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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
IPLACE, INC.
AND THE
STOCKHOLDERS OF IPLACE, INC.
LISTED ON THE SIGNATURE PAGES HERETO
DATED AS OF AUGUST 7, 2001
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ARTICLE I
THE MERGER
1.1 THE MERGER.......................................................................... 1
1.2 CLOSING............................................................................. 1
1.3 EFFECTS OF THE MERGER............................................................... 1
1.4 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION................................... 2
1.5 PURCHASE PRICE...................................................................... 4
1.6 ADJUSTMENTS TO PURCHASE PRICE....................................................... 4
1.7 ESCROW.............................................................................. 8
1.8 REGISTRATION RIGHTS AND LOCK-UP..................................................... 8
1.9 PAYMENT OF MERGER CONSIDERATION TO STOCKHOLDERS..................................... 8
1.10 DISSENTING SHARES................................................................... 9
1.11 TAX CONSEQUENCES.................................................................... 10
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND THE STOCKHOLDERS
2.1 ORGANIZATION AND POWER; CAPITALIZATION............................................. 10
2.2 AUTHORIZATION; BINDING EFFECT, ETC................................................. 12
2.3 CHARTER, BY-LAWS AND MINUTES....................................................... 12
2.4 NO VIOLATION....................................................................... 12
2.5 FINANCIAL STATEMENTS............................................................... 13
2.6 LIABILITIES........................................................................ 13
2.7 REAL AND PERSONAL PROPERTY......................................................... 13
2.8 NO ENCUMBRANCES.................................................................... 13
2.9 TAXES.............................................................................. 13
2.10 CONTRACTS.......................................................................... 14
2.11 ACCOUNTS RECEIVABLE................................................................ 14
2.12 INTELLECTUAL PROPERTY.............................................................. 14
2.13 CONSENTS; COMPLIANCE WITH LAW...................................................... 15
2.14 EMPLOYEES.......................................................................... 16
2.15 EMPLOYEE PLANS AND BENEFITS........................................................ 16
2.16 INSURANCE.......................................................................... 17
2.17 TRANSACTIONS WITH AFFILIATES....................................................... 17
2.18 BOOKS AND RECORDS; BANK ACCOUNTS................................................... 17
2.19 OPERATION OF BUSINESS IN ORDINARY COURSE........................................... 17
2.20 LITIGATION......................................................................... 17
2.21 FINDER'S FEE....................................................................... 17
2.22 APPROVALS.......................................................................... 18
2.23 REGULATED ENTITY................................................................... 18
2.24 INVESTMENT INTENT.................................................................. 18
2.25 DISCLOSURE......................................................................... 19
2.26 STOCKHOLDERS OF COMPANY............................................................ 19
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2.27 POWERS OF ATTORNEY................................................................. 19
2.28 NO BANKRUPTCY PROCEEDINGS.......................................................... 19
2.29 ENVIRONMENTAL LIABILITIES.......................................................... 20
2.30 YAHOO LICENSE AGREEMENT............................................................ 20
ARTICLE III
REPRESENTATIONS OF BUYER AND SUB
3.1 ORGANIZATION AND POWER............................................................. 20
3.2 NO VIOLATION....................................................................... 20
3.3 AUTHORITY.......................................................................... 21
3.4 BUYER SHARES....................................................................... 21
3.5 APPROVALS.......................................................................... 21
3.6 OWNERSHIP OF SUB................................................................... 21
ARTICLE IV
PRE-CLOSING COVENANTS
4.1 CONSENTS AND FILINGS............................................................... 21
4.2 CLOSING CONDITIONS................................................................. 22
4.3 CONDUCT OF COMPANY'S BUSINESS PRIOR TO THE CLOSING DATE............................ 22
4.4 FULL ACCESS AND NOTICE............................................................. 24
4.5 EXCLUSIVITY........................................................................ 24
4.6 COMPANY STOCK OPTION PLAN.......................................................... 24
4.7 TERMINATION AND AMENDMENT OF AGREEMENTS............................................ 25
4.8 SCHEDULE 2.7....................................................................... 25
4.9 BENEFIT PROVIDER AGREEMENT......................................................... 25
ARTICLE V
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
5.1 BOARD AND STOCKHOLDER APPROVAL..................................................... 25
5.2 REPRESENTATIONS AND WARRANTIES..................................................... 25
5.3 COMPANY'S PERFORMANCE.............................................................. 26
5.4 NO MATERIAL ADVERSE CHANGE......................................................... 26
5.5 CONSENTS........................................................................... 26
5.6 APPROVALS.......................................................................... 26
5.7 NO ORDERS; LEGAL PROCEEDINGS....................................................... 26
5.8 APPROVAL OF DOCUMENTATION.......................................................... 27
5.9 RELATED AGREEMENTS................................................................. 27
5.10 OPINION OF COUNSEL FOR COMPANY..................................................... 27
5.11 OPINION OF COUNSEL FOR BUYER....................................................... 27
5.12 CAPITALIZATION SCHEDULE............................................................ 27
5.13 COMPANY STOCK OPTION PLAN.......................................................... 27
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5.14 OPTION HOLDERS..................................................................... 27
5.15 JUNE 30 AUDITED FINANCIALS......................................................... 27
5.16 REPAYMENT OF MEMBERWORKS NOTE RECEIVABLE........................................... 27
5.17 MEMBERWORKS AGREEMENTS............................................................. 28
5.18 NO DISSENTING STOCKHOLDER.......................................................... 28
5.19 OPINION OF COUNSEL OF MEMBERWORKS.................................................. 28
ARTICLE VI
CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS
6.1 REPRESENTATIONS AND WARRANTIES..................................................... 28
6.2 PERFORMANCE OF BUYER............................................................... 28
6.3 APPROVAL OF DOCUMENTATION.......................................................... 28
6.4 APPROVALS.......................................................................... 28
6.5 NO ORDERS; LEGAL PROCEEDINGS....................................................... 28
6.6 RELATED AGREEMENTS................................................................. 28
6.7 LEGAL OPINION...................................................................... 28
6.8 OPINION OF COUNSEL FOR BUYER....................................................... 29
ARTICLE VII
POST-CLOSING COVENANTS
7.1 COVENANT NOT TO COMPETE............................................................ 29
7.2 CONFIDENTIALITY.................................................................... 30
7.3 REASONABLENESS OF RESTRICTIONS AND ENFORCEABILITY.................................. 30
7.4 SEVERABLE COVENANTS................................................................ 30
7.5 LITIGATION SUPPORT................................................................. 30
7.6 TRANSITION......................................................................... 31
7.7 GENERAL............................................................................ 31
ARTICLE VIII
INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, COVENANTS AND AGREEMENTS............... 31
8.2 INDEMNIFICATION BY STOCKHOLDERS.................................................... 32
8.3 INDEMNIFICATION BY BUYER........................................................... 32
8.4 PROCEDURES......................................................................... 32
8.5 PREVAILING PARTY TO BE AWARDED LEGAL FEES.......................................... 33
8.6 INDEMNIFICATION RECOVERY........................................................... 33
8.7 ESCROW AMOUNT...................................................................... 33
8.8 STOCKHOLDER AGENT.................................................................. 34
8.9 INSURANCE PROCEEDS................................................................. 34
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ARTICLE IX
TAX MATTERS
9.1 CERTAIN TAXES...................................................................... 35
9.2 TAX COOPERATION.................................................................... 35
ARTICLE X
TERMINATION
10.1 TERMINATION OF AGREEMENT........................................................... 35
10.2 EFFECTS OF TERMINATION............................................................. 36
ARTICLE XI
GENERAL
11.1 ENTIRE AGREEMENT................................................................... 36
11.2 EQUITABLE RELIEF; BINDING EFFECT................................................... 36
11.3 SEPARATE COUNTERPARTS.............................................................. 36
11.4 TRANSACTION COSTS.................................................................. 36
11.5 NOTICES............................................................................ 36
11.6 NO DISCLOSURE WITHOUT CONSENT...................................................... 37
11.7 SEVERABILITY....................................................................... 37
11.8 CAPTIONS........................................................................... 37
11.9 GOVERNING LAW...................................................................... 37
11.10 NO THIRD-PARTY BENEFICIARIES....................................................... 38
11.11 ARBITRATION........................................................................ 38
11.12 SUCCESSORS AND ASSIGNS............................................................. 38
11.13 CONSTRUCTION....................................................................... 38
11.14 INCORPORATION OF EXHIBITS AND SCHEDULES............................................ 39
11.15 SUBMISSION TO JURISDICTION......................................................... 39
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("AGREEMENT") is made and entered into as of
August 7, 2001, by and among ▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation
("BUYER"), on behalf of itself and a wholly-owned subsidiary of Buyer to be
formed in Delaware ("SUB"), iPlace, Inc., a Delaware corporation ("COMPANY") and
the stockholders of Company listed on the signature pages hereto (collectively,
the "STOCKHOLDERS"). Certain capitalized terms used in this Agreement are
defined in Exhibit A.
RECITALS
WHEREAS, the Boards of Directors of Buyer, Sub and Company deem it advisable and
in the best interest of said corporations and their respective stockholders that
Company be merged with and into Sub in a transaction whereby Sub will be the
surviving corporation (the "MERGER"), all in accordance with the terms of this
Agreement and applicable law; and
WHEREAS, Buyer, Sub and Company intend that the Merger qualify as a tax-free
reorganization under the provisions of Section 368(a) of the Code.
AGREEMENT
In consideration of the foregoing premises and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time and subject to the conditions of
this Agreement and the applicable provisions of the Delaware Law, Company will
merge with and into Sub. At that time, the separate corporate existence of
Company will cease, and Sub will continue as the surviving corporation (the
"SURVIVING CORPORATION").
1.2 CLOSING. Unless this Agreement is earlier terminated under Section
10.1 and subject to the satisfaction or waiver of the conditions set forth in
Articles V and VI, the closing of the Merger (the "CLOSING") will take place on
August 31, 2001 or such other date as may be mutually agreed upon by the
Parties. The date that the Closing actually occurs is referred to herein as the
"CLOSING DATE". The Closing will be held at the offices of O'Melveny & ▇▇▇▇▇
LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ or at such other
location as the Parties shall mutually agree. On the Closing Date, the Parties
will cause the Merger to be consummated by filing a Certificate of Merger (the
"CERTIFICATE OF MERGER") and any other required documents with the Secretary of
State of Delaware, in accordance with the Delaware Law.
1.3 EFFECTS OF THE MERGER.
(a) GENERAL. At the Effective Time, the effects of the Merger will
be as provided herein and under the Delaware Law. Subject thereto, (a) all the
property, rights, privileges, powers and franchises of Company and Sub will vest
in the Surviving Corporation, and (b) all debts, liabilities and duties of
Company and Sub will become the Surviving Corporation's debts, liabilities and
duties.
(b) CERTIFICATE OF INCORPORATION. At the Effective Time, Sub's
Certificate of Incorporation in effect immediately before the Effective Time
will be the Certificate of Incorporation of the Surviving Corporation, until
later amended in accordance with applicable law and that Certificate of
Incorporation;
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(c) BYLAWS. Sub's Bylaws in effect immediately before the
Effective Time will be the Surviving Corporation's Bylaws, until amended in
accordance with applicable law and the Surviving Corporation's Certificate of
Incorporation and Bylaws.
(d) DIRECTORS AND OFFICERS. Sub's directors immediately before the
Effective Time will be the directors of the Surviving Corporation. Each such
director will hold that office, in accordance with applicable law and the
Surviving Corporation's Certificate of Incorporation and Bylaws, until his or
her successor is duly elected and qualified. Sub's officers immediately before
the Effective Time will be the Surviving Corporation's officers. Each of these
officers will hold office in accordance with the Surviving Corporation's Bylaws.
1.4 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION.
(a) SERIES A HOLDER. (i) Scenario 1. If the holder of Series A
Preferred Stock, $0.01 par value per share, of Company (the "COMPANY SERIES A
PREFERRED STOCK") elects to receive the liquidation preference set forth in
Article IV(B)(4)(a) of Company's Restated Certificate of Incorporation
("SCENARIO 1"), then at the Effective Time, , each share of Company Series A
Preferred Stock issued and outstanding immediately prior to the Effective Time
will be canceled and extinguished and automatically converted into the right to
receive in cash $27.23 plus all declared and unpaid dividends in respect of such
share (the "SERIES A LIQUIDATION PREFERENCE") of Company Series A Preferred
Stock. Company shall deliver to Buyer no later than five (5) Business Days prior
to the Closing a schedule detailing the amount of all such declared and unpaid
dividends as of the Closing Date for purposes of Scenario 1. (ii) Scenario 2. If
the holder of Company Series A Preferred Stock does not elect to receive such
liquidation preference ("SCENARIO 2"), then each share of Company Series A
Preferred Stock shall be canceled and extinguished and automatically converted
into the right to receive: (i) the Closing Date Consideration Per Share Amount
multiplied by the number of shares of Company Common Stock into which one share
of Company Series A Preferred Stock can be converted immediately prior to the
Effective Time, one-half of which will be payable in cash and one-half of which
will be payable in Buyer Shares and (ii) and the Series A Fractional Interest in
the Escrow Fund multiplied by (A) the Escrow Cash and (B) the Escrow Shares. As
used herein, "CLOSING DATE CONSIDERATION PER SHARE AMOUNT" means (1) under
Scenario 1, the quotient of (A) the Purchase Price or the Adjusted Purchase
Price, as the case may be, (i) less the aggregate Series A Liquidation
Preference, (ii) less the Initial Escrow Share Value (as defined in Section
1.5), (iii) less the aggregate Escrow Cash, divided by (B) the total number of
shares of Company Common Stock issued and outstanding as of the Effective Time,
assuming no conversion of the Company Series A Preferred Stock into Company
Common Stock, and (2) under Scenario 2, the quotient of (A) the Purchase Price
or the Adjusted Purchase Price, as the case may be, (i) less the Initial Escrow
Share Value, (ii) less the aggregate Escrow Cash, divided by (B) the total
number of shares of Company Common Stock issued and outstanding as of the
Effective Time, assuming deemed conversion of the Company Series A Preferred
Stock into Company Common Stock immediately prior to the Effective Time.
SCHEDULE 1.4(B) sets forth each of the Nonaccredited Investors and the number of
shares of Company Capital Stock held by each such Nonaccredited Investor.
(b) NONACCREDITED INVESTORS. At the Effective Time, by virtue of
the Merger and without any action by any party, each share of common stock,
$0.01 par value per share, of Company (the "COMPANY COMMON STOCK")held by
Nonaccredited Investors that is issued and outstanding immediately prior to the
Effective Time shall be canceled and extinguished and automatically converted
into the right to receive in cash the Nonaccredited Investors' Closing Date
Consideration Per Share Amount.
As used herein, "NONACCREDITED INVESTORS' CLOSING DATE CONSIDERATION
PER SHARE AMOUNT" means (1) under Scenario 1, the quotient of (A) the Purchase
Price or the Adjusted Purchase Price, as the case may be, less the aggregate
Series A Liquidation Preference divided by (B) the total
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number of shares of Company Common Stock issued and outstanding as of the
Effective Time, assuming no conversion of the Company Series A Preferred Stock
into Company Common Stock, and (2) under Scenario 2, the quotient of (A) the
Purchase Price or the Adjusted Purchase Price, as the case may be, divided by
(B) the total number of shares of Company Common Stock issued and outstanding as
of the Effective Time, assuming deemed conversion of the Company Series A
Preferred Stock into Company Common Stock immediately prior to the Effective
Time.
(c) MEMBERWORKS AND OTHER ACCREDITED INVESTORS (OTHER THAN THE
MANAGEMENT STOCKHOLDERS). At the Effective Time, by virtue of the Merger and
without any action by any party, each share of Company Common Stock held by
MemberWorks and other Accredited Investors (other than the Management
Stockholders) that is issued and outstanding immediately prior to the Effective
Time will be canceled and extinguished and automatically converted into the
right to receive: (i) the Closing Date Consideration Per Share Amount, one-half
of which will be payable in cash and one-half of which will be payable in Buyer
Shares, and (ii) the Accredited Investors' Fractional Interest in the Escrow
Fund multiplied by (A) the Escrow Cash and (B) the Escrow Shares. SCHEDULE
1.4(c) sets forth each of the Accredited Investors and the number of shares of
Company Capital Stock held by each such Accredited Investor.
(d) MANAGEMENT STOCKHOLDERS. At the Effective Time, by virtue of
the Merger and without any action by any party, each share of Company Common
Stock held by the Management Stockholders that is issued and outstanding
immediately prior to the Effective Time will be canceled and extinguished and
automatically converted into the right to receive: (i) in cash the quotient of
(A) the difference between (x) the Closing Date Cash (as defined in Section 1.5)
and (y) the aggregate amount of cash disbursed under clauses (a), (b), and (c)
of this Section 1.4 divided by (B) the total number of issued and outstanding
shares of Company Common Stock owned by Management Stockholders as of the
Effective Time, (ii) a number of Buyer Shares equal to the quotient of (A) the
difference between (x) the Closing Date Shares (as defined in Section 1.5) and
(y) the total number of Buyer Shares disbursed under clauses (a), (b), and (c)
of this Section 1.4 divided by (B) the total number of issued and outstanding
shares of Company Common Stock owned by Management Stockholders as of the
Effective Time, and (iii) the Management Stockholders Fractional Interest in the
Escrow Fund multiplied by (A) the Escrow Cash and (B) the Escrow Shares.
