party's Costs pursuant to
Section 7.1(c) or Section 7.2(b), a written determination of its final Costs,
detailing the calculation of such final Costs, which shall not exceed the
limitation set forth in Section 7.2(a) above. The other party shall have 30 days
after receipt of the determination of final Costs within which to object to such
determination. If the non-terminating party fails to object by written notice to
the other party within such 30-day period, the non-terminating party will be
deemed to have accepted and agreed to such final Costs, whereupon such
determination shall be final and binding upon the parties. If the
non-terminating party objects to such determination, then the parties agree to
meet within ten days after the other party has received written notice of the
objection to discuss such objection. At the conclusion of such meeting, the
parties will either (i) agree to accept the determination of final Costs, making
such determination final and binding on all parties, (ii) agree to a revised
amount of final Costs, whereupon such determination shall be final and binding
on all parties, or (iii) direct the parties' accountants to review the
determination of final Costs in light of specific calculations or methodologies
in dispute, report to each party the results of such review, such accountants'
conclusions with respect thereto, and a final determination of the amount of the
Costs, whereupon such determination shall be final and binding on all parties.
Any adjustment to the payment of the initial estimate of Costs which may have
been paid pursuant to Section 7.1(b)(v) or the payment of Costs pursuant to this
Section 7.2 shall be paid in immediately available funds to an account
designated by the Terminating Party.
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7.3 Amendment. This Agreement may be amended by the parties hereto, by action
taken or authorized by their respective boards of directors, at any time before
or after adoption of this Agreement by Espotting Stockholders and the FindWhat
Stockholders, but after any such approval, no amendment shall be made that by
law requires further approval or authorization by the Espotting Stockholders or
the FindWhat Stockholders or by agreement requires the consent of Beringea or a
majority of the outstanding principal amount of the Loan Notes without such
further approval, authorization or consent. Notwithstanding the foregoing, this
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time, FindWhat (with
respect to Espotting) and Espotting (with respect to FindWhat and Subcorp) by
action taken or authorized by their respective Boards of Directors, may, to the
extent legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of such party, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
ARTICLE VIII
MISCELLANEOUS
8.1 Survival of Representations and Warranties. Except as provided in Article IX
hereof, the representations, warranties, covenants and agreements made herein by
the parties hereto shall not survive the Effective Time. This Section 8.1 shall
not limit any covenant or agreement of the parties hereto, which by its terms
contemplates performance after the Effective Time or after the termination of
this Agreement.
8.2 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally, telecopied (which is
confirmed) or dispatched by a nationally recognized overnight courier service to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to FindWhat or Subcorp.
▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chairman and Chief Executive Officer
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
-▇▇-
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Espotting:
Espotting, Inc.
▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇
Attention: President
Facsimile: (▇▇-▇▇) ▇▇▇▇ ▇▇▇▇
with a copy to:
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if, after the Closing Date, to the Sellers' Representative:
▇▇▇▇ ▇▇▇▇▇
Investment Manager
Beringea
▇▇-▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
8.3 Interpretation.
(a) When a reference is made in this Agreement to an Article or
Section, such reference shall be to an Article or Section of this Agreement
unless otherwise indicated. The headings, the table of contents and the index of
defined terms contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes", or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
(b) For the purposes of any provision of this Agreement, a "Material
Adverse Effect" with respect to any person shall be deemed to occur if any
event, change or effect, has occurred which has a material adverse effect on the
business, assets (including intangible assets), liabilities (contingent or
otherwise), results of operations, business prospects, or financial
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condition of such person, or a material adverse effect on the ability of such
person to consummate Merger and the other transactions contemplated hereby;
provided, however, none of the following shall be deemed in themselves, either
alone or in combination, to constitute, and none of the following shall be taken
into account in determining whether there has been a Material Adverse Effect:
(i) with respect to any person, any change in or effect upon the
assets (including intangible assets), liabilities (contingent or otherwise),
financial condition, business prospects, or results of operations of such party
or any of its subsidiaries directly or indirectly arising out of or attributable
to any decrease in the market price of FindWhat Common Shares (but not any
change or effect underlying such decrease to the extent such change or effect
would otherwise constitute a Material Adverse Effect on FindWhat);
(ii) with respect to any person, any change in or effect upon the
assets (including intangible assets), liabilities (contingent or otherwise),
financial condition, business prospects, or results of operations of such person
directly or indirectly arising out of or attributable to conditions, events, or
circumstances generally affecting the economies of the United States, United
Kingdom or continental Europe;
(iii) with respect to any person, any change in or effect upon
the assets (including intangible assets), liabilities (contingent or otherwise),
financial condition, business prospects, or results of operations of such person
directly or indirectly arising out of or attributable to the general state of
industries and market sectors in which such person operates; and
(iv) with respect to Espotting or any Key Espotting Subsidiary
any change in or effect upon the assets (including intangible assets),
liabilities (contingent or otherwise), financial condition, or results of
operations of Espotting or any Key Espotting Subsidiary directly or indirectly
arising out of or attributable to the loss by Espotting or any Key Espotting
Subsidiary of any of its business prospects or customers (including business of
such business prospects or customers), suppliers or employees (including,
without limitation, any financial consequence of such loss of customers
(including business of such customers), suppliers or employees) due primarily to
the transactions contemplated hereby or the or public announcement of this
Agreement, in each case arising after the date of this Agreement, or arising out
of or attributable to the status of Espotting's agreements and relationship with
its largest distribution partner as of the date of this Agreement or Lycos, Inc.
for any reason.
(c) For purposes of this Agreement, a "subsidiary" when used with
respect to any party means any individual partnership, firm, corporation,
association, trust, unincorporated organization (including any representative
office or branch) or other entity under the laws of any jurisdiction, (i) of
which such party or another subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any subsidiary of such party do not have 50% or more of the voting
interests in such partnership) or (ii) 50% or more of the securities or other
interests of which having by their terms ordinary voting power to elect at least
50% of the board of directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or one or more of its subsidiaries (or if
there are no such voting
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securities or interests, 50% or more of the equity interests of which is
directly or indirectly owned or controlled by such party or one or more of its
subsidiaries).
(d) For purposes of this Agreement, "affiliate" means a person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with another person or beneficially
owns or has the power to vote or direct the vote of 10% of more of the voting
stock (or of any other form of general partnership, limited partnership or
voting equity interest in the case of a person that is not a corporation) of
such other person. For purposes of this definition, "control," including the
terms "controlling" and "controlled," means through the ownership of voting
securities, by contract or credit arrangement, as trustee, partner or executor
or otherwise.
(e) For purposes of this Agreement, "knowledge" of a party shall mean
the actual knowledge of such party's or such party's subsidiaries' executive
officers, managers or directors (or foreign equivalent) having primary
responsibility for such matter.
8.4 Counterparts. This Agreement may be executed in counterparts, which together
shall constitute one and the same Agreement. The parties may execute more than
one copy of the Agreement, each of which shall constitute an original.
8.5 Entire Agreement. This Agreement (including the exhibits, schedules,
documents and the instruments referred to herein) constitutes the entire
agreement among the parties and supersedes all prior agreements and
understandings, agreements or representations by or among the parties, written
and oral, with respect to the subject matter hereof and thereof, including,
without limitation, (a) the Agreement and Plan of Merger dated June 17, 2003 by
and among the parties hereto, (b) the First Amendment, (c) the Second Amendment,
(d) the Consent and Reservation of Rights dated September 19, 2003 ("Consent
and Reservation of Rights") by and among the parties, and (e) the Agreement
dated June 17, 2003 by and among the parties with respect to, among other
things, the formation of an advisory board; provided, however, that nothing in
this Agreement supercedes or replaces (a) Section 2 of the First Amendment,
which section shall survive the execution of this Agreement, (b) Section 1 of
the Consent and Reservation of Rights which section shall survive the execution
of this Agreement, or (c) the Confidentiality Agreement which shall survive the
execution of this Agreement, subject to any modifications thereto contained in
the second sentence of Section 5.1(d) hereof (the terminated agreements or
agreement provisions, collectively, the "Terminated Agreements").