SCHEDULE 1.4(d) sets forth each of the Management Stockholders and the number of
shares of Company Capital Stock held by each such Management Stockholder.
(e) COMPANY STOCK OPTIONS. At the Effective Time, all Company
Options shall be treated in accordance with Section 4.6.
(f) NO FRACTIONAL SHARES. No fractional share of Buyer Common
Stock will be issued in the Merger. Any fractional shares will be rounded to the
nearest whole share (with .5 being rounded up.)
(g) LIMITATION. Notwithstanding the foregoing calculations in this
Section 1.4, in no event will the aggregate cash and number of Buyer Shares paid
or issued under this Section 1.4 exceed the Closing Date Cash and Closing Date
Shares, respectively.
1.5 PURCHASE PRICE.
(a) PURCHASE PRICE. In the Merger, Buyer will pay an aggregate
purchase price (the "PURCHASE PRICE"), subject to adjustment as provided in
SECTION 1.6, consisting of (i) cash in the amount of U.S.$72,000,000 (the "CASH
PORTION OF THE PURCHASE PRICE") less (A) the amount of Company's indebtedness to
related parties set forth in SCHEDULE 1.5 (the "RELATED PARTY INDEBTEDNESS
AMOUNT") (B) those certain reasonable legal, accounting and other expenses
incurred by Company directly in
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evaluating, negotiating and effecting the Transactions (and not any other
transactions with any other parties) that in the aggregate, together with
Incremental Transaction Share Expenses (as defined below), exceed the
limitations set forth in the proviso in Section 11.4, which expenses shall be
set forth on a schedule to be provided by Company two Business Days prior to the
Closing Date (the "INCREMENTAL TRANSACTION CASH EXPENSES"), and (C) any
dividends distributed to the holder of the Company Series A Preferred Stock and
(ii) that number of unregistered shares of Buyer Common Stock (the "BUYER
SHARES") that equals the quotient of (x) U.S.$78,000,000 less those certain
reasonable legal, accounting and other expenses incurred by Company directly in
evaluating, negotiating and effecting the Transactions (and not any other
transactions with any other parties), which expenses shall be set forth on a
schedule to be provided by Company two Business Days prior to the Closing Date
(the "INCREMENTAL TRANSACTION SHARE EXPENSES," and, together with the
Incremental Transaction Cash Expenses, the "INCREMENTAL TRANSACTION EXPENSES"),
divided by (y) the Fair Market Value (the "TOTAL NUMBER OF BUYER SHARES") .
(b) DELIVERY OF PURCHASE PRICE AT CLOSING. On the Closing Date,
Buyer will deliver (i) to the Escrow Agent, that number of Buyer Shares that
equals the quotient of U.S.$17,500,000 (the "INITIAL ESCROW SHARE VALUE")
divided by the Fair Market Value, to be held and applied pursuant to the Escrow
Agreement (the "ESCROW SHARES"); (ii) to the Exchange Agent a number of Buyer
Shares (the "CLOSING DATE SHARES") equal to the difference between (A) the Total
Number of Buyer Shares less (B) the total number of Escrow Shares under this
Agreement for distribution to the stockholders in accordance with the procedures
set forth in Section 1.9 and pursuant to the allocations set forth in Section
1.4 less (C) the total number of Buyer Shares paid in accordance with
Incremental Transaction Share Expenses; (iii) to the Exchange Agent by wire
transfer of immediately available funds, an amount equal to $67,000,000 of the
Cash Portion of the Purchase Price less the Related Party Indebtedness Amount
less the Incremental Transaction Cash Expenses (the "CLOSING DATE CASH") for
distribution to the stockholders in accordance with the procedures set forth in
Section 1.9 and pursuant to the allocations set forth in Section 1.4; (iv) to
the Escrow Agent, by wire transfer of immediately available funds, an amount of
the Cash Portion of the Purchase Price (the "ESCROW CASH") equal to $5,000,000
to be held and applied pursuant to the Escrow Agreement; and (v) to the holders
of the Related Party Indebtedness, by wire transfer of immediately available
funds, the Related Party Indebtedness Amount.
(c) DELIVERY OF DOCUMENTS. In addition, on the Closing Date,
Company and Stockholders shall deliver to Buyer the various certificates,
instruments, and documents referred to in Article 5 below and the Buyer will
deliver to Company the various certificates, instruments, and documents referred
to in Article 6 below.
1.6 ADJUSTMENTS TO PURCHASE PRICE.
(a) BALANCE SHEET ADJUSTMENTS.
(i) Net Book Value Adjustment. The Purchase Price shall be
reduced (the "NET BOOK VALUE ADJUSTMENT") on a dollar for dollar basis in the
event that Net Book Value as computed with reference to the Closing Date Balance
Sheet (as defined in SECTION 1.6(b) below) is less than the Net Book Value as
computed with reference to the Company's unaudited June 30, 2001 balance sheet
attached hereto as SCHEDULE 1.6(a) (the "JUNE 30 BALANCE SHEET"). For purposes
hereof, "NET BOOK VALUE" shall mean total balance sheet assets (excluding
deferred membership related charges and reductions in cash related to (i)
Transaction expenses paid by Company and approved by Buyer and (2) any dividends
paid to the holder of the Company Series A Preferred Stock) less total balance
sheet liabilities (excluding deferred membership fees and related party
obligations and accrued expenses relating to the Transaction), in each case as
determined in accordance with GAAP, but will not include
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any balance sheet items, if any, that result from the repricing of Company's
stock options as permitted in this Agreement.
(ii) Deferred Revenue Adjustment. Without duplication of the
Net Book Value Adjustment, if the Net Book Value of Deferred Revenue set forth
on the Closing Date Balance Sheet is less than the Net Book Value of Deferred
Revenue set forth on the June 30 Balance Sheet, the Purchase Price will be
reduced $2.50 for each dollar of the shortfall (the "DEFERRED REVENUE
ADJUSTMENT").
(iii) Exclusions. The determination of whether a Net Book
Value Adjustment or Deferred Revenue Adjustment exists shall be made without
regard to the effect of Excluded Losses on any component of such determination.
(b) ADJUSTMENT PROCEDURE.
(1) Closing Date Balance Sheet. Within 30 days after the
Closing, Stockholder Agent will deliver to Buyer a balance sheet of Company as
of the Closing Date (the "CLOSING DATE BALANCE SHEET"). Within 60 days after the
Closing, Buyer will deliver to Stockholder Agent a computation of the Net Book
Value Adjustment as of the Closing Date and the Deferred Revenue Adjustment. The
Closing Date Balance Sheet will be prepared in accordance with GAAP, as
consistently applied by Company in connection with the preparation of its June
30, 2001 financial statements, and in accordance with the Company's books and
records. If, within 15 days after these deliveries, Stockholder Agent has not
given Buyer notice of its objection to the computation of the Net Book Value
Adjustment or the Deferred Revenue Adjustment containing a reasonably detailed
statement of the basis for the objection, the computation of the Net Book Value
Adjustment and the Deferred Revenue Adjustment will be binding on the Parties.
For purposes of this SECTION 1.6, "PARTIES" will mean Buyer, on the one hand,
and Stockholder Agent on behalf of the stockholders, on the other hand.
(2) Objection. If Buyer gives notice of its objection to the
Closing Date Balance Sheet or if Stockholder Agent gives notice of its objection
to the computation of the Net Book Value Adjustment or Deferred Revenue
Adjustment, and the Parties do not resolve their differences within 10 days
after the notice is given, the issues in dispute will be immediately submitted
to a big 5 accounting firm (other than PriceWaterhouseCoopers LLP or KPMG Peat
Marwick) acceptable to Buyer and Company (the "ACCOUNTANTS") for resolution. In
this connection, (A) each Party will, within 10 days following that 10-day
period, furnish to the Accountants a statement of its position and any
supporting work papers, computations and written arguments, along with any other
documents and information relating to the disputed issues the Accountants
request and are available to that Party; (B) the Accountants will, as soon as
practicable and in no event later than thirty (30) days, make their
determination based solely on the materials submitted by the Parties and any
oral presentations the Accountants decide to allow, and not on any independent
review; (C) the Accountants' determination, as stated in a notice to the Parties
from the Accountants, will be binding and conclusive on the Parties; and (D)
each Party will bear one-half of the amount of the Accountants' fees and
expenses.
(c) PAYMENT. If the Net Book Value Adjustment and/or the Deferred
Revenue Adjustment is positive, then no later than the third Business Day after
the final determination of the Net Book Value Adjustment and/or the Deferred
Revenue Adjustment Stockholder Agent will direct the Escrow Agent to pay the
amount of the Net Book Value Adjustment and/or the Deferred Revenue Adjustment,
as the case may be, to Buyer from the Escrow Fund by wire transfer of
immediately available funds to the extent of the cash on deposit therein and
thereafter shall deliver to Buyer a number of shares of Buyer Common Stock
(valued at the Fair Market Value) that is sufficient to cover the deficiency.
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(d) DUE DILIGENCE ADJUSTMENTS.
(1) Determination.
(A) If Buyer discovers during the Due Diligence Period
any Undisclosed Quantifiable Liabilities, then the Purchase Price
shall be reduced by an amount equal to the aggregate amount of all
such Undisclosed Quantifiable Liabilities computed with reference to
each underlying contract or agreement that establishes such
liability or obligation (a "QUANTIFIABLE LIABILITY PRICE
ADJUSTMENT").
(B) If Buyer discovers during the Due Diligence Period
any Reasonably Expected Contingent Liability, then the Escrow Amount
shall be increased (by the addition of Escrow Shares valued at Fair
Market Value) by an amount equal to Buyer's good faith estimate of
the amount of the Reasonably Expected Contingent Liability (a
"CONTINGENT LIABILITY ESCROW ADJUSTMENT").
(C) The aggregate amount of all Quantifiable Liability
Price Adjustments, Contingent Liability Escrow Adjustments and the
Yahoo! Purchase Price Adjustment, if any, shall not exceed $15
million.
(D) If a Reasonably Expected Contingent Liability that
is the basis of a Contingent Liability Escrow Adjustment becomes an
actual liability in accordance with GAAP on or prior to the two-year
anniversary of the Closing of this Agreement, then Buyer shall be
entitled to immediately receive a disbursement from the Escrow
Account of the number of Escrow Shares that were deposited in escrow
in connection with such Contingent Liability Adjustment. Any such
disbursements shall not affect the limitations on liability set
forth in SECTION 8.1(c).
(E) If during the Due Diligence Period the aggregate
amount of all Undisclosed Quantifiable Liabilities, Reasonably
Expected Contingent Liabilities and the Yahoo! Purchase Price
Adjustment, if any, exceeds $22,500,000 (the "INITIAL TERMINATION
ADJUSTMENT AMOUNT"), but is less than or equal to $30,000,000, Buyer
shall promptly give written notice to the Company that the Initial
Termination Adjustment Amount has been exceeded and the Buyer shall
have a right to terminate this Agreement without liability in
accordance with SECTION 10.1 (d) (iii); provided, however, that
Buyer may not so terminate this Agreement if within five (5)
Business Days of receipt from Buyer of notice that the Initial
Termination Adjustment Amount has been exceeded, the Company
consents in writing to increase the Escrow Amount by the amount by
which the aggregate amount of all Undisclosed Quantifiable
Liabilities, Reasonably Expected Contingent Liabilities and the
Yahoo! Purchase Price Adjustment, if any, exceeds $22,500,000,
provided, however, that any such increase shall not increase the
Escrow Amount above $30,000,000. Any increases in the Escrow Amount
pursuant to this SECTION 1.6(D)(1)(E) shall be made in Escrow
Shares.
(F) If during the Due Diligence Period the aggregate
amount of all Undisclosed Quantifiable Liabilities, Reasonably
Expected Contingent Liabilities and the Yahoo! Purchase Price
Adjustment, if any, exceeds $30,000,000 (the "FINAL TERMINATION
ADJUSTMENT AMOUNT"), Buyer shall have a right to terminate this
Agreement without liability in accordance with SECTION 10.1 (d)
(iii).
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(G) Any Undisclosed Quantifiable Liability that
results in a Quantifiable Liability Price Adjustment shall not also
be recoverable under the indemnities provided in SECTION 8.2 except
to the extent that the amount that would have been recoverable under
such indemnification with respect to such particular Undisclosed
Quantifiable Liability exceeds the amount of any related
Quantifiable Liability Price Adjustment. For example, if Buyer
discovers Undisclosed Quantifiable Liabilities of $20,000,000
(assuming no Contingent Liability Escrow Adjustments), then the
Purchase Price would be reduced by $15,000,000 as a Quantifiable
Liability Price Adjustment and the remaining $5,000,000 would be
eligible for recovery in accordance with the indemnity provisions in
SECTION 8.2.
(H) The determination of whether a Quantifiable
Liability Price Adjustment or a Contingent Liability Escrow
Adjustment exists shall be made without regard to the effect of
Excluded Losses on any component of such determination.
(2) Procedure. Buyer shall give notice to Company promptly
following discovery of any facts or circumstances Buyer believes should result
in a Due Diligence Adjustment, which notice shall include a detailed description
of such facts or circumstances related to such Due Diligence Adjustment and a
detailed calculation of such Due Diligence Adjustment. If, within 5 Business
Days after receipt by Company of such notice, Company has not given Buyer notice
of its objection to the computation of the Due Diligence Adjustment (the notice
must contain a reasonably detailed statement of the basis for the objection),
the computation of the Due Diligence Adjustment will be binding on the Parties.
If Company gives notice of objection to the computation of the Due Diligence
Adjustment, and the Parties do not resolve their differences within 10 days
after the notice is given, then the issues in dispute will be immediately
submitted to the Accountants for resolution. In this connection, (A) Buyer and
Company will, within 10 days following that 10-day period, furnish to the
Accountants a statement of its position and any supporting work papers,
computations and written arguments, along with any other documents and
information relating to the disputed issues the Accountants request and are
available to that Party; (B) the Accountants will, as soon as practicable and in
no event later than the earlier of thirty (30) days after the end of such ten
(10) day period or three (3) days before September 25, 2001, make their
determination based solely on the materials submitted by the Parties and any
oral presentations the Accountants decide to allow, and not on any independent
review; (C) the Accountants' determination, as stated in a notice to the Parties
from the Accountants, will be binding and conclusive on the Parties; and (D)
each Party will bear one-half of the amount of the Accountants' fees and
expenses.
(e) YAHOO! LICENSE AGREEMENT ADJUSTMENT. Buyer and Company shall,
prior to the Closing, jointly strategize on whether or not Company shall seek
the consent of Yahoo! to the consummation of the Transactions and the assignment
of the Yahoo! License Agreement to Surviving Corporation in connection with the
Transactions (the "YAHOO! CONSENT"). Company shall have the ultimate sole
discretion to determine whether or not Company will seek the Yahoo! Consent. If
Company elects to seek the Yahoo! Consent and is unable to obtain such Yahoo!
Consent prior to the Closing Date, the Purchase Price shall be reduced by
$4,005,464 (the "YAHOO! PURCHASE PRICE ADJUSTMENT"). If Company elects not to
seek the Yahoo! Consent, the Escrow Shares shall be increased by a number of
shares of Buyer Stock equal to the quotient of $4,005,464 divided by the Fair
Market Value (the "YAHOO! ESCROW DEPOSIT"). If Yahoo! thereafter terminates the
Yahoo! Agreement solely as a result of failure to receive the Yahoo! Consent,
Buyer shall be entitled to receive from the Escrow Fund a number of Buyer Shares
equal to the Yahoo! Termination Amount and Company and Buyer shall jointly
instruct the Escrow Agent to disburse such Buyer Shares to Buyer. As used
herein, the "YAHOO TERMINATION AMOUNT" shall mean an amount equal to the product
of (i) the Yahoo! Monthly Revenue multiplied by (ii) the number of months
remaining during the term of the Yahoo License Agreement after its termination
by Yahoo! multiplied by (iii) 2.59. As used herein, the "YAHOO! MONTHLY REVENUE"
shall
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mean the average monthly revenue (using cash basis accounting) generated under
the Yahoo! License Agreement (other than with respect to revenue generated from
Merged Reports) for the nine (9) month period ending June 30, 2001, as set forth
on the attached SCHEDULE 1.6(e) (the "YAHOO! HISTORICAL REVENUE SCHEDULE"). If,
at the end of each three (3) month period during the remaining term of the
Yahoo! License Agreement, Yahoo! has not terminated such agreement, then Company
and Buyer shall jointly instruct the Escrow Agent to disburse to Stockholders
one-quarter of the total number of original number of Buyer Shares included in
the Yahoo! Escrow Deposit.
1.7 ESCROW. On the Closing Date, Buyer will deposit the Escrow Shares
and the Escrow Cash, in each case, as adjusted pursuant to the provisions of
Section 1.6, into an escrow account with Mellon Bank, N.A., as escrow agent (the
"ESCROW AGENT"), pursuant to that certain Escrow Agreement (the "ESCROW
AGREEMENT") dated as of the Closing Date among Buyer, Company, the Stockholder
Agent and the Escrow Agent in a form to be mutually agreed upon by the Parties.
The Escrow Amount, including all distributions thereon and proceeds thereof will
secure the indemnification obligations of Company and the Stockholders under
ARTICLE VIII and any adjustments due to Buyer under Section 1.6. The Escrow Fund
will be held and disbursed as provided in the Escrow Agreement, which shall
provide that except with respect to escrow amounts relating to liabilities under
Section 1.6, the escrow amounts shall be released on the 18-month anniversary of
the Closing Date, except to the extent of outstanding claims as of such 18-month
anniversary date which shall be handled as set forth in the Escrow Agreement.
The Escrow Agreement will provide that Buyer shall have the option of either
receiving a disbursement of Buyer Shares from the Escrow Fund or causing the
Escrow Agent to sell and liquidate Buyer Shares (which, for the purposes of this
Section 1.7, will be deemed to have been liquidated for the Fair Market Value
regardless of the actual sale price) so that Buyer may receive a disbursement of
the cash proceeds from such sale. The Parties will promptly give any necessary
instructions to the Escrow Agent to carry out the purposes of this Agreement and
the Escrow Agreement.
1.8 REGISTRATION RIGHTS AND LOCK-UP. The Buyer Shares issued to
stockholders will be entitled to registration under the Securities Act of 1933,
as amended, and will be subject to a Registration Rights and Lock-Up Agreement
(the "REGISTRATION RIGHTS AND LOCK-UP AGREEMENT") substantially in the form of
EXHIBIT B and are further subject to any other restrictions that may be imposed
by applicable law (e.g. Rule 144 under the Securities Act of 1933, as amended).
1.9 PAYMENT OF MERGER CONSIDERATION TO STOCKHOLDERS.
(a) EXCHANGE AGENT. Mellon Investors Services shall act as the
exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) INITIAL EXCHANGE PROCEDURES RELATING TO CERTIFICATES. As soon
as practicable after the Closing Date, Buyer will cause to be mailed to each
holder of record of a certificate or certificates ("CERTIFICATES"), which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock or Company Preferred Stock that are entitled to the right
to receive the Closing Date Shares and/or the Closing Date Cash and/or such
Certificate holder's Fractional Interest in the Escrow Fund (the "MERGER
CONSIDERATION"): (i) a letter of transmittal, and (ii) instructions for
surrendering the Certificates in exchange for certificates representing that
stockholder's Merger Consideration. The letter of transmittal will be in the
form, and contain the provisions, Buyer reasonably determines and will specify
that delivery will be made, and risk of loss and title to the Certificates will
pass, only upon delivery of the Certificates to the Exchange Agent. Upon
surrender of a Certificate to the Exchange Agent, together with a letter of
transmittal duly completed and validly executed in accordance with the
instructions included with the letter, the Exchange Agent will promptly cancel
the Certificate and deliver to the stockholders (x) one or more certificates
(which will bear Buyer's customary Securities Act legend relating to
unregistered shares) representing the number of whole shares equal to the number
of
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Closing Date Shares to which such holder is entitled, and (y) the Closing Date
Cash to which such holder is entitled. Until so surrendered, outstanding
Certificates will be deemed from and after the Effective Time, for all corporate
purposes, to evidence only the ownership of the Merger Consideration into which
such shares of Company Capital Stock converted.
(c) DISTRIBUTION OF ESCROW AMOUNT. Upon release of the Escrow
Amount pursuant to the Escrow Agreement, the Escrow Agent will deliver the
released shares and cash, if any, to the Exchange Agent. The Exchange Agent will
then deliver to each stockholder who has previously submitted Certificates (i)
one or more certificates (which will bear Buyer's customary Securities Act
legend relating to unregistered shares) and (ii) cash, representing such
stockholder's applicable Fractional Interest in the Escrow Fund. Neither the
Escrow Shares nor any rights therein shall be assignable.
(d) LOST, STOLEN OR DESTROYED CERTIFICATES. If any Certificates
are lost, stolen or destroyed, the Exchange Agent will issue the appropriate
portion of the Merger Consideration in exchange for them, upon the delivery by
the rightful holder of the lost, stolen or destroyed Certificate of an affidavit
of that fact containing customary indemnification provisions.
(e) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.9, neither the Exchange Agent, Buyer, the Surviving Corporation nor
any party hereto shall be liable to a holder of shares of Company Capital Stock
for any amount paid to a public official in good faith pursuant to any
applicable abandoned property, escheat or similar law. If any Certificates have
not been surrendered prior to seven years after the Effective Time (or
immediately prior to any earlier date on which any Merger Consideration payable
with respect to any unsurrendered certificates would otherwise escheat or become
property of any Governmental Agency), any Merger Consideration in respect of
such Certificates shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all the claims or
interest of any person previously entitled thereto.
1.10 DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, in the event that dissenters' rights are available in connection with
the Merger pursuant to Section 262 of the Delaware Law, shares of Company
Capital Stock that are issued and outstanding immediately prior to the Effective
Time and that are held by stockholders who did not vote in favor of the Merger
and who comply with all of the relevant provisions of Section 262 of the
Delaware Law ("DISSENTING SHARES") shall not be converted into or be
exchangeable for the right to receive the Merger Consideration, but instead
shall be converted into the right to receive such consideration as may be
determined to be due to such dissenting stockholders pursuant to Section 262 of
the Delaware Law, unless and until such holders shall have failed to perfect or
shall have effectively withdrawn or lost their rights to appraisal under the
Delaware Law. If any such holder shall have failed to perfect or shall have
effectively withdrawn or lost such right, such holders' shares of Company
Capital Stock shall thereupon be deemed to have been converted into and to have
become exchangeable for the right to receive, as of the Effective Time, the
Merger Consideration without any interest thereon. Company shall give Buyer (i)
prompt notice of any written demands for appraisal of shares received by Company
and (ii) the opportunity to participate in all negotiations and proceedings with
respect to any such demands. Company shall not, without the prior written
consent of Buyer, not to be unreasonably withheld, voluntarily make any payment
with respect to, or settle or offer to settle, any such demands.
1.11 TAX CONSEQUENCES. The Parties intend that the Merger will constitute
a reorganization within the meaning of Section 368(a)(1)(A) of the Code by
virtue of Section 368(a)(1)(A) and 368(a)(2)(D) of the Code, that the Agreement
shall constitute a "Plan of Reorganization" within the meaning of Treasury
Regulation Section 1.368-2(g) and that each of them shall report the Merger
consistent with Section 368(a) of the Code. Each Party has consulted with its
own tax advisers with respect to the tax consequences of the Merger.
Notwithstanding the foregoing, at the request of Buyer,
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Company and Stockholders agree that the Parties will restructure the Merger in a
manner acceptable to Buyer, which may include, without limitation, having the
Company merge directly into Buyer or a subsidiary of Buyer so long as such new
structure, in the opinion of counsel to Buyer and Company, will qualify as
reorganization under Section 368(a) of the Code and will not result in tax
consequences to the stockholders that are materially less favorable than the tax
consequences afforded the stockholders under the structure set forth in this
Agreement. In addition, at the option of Buyer, if the Fair Market Value of
Buyer Shares is less than $18 per share, then Buyer may pay cash in lieu of all
or any portion of the Buyer Shares that would otherwise be payable under Section
1.5(a); provided, however, that if the payment of such cash would cause the
conditions in Section 5.11 and 6.8 to not be met, then the Parties agree that
the Parties will restructure the Merger, which may include, without limitation,
having the transaction be in the form of a taxable merger; provided, further,
that if Buyer elects to pay cash as described in this Section 1.11, the Cash
Portion of the Purchase Price shall be between seventy (70) percent and ninety
(90) percent in cash of the total Purchase Price. The Parties will execute any
necessary amendments to this Agreement to effect such restructuring.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND THE STOCKHOLDERS
As a material inducement to Buyer to enter into and perform this Agreement,
Company and each Stockholder, jointly and severally, represents and warrants
that:
The Company and each Stockholder represents and warrants to the Buyer that the
statements contained in this Article II are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article II). As used in this Article II,
"COMPANY" shall mean Company and its subsidiaries, unless the context dictates
otherwise.
2.1 ORGANIZATION AND POWER; CAPITALIZATION
(a) Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, with full power and
authority to own or lease and operate its properties and assets, to carry on its
business as such business is now conducted, to execute and deliver this
Agreement, and to consummate the Transactions. Company is duly qualified to do
business as a foreign corporation, and is in good standing under the laws of
each jurisdiction in which the conduct of its business requires such
qualification or license.
(b) Each subsidiary of the Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, with full power and authority to own or lease and operate its
properties and assets, and to carry on its business as such business is now
conducted. Each subsidiary of the Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
in which the conduct of its business requires such qualification or license.
SCHEDULE 2.1(b) sets forth each subsidiary of Company, and for each subsidiary
of Company (i) its name and jurisdiction of incorporation, (ii) the number of
shares of authorized capital stock of each class of its capital stock, (iii) the
number of issued and outstanding shares of each class of its capital stock, the
names of the holders thereof, and the number of shares held by each such holder,
(iv) the number of shares of its capital stock held in treasury, and (v) its
directors and officers. All of the issued and outstanding shares of capital
stock of each subsidiary of Company have been duly authorized and are validly
issued, fully paid, and nonassessable. Only Company holds of record and owns
beneficially all of the outstanding shares of each of its subsidiaries, free and
clear of any restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), Taxes, Liens, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require Company or any of its subsidiaries
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to sell, transfer, or otherwise dispose of any capital stock of any of such
subsidiaries or that could require any such subsidiary to issue, sell, or
otherwise cause to become outstanding any of its own capital stock (other than
this Agreement). There are no outstanding stock appreciation, phantom stock,
profit participation, or similar rights with respect to any such subsidiary.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any such subsidiary.
(c) Except as set forth in SCHEDULE 2.1(c), Company has no
subsidiaries and owns no capital stock of, or any interest of any nature, in any
other entity. Company has not agreed and is not obligated to make, nor bound by
any written, oral or other agreement, contract, subcontract, lease, binding
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy, benefit plan or legally binding commitment or
undertaking of any nature, as in effect as of the date hereof or as may
hereinafter be in effect under which it may become obligated to make, any future
investment in or capital contribution to any other entity. Company has not, at
any time, been a general partner of any general partnership, limited partnership
or other entity or a participant in any joint venture.
(d) On the date hereof, the authorized capital stock of Company
consists of (i) 40,000,000 shares of Company Common Stock, of which 28,807,505
shares are issued and outstanding, and (ii) 2,000,000 shares of Company
Preferred Stock, of which 184,000 shares have been designated as Company Series
A Preferred Stock, 183,621 shares of which are issued and outstanding. The
rights, privileges and preferences of the Company Series A Preferred Stock are
as stated in the Certificate of Incorporation and the Company's Second Amended
and Restated Stockholders Agreement dated as of October 10, 2000. All of the
record and beneficial owners of Company Capital Stock are set forth on SCHEDULE
2.1(d).
(e) On the date hereof, there were no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require Company to
sell, transfer, or otherwise dispose of any capital stock of Company or that
could require Company to issue, sell, or otherwise cause to become outstanding
any of its own capital stock (other than this Agreement), other than (i) options
(the "COMPANY OPTIONS") representing in the aggregate the right to purchase
(whether vested or unvested) 5,552,313 shares of Company Common Stock under the
Company's employee stock option plans (the "COMPANY OPTION PLANS"), and (ii)
shares of Company Series A Preferred Stock validly issued and convertible into
shares of Company Common Stock in accordance with the terms of the Series A
Convertible Preferred Stock Certificate of Designation. SCHEDULE 2.1(e) set
forth all of holders of Company Options and the exercise price and the vesting
schedule of the Company Options. Except as set forth in SCHEDULE 2.1(e), the
unvested Company Options will not accelerate or become vested upon consummation
of the Merger.
(f) The outstanding shares of Company Capital Stock are duly and
validly authorized and issued, fully-paid and nonassessable, and have been
issued in accordance with the registration or qualification provisions of the
Securities Act, and any relevant state securities laws or pursuant to valid
exemptions there from.
(g) The Company Capital Stock constitutes all of the issued and
outstanding securities of Company, of any kind whatsoever. Other than the
Company Options and the Company Series A Preferred Stock, no Person has any
right or option to acquire any of Company Capital Stock or any interest therein.
Except as set forth on SCHEDULE 2.1(g), with respect to Company Capital Stock
and Company Options owned by the stockholders, all of the Company Capital Stock
and the Company Options are free and clear of all Encumbrances (except as may
exist pursuant to the Securities Act), except for purposes of this Section
2.1(g), Encumbrances shall not exclude any imperfections of title, liens,
security interests, claims, restrictions and other charges and encumbrances the
existence of which do not, individually or in the aggregate, have a Material
Adverse Effect.
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(h) At the Effective Time, the Closing Date Capitalization
Schedule shall be true, correct and complete.
(i) To the Knowledge of Company and Stockholders, no
stockholder intends to exercise dissenters' rights as of the date hereof.
2.2 AUTHORIZATION; BINDING EFFECT, ETC. Company has all requisite power
and authority to execute, deliver and perform this Agreement, the Transactions
and each other Transaction Document to which it is a Party. The execution,
delivery and performance of this Agreement and all other Transaction Documents
to be executed by Company and the Stockholders have been duly authorized by all
requisite action of Company and each Stockholder, and (assuming the due
authorization, execution and delivery hereof and thereof by the other Parties
hereto and thereto), this Agreement and each such other Transaction Document
will be, a valid and binding obligation of Company and each Stockholder,
enforceable against Company and such Stockholder in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity. Each of Company and each
Stockholder has, as of the date of this Agreement, and will, as of the Closing,
have taken or will take all actions necessary and advisable in order to approve
and adopt this Agreement and the Transactions.
2.3 CHARTER, BY-LAWS AND MINUTES. The copies of the Certificate of
Incorporation of Company as certified by the Secretary of State of Delaware; the
By-Laws of Company as certified by its Secretary; and the minutes of meeting of
its Board of Directors (or consents in lieu thereof) approving the Transactions
as furnished to Buyer by Company, are true, correct and complete and conform to
the originals thereof. The minutes of a meeting of stockholders (or consents in
lieu thereof) approving the Transactions will be furnished to Buyer by Company
and will be true, correct and complete and will conform to the originals
thereof.
2.4 NO VIOLATION. Except as set forth in SCHEDULE 2.4, the execution,
delivery and performance of this Agreement and all other Transaction Documents
and the consummation of the Transactions do not and will not (a) violate any
provisions of law applicable to Company; (b) with or without the giving of
notice or passage of time, or both, conflict with or result in the breach of any
provision of Company's Certificate of Incorporation or by-laws, or, except for
conflicts and breaches that would not result in a Material Adverse Effect, any
instrument, license, agreement or commitment to which Company is a party, or by
which the Company's assets are bound; (c) constitute a violation of any order,
judgment or decree to which Company is a party or by which any of its assets or
properties are bound; (d) require the consent, approval, order or authorization
of, or registration or filing with any court, administrative agency, or other
governmental authority (other than approval under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act) or
(e) assuming the correctness of Buyer's representations and warranties, require
any approval of, or filing or registration with, any governmental entity or
third person.
2.5 FINANCIAL STATEMENTS. Company has delivered to Buyer copies of the
Financial Statements. The Financial Statements have been prepared in accordance
with the books and records of Company, as of the dates and for the periods
indicated, and in conformity with GAAP for the dates and periods involved, and
accurately account for the financial positions of Company and the results of
operations and the cash flows of Company for the periods covered thereby. All of
the financial books and records of Company have been made available to Buyer and
such books and records completely and fairly record Company's financial affairs
that would normally be recorded in financial books and records maintained in
accordance with GAAP. All financial books and records of Company have been made
available to Buyer. Except as listed in SCHEDULE 2.5, none of the revenues
included in the Financial Statements include any barter or other forms of
non-cash remuneration made to Company and, except as
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listed in SCHEDULE 2.5, do not include any revenues received from or generated
by any stockholder or Affiliate, and, except as listed in SCHEDULE 2.5, none of
the expenses included in the Financial Statement include any payments or other
forms of remuneration paid by Company to any stockholder or Affiliate.
2.6 LIABILITIES. All of Company's liabilities (whether accrued,
unmatured, contingent, or otherwise, and whether due or to become due) that are
required to be disclosed or reserved for on the June 30 Balance Sheet are so
stated or adequately reserved for in the June 30 Balance Sheet (or described in
the notes thereto) in accordance with GAAP, consistently applied, or disclosed
on SCHEDULE 2.6, except for liabilities incurred since the date of the June 30
Balance Sheet in the Ordinary Course. None of Company's indebtedness or other
liabilities has been guaranteed or assumed by any other Person. SCHEDULE 1.5
hereto sets forth any and all indebtedness of Company to any related party,
which includes, without limitation, any director, officer, employee, consultant
or Affiliate or Company.
2.7 REAL AND PERSONAL PROPERTY.
(a) SCHEDULE 2.7(a) lists all of the Real Property and
includes a reasonably detailed description of the lessor, the location and any
improvements.
(b) SCHEDULE 2.7(b) lists and describes in reasonable detail
all of the Personal Property, but may not list Personal Property that is
immaterial in nature to the Business, has minimal cost and is not readily
subject to identification and inventory (such as office supplies).
(c) Company's Real Property and Personal Property (whether
leased or owned) are in good operating condition and repair as required by the
Business as presently conducted, subject to ordinary wear and tear. No
condemnation or other proceeding is pending or, to the Company's Knowledge,
Threatened, that would adversely affect the use of any Real Property by Buyer.
All facilities located on any Real Property are supplied with utilities and
other services necessary for the operation of such facilities, including gas,
electricity, water, telephone, sanitary sewer and storm sewer, all of which
services are adequate in accordance with applicable laws, ordinances, rules and
regulations.