The parties no longer have any rights or obligations under, arising
from and in connection with the Terminated Agreements and each party releases
the other parties and all of their past, present and future administrators,
"affiliates" (as that term is defined in Rule 12b-2 under the U.S. Securities
Act of 1933, as amended), agents, assigns, beneficiaries, directors, employees,
insurers, officers, stockholders and other representatives and related parties
("Related Parties"), from all claims which such party now has, has ever had or
may hereafter have, arising contemporaneously with or before the date of this
Agreement. The parties will not, directly or indirectly, assert any claim, or
commence, institute or cause to be commenced, any proceeding of any kind against
the other parties which they have released from claims pursuant to this Section
8.4 based upon or in connection with any released matter. Notwithstanding the
foregoing, nothing contained in this Section 8.4 will release any party from
claims for fraud.
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8.6 Third-Party Beneficiaries. Except for the agreement set forth in Section
5.2(c), nothing in this Agreement, express or implied, is intended or shall be
construed to create any third-party beneficiaries.
8.7 Governing Law; Venue.
(a) Except to the extent that the laws of the jurisdiction of
organization of any party hereto, or any other jurisdiction, are mandatorily
applicable to the Merger or to matters arising under or in connection with this
Agreement, this Agreement shall be governed by the laws of the State of Delaware
without regard to its conflict of laws rules. All actions and proceedings
arising out of or relating to this Agreement shall be heard and determined
exclusively in any state or federal court sitting in Delaware. Each of the
parties hereto agrees that a final judgment in any action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) Each of the parties hereto irrevocably consents to the service of
any summons and complaint and any other process in any other action or
proceeding relating to the Merger, on behalf of itself or its property, by the
personal delivery of copies of such process to such party. Nothing in this
Section 8.7 shall affect the right of any party hereto to serve legal process in
any other manner permitted by law.
8.8 Specific Performance. The transactions contemplated by this Agreement are
unique. Accordingly, each of the parties acknowledges and agrees that, in
addition to all other remedies to which it may be entitled, each of the parties
hereto is entitled to a decree of specific performance, provided such party is
not in material default hereunder.
8.9 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Additionally, notwithstanding the foregoing
or anything to the contrary contained in this Agreement, FindWhat is
specifically permitted to adopt a holding company structure pursuant to Section
251(g) of the Delaware General Corporation Law and assign this Agreement to the
holding company or consummate the reincorporation of FindWhat into the State of
Delaware.
8.10 Expenses. Subject to the provisions of Section 7.2, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby and thereby shall be paid by the party incurring such expenses.
8.11 Severability. The invalidity or unenforceability in whole or in part of any
covenant, promise or undertaking, or any section, subsection, sentence, clause,
phrase, word, or any of the provisions of this Agreement will not affect the
validity or enforceability of the remaining portions of this Agreement. If for
any reason, any provision is determined to be invalid or in conflict with any
existing, or future law or regulation by a court or agency having valid
jurisdiction, such will not impair the operation or have any other effect upon
such other
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provisions of this Agreement as may remain otherwise valid, and the latter will
continue to be given full force and effect and bind the parties hereto.
8.12 Non-Solicitation Agreement. Upon this Agreement becoming effective, that
certain Agreement dated March 26, 2003, by and between FindWhat and Espotting,
with respect to the respective parties' covenants not to solicit, among other
things, a Competing Transaction, is terminated and the relationship of the
parties with respect to a Competing Transaction and related matters shall be
governed by this Agreement.
ARTICLE IX
PURCHASE PRICE ADJUSTMENT
9.1 Adjustment. From time to time after the Closing Date and subject to this
Article IX and the Escrow Agreement, FindWhat may assert a claim to reduce the
Merger Consideration to be received by the Espotting Stockholders and Sellers'
Representative by providing notice to the Sellers' Representative and Escrow
Agent requesting that some or all of the Escrow Funds (as defined in the Escrow
Agreement) be returned by the Escrow Agent to FindWhat.
9.2 Survival; Knowledge; Waiver.
(a) All of Espotting's covenants and agreements, and its
representations and warranties in Article IV, the Espotting Disclosure Schedule,
the supplements to the Espotting Disclosure Schedule, the certificate delivered
by Espotting pursuant to Section 6.2(c) and any other certificate or document
delivered by Espotting pursuant to this Agreement shall survive the Closing and
the consummation of the transactions contemplated hereby, subject to the
limitations set forth in this Article IX; provided, however, that nothing in
this Article IX shall in any way limit the parties' rights as described in
Section 7.2 should this Agreement be terminated.