2.8 NO ENCUMBRANCES. The Real Property, Personal Property and
Intellectual Property held by Company is sufficient to conduct the Business as
conducted by Company as of the date hereof and as of the Closing date, and,
except as set forth on SCHEDULE 2.8, such property is not, subject to
Encumbrances of any kind, except for purposes of this Section 2.8, Encumbrances
shall not exclude any imperfections of title, liens, security interests, claims,
restrictions and other charges and encumbrances the existence of which do not,
individually or in the aggregate, have a Material Adverse Effect.
2.9 TAXES. Company has timely filed all Tax Returns required to be
filed to the date hereof, and they are all correct and complete in all material
respects. All Taxes due and payable or claimed to be due by any taxing authority
have been timely paid. All unpaid Taxes payable by Company or that will, with
the passage of time, become payable by Company for periods (or portions thereof)
ending on or before the date of the June 30 Balance Sheet, whether or not
disputed, are adequately reserved against in accordance with GAAP in the June 30
Balance Sheet. There are no outstanding waivers or extensions of time with
respect to the assessment or audit of any Tax or Tax Return of Company, or
claims now pending or matters under discussion with any taxing authority in
respect of any such Tax. Company has furnished to Buyer correct and complete
copies of Company's Federal Tax Return for the 2000 tax year. Neither the
Company nor any of its subsidiaries is a party to any agreement, contract, or
arrangement that will result, either directly or indirectly, on account of the
transactions contemplated hereunder, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G of
the Code.
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2.10 CONTRACTS. SCHEDULE 2.10(a) sets forth a true, complete and
correct list of all Material Contracts. True, complete and correct copies of all
written Material Contracts, together with all amendments, supplements or other
modifications thereto, have heretofore been delivered or otherwise made
available to Buyer for review. The Material Contracts are in full force and
effect, constitute legal, valid and binding obligations of the respective
Parties thereto, and are enforceable in all material respects in accordance with
their respective terms and will continue to be valid and enforceable following
the Closing. Company, has, in all material respects, performed all of the
obligations required to be performed by it to date, and there exists no default,
or any event which upon the giving of notice or the passage of time, or both,
would give rise to a claim of a default or breach in the performance by Company
or permit termination, modification or acceleration thereunder by the Company
or, any other party, of their respective obligations thereunder. Except as set
forth on SCHEDULE 2.10(b), no consent or approval by, or any notification or
filing with, any party to any Material Contract is required in connection with
the execution, delivery and performance by Company of this Agreement or the
consummation by Company of the Transactions. As used herein, "MATERIAL CONTRACT"
means any Contract that is material to the Company's operation of its Business
or that contain any exclusivity or other restrictive provisions binding on the
Company or that is integral to any material aspect of the Business, including,
without limitation, with respect to any software, content, business relationship
or other matter. Except as set forth on SCHEDULE 2.10(c), no Contract contains
any exclusivities, rights of first refusal, pre-emptive or similar rights in
favor of third parties.
2.11 ACCOUNTS RECEIVABLE. SCHEDULE 2.11 lists in summary form, and
shows the aging of, Company's accounts receivable as of June 30, 2001, net of
specified discounts, allowances, rebates and reserves. There has been no
material change in the Company's accounts receivable between June 30, 2001 and
the date hereof. Company's accounts receivable have arisen in the Ordinary
Course and the reserves shown on SCHEDULE 2.11 have been determined in
accordance with GAAP, consistently applied.
2.12 INTELLECTUAL PROPERTY.
(a) Paragraph (a) of SCHEDULE 2.12 attached hereto sets forth
a list of all registered Intellectual Property owned by Company (the
"REGISTRATIONS"). The Registrations are valid and subsisting and Company is the
exclusive owner of, and enjoys all rights of ownership with respect to, the
Registrations. Company is neither a licensor nor a licensee with respect to any
of the Registrations or the Intellectual Property except in the Ordinary Course.
(b) Paragraph (b) of SCHEDULE 2.12 sets forth a list of all
domain names used or owned by Company. The domain names are validly registered
in Company's name or licensed for Company's use. Paragraph (b) of SCHEDULE 2.12
sets forth a true, complete and correct list of all such licenses. Company has
the right to use all of the Intellectual Property as necessary or required to
conduct its Business, except as listed on SCHEDULE 2.12(a).
(c) Company owns and has good and exclusive title to, or has
licensee interests (sufficient for the conduct of its business as currently
conducted) to the Intellectual Property described in paragraph (c) of SCHEDULE
2.12, free and clear of any Encumbrance; Company is the licensee or exclusive
owner of all trademarks and trade names used in connection with the operation or
conduct of the Business of Company, including the sale of any products or the
provision of any services by Company.
(d) To Company's Knowledge, Company has not received any
written threat, demand or notice of claim from any person or entity asserting
that Company's use of any of the Intellectual Property or the Registrations
constitutes any infringement, interference, violation, misappropriation, breach
or wrongful use of the intellectual property rights of any other person or
entity
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and Company is not Party to any proceeding or outstanding decree, order,
judgment, agreement or stipulation restricting in any manner the use, transfer,
or licensing by Company of any Intellectual Property necessary to conduct its
Business, or which may affect the validity, use or enforceability of such
Intellectual Property by Company. To Company's and Stockholders' Knowledge, the
Company's Intellectual Property does not infringe, misappropriate or violate any
patent, copyright, mask work rights, trademark, trade secret or other
intellectual property right owned or controlled by any third party.
(e) Paragraph (e) of SCHEDULE 2.12 sets forth each item of
proprietary software owned by Company together with an indication of whether it
was purchased by Company or created for Company by an employee or independent
contractor. All such proprietary software was created by employees or
independent contractors, including any works for hire, and Company is the
exclusive owner of all right, title and interest therein, including all
Intellectual Property rights therein by virtue of valid and enforceable
Intellectual Property assignment agreements between Company and each of the
employees or independent contractors responsible for creating such software.
Except as described in paragraph (e) of SCHEDULE 2.12, no third-party software
is integral to Company's proprietary software (other than information feeds from
subscription sources and operating systems and software programs of general
availability and application, none of which is integral to the source codes of
Company's proprietary software). Except as set forth in paragraph (e-1) of
Schedule 2.12, the rights of Company in the proprietary software listed in
paragraph (e) of SCHEDULE 2.12, together with third-party software held under
valid operation licenses, constitute all material software used by Company in
the conduct of the Business.
2.13 CONSENTS; COMPLIANCE WITH LAW.
(a) Company holds Consents from the Governmental Agencies
listed in SCHEDULE 2.13. These Consents are valid and unimpaired, are being
transferred to Buyer by this Agreement, are not affected by the Transactions,
and constitute all the Consents required for the ownership or occupancy of the
Company's assets and the operation of the Business. Company has not entered into
any agreement with, had any material dispute with, or, been investigated by, any
Governmental Agency, community group, or other third Party.
(b) Company and the Stockholders have operated the Business in
compliance with all applicable Laws, including without limitation, any and all
environmental laws and regulations, and all required Filings have been properly
made, except for failures of compliance or failures to make required filings
that, singly or in the aggregate, would not have a Material Adverse Effect.
(c) No action, proceeding, revocation proceeding, amendment
procedure, writ or injunction is pending, and no action, proceeding, revocation
proceeding, amendment procedure, writ or injunction has been threatened by any
governmental entity against Company concerning any Consents and Company has no
Knowledge of any fact or circumstance which would involve Company in any
litigation related thereto or impose upon Company any material liability,
including without limitation, environmental liability.
2.14 EMPLOYEES.
(a) SCHEDULE 2.14(a) contains: (1) a list of the names, office
locations, and compensation of all full and part-time employees of the Business,
and the names of all Company's officers, directors and the stockholders; and (2)
a description of all material employee "perks" or other benefit practices not
stated in the Plans or in the agreements listed in SCHEDULE 2.15, for all
employees. The consummation of the Transactions will not give rise to any
liability of Company for severance pay, termination pay or any similar payment
to any of its employees.
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(b) No key employee of the Business has told Company or any
Stockholder (orally or in writing) since January 1, 2001 that he or she is
considering terminating his or her employment. Except as listed in SCHEDULE
2.14(b), no employee has, to the Company's Knowledge, Threatened any actions
against Company in relation to his or her employment with Company.
2.15 EMPLOYEE PLANS AND BENEFITS.
(a) Except as listed on SCHEDULE 2.15, Company does not
maintain or contribute to or have any liability, including any contingent
liability, with respect to (i) any nonqualified deferred compensation, profit
sharing, bonus or retirement plans, (ii) any qualified defined contribution
retirement plans, (iii) any qualified defined benefit pension plans (the plans
described in (ii) and (iii) are collectively referred to as the "PENSION
PLANS"), and (iv) any welfare benefit plans (the "WELFARE PLANS"). The Pension
Plans and the Welfare Plans are collectively referred to as the "PLANS". Each of
the Pension Plans has received a favorable determination letter from the
Internal Revenue Service that such Plan is a "qualified plan" under Section
401(a) of the Code, the related trusts are exempt from tax under Section 501(a)
of the Code, and nothing has occurred that would jeopardize the qualification of
such Pension Plan. The Plans comply in form and in operation in all material
respects with the requirements of the Code and the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Neither Company nor any ERISA
Affiliate is a Party to, or has any liability with respect to any Pension Plan
subject to Title IV of ERISA or any "multiple employer welfare arrangement"
within the meaning of Section 3(40) of ERISA. As used in this Agreement, an
"ERISA AFFILIATE" will mean each other person or entity with whom Company
constitutes or has constituted all or part of a controlled group or which would
be treated or has been treated with Company as under common control or whose
employees would be treated as employed by Company under Section 414 of the Code
or Section 4001(b) of ERISA.
(b) With respect to the Plans (i) all required contributions
have been made or properly accrued, (ii) there are no actions, suits or claims
pending, other than routine claims for benefits, (iii) there have been no
"prohibited transactions" (as that term is defined in Section 406 of ERISA or
Section 4975 of the Code), and (iv) all Forms 5500 have been timely filed.
(c) Neither Company nor, to Company's Knowledge, any of its
directors, officers, employees or any other "fiduciary," as such term is defined
in Section 3 of ERISA, has committed any material breach of fiduciary
responsibility imposed by ERISA or any other applicable law with respect to the
Plans which would subject Company or any of its directors, officers or employees
to any material liability under ERISA or any other applicable law.
(d) Company has not incurred any material liability for any
tax or civil penalty imposed by Section 4975 of the Code or Section 502 of
ERISA.
2.16 INSURANCE. SCHEDULE 2.16 lists all policies of insurance covering
Company, including policies of life, fire, theft, auto, casualty, product
liability, workmen's compensation, health, medical, disability, business
interruption, employee fidelity, and other casualty and liability insurance,
indicating for each policy the type of coverage, the name of the insured, the
insurer, the premium, the expiration date and the amount of coverage. These
policies (a) are valid, in effect, and enforceable; (b) provide coverage of the
kind, and in the amounts, customary in Company's industry; (c) except for
policies relating to and providing benefits under a Plan, name only Company as
the beneficiary; and (d) are being transferred to Buyer under this Agreement and
are not affected by that transfer. Company has not been denied any insurance
coverage that it has requested, nor has it made, since January 1, 1998, any
material reduction in the scope or change in the nature of its insurance
coverage.
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2.17 TRANSACTIONS WITH AFFILIATES. Except as listed in SCHEDULE 2.17,
no Affiliate of Company is directly or indirectly a Party to any agreement,
contract, commitment or transaction with Company which will be assigned to,
assumed by, or binding upon Buyer.
2.18 BOOKS AND RECORDS; BANK ACCOUNTS. Company's books and records are
correct and complete in all material respects and have been maintained in
accordance with sound business practices. Company's minute books contain correct
and complete records of all meetings and accurately reflect all other corporate
action of the stockholders, the Board, and any Board committees of Company.
SCHEDULE 2.18 lists (a) all bank accounts and safe deposit boxes maintained by
Company and all authorized signatories for those accounts, specifying their
respective authority. No person or entity holds any general or special power of
attorney from Company.
2.19 OPERATION OF BUSINESS IN ORDINARY COURSE. Since the date of the
June 30 Balance Sheet, Company has been engaged solely in the operation of its
business in the Ordinary Course, consistent with past practice, and (i) except
in the operation of its business in the Ordinary Course, consistent with past
practice, no Party has accelerated, terminated, modified or canceled any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) to which Company is a Party or by which it is
bound which individually or in the aggregate with any other such agreements,
contracts, leases or licenses, has had or may have a Material Adverse Effect and
no Party has provided Company with notice of his/its intention to take any such
action; (ii) Company has not sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than for fair consideration in the
Ordinary Course; (iii) Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to any of the assets of the Company
except for damage, destruction and loss that has not had a Material Adverse
Effect; (iv) except for any Excluded Losses, there has not been any other
occurrence, event, incident, action, failure to act or transaction outside the
Ordinary Course of business involving Company which has had or is reasonably
likely to have a Material Adverse Effect; and (v) Company has not committed to
do any of the foregoing.
2.20 LITIGATION. Except as described in reasonable detail in SCHEDULE
2.20, there are no actions, suits, proceedings or arbitrations, investigations
or claims of any kind pending, or to Company's Knowledge, Threatened before any
court, commission, agency or other administrative authority against Company or
any of its officers or directors, or its businesses or properties, and Company
is not the subject of any order or decree. There is no injunction, order,
judgment, decree or regulatory restriction that has been imposed upon Company or
the assets of the Company. The litigation described in SCHEDULE 2.20 if
adjudicated adversely to Company would not have a Material Adverse Effect.
2.21 FINDER'S FEE. Company has not incurred any obligation of any kind
whatsoever to any Party for a finder's fee (or similar compensation) in
connection with the transactions contemplated by this Agreement for which the
Buyer could become liable or obligated, except for fees due to ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Inc. The Stockholders shall be solely responsible for the payment of
any such finder's fee (or similar compensation).
2.22 APPROVALS. Except as set forth in SCHEDULE 2.22, no approval,
authorization, order, license or consent of or registration, qualification or
filing with any governmental authority and no approval or consent by any other
person or entity is required in connection with the execution, delivery or
performance by Company of this Agreement and any related agreements, except for
any such approval, authorization, order, license or consent of or registration,
qualification or filing of which the failure to obtain would not result in a
Material Adverse Effect.
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2.23 REGULATED ENTITY.
(a) Except as listed in SCHEDULE 2.23(a), Company and the
Business are not regulated by any Laws (other than Laws that apply to
corporations generally).
(b) SCHEDULE 2.23(b) lists all of the material Contracts that
are subject to regulation of the Laws referred to in clause (a) between Company
and one or more third parties ("REGULATORY CONTRACTS") and Company has provided
Buyer with a copy of each such Regulatory Contract listed on such Schedule.
Company is in compliance in all material respects with all of the provisions of
the Regulatory Contracts, including its obligations thereunder and
representations and warranties made therein.
(c) Except as described in SCHEDULE 2.23(c), Company has not
been subject to any regulatory proceeding, investigation, complaint, civil
action, arbitration proceeding, or other proceeding by the Department of
Justice, Federal Trade Commission, any other federal agency, any applicable
state agency or person alleging a material violation of any applicable federal
or state consumer credit law, including the Consumer Credit Protection Act, the
Truth in Lending Act, the Fair Credit Reporting Act, the Fair Credit Billing
Act, the Equal Credit Opportunity Act, the Fair Debt Collections Practices Act,
the Real Estate Settlement Procedures Act, the ▇▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, all
federal regulatory rules and regulations promulgated pursuant to these laws, all
federal state and local privacy laws, rules and regulations, all applicable
state laws and regulations relating to consumer credit and use of credit
reports. Company is not a mortgage broker and is not subject to the laws
relating to mortgage brokers.
(d) Without limiting the generality of the foregoing, Company
has not engaged in any activities and does not engage in any activities and is
not obligated (other than in the Experian Agreement) to engage in any activities
that would cause Company to be a consumer reporting agency under the Laws
referenced in Section 2.23(c) above.
2.24 INVESTMENT INTENT. Each Stockholder acknowledges that as part of
the Purchase Price, each Stockholder will receive shares of Buyer Common Stock
in a transaction which is intended by the Parties to be exempt from registration
under the Securities Act of 1933, as amended, and, in furtherance thereof, and
in connection with such an investment by Stockholder in Buyer, each Stockholder
represents and warrants to, and agrees with Buyer as follows:
(a) each Stockholder is acquiring the Buyer Shares for their
own account for investment purposes only and not with a view to or for sale in
connection with a distribution thereof in violation of the Securities Act, in
whole or in part.
(b) each Stockholder is a sophisticated investor with
knowledge and experience in business and financial matters;
(c) each Stockholder has received certain information
concerning the Buyer and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and risks inherent in
holding Buyer Common Stock;
(d) each Stockholder is able to bear the economic risk
inherent in holding Buyer Common Stock;
(e) each Stockholder is an "ACCREDITED INVESTOR" as such term
is defined in Regulation D promulgated under the Securities Act; and
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(f) each Stockholder acknowledges that the Buyer Shares will
be subject to the Registration Rights and Lock-up Agreement, and during the
period it is subject to the Registration Rights and Lock-up Agreement they will
not be permitted to sell or otherwise transfer the Buyer Shares in any
transaction and that the Buyer Shares at Closing will not be registered under
the Securities Act of 1933 and therefore they will be "restricted securities"
under the Securities Act of 1933. Each certificate evidencing the Buyer Shares
will be imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS
OF ANY STATE. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO THE
PROVISIONS OF THAT ACT AND THE LAWS OF SUCH STATES UNDER WHOSE LAWS A TRANSFER
OF SECURITIES WOULD BE SUBJECT TO A REGISTRATION REQUIREMENT OR AN OPINION OF
COUNSEL TO ▇▇▇▇▇▇▇▇▇.▇▇▇, INC. IS OBTAINED STATING THAT SUCH DISPOSITION IS IN
COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION. THESE SHARES ARE
ALSO SUBJECT TO A REGISTRATION RIGHTS AND LOCK-UP AGREEMENT RESTRICTING THE
HOLDER'S RIGHTS TO TRANSFER THESE SHARES AND ARE FURTHER RESTRICTED BY SUCH
RESTRICTIONS ON TRANSFER CONTAINED THEREIN.
2.25 DISCLOSURE. None of this Agreement, the Financial Statements, the
June 30 Balance Sheet, any Schedule or exhibit hereto or any certificate,
document or other statement delivered to Buyer in connection with the
Transactions contains any untrue statement of a material fact, or omits any
statements of material fact necessary to make the statements contained herein or
therein not misleading.
2.26 STOCKHOLDERS OF COMPANY. Company and each Stockholder represents
that as of the date hereof, the stockholders listed in SCHEDULE 2.26
collectively own all of the issued and outstanding capital stock and all other
ownership interest of Company and no other party has any right or claim to any
such shares or interest.
2.27 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of any of the Company and the Stockholders that would have a
material adverse effect on the Transactions or a Material Adverse Effect.
2.28 NO BANKRUPTCY PROCEEDINGS. There is no Bankruptcy Proceeding
pending against the Company, and to the best knowledge of the Stockholders and
the Company, no other Person has threatened to commence any such Bankruptcy
Proceeding against the Company. The Company is not Insolvent, and the
Stockholders have no reason to believe that the Company may become Insolvent in
the ordinary course of the Company's business. For purposes of this Section
2.28, a "BANKRUPTCY PROCEEDING" shall mean and include any action, suit or
judicial or administrative proceeding under any applicable bankruptcy or
insolvency law, including, but not limited to, any such action, suit, or
judicial or administrative proceeding: (i) involving the filing of a voluntary
or involuntary bankruptcy petition, or petition for relief from claims of
creditors, with respect to the Company, (ii) in which it is alleged that the
Company is insolvent; or (iii) seeking the liquidation of the Company, the
appointment of a receiver or trustee over all or substantially all of the assets
of the Company, or the composition or assignment of all or a substantial portion
of the assets of the Company for the benefit of the Company's creditors. For
purposes of this Section 2.28, the Company shall be "INSOLVENT" if is generally
not paying, or is unable or lacks the means to pay, its debts as they become due
in the ordinary course of the Company's business.
2.29 ENVIRONMENTAL LIABILITIES.
(a) To the Knowledge of Company and the Stockholders, Company
is in material compliance with all applicable Environmental Laws, which
compliance includes the possession by
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Company of all permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof. Company has not received any notice or other communication, whether
from a governmental body, citizens groups, employee or otherwise, that alleges
that Company is not in compliance with any Environmental Law, and there are no
circumstances that may prevent or interfere with the compliance by Company with
any current Environmental Law in the future. To Company's knowledge, no current
or prior owner of any property leased or possessed by Company has received any
notice or other communication (in writing or otherwise), whether from a
government body, citizens group, employee or otherwise, that alleges that such
current or prior owner or Company is not in compliance with any Environmental
Law. All governmental authorizations currently held by Company pursuant to any
Environmental Law (if any) are identified in SCHEDULE 2.29.
(b) For purposes of this SECTION 2.29, "ENVIRONMENTAL LAW"
means any federal, state or local statute, law regulation or other legal
requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern, and "MATERIAL OF ENVIRONMENTAL CONCERN" include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is currently regulated by an
Environmental Law or that is otherwise a danger to health, reproduction or the
environment.
2.30 YAHOO LICENSE AGREEMENT. The Yahoo! Historical Revenue Schedule is
true, complete and accurate in all material respects.
ARTICLE III
REPRESENTATIONS OF BUYER AND SUB
As a material inducement to Company to enter into and perform this Agreement,
Buyer and Sub represent and warrant that:
3.1 ORGANIZATION AND POWER. Each of Buyer and Sub is (or will be in the
case of Sub) a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with full power and authority to own or
lease and use its properties and assets, to carry on its business as such
business is now conducted, to execute and deliver this Agreement and to carry
out the Transactions.
3.2 NO VIOLATION. Neither the execution and delivery by Buyer or Sub of
this Agreement or any related agreements to which Buyer or Sub may be a Party,
nor consummation of the transactions herein or therein contemplated, nor
compliance with the terms, conditions and provisions hereof or thereof will
conflict with or violate any provision of law or the Articles of Incorporation
or By-laws of Buyer or Sub, or result in a violation or default in any provision
of any regulation, order, writ, injunction or decree of any court or
governmental agency or authority or of any agreement or instrument to which
Buyer or Sub is a party or by which Buyer or Sub is bound or to which Buyer or
Sub is subject, or constitute a default thereunder or result in the imposition
of any lien, charge, encumbrance or security interest of any nature whatsoever
upon any of Buyer's or Sub's assets pursuant to the terms of any such agreement
or instrument, provided that the actions contemplated by Article V are taken.
3.3 AUTHORITY. Each of Buyer and Sub has (or will have in the case of
Sub)all requisite power and authority to execute, deliver and perform this
Agreement and the other Transaction Documents to which it may be a party, all
proper corporate actions authorizing the execution, delivery and performance
hereof and thereof having been taken. This Agreement has been duly executed and
delivered by Buyer for itself and on behalf of Sub and constitutes, and the
other Transaction Documents
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to which Buyer or Sub is a party will be duly executed and delivered and, when
executed and delivered, will constitute, valid and legally binding obligations
of Buyer or sub, as applicable, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity.
3.4 BUYER SHARES. The Buyer Shares will be delivered to stockholders
free and clear of all Encumbrances other than the terms and provisions of the
Registration Rights and Lock-up Agreement or from any liens or Encumbrances
created by or through, or otherwise resulting from, actions or inactions by the
stockholders or under Law. Upon issuance in accordance with this Agreement, the
Buyer Shares will be validly issued, fully paid and non-assessable.
3.5 APPROVALS. No approval, authorization, order, license or consent of
or registration, qualification or filing with any governmental authority and no
approval or consent by any other person or entity is required in connection with
the execution, delivery or performance by Buyer of this Agreement and the
Transactions, other than as contemplated by ARTICLE IV and ARTICLE V.
3.6 OWNERSHIP OF SUB. Buyer owns or will own upon its formation all of
the outstanding capital stock of Sub.
ARTICLE IV
PRE-CLOSING COVENANTS
4.1 CONSENTS AND FILINGS.
(a) Company will notify as soon as practicable (and will cause
its subsidiaries to notify as soon as practicable) all of its and its
subsidiaries' clients, customers and contract parties (collectively, "CLIENTS")
of the Transactions, including, without limitation, Yahoo!, will have sent
Consents to all of such Clients whose consent is required to consummate the
Transactions or as reasonably requested by Buyer, except for those Clients whom
Buyer requests not be notified of the Transactions. Company will use, and will
cause its subsidiaries to use, its and their best efforts to procure such
execution of Consents in due course, including, without limitation, the Consent
of Yahoo!. Company will deliver to Buyer prior to the Closing copies of all
executed Clients' Consents and make available for inspection the originals of
such Consents at or prior to the Closing.
(b) Each of the Parties agrees to make such notices to, make
any filings with, and use commercially reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the Transactions. Without limiting the generality of the
foregoing, each of the Parties will file (and the Company will cause each of its
subsidiaries to file) any Notification and Report Forms and related material
that it may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, will use commercially reasonable best efforts to obtain
(and the Company will cause each of the subsidiaries to use commercially
reasonable efforts to obtain) an early termination of the applicable waiting
period, will make (and Company will cause each of the subsidiaries to make) any
further filings pursuant thereto that may be necessary, proper, or advisable in
connection therewith and will assist and cooperate with each other with respect
to any of the foregoing, including sharing any information that is required to
be provided with respect to any of the filings. Each of the Parties agrees to
use commercially reasonable best efforts to make such filing within 5 days after
the date of this Agreement.
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4.2 CLOSING CONDITIONS. Company and Stockholders will use commercially
reasonable efforts to cause the satisfaction of all conditions precedent to
Buyer's obligations hereunder set forth in Article V. Buyer will use
commercially reasonable efforts to cause the satisfaction of all conditions
precedent to Company's obligations hereunder set forth in Article VI.
4.3 CONDUCT OF COMPANY'S BUSINESS PRIOR TO THE CLOSING DATE. During the
period from the date of this Agreement and continuing until the earlier of the
time the Parties have determined that all conditions to close have not or cannot
be satisfied or waived and the Closing Date, Company agrees to, and to cause
each of its subsidiaries to, carry on the Business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to pay
the debts and Taxes of Company and its subsidiaries when due, to pay or perform
other obligations when due, and, to the extent consistent with such business,
use all reasonable efforts consistent with past practice and policies to
preserve intact Company's and its subsidiaries' present business organization,
keep available the services of Company's and its subsidiaries' present officers
and employees and preserve Company's and its subsidiaries' relationships with
customers, suppliers, distributors, licensors, licensees and others having
business dealings with it, all with the goal of preserving unimpaired Company's
and its subsidiaries' goodwill and ongoing Business at the Closing Date. Except
as expressly contemplated in this Agreement, after the date of this Agreement,
Company will not, and will cause its subsidiaries to not, without the prior
written consent of Buyer:
(A) other than performing the Contracts listed in the SCHEDULE
2.10 in accordance with their terms existing on the date hereof, make any
expenditure or enter into any transaction exceeding $50,000 or grant any to any
Person any exclusivities, rights of first offer or refusal or other rights that
would similarly restrict or impose obligations upon Buyer after the Closing;
(B) sell, license or transfer to any person or entity of any
rights to any Intellectual Property or enter into any agreement with respect to
the Intellectual Property with any person or entity other than in the Ordinary
Course (subject to the other provisions of this Section 4.3);
(C) revalue any of its assets, including without limitation
writing down the value of items on its balance sheets or writing off notes or
accounts receivable;
(D) amend or change its Certificate of Incorporation or
bylaws;
(E) issue, sell, grant, contract to issue, grant or sell, or
authorize the issuance, delivery, sale or purchase of any Common Stock of
Company or any of its subsidiaries or securities convertible into, or
exercisable or exchangeable for, Common Stock of Company or any of its
subsidiaries, or any securities, warrants, options or rights to purchase any of
the foregoing, except for the issuance of Company Common Stock to optionholders
who have exercised their options under the Company Stock Option Plan, and except
for the issuance of the employee options as set forth on SCHEDULE 2.1(e);
(F) declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any of
its capital stock, except any dividends paid in cash to the holder of Company
Series A Preferred Stock, or split, combine or reclassify any shares of its
capital stock, or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
repurchase, redeem, or otherwise acquire, directly or indirectly, any shares of
its capital stock (or options, warrants or other rights convertible into,
exercisable or exchangeable therefore);
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(G) grant any severance or termination pay (i) to any director
or officer or (ii) to any employee, except payments made pursuant to standard
written agreements outstanding as of the date hereof and disclosed on the
Schedules, or increase in the salary or other compensation payable or to become
payable by Company or its subsidiaries to any of its respective officers,
directors, employees or advisors, or declare, pay or make any commitment or
obligation of any kind for the payment by Company of a bonus or other additional
salary or compensation to any such person, or adopt or amend any employee
benefit plan or enter into any employment contract;
(H) sell, lease, license or otherwise dispose of any of the
assets or properties of Company or its subsidiaries other than in the Ordinary
Course but not exceeding $50,000 in the aggregate, including but not limited to
the performance of obligations under contractual arrangements existing as of the
date hereof set forth on the Schedules, or create any security interest in such
assets or properties;
(I) grant any loan to any person or entity except for accounts
receivable in the Ordinary Course but not exceeding $50,000 in the aggregate,
incur any indebtedness or guarantee any indebtedness except for accounts payable
incurred in the Ordinary Course but not exceeding $50,000 in the aggregate,
issue or sell any debt securities, guarantee any debt securities of others,
purchase any debt securities of others or amend the terms of any outstanding
agreements related to borrowed money, except for expenses in the Ordinary Course
but not exceeding $50,000 in the aggregate;
(J) amend in any material respect or otherwise modify (or
agree to do so), or violate the terms of any of the Contracts set forth or
described in SCHEDULE 2.10 or enter into any Contract except in the Ordinary
Course (subject to the other provisions of this Section 4.3);
(K) acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities or, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
Company's or any of its subsidiaries' Business;
(L) pay, discharge or satisfy, in an amount in excess of
$10,000 (in any one case) or $50,000 (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction of liabilities in the Ordinary
Course (subject to the other provisions of this Section 4.3);
(M) make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of material Taxes,
or consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of material Taxes;
(N) change any accounting methods or practices (including any
change in depreciation or amortization policies or rates) or extend the due
dates of any accounts receivable;
(O) terminate any employees other than for cause or encourage
any employees to resign from Company;
(P) enter into any contract, purchase order or other agreement
pursuant to which Company would be required to book any amounts due thereunder
as deferred revenue; or
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(Q) take or agree in writing or otherwise to take any of the
actions described in the preceding clauses (A) through (P) of this section or
any other action that would prevent Company from performing or cause Company not
to perform its covenants and agreements hereunder or from consummating the
Transactions.
4.4 FULL ACCESS AND NOTICE
(a) FULL ACCESS. Company will permit (and will cause each of
its subsidiaries to permit) representatives of the Buyer (including, but not
limited to, its legal and financial advisors) to have reasonable access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of Company and its subsidiaries, to all premises,
properties, personnel, books, records (including Tax records), Contracts, and
documents of or pertaining to Company and each of its subsidiaries and to make
copies of such books, records (including Tax records), Contracts, and documents
for review at Buyer's premises, provided that if the Merger does not close, the
Buyer shall return or destroy such materials. Company shall cooperate fully with
Buyer in the conduct of Buyer's due diligence.
(b) NOTICE OF DEVELOPMENTS. Each Party will give prompt
written notice to the other Parties of any material adverse development causing
a breach of any of its own representations and warranties in Articles II and
III, above, respectively. No disclosure by any Party pursuant to this Section
4.4(b), however, shall be deemed to amend or supplement any Schedule attached
hereto or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
4.5 EXCLUSIVITY
The Company and the Stockholders will not (and the Company will not cause or
permit any of its subsidiaries to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets, of Company or any of its subsidiaries (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. The Company will
notify the Buyer immediately if any Person makes any proposal, offer,
counter-offer, inquiry, or contact with respect to any of the foregoing,
including a summary of the terms of such proposal, offer, counter-offer,
inquiry, or contact with respect to any of the foregoing.
4.6 COMPANY STOCK OPTION PLAN.
(a) Company agrees to adopt, approve and authorize, subject to
shareholder approval, no later than 10 days prior to the Closing Date, the 2001
Company Option Plan, the terms and conditions of which shall be subject to prior
written approval of Buyer. Company agrees to authorize for issuance under the
2001 Company Option Plan a number of options approved by Buyer in its reasonable
discretion. No options or other rights shall be granted by Company under the
2001 Company Option Plan without the prior written approval of Buyer, except for
options granted by Company as replacements for options outstanding under the
Company Option Plan. Buyer shall assume Company's current Company Option Plan or
terminate the Company Option Plan and replace existing options with options
under the 2001 Company Option Plan.
(b) The options of certain holders listed on SCHEDULE 4.6(b)
(i.e. the non-continuing directors) shall become fully vested upon the
consummation of the Merger and be included under the 2001 Company Option Plan;
provided, that each such holder has executed and delivered to Buyer as of the
Closing Buyer's standard form of stock option agreement, except that such option
agreement shall provide that such options shall (i) not be exercisable during
the first 120 days after the Closing and (ii)
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expire at the end of ten (10) months after the Closing, but in no event shall
such options expire earlier than 6-months after the effective date of the
registration statement covering the options.
(c) Company shall provide to Buyer on or before the Closing
all information and documents reasonably requested by Buyer in respect of the
recipients of the options under Sections 4.6(a) and (b) above to assist Buyer to
properly administer such options.
4.7 TERMINATION AND AMENDMENT OF AGREEMENTS.
Company agrees to use its commercially reasonable efforts to terminate prior to
Closing each of the E-Loan Agreement and the Lending Tree Agreement. Company
also agrees to give a notice of cancellation or termination of the ▇▇▇▇▇▇▇ Mac
Agreement to Federal Home Loan Mortgage Corporation prior to the Closing .
Company also agrees to use its best efforts to amend the Experian Agreement to
delete therefrom the reference that Company is a "consumer reporting agency" or
similarly regulated Person.
4.8 SCHEDULE 2.7. Company shall, within seven (7) days of the date of
this Agreement, deliver to Buyer an updated Schedule 2.7 reasonably satisfactory
to Buyer showing in reasonable detail a breakdown of the Schedule 2.7 hereto by
individual asset and location (e.g., showing the number of laptop computers in
each facility and their book value).
4.9 BENEFIT PROVIDER AGREEMENT. Buyer agrees to execute and deliver the
Benefit Provider Agreement, in substantially the form of Exhibit E,
contemporaneous with the Closing.