(b) The right of FindWhat to a reduction of the Merger Consideration
payable hereunder and pursuant to the Escrow Agreement based on breaches of such
representations, warranties, covenants and obligations shall not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of having been acquired) about, the accuracy or inaccuracy of or
compliance or noncompliance with, any such representation, warranty, covenant or
obligation. The waiver by FindWhat or Subcorp of any condition based on the
accuracy of any of Espotting's representations or warranties, or on the
performance of or compliance with any covenant or obligation of Espotting, shall
not affect the right of FindWhat to a reduction of the Merger Consideration
payable hereunder and pursuant to the Escrow Agreement based on breaches of such
representations, warranties, covenants and obligations.
9.3 Bases for Reduction of Merger Consideration. The Merger Consideration
payable to the Espotting Stockholders shall be reduced by the monetary value of,
any liability, loss, damage, claim, cost, deficiency, diminution of value, or
expense (including costs of investigation and defense, penalties and reasonable
legal fees and costs), whether or not involving a third-party claim
(collectively, "Adverse Consequences") incurred by FindWhat, Subcorp or their
Related Parties ("FindWhat Parties") arising, directly or indirectly, from or in
connection with the following matters (collectively, the "Reduction Matters"):
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(a) any breach of any representation or warranty made by Espotting in
this Agreement (without giving effect to any Material Adverse Effect qualifier
contained therein, and without giving effect to any supplement to Espotting
Disclosure Schedule made after signing which relate to facts and circumstances
existing on or before the date of this Agreement which were known or should have
been known to Espotting), the Espotting Disclosure Schedule, the supplements to
the Espotting Disclosure Schedule, the certificate delivered pursuant to Section
6.2(c) or any other certificate or document delivered by Espotting pursuant to
this Agreement;
(b) any breach by Espotting of any covenant or obligation in this
Agreement;
(c) any liabilities of Espotting existing at or arising out of a state
of facts existing at or before the Closing Date, to the extent that such
liabilities are not reflected or reserved against in the Closing Date Balance
Sheet;
(d) (i) any brokerage, finders' or similar fee claimed in connection
with the transactions contemplated by this Agreement in excess of $1,700,000;
(ii) any breach by Espotting of the covenants and obligations in Section 5.3(k)
of this Agreement; and (iii) the matters disclosed in the following sections of
the Espotting Disclosure Schedule: Item 4 of Section 4.2(a), Item 5 of Section
4.4, Item 2 of Section 4.9, Item 3 of Section 4.9, Item 2 of Section 4.10, all
of Section 4.12(a), and Item 10 of Appendix 4 to the Espotting Disclosure
Schedule; and
(e) any Proceeding, demand or assessment incidental to any of the
matters set forth in Sections 9.3(a) through (d). "Proceeding" means any action,
arbitration, audit, examination, investigation, hearing, litigation or suit
(whether civil, criminal, administrative, judicial or investigative, whether
formal or informal, and whether public or private) commenced, brought, conducted
or heard by or before, or otherwise involving, any Governmental Authority or
arbitrator.
9.4 Claim Notices. On or before the second anniversary of the Closing Date,
FindWhat may deliver to the Sellers' Representative and the Escrow Agent one or
more notices which assert that the Merger Consideration should be reduced in an
amount equal to the monetary value of Adverse Consequences incurred by the
FindWhat Parties as a result of the Reduction Matters. Such notices will specify
in reasonable detail the nature and dollar amount of any claim and the
anticipated expenses and costs relating to such claim ("Claim") FindWhat may
have for Reduction Matters ("Claim Notice").
9.5 Limitations on Amount. Except as provided below, on and after the Closing
Date, FindWhat's sole monetary remedy with respect to any and all matters
arising out of this Agreement shall be limited (a) to the right to assert a
Claim for Reduction Matters and have recourse to the Escrow Funds (as defined in
the Escrow Agreement) and (b) the Net Adjustment Amount. FindWhat shall not
assert a Claim until the total monetary value of all Adverse Consequences with
respect to the Reduction Matters exceeds $500,000, but then for the total
monetary value of such Adverse Consequences. The maximum, aggregate amount by
which the Merger Consideration may be reduced pursuant to this Article IX and
Section 2.4 shall be the value of 20% of the Merger Consideration, which
reduction, if any, shall be pro rata among the Espotting Stockholders.