ARTICLE V
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
All obligations of Buyer under this Agreement are subject to the fulfillment and
satisfaction, prior to or at the Closing, of each of the following conditions,
any one or more of which may be waived in writing by Buyer:
5.1 BOARD AND STOCKHOLDER APPROVAL. The board of directors and
stockholders of Company shall have approved this Agreement, the Merger and the
related transactions by the requisite vote under applicable law and Company's
Certificate of Incorporation and Bylaws. Company will have delivered to Buyer
copies of the board and stockholders resolutions.
5.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Company contained in this Agreement and in any certificate delivered in
accordance with this agreement will be true and correct in all material respects
on and as of the Closing Date as though newly made at and as of that time.
Company will have delivered to Buyer a certificate, dated the Closing Date, to
such effect. Company will have delivered to Buyer an updated SCHEDULE 2.11 as of
the date two days prior to the Closing Date. Notwithstanding the foregoing
provisions of this Section 5.2, if a representation and warranty contained in
this Agreement shall not be true and correct in all material respects on and as
of the Closing and Buyer has identified such representation and warranty and the
Parties have agreed to a Quantifiable Liability Price Adjustment or a Contingent
Liability Escrow Adjustment pursuant to Section 1.6(d) above in respect of such
particular representation and warranty, then to the extent that such
Quantifiable Liability Price Adjustment or Contingent Liability Escrow
Adjustment has been so made, Buyer shall not have the right to not proceed to
Closing solely on the basis that such particular representation and warranty is
not true and correct in all material respects; provided, that nothing contained
in this paragraph shall affect the provisions relating to the Initial
Termination Adjustment Amount or Final Termination Adjustment Amount and Buyer's
right to terminate this Agreement in respect thereof.
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5.3 COMPANY'S PERFORMANCE. Each of the agreements of Company to be
performed on or before the Closing Date pursuant to the terms of this Agreement
will have been duly performed on or before the Closing Date.
5.4 NO MATERIAL ADVERSE CHANGE. There will not have been any material
adverse change in or affecting the Business or any of Company's assets since the
date of this Agreement and Company and the Stockholders will have delivered to
Buyer a certificate dated the Closing Date to such effect; provided, that the
determination of whether or not there has been any material adverse change in or
affecting the Business or any of the Company's assets shall be made without
regard to the effect of Excluded Losses on any component of such determination.
Notwithstanding the foregoing provisions of this Section 5.4, if there shall
have been any material adverse change in or affecting the Business or any of
Company's assets since the date of this Agreement and Buyer has identified such
material adverse change and the Parties have agreed to a Quantifiable Liability
Price Adjustment or a Contingent Liability Escrow Adjustment pursuant to Section
1.6(d) above in respect of such material adverse change, then to the extent that
such Quantifiable Liability Price Adjustment or Contingent Liability Escrow
Adjustment has been so made, Buyer shall not have the right to not proceed to
Closing solely on the basis that such material adverse change has occurred;
provided, that nothing contained in this paragraph shall affect the provisions
relating to the Initial Termination Adjustment Amount or Final Termination
Adjustment Amount and Buyer's right to terminate this Agreement in respect
thereof.
5.5 CONSENTS. At the Closing, Company will deliver all Consents
referenced in Section 2.13, together with a certificate, in a form reasonably
acceptable to both Buyer and Company, certifying that all such consents have
been so delivered. Such certificate will also certify that no parties who have
executed such Consents have revoked such Consents or disclosed to Company an
intention to do so or to terminate their relationship with Company.
5.6 APPROVALS. Any consent, approval, authorization or order of any
court, governmental agency, administrative body or other person or entity
required for the consummation of the Transactions will have been obtained, will
be in effect on the Closing Date and copies of which will be delivered to Buyer.
All applicable waiting periods (and any extensions thereof) under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or otherwise been terminated. Consent,
approval or authorization will have been obtained, will be in effect on the
Closing Date and copies of which will be delivered to Buyer with respect to the
following: (i) at least two of Experian, Equifax and TransUnion, and (ii)
facility leases.
5.7 NO ORDERS; LEGAL PROCEEDINGS. No Law will have been enacted,
entered, issued, promulgated or enforced by any Governmental Agency, nor will
any action or proceeding have been instituted and remain pending or, to
Company's Knowledge, Threatened and remain so at what would otherwise be the
Closing Date, that prohibits or restricts or would (if successful) prohibit or
restrict the Transactions or cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or affect adversely the right
of the Buyer to own any of the Company's assets, to operate the businesses of
Company, or affect adversely the right of any of the subsidiaries of Company to
own its assets and to operate its businesses.
5.8 APPROVAL OF DOCUMENTATION. The form and substance of all opinions,
certificates, and other documents required to be delivered hereunder will be
reasonably satisfactory in all respects to Buyer and its counsel.
5.9 RELATED AGREEMENTS. The Escrow Agreement, Employment Agreements and
other Transaction Documents must have been executed and delivered by all parties
to those agreements, and the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer
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of the subsidiaries of Company other than those whom the Buyer shall have
specified in writing at least five Business Days prior to the Closing.
5.10 OPINION OF COUNSEL FOR COMPANY. Company will have delivered to
Buyer opinions from (a) ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel for Company, in form
and substance reasonably satisfactory to Buyer and Buyer's counsel and (b)
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Finger, Delaware counsel for Company, in form and substance
reasonably satisfactory to Buyer and Buyer's counsel.
5.11 OPINION OF COUNSEL FOR BUYER. Buyer must have received a legal
opinion from O'Melveny & ▇▇▇▇▇ LLP, legal counsel to Buyer to the effect that
the Merger will qualify as a "reorganization" within the meaning of Section
368(a) of the Code, which opinion shall be given in reliance on a representation
letter provided to such counsel by Buyer and Company.
5.12 CAPITALIZATION SCHEDULE. Buyer must have received a schedule from
Company showing all of the holders of Company Capital Stock and Company Options.
Such schedule shall list the name and mailing address of each such holder. Buyer
shall have also received from Company, on or prior to five (5) Business Days
prior to the Closing Date, a schedule showing as of the Closing Date the names
and number of shares owned by all holders of Company Common Stock and Company
Series A Preferred Stock that are entitled to receive Merger Consideration
hereunder (the "CLOSING DATE CAPITALIZATION SCHEDULE").
5.13 COMPANY STOCK OPTION PLAN. Company shall have adopted the 2001
Company Option Plan as described in Section 4.6 and terminated its existing
Company Option Plan.
5.14 OPTION HOLDERS. Option holders holding at least ninety (90)
percent of shares issuable under the existing Company Option Plan shall have
entered into Lock-Up Agreements for a period of sixty (60) days; provided,
however, that the holders of the vested options of continuing employees and the
holders of options that will accelerate upon Closing (i.e. the non-continuing
directors) shall enter into Lock-Up Agreements for a period of 120 days.
5.15 JUNE 30 AUDITED FINANCIALS. Company must have delivered to Buyer
on or before August 26, 2001, its audited financial statements as of and for the
period ended June 30, 2001.
5.16 REPAYMENT OF MEMBERWORKS NOTE RECEIVABLE. MemberWorks shall have
repaid to Company in full the MemberWorks Note and such MemberWorks Note shall
have been cancelled and voided to Buyer's satisfaction.
5.17 MEMBERWORKS AGREEMENTS. Each of the agreements between MemberWorks
and Company shall have been terminated to Buyer's satisfaction, and Company and
MemberWorks shall have entered into that certain Benefit Provider Agreement
attached hereto as EXHIBIT E.
5.18 NO DISSENTING STOCKHOLDER. The aggregate number of shares of
Company Capital Stock held by Persons who have asserted and maintain the
continued right to perfect dissenter's rights under applicable law, if any,
shall not exceed 10% of the total number of outstanding shares of the Company
Capital Stock.
5.19 OPINION OF COUNSEL OF MEMBERWORKS. Memberworks will have delivered
to Buyer an opinion Shearman & Sterling, counsel for Memberworks, in form and
substance reasonably satisfactory to Buyer and Buyer's counsel.
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ARTICLE VI
CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS.
All obligations of Company under this Agreement are subject to the fulfillment
and satisfaction, prior to or on the Closing Date, of each of the following
conditions, any one or more of which may be waived in writing by Company:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Buyer contained in this Agreement and in any certificate delivered in
accordance with this agreement will be true and correct on and as of the Closing
Date as though newly made at and as of that time. Buyer will have delivered to
Company a certificate, dated the Closing Date, to such effect.
6.2 PERFORMANCE OF BUYER. Each of the agreements of Buyer to be
performed on or before the Closing Date pursuant to the terms of this Agreement
will have been duly performed on or before the Closing Date.
6.3 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates and other documents hereunder will be reasonably satisfactory in
all respects to Company and its counsel.
6.4 APPROVALS. Any consent, approval, authorization or order of any
court, governmental agency, administrative body or other person or entity
required for the consummation of the transactions contemplated by this Agreement
will have been obtained and will be in effect on the Closing Date. All
applicable waiting periods (and any extensions thereof) under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or otherwise been terminated.
6.5 NO ORDERS; LEGAL PROCEEDINGS. No Law will have been enacted,
entered, issued, promulgated or enforced by any Governmental Entity, nor will
any action or proceeding have been instituted and remain pending or Threatened
and remain so at what would otherwise be the Closing Date, that prohibits or
restricts or would (if successful) prohibit or restrict the Transactions.
6.6 RELATED AGREEMENTS. The Escrow Agreement and other Transaction
Documents must have been executed and delivered by all parties thereto.
6.7 LEGAL OPINION. The Company shall have received a legal opinion from
▇▇▇▇▇▇ ▇▇▇▇▇ & Bockius LLP, counsel to Company to the effect that the Merger
will qualify as a "reorganization" within the meaning of Section 368(a) of the
Code, which opinion shall be given in reliance on a representation letter
provided to such counsel by Buyer and Company.
6.8 OPINION OF COUNSEL FOR BUYER. Buyer will have delivered to Company
and each Stockholder opinions from Buyer's counsel, in form and substance
reasonably satisfactory to Company and Company counsel.
ARTICLE VII
POST-CLOSING COVENANTS
7.1 COVENANT NOT TO COMPETE.
(a) Except as provided in the last paragraph of this SECTION
7.1, each Stockholder will not for two (2) years from the Closing Date, directly
or indirectly, as an owner, partner, shareholder, joint venturer, corporate
officer, director, employee, manager, consultant, principal, trustee or
licensor, or in any other capacity whatsoever of or for any person, firm,
partnership, company, corporation or other entity (other than Buyer or any of
its Affiliates):
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(i) own, manage, operate, sell, control or
participate in the ownership, management, operation, sales or control of, be
involved with the development efforts of, serve as a technical advisor to or
supply product to any business that competes with the Business; or
(ii) solicit, divert or take away, or attempt to
solicit, divert or take away, the business or patronage of any of the clients,
customers or suppliers of Buyer; or
(iii) lend or allow his name or reputation to be used
by or otherwise allow his skill, knowledge or experience to be used by any
business that competes with the Business.
Notwithstanding the foregoing, (A) each Stockholder is permitted to own,
individually, as a passive investor up to a 5% interest in any publicly-traded
entity; (B) the Parties acknowledge that the performance by ▇▇▇▇▇▇ ▇▇▇▇▇▇ of any
duties, or the devotion of his time, with respect to the operations of HomeData
Corporation, in substantially the same manner as he performs such duties or
devotes such time immediately prior to the Closing Date, shall not be or be
deemed to be a breach of the covenants contained in this SECTION 7.1, and (C)
the provisions of this Section 7.1 shall not apply to the business activities of
Memberworks Inc., a stockholder of Company ("MEMBERWORKS"), or any of its direct
or indirect Affiliates (other than those business activities of Company or any
subsidiary of Company) actually being conducted immediately prior to the
Effective Time. Notwithstanding the foregoing proviso, Memberworks agrees that
it will not directly provide to consumers N&H Information Products or Personal
Credit Information Products other than through third party providers with which
it is not Affiliated, either directly or indirectly. The restrictions in this
SECTION 7.1 will be effective (w) in the counties of Los Angeles and Ventura,
(x) in the state of California, (y) in the United States of America, and (z)
throughout the world (collectively, the "LOCATIONS"). Company and each
Stockholder acknowledge that the Business, given that it is conducted on the
Internet, is national and international, rather than local, in scope.
(b) Each of Buyer and MemberWorks agrees that it will not for
a period of two (2) years after the Closing Date solicit any current employee of
the other party without such party's prior written consent; provided, however,
that term "solicit" shall not be deemed to include generalized searches for
employees through media advertisements, employment firms or otherwise that are
not focused on persons employed by such party.
7.2 CONFIDENTIALITY.
(a) Each Stockholder has had access to, and there has been
disclosed to each Stockholder, information of a confidential nature that has
great value to the Business and constitutes a substantial basis upon which the
Business is predicated. Such information includes trade secrets, customer or
supplier lists, pricing information, marketing arrangements, strategies,
business plans, internal performance statistics, training manuals, and other
information concerning Company (or Buyer as successor to the Business) that is
competitively sensitive or confidential (the "CONFIDENTIAL INFORMATION").
(b) Each Stockholder will not, for three (3) years following
the Closing Date, use or divulge any Confidential Information, except: (a) to
Buyer's personnel; (b) to the extent disclosure may be required by Law; or (c)
if such information becomes lawfully obtainable from other sources. Each
Stockholder will not use or permit to be used any Confidential Information for
the gain or benefit of any Party outside of Buyer or for his own personal gain
or benefit outside the scope of his engagement by Buyer.
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7.3 REASONABLENESS OF RESTRICTIONS AND ENFORCEABILITY. Given each
Stockholder's position as a stockholder of Company and each Stockholder's strong
business ties that are significant to the growth of the Business, each
Stockholder acknowledges that the restrictions in this Agreement are reasonable
both individually and in the aggregate and that the duration, geographic scope,
extent and application of each of such restrictions are no greater than is
necessary for the protection of Buyer's legitimate business interests, which
include but are not limited to Company's trade secrets and other valuable
confidential business information acquired by Buyer, its substantial
relationships with prospective or existing customers and suppliers, and the
goodwill associated with the Business.
7.4 SEVERABLE COVENANTS. The Parties intend that the covenants in
SECTION 7.1 will be construed as a series of separate covenants, each consisting
of the covenants in SECTION 7.1 for each of the Locations. Except for the
Locations, all such separate covenants will be deemed identical. The Parties
desire and intend that this Agreement be enforced to the fullest extent
permissible under the Laws and public policies applied in each jurisdiction in
which enforcement is sought. If any particular provision of SECTION 7.1, 7.2 or
7.3 is adjudicated to be invalid or unenforceable, (a) each of the Parties
agrees that if such provisions would be valid or enforceable if some part or
parts of them were deleted or the period or area of application reduced, the
applicable restriction will apply with the modifications necessary to make it
valid and enforceable, and (b) such adjudication will apply only with respect to
the operation of this Agreement in the particular jurisdiction in which the
adjudication is made, and the unenforceable covenant will be eliminated from
this Agreement to the extent necessary to permit the remaining separate
covenants (or portions of them) to be enforced.
7.5 LITIGATION SUPPORT.
In the event and for so long as any Party actively is contesting or defending
against any action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand in connection with (i) any of the Transactions or (ii) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Company or any of its subsidiaries, the other
Parties will cooperate with the contesting or defending Party and its counsel in
the contest or defense, make available its personnel, and provide such testimony
and access to its books and records as shall be reasonably necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8.2 below).
7.6 TRANSITION. The Stockholders will not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of Company or any of its
subsidiaries from maintaining the same business relationships with the Buyer
after the Closing as it maintained with the Company and its subsidiaries prior
to the Closing. Each Stockholder will refer all customer inquiries relating to
the businesses of the Company and its subsidiaries to the Buyer from and after
the Closing.
7.7 GENERAL. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement and the
other Transaction Documents, each of the Parties will take such further action
(including the execution and delivery of such further instruments and documents)
as the other Party reasonably may request, at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification
therefor under Article VIII below. Stockholders acknowledge and agree that from
and after the Closing Buyer will be entitled to possession of all documents,
books, records (including Tax records), agreements, and financial data of any
sort relating to Company and its former subsidiaries.
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ARTICLE VIII
INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, COVENANTS AND
AGREEMENTS.
(a) Except as otherwise expressly provided in this Agreement,
all representations, warranties, covenants and agreements of the Parties
contained in this Agreement, including the schedules and exhibits attached
hereto, will survive the Closing and the consummation of the Transactions for a
period of eighteen (18) months. The representations and warranties in SECTIONS
2.1, 2.2, 2.8, 2.9, 2.18, 2.24, 3.1, 3.3 AND 3.4 will survive the Closing and
the consummation of the Transactions for any applicable statue of limitations.
The representations and warranties in SECTIONS 2.12 AND 2.23 will survive the
Closing and the consummation of the Transactions for a period of three (3)
years.
(b) With the exception of the ▇▇▇▇▇▇▇ Mac Indemnity, the
Experian Indemnity and the Dissenting Shares Indemnity, no claims will be made
by any Party entitled to indemnification under this Article VIII unless and
until all such claims taken cumulatively will have exceeded $475,000 (the
"INDEMNIFICATION THRESHOLD") provided however, indemnification will then be
available from the first dollar thereof.
(c) With the exception of (i) indemnification by Company and
the Stockholders related to breaches of the representations and warranties
contained in Sections 2.1, 2.2, 2.8, 2.12, 2.23 and 2.29, (ii) any Losses that
arise from the fraud or willful misconduct of the indemnifying party, in which
case with respect to each of clauses (i) and (ii) above the responsibility of
the indemnifying party shall not be limited, and with the exception of (iii) the
▇▇▇▇▇▇▇ Mac Indemnity, (iv) the Experian Indemnity and (v) the Dissenting Shares
Indemnity, in which case with respect to clauses (iii), (iv) and (v) above, the
responsibility of the indemnifying party shall be limited to the Purchase Price
or the Adjusted Purchase Price, as the case may be, the aggregate liability of
the Stockholders on the one hand, and Buyer, on the other hand, under Section
8.2 and 8.3 shall not exceed thirty percent (30%) of the Purchase Price (i.e.,
U.S.$45,000,000) or thirty percent (30%) of the Adjusted Purchase Price, as the
case may be; provided, however, that breaches of representations and warranties
in Section 2.12 shall not (in the aggregate, with all the aggregate liability
under Section 8.2) exceed fifty percent (50%) of the Purchase Price (i.e.,
U.S.$75,000,000) or fifty percent (50%) of the Adjusted Purchase Price, as the
case may be. For the avoidance of doubt, Buyer may pursue its remedies in
connection with the Transactions under any theory of recovery, but the
limitations as set forth in this Section 8.1shall apply regardless of the theory
of recovery used by Buyer.
8.2 INDEMNIFICATION BY STOCKHOLDERS. Regardless of any pre-Closing
investigations, examinations or prior knowledge of Buyer or due diligence
conducted by it or disclosure by Company or the Stockholders, the Stockholders,
severally and not jointly and severally, hereby agree to indemnify and hold
Buyer and its affiliates, together with their respective directors, officers,
employees, managers, agents, advisors, and transferees, harmless from, against
and with respect to any and all demands, claims, actions or causes of action,
assessments, liabilities, losses, costs, damages, penalties, charges or
expenses, including without limitation interest, penalties and reasonable
counsel and accountants' fees, disbursements and expenses (collectively,
"LOSSES") arising out of, or related to: (a) any breach of any representation,
warranty, covenant or agreement made by Company or the Stockholders in this
Agreement, including the Schedules and exhibits hereto or any other document or
agreement delivered by or on behalf of Company or the Stockholders in connection
therewith, (b) without limiting the foregoing in paragraph (a) of this Section
8.2 above, any Losses of Buyer or its affiliates that arise with respect to or
relate to any period(s) from the date of this Agreement through and immediately
before the Closing in connection with Company's acts or omissions or the
operation of the Business (without
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limiting the other provisions of this Section 8.2, other than Losses that arise
as a result of the performance by Company and Stockholders of their obligations
under Article IV of this Agreement during such period or that are described in
clause (i) of the definition of Excluded Losses), (c) the cancellation or
termination of or the lack of performance under the ▇▇▇▇▇▇▇ Mac Agreement (the
"▇▇▇▇▇▇▇ MAC INDEMNITY"), (d) the Experian Agreement (the "EXPERIAN INDEMNITY"),
(e) any amounts paid to stockholders for each Dissenting Share in excess of the
Closing Date Consideration Per Share Amount (the "DISSENTING SHARES INDEMNITY")
or (f) any Losses of Buyer of its affiliates that arise with respect to claims
or actions by third parties against Buyer, its affiliates or Surviving
Corporation relating to the inability of Surviving Corporation to provide to
such third party any 3-bureau merged report product or service required to be
provided pursuant to any agreement between Company and such third party. Except
as otherwise provided herein, the liability of each Stockholder under this
Section 8.2 shall not exceed thirty percent (30%) of the the value of the
consideration payable to such Stockholder pursuant to Section 1.4 above or fifty
percent (50%) of the value of the consideration payable to such Stockholder
pursuant to Section 1.4 above, as the case may be, consistent with the
percentages set forth in Section 8.1(c) above, plus a fraction of the
consideration payable to the other stockholders of Company pursuant to Section
1.4 above, the numerator of which is the total number of shares of Company
Capital Stock held by such Stockholder, and the denominator of which is the
total number of shares of Company Capital Stock held by all Stockholders.
8.3 INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify, defend
and hold the Stockholders and their representatives, agents, advisors and
transferees harmless from, against and with respect to any and all Losses
arising out of, or related to any breach of any representation, warranty,
covenant or agreement made by Buyer in this Agreement, including the Schedules
and exhibits hereto, if any, or any other document or agreement delivered by or
on behalf of Buyer in connection herewith.
8.4 PROCEDURES.
(a) Any claim for recovery pursuant to this indemnification
will be made promptly after discovery of the circumstances underlying such claim
in a written statement signed by the Party seeking indemnification, which will
specify in reasonable detail each individual item of Loss and the estimated
amount thereof, the date such item was claimed or the facts giving rise to such
claim were discovered, the basis for any alleged liability and the nature of the
breach or claim to which each such item is related.
(b) The Party seeking indemnification will give the
indemnifying Party(s) prompt notice of any third Party claim, action or
proceeding which might give rise to liability of the indemnifying Party(s) for
indemnification hereunder; provided the failure to give such prompt notice shall
relieve the indemnifying Party of its obligations hereunder to the extent such
Party is materially prejudiced thereby. If the indemnifying Party(s) contest any
third Party claim, it will have the option to defend (retaining counsel
reasonably acceptable to the indemnified Party), at the indemnifying Party's
expense, any such matter, provided that the indemnified Party will have the
right, at its own cost and expense, to participate in the defense of such claim.
However, notwithstanding the preceding sentence, (a) if the indemnifying Party
elects not to defend the claim, or (b) if the claim has been brought or asserted
against the indemnifying Party(s) as well as the indemnified Party and such
indemnified Party reasonably concludes that there may be one or more factual or
legal defenses available to it that are in conflict with those available to the
indemnifying Party(s) and the indemnifying Party is unwilling to raise such
defenses, then the indemnified Party may elect to conduct its defense on its own
behalf, in which case the reasonable fees and expenses of the indemnified
Party's counsel will be at the expense of the indemnifying Party(s). Except
under the circumstances described in the preceding sentence, the indemnified
Party will not enter into any settlement agreement without the indemnifying
Party's consent which will not be unreasonably
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withheld or delayed. The indemnifying Party(s) will not, without the prior
written consent of the indemnified Party (which will not be unreasonably
withheld), enter into any settlement of a claim, if pursuant to or as a result
of such settlement, injunctive or other equitable relief will be imposed against
the indemnified Party or if such settlement does not expressly unconditionally
release the indemnified Party from all liabilities or obligations with respect
to such claim, with prejudice. The indemnified Party and the indemnifying
Party(s) will cooperate with each other in the defense, compromise or settlement
of any claim for which indemnification is sought.
8.5 PREVAILING PARTY TO BE AWARDED LEGAL FEES. In the event of any
dispute arising out of this Agreement, the Party prevailing in resulting
litigation or arbitration will be entitled to receive, upon application to the
arbitrators or court, as the case may be, its reasonable legal fees and expenses
incurred in connection therewith.
8.6 INDEMNIFICATION RECOVERY.
(a) Any payment made pursuant to this ARTICLE VIII will be
treated as an adjustment to the Purchase Price for purposes of federal and state
income Taxes.
(b) At the time of delivery of notice of a claim of a Loss
hereunder the Party against whom such claim is made will respond to the claiming
Party within fifteen (15) days following receipt of such notice. If there is no
dispute of such claim, the indemnifying Party will promptly make payment to the
other Party. Upon receipt of a disputed claim, the Party will deliver, in good
faith, to the claiming Party a written statement responding to the claim and
presenting the basis of reasonable dispute of the terms thereof. The Parties
will attempt in good faith to agree upon the rights of the respective Parties
with respect to each of such claims. If the Parties cannot agree upon a
settlement of any claim within thirty (30) days thereafter, the Parties will
submit such dispute to arbitration, as provided for in SECTION 11.11.
8.7 ESCROW AMOUNT. Except for the Dissenting Shares Indemnity, if Buyer
is the indemnified Party, Buyer will first seek payment of any claim under the
Escrow Agreement (in the same proportion of Escrow Cash and Escrow Shares, with
the Escrow Shares value based on the Fair Market Value); provided, however, the
Escrow Cash and the Escrow Shares are not Buyer's exclusive source of
satisfaction for Stockholders' indemnification obligations. If (i) all of the
Escrow Cash and the Escrow Shares have been disbursed from the Escrow Account
and Buyer is entitled to further indemnification from the Stockholders hereunder
and (ii) if the registration statement required under the Registration Rights
Agreement is not effective during the required period of effectiveness provided
for by the Registration Rights Agreement due to Buyer's failure to perform,
other than in accordance with the terms of the Registration Rights Agreement,
then Stockholders shall have the option of satisfying their indemnity
obligations hereunder with the delivery to Buyer of Buyer Shares valued at the
Fair Market Value until such time as Buyer cures such breach under the
Registration Rights Agreement, after which point the Stockholders shall be
obligated to satisfy their indemnity obligations hereunder with the payment of
cash. The Dissenting Shares Indemnity must be paid in cash (outside of the
Escrow Cash).
8.8 STOCKHOLDER AGENT.
(a) APPOINTMENT. The approval of the Merger by the
stockholders will, effective upon the approval and without additional action by
them, constitute the appointment of the Stockholder Agent for each stockholder
(except those having perfected their appraisal or dissenters' rights under
Delaware Law), with power to act for and on behalf of the stockholders with
respect to Article 8 and Section 1.6. The Stockholder Agent will be authorized
to (i) give and receive notices and communications, (ii) authorize delivery to
Buyer of Escrow Shares from the Escrow Fund in satisfaction of claims made by
Buyer, (iii) deliver notices of objection, (iv) agree to, negotiate, enter into
settlements
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and compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims, and (v) take all actions
necessary or appropriate in the judgment of Stockholder Agent to carry out his
responsibilities, exercise his authority and represent the interests of the
stockholders. The stockholders can appoint a different Stockholder Agent from
time to time upon not less than thirty (30) days prior written notice to Buyer.
However, the Stockholder Agent cannot be removed unless holders of a two-thirds
interest in the Escrow Fund agree to the removal and to the identity of the
substituted agent. Any vacancy in the position of Stockholder Agent can be
filled by approval of the holders of a majority in interest of the Escrow Fund.
No bond will be required of the Stockholder Agent, and the Stockholder Agent
will not receive compensation for his services. Notices or communications to or
from the Stockholder Agent will constitute notice to or from each of the
stockholders.
(b) INDEMNIFICATION. The Stockholder Agent will not be liable
for any act done or omitted under this Agreement as Stockholder Agent while
acting without gross negligence, in good faith and in the exercise of reasonable
judgment.
(c) ACTIONS. A decision, act, consent or instruction of the
Stockholder Agent will constitute a decision of all the former stockholders for
whom a portion of the Escrow Cash and Escrow Shares otherwise payable or
issuable to them are deposited in the Escrow Fund and will be final, binding and
conclusive upon each of such former stockholders, and the Escrow Agent and Buyer
may rely upon any such decision, act, consent or instruction of the Stockholder
Agent as being the decision, act, consent or instruction of each former
stockholder. The Escrow Agent and Buyer are hereby relieved from any liability
to any Person for any acts done by them in accordance with such Stockholder
Agent decision, act, consent or instruction.
8.9 INSURANCE PROCEEDS. In determining the amount of any Loss,
liability or expense for which any Party is entitled to indemnification under
this Article 8, the gross amount thereof shall be reduced by any insurance
proceeds actually received by such Party from third party issuers and the
indemnified party agrees to use its reasonable efforts to secure payment of any
insurance proceeds to which it may be entitled in connection with any matter for
which it makes a claim for indemnity hereunder.
ARTICLE IX
TAX MATTERS
9.1 CERTAIN TAXES. The responsibility for paying all transfer,
documentary, sales, use, registration, value-added and other similar Taxes and
related fees (including any additions to Taxes) incurred by the Stockholders in
connection with this Agreement and the Transactions will be borne by
Stockholders. All Taxes that are imposed on Buyer or the Company in connection
with the Merger shall be solely for the account of Buyer.
9.2 TAX COOPERATION. After the Closing, the Stockholders, on one hand,
and Buyer and Sub, on the other hand, shall cooperate fully with each other in
the preparation of all Tax Returns and the handling of all Tax audits, and shall
provide, or cause to be provided, at their sole cost and expense, to the other
parties, any records and other information reasonably requested by such parties
in connection therewith.
ARTICLE X
TERMINATION
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10.1 TERMINATION OF AGREEMENT. Certain of the Parties may terminate
this Agreement provided below:
(a) Buyer and Company may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written
notice to Company on or before the end of the Due Diligence Period if a Final
Termination Adjustment Amount results as described in Section 1.6 above.
(c) Buyer may terminate this Agreement by giving written
notice to Company at any time prior to the Closing (i) in the event Company or
any Stockholder has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Buyer has notified Company
of the breach, and the breach has continued without cure for a period of 20 days
after the notice of breach or (ii) if the Closing shall not have occurred on or
before September 30, 2001 (or if the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ waiting period has not
expired or terminated before such date, on or before November 30, 2001) or (iii)
by reason of the failure of any condition precedent under Article V hereof
(unless the failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement) or (iv)
pursuant to the provisions of Section 1.6 in respect of a Due Diligence
Adjustment; and
(d) Company may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (i) in the event Buyer has
breached any material representation, warranty, or covenant contained in this
Agreement in any material respect, Company has notified Buyer of the breach, and
the breach has continued without cure for a period of 20 days after the notice
of breach or (ii) if the Closing shall not have occurred on or before September
30, 2001 (or if the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ waiting period has not expired or
terminated before such date, on or before November 30, 2001) or (iii) by reason
of the failure of any condition precedent under Article VI (unless the failure
results primarily from Company or any Stockholder breaching any representation,
warranty, or covenant contained in this Agreement).
10.2 EFFECTS OF TERMINATION. If any Party terminates this Agreement
pursuant to this Section 10.1 above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to the other Party
(except for any liability of any Party then in breach).
ARTICLE XI
GENERAL
11.1 ENTIRE AGREEMENT. All Exhibits and Schedules hereto will be deemed
to be incorporated into and made part of this Agreement. This Agreement,
together with the Exhibits and Schedules hereto, contains the entire agreement
among the Parties and there are no agreements, representations, or warranties by
any of the Parties hereto which are not set forth herein. This Agreement may not
be amended or revised except by a writing signed by all the Parties; provided,
that Company may consent to any such amendment at any time prior to the Closing
with the prior authorization of its board of directors; provided, further,
however, that any amendment effected after the stockholders have approved this
Agreement will be subject to the restrictions contained in the Delaware Law. No
waiver by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
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11.2 EQUITABLE RELIEF; BINDING EFFECT. Company recognizes that if
Buyer's remedy at law for any breach of the provisions of SECTIONS 7.1, 7.2 AND
7.3 would be inadequate and that for breach of such provisions Buyer will, in
addition to such other remedies as may be available to them at law or in equity
or as provided in this Agreement, be entitled to injunctive relief by an action
for specific performance to the extent permitted by law. This Agreement will be
binding upon and inure to the benefit of the Parties hereto and their respective
successors and assigns; provided, however, this Agreement and all rights
hereunder may not be assigned by Company except by prior written consent of
Buyer or assigned by Buyer except by prior written consent of Company.
11.3 SEPARATE COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one Party, but all such counterparts taken together
will constitute one and the same Agreement. Facsimile signatures on counterparts
of this Agreement will be deemed original signatures.
11.4 TRANSACTION COSTS. Except as may be otherwise expressly set forth
herein, each Party to this Agreement will be responsible for his, her or its own
legal, accounting and other expenses, if any, attendant to the negotiation and
drafting of this Agreement and to the transactions contemplated by this
Agreement; provided, that Company will be responsible for the reasonable legal,
accounting and other expenses incurred by Company directly in evaluating,
negotiating and effecting the Transactions (and not any other transactions with
any other parties) up to the lesser of $2,500,000 or the cash on Company's
balance sheet at Closing.
11.5 NOTICES. All notices, demands, consents or other communications to
be given or delivered under or by reason of the provisions of this Agreement
will be in writing and will be deemed to have been given when sent by certified
or registered mail, return receipt requested and postage prepaid, or by a
national overnight delivery service, and received by the recipient. Such
notices, demands, consents and other communications will be sent to Buyer,
Company and the Stockholders at the respective addresses indicated below:
(i) If to Buyer:
▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇, Esq.
O'Melveny & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(ii) If to Company:
iPlace, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
(iii) If to the Stockholders:
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to their address as set forth in the stock records of the
Company.
With a copy to, in the case of notice to MemberWorks:
Shearman & Sterling
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
unless and until notice of another or different address will be given as
provided herein.
11.6 NO DISCLOSURE WITHOUT CONSENT. No Party will issue any press
release related to this Agreement or the Transactions, or make any other
announcements (except to any employee on a "need to know" basis and other third
Parties but only to the extent necessary in order to consummate the Transactions
and who are informed of the confidential nature of such information) without the
joint approval of Buyer and Company, except any public disclosure which Buyer in
its good faith judgment believes is required by law or by any stock exchange on
which its securities are listed to be made (in which case Buyer will consult
with Company prior to making any such disclosure).
11.7 SEVERABILITY. The provisions of this Agreement are severable and
the invalidity of any provision will not affect the validity of any other
provision.
11.8 CAPTIONS. The captions herein have been inserted solely for
convenience of reference and in no way define, limit or describe the scope or
substance of any provision of this Agreement.
11.9 GOVERNING LAW. The execution, interpretation, and performance of
this Agreement will be governed by the law of the State of New York.