Notwithstanding the foregoing, this Section 9.5 shall not (a) limit in any
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way any equitable remedy available to FindWhat, including, without limitation,
specific performance, injunctive relief and rescission, or (b) apply to (i)
breaches of Espotting's representations and warranties contained in Section 4.6,
(ii) breaches of any of its other representations and warranties of which breach
Espotting had knowledge before the date on which Espotting made such
representation and warranty, (iii) intentional breaches by Espotting of its
covenants or obligations, (iv) any of the matters set forth in Section 9.3(d),
or (v) any Reduction Matter based on a claim of fraud or deceit.
ARTICLE X
SELLERS' REPRESENTATIVE
10.1 Appointment. On behalf of the Espotting Stockholders, Espotting hereby
irrevocably confirms, designates and appoints ▇▇▇▇ ▇▇▇▇▇ as the Espotting
Stockholders' representative, agent and attorney-in-fact ("Sellers'
Representative").
10.2 Powers. The rights and obligations of the Sellers' Representative and those
of the Espotting Stockholders relative to the Sellers' Representative are set
forth in the Sellers' Representative Agreement ("Sellers' Representative
Agreement") attached as Exhibit 10.1. The Sellers' Representative Agreement
shall be submitted by Espotting to FindWhat and Subcorp before the date of this
Agreement and must be in a customary form reasonably acceptable to FindWhat. At
a minimum, the Sellers' Representative Agreement must contain provisions that do
the following and place no limitations thereon:
(a) appoint the Sellers' Representative as each Espotting Stockholders'
representative, agent and attorney-in-fact with exclusive power and authority to
act for and on behalf of each Espotting Stockholders' behalf after the Closing
Date in connection with the Merger Agreement and Escrow Agreement, including,
without limitation:
(i) all matters arising under or relating to this Agreement and
the Escrow Agreement;
(ii) the adjustment procedure in Section 2.4 and all disputes and
other matters relating thereto or arising there from;
(iii) all matters governed by Article IX and all disputes or
other matters relating thereto or arising there from;
(iv) execution, delivery and receipt on behalf of the Espotting
Stockholders of all notices, requests and other communications required or
permitted to be given under this Agreement and the Escrow Agreement after the
Closing Date;
(v) receive disbursements and payments of Escrow Funds from the
Escrow Agent, and distribute them to the Espotting Stockholders; and
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(vi) take all other actions and make all other decisions that
this Agreement or the Escrow Agreement requires or permits the Sellers'
Representative to take or make;
(b) couple the appointment and grant of authority to the Sellers'
Representative with an interest, such that it is irrevocable and may not be
terminated by the act of any Espotting Stockholder or by operation of law,
whether upon the death or incapacity of any Espotting Stockholder or by the
occurrence of any other event;
(c) provide a mechanism for the immediate appointment or election of a
successor to the Sellers' Representative should he or she die or become
incapacitated or refuses to continue to serve in that capacity; and
(d) provide that the Espotting Stockholders shall bear, and shall not
seek reimbursement or indemnification from FindWhat or Subcorp for, all fees,
costs and expenses of the Sellers' Representative and his or her advisors in
connection with the performance of his or her duties.
10.3 Reliance. After the Closing Date,
(a) FindWhat and the Escrow Agent shall be entitled to rely upon any
document delivered by Sellers' Representative as being genuine and correct and
having been duly signed or sent by Sellers' Representative, and FindWhat and the
Escrow Agent shall not be liable to any Espotting Stockholder for any action
taken or omitted by FindWhat or the Escrow Agent in such reliance;
(b) FindWhat and the Escrow Agent shall be entitled to direct all
communications through and rely on decisions made by the Sellers'
Representative.
IN WITNESS WHEREOF, FindWhat, Subcorp and Espotting have signed this
Agreement as of the respective dates set forth below.
▇▇▇▇▇▇▇▇.▇▇▇
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇
Title: Chairman, Chief Executive Officer and
President
WHO MERGER CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇
Title: President
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ESPOTTING MEDIA INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President and Chief Executive Officer
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