11.10 NO THIRD-PARTY BENEFICIARIES. The Parties hereto have entered
into this Agreement for their own benefit and do not intend to benefit any other
person or entity thereby.
11.11 ARBITRATION.
(a) Other than with respect to SECTION 1.3, in the event the
Parties (meaning, for purposes of this section, Buyer on the one hand and
Company and the Stockholders on the other hand) are unable to resolve a disputed
claim or claims, any of the Parties may request arbitration of the matter unless
the amount of the damage or loss is at issue in pending litigation with a third
Party, in which event arbitration will not be commenced until such amount is
ascertained or both Parties agree to arbitration; and in either such event the
matter will be settled by arbitration conducted by three arbitrators. Buyer on
the one hand and Company and the Stockholders on the other will each select one
arbitrator, and the two arbitrators so selected will select a third arbitrator.
The arbitrators will set a limited time period and establish procedures designed
to reduce the cost and time for discovery while allowing the Parties an
opportunity, adequate in the sole judgment of the arbitrators, to discover
relevant information from the opposing Parties about the subject matter of the
dispute. The arbitrators will rule upon motions to compel or limit discovery and
will have the authority to impose sanctions, including attorneys' fees and
costs, to the extent as a court of competent law or equity, should the
arbitrators determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of a majority of the three arbitrators as to the
validity and amount of any claim will be binding and conclusive upon the Parties
to this Agreement. Such decision will be written and will be supported by
written findings of fact and conclusions which will set forth the award,
judgment, decree or order awarded by the arbitrators.
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(b) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration will be held in
Los Angeles County, California under the rules then in effect of the American
Arbitration Association. For purposes of this SECTION 11.11, in any arbitration
hereunder in which any claim or the amount thereof stated is at issue, Buyer
will be deemed to be the non-prevailing Party in the event that the arbitrators
award Buyer less than the sum of (A) one-half (1/2) of the disputed amount plus
(B) any amounts not in dispute; otherwise, Company and the Stockholders will be
deemed to be the non-prevailing Party. The non-prevailing Party to an
arbitration will pay its own expenses, the fees of each arbitrator, the
administrative costs of the arbitration and the expenses, including without
limitation, travel, reasonable attorneys' fees and costs, incurred by the other
Party to the arbitration.
11.12 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party; provided however, that Buyer may (i) assign any or all of
its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
11.13 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure Schedule identifies
the exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself). The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
11.14 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
11.15 SUBMISSION TO JURISDICTION. Each of the Parties submits to the
exclusive jurisdiction of any state or federal court sitting in Los Angeles
County, California, in any non-arbitration action or proceeding arising out of
or relating to this Agreement and agrees that all claims in respect of the
action or proceeding may be heard and determined in any such court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Each Party
appoints CT Corporation (the "PROCESS AGENT") as its agent to receive on its
behalf service of copies of the summons and complaint and any other process that
might be served in the action or proceeding. Any Party may make service on the
other Party by sending or delivering a copy of the process (i) to the Party to
be served at the address and in the manner provided for the giving of notices in
SECTION 11.5 above or
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(ii) to the Party to be served in care of the Process Agent at the address and
in the manner provided for the giving of notices in SECTION 11.5 above. Nothing
in this SECTION 11.15, however, shall affect the right of any Party to serve
legal process in any other manner permitted by law or in equity. Each Party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or in equity.
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IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as of
the date first above written.
▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President
IPLACE, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
STOCKHOLDERS:
MEMBERWORKS INCORPORATED
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President and CFO
▇▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
S-1
46
▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ TRUST
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Trustee
S-2
47
EXHIBIT A
DEFINITIONS
"ACCREDITED INVESTOR" means each holder of Company Capital Stock who is an
"Accredited Investor" as such term is defined in Regulation D promulgated under
the Securities Act and identified in Schedule 1.4(c).
"ACCOUNTANTS" is defined in Section 1.6.
"ACCREDITED INVESTORS FRACTIONAL INTEREST IN ESCROW FUND" means with respect to
MemberWorks and each Accredited Investor, under Scenario 1, the quotient of (i)
the total number of issued and outstanding shares of Company Common Stock owned
by MemberWorks or such Accredited Investor, as the case may be, as of the
Effective Time divided by (ii) the Applicable Shares Outstanding less the Series
A Shares Outstanding less the Nonaccredited Investors Shares Outstanding, and
under Scenario 2, the quotient of (i) the total number of issued and outstanding
shares of Company Common Stock owned by MemberWorks or such Accredited Investor,
as the case may be, as of the Effective Time divided by (ii) the Applicable
Shares Outstanding as of the Effective Time less the Nonaccredited Investors
Outstanding Shares.
"ADJUSTED PURCHASE PRICE" means the purchase price resulting from any adjustment
to the Purchase Price pursuant to Section 1.6.
"AFFILIATE" means a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person specified.
"APPLICABLE SHARES OUTSTANDING" as of any date of determination means the
aggregate number of shares of Company Common Stock outstanding as of such date,
including all shares of Company Common Stock issued or issuable upon conversion
of all Shares of Company Series A Preferred Stock.
"BANKRUPTCY PROCEEDING" is defined in Section 2.28.
"BUSINESS" means Company's and its subsidiaries' business as conducted as of the
Closing Date and during the periods covered by the Financial Statements and the
Closing Date Balance Sheet.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of California or is a day on which
banking institutions are required or authorized by law to close.
"BUYER COMMON STOCK" means the common stock $0.001 par value of Buyer.
"BUYER SHARES" is defined in Section 1.5.
"CERTIFICATES" is defined in Section 1.9.
"CERTIFICATE OF MERGER" is defined in Section 1.2.
"CLOSING" is defined in Section 1.2.
"CLOSING DATE" is defined in Section 1.2.
"CLOSING DATE BALANCE SHEET" is defined in Section 1.6.
"CLOSING DATE CASH" is defined in Section 1.5(b).
"CLOSING DATE CAPITALIZATION SCHEDULE" is defined in Section 5.12.
"CLOSING DATE CONSIDERATION PER SHARE AMOUNT" is defined in Section 1.4.
"CLOSING DATE SHARES" is defined in Section 1.5(b).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY CAPITAL STOCK" means the Company Common Stock and Company Series A
Preferred Stock.
"COMPANY COMMON STOCK" is defined in Section 1.4.
"COMPANY SERIES A PREFERRED STOCK" is defined in Section 1.4.
"COMPANY OPTION PLAN" is defined in Section 2.1.
"COMPANY OPTIONS" is defined in Section 2.1.
"CONFIDENTIAL INFORMATION" is defined in Section 7.2.
"CONSENTS" means all consents, approvals, or waivers from Governmental Agencies
necessary for the execution, delivery, and performance by Company and the
Stockholders of the Transaction Documents and the consummation of the
Transactions.
"CONTINGENT LIABILITY ESCROW ADJUSTMENT" is defined in Section 1.6.
"CONTRACTS" means any written or oral purchase or sales commitments,
financing or security agreements, guaranties, licenses, franchises, repurchase
agreements, agency agreements, customer agreements, supplier agreements,
representative agreements, commission agreements, employment or collective
bargaining agreements, independent contractor agreements, insurance policies,
and leases of real or personal property or any other agreements to which Company
is a party or is bound, including any oral or unwritten amendment, waivers, or
legally binding understandings with respect thereto.
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"DEFERRED REVENUE ADJUSTMENT" is defined in Section 1.6.
"DELAWARE LAW" means the Delaware General Corporation Law.
"DISSENTING SHARES" is defined in Section 1.10.
"DISSENTING SHARES INDEMNITY" is defined in Section 8.2.
"DUE DILIGENCE PERIOD" means the period commencing on the date of this Agreement
and ending on the earlier of (1) the date 45 days following the date of this
Agreement and (2) the date of expiration or early termination of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ waiting period, but in no event earlier than the later of 21
days after the date of this Agreement or 3 days after receipt by Buyer of
Company's audited financial statements as of and for the fiscal year ended June
30, 2001; provided, however, if any delay is caused by Company, the Due
Diligence Period shall be extended by such delay.
"EFFECTIVE TIME" means the time of the acceptance of the filing of the
Certificate of Merger and any other required documents with the Secretary of
State of the State of Delaware.
"E-LOAN AGREEMENT" means the Agreement dated as of May 3, 2001 between Company
and E-LOAN, Inc., and any amendments thereto.
"EMPLOYMENT AGREEMENTS" means the Employment, Non-Competition, Non-Disparagement
and Non-Solicitation Agreements between Buyer and each of ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇, to be mutually agreed upon,
except that if the parties cannot agree on the terms, the Employment Agreements
shall be the existing employment agreements between Company and each of ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇, respectively, and for ▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇, employment agreements that are substantially similar, except for
compensation.
"ENCUMBRANCES" means liens, mortgages, pledges, security interests,
restrictions, prior assignments, options, encumbrances, charges, agreements, or
claims of any kind, except (a) any encumbrance expressly created by Contracts
listed in the Disclosure Schedules; (b) liens for Taxes, assessments,
governmental charges or levies not due or payable as of the Closing or being
contested in good faith; (c) material men's, mechanics', carriers', warehouse
men's, landlords', workmen's, repairmen's, employees' or other similar liens
arising in the Ordinary Course; (d) any restrictions on transfer imposed by
applicable Laws (other than environmental Laws); or (e) any imperfections of
title, liens, security interests, claims, restrictions and other charges and
encumbrances the existence of which do not, individually or in the aggregate,
have a Material Adverse Effect.
"ENVIRONMENTAL LAW" is defined in Section 2.29.
"ERISA" is defined in Section 2.15.
"ERISA AFFILIATE" is defined in Section 2.15.
"ESCROW AGENT" is defined in Section 1.7.
"ESCROW AGREEMENT" is defined in Section 1.7.
"ESCROW AMOUNT" means the Escrow Cash and the Escrow Shares.
"ESCROW CASH" is defined in Section 1.5.
"ESCROW FUND" means the escrow fund established pursuant to the Escrow
Agreement.
"ESCROW SHARES" is defined in Section 1.5.
"EXCHANGE AGENT" is defined in Section 1.9.
"EXCLUDED LOSSES" means (i) any Losses arising out of, related to or resulting
from, with or respect to actions or inactions of the Individual Agency; (ii) any
fees incurred by Company in connection with the Merger, not to exceed
$2,500,000; and (iii) any Losses or expenses incurred by Company arising out of,
related to, or resulting from or with respect to the repricing of stock options
as permitted under this Agreement.
"EXPERIAN AGREEMENT" means the Reseller Services Agreement dated as of July 20,
1999 between ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. and Experian Information Solutions, Inc.,
and any amendments thereto.
"EXPERIAN INDEMNITY" is defined in Section 8.2.
"FAIR MARKET VALUE" means the average closing price of Buyer's Common Stock for
the ten (10) trading days immediately preceeding the second Business Day prior
to the Closing Date.
"FILINGS" means all filings, reports, notices, certificates, forms or other
documents filed with or submitted to Governmental Agencies.
"FINAL TERMINATION ADJUSTMENT AMOUNT" is defined in Section 1.6.
"FINANCIAL STATEMENTS" means the unaudited balance sheet and the related
statements of operations and accumulated deficit and cash flows of Company and
any notes thereto, as at and for the fiscal year ended June 30, 2001, the
audited balance sheet and the related statements of operations and accumulated
deficit and cash flows of Company and any notes thereto, as at and for the
fiscal year ended June 30, 2000.
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"FRACTIONAL INTEREST" means, as applicable, the Accredited Investors Fractional
Interest, the Nonaccredited Investors Fractional Interest and the Management
Stockholders Fractional Interest.
"▇▇▇▇▇▇▇ MAC AGREEMENT" means collectively the Strategic Data Agreement, dated
as of May 10, 2000 between Company and Federal Home Loan Mortgage Corporation,
and any amendments thereto, and the ▇▇▇▇▇▇▇ Mac Umbrella Agreement -
Non-Licensed Sourcing Institution, dated as of June 20, 2001 between Company and
Federal Home Loan Mortgage Corporation, and any amendments thereto.
"▇▇▇▇▇▇▇ MAC INDEMNITY" is defined in Section 8.2.
"GOVERNMENTAL AGENCIES" means federal, state and local governments, and their
subdivisions, instrumentalities, departments, agencies, courts, tribunals or
other bodies.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
"INCREMENTAL TRANSACTION EXPENSES" is defined in Section 1.5(a).
"INDEMNIFICATION THRESHOLD" is defined in Section 8.1.
"INDIVIDUAL AGENCY" means one of Equifax, Experian and TransUnion (including any
entity that succeeds to substantially all of the rights and liabilities of the
credit reporting business of any such entity or any entity that acquires the
credit reporting business assets of any such entity); each and every reference
in this Agreement to the Individual Agency shall be deemed to consistently refer
to the same one of the above entities throughout this Agreement.
"INSOLVENT" is defined in Section 2.28.
"INTELLECTUAL PROPERTY" means any or all of the following and all rights in,
arising out of, or associated therewith, including, but not limited to, all such
rights used in the operation of the Business: (i) all United States,
international and foreign patents and applications therefore and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical information, data and customer lists,
engineering procedures and all documentation relating to any of the foregoing;
(iii) all copyrights, copyrights registrations and applications therefore, and
all other rights corresponding thereto throughout the world; (iv) all industrial
designs and any registrations and applications therefore throughout the world;
(v) all trade names, logos, URLs, common law trademarks and service marks, brand
names, trademark and service ▇▇▇▇ registrations and applications therefore
throughout the world; (vi) all software (excluding "shrink wrapped" software
which is generally available to the public), (vii) customer lists, mailing
lists, or know-how (viii) all databases and data collections and all rights
therein throughout the world; and (ix) any similar or equivalent rights to any
of the foregoing anywhere in the world.
"INITIAL ESCROW SHARE VALUE" is defined in Section 1.5(b).
"INITIAL TERMINATION ADJUSTMENT AMOUNT" is defined in Section 1.6.
"JUNE 30 BALANCE SHEET" is defined in Section 1.6.
"JUNE 30 PROFIT AND LOSS STATEMENT" means the Company's audited profit and loss
statement as of June 30, 2001 set forth as EXHIBIT C.
"KNOWLEDGE" of Company or any Stockholder means the person or entity's actual
knowledge and the knowledge a reasonable person having the same duties and
responsibilities as such person or entity could reasonably be expected to have.
"LAW" means any statute, rule, regulation or other provision of law, or any
order, judgment or other direction of a court or other tribunal, or any other
governmental requirement, permit, registration, license or authorization.
"LENDING TREE AGREEMENT" means the Agreement dated as of September 14, 2000,
between QSpace, Inc. and Lending Tree, Inc.
"LOCATIONS" is defined in Section 7.1.
"LOSSES" is defined in Section 8.1.
"MANAGEMENT STOCKHOLDERS" means the Stockholders identified in Schedule 1.4(d).
"MANAGEMENT STOCKHOLDERS FRACTIONAL INTEREST IN ESCROW FUND" means with respect
to Management Stockholders, under Scenario 1, the quotient of (i) the total
number of issued and outstanding shares of Company Common Stock owned by
Management Stockholders, as of the Effective Time divided by (ii) the Applicable
Shares Outstanding less the Series A Shares Outstanding less the Nonaccredited
Investors Shares Outstanding, and under Scenario 2, the quotient of (i) the
total number of issued and outstanding shares of Company Common Stock owned by
Management Stockholders, as of the Effective Time divided by (ii) the Applicable
Shares Outstanding as of the Effective Time less the Nonaccredited Investors
Shares Outstanding.
"MATERIAL CONTRACT" is defined in Section 2.10.
"MATERIAL OF ENVIRONMENTAL CONCERN" is defined in Section 2.29.
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"MEMBERWORKS" is defined in Section 7.1.
"MEMBERWORKS NOTE" means that certain Non-Negotiable Promissory Note, dated
October 13, 2000, pursuant to which MemberWorks is obligated to pay certain
amounts to Company.
"MERGER" is defined in the Recitals.
"MERGER CONSIDERATION" is defined in Section 1.9.
"N&H INFORMATION PRODUCTS" means neighborhood information and home sales
information substantially similar in scope to that provided by Company or any
subsidiary (immediately prior to the Effective Time) to the members of Company's
or any subsidiary's online membership programs and visitors to Company's or any
subsidiary's web site.
"NET BOOK VALUE" is defined in Section 1.6.
"NET BOOK VALUE ADJUSTMENT" is defined in Section 1.6.
"NET BOOK VALUE OF DEFERRED REVENUE" means total deferred membership fees less
the total deferred membership charges, in each case determined in accordance
with GAAP.
"NONACCREDITED INVESTOR" means each holder of Company Capital Stock who is not
an "Accredited Investor" as such term is defined in Regulation D promulgated
under the Securities Act as identified in Schedule 1.4(b).
"NONACCREDITED INVESTORS' CLOSING DATE CONSIDERATION PER SHARE AMOUNT" is
defined in Section 1.4(b).
"NONACCREDITED INVESTOR SHARES OUTSTANDING" means the total number of issued and
outstanding shares of Company Common Stock held by the Nonaccredited Investors
as of the Effective Time.
"ORDINARY COURSE" means the ordinary and usual course of the conduct of the
Business substantially as currently conducted and conducted in the past.
"PARTIES" means the parties to this Agreement.
"PENSION PLANS" is defined in Section 2.15.
"PERSONAL CREDIT INFORMATION PRODUCT" will mean consumer credit information and
scores and credit monitoring information probed by Company or any subsidiary and
substantially similar in scope to that provided by Company or any subsidiary
(immediately prior to the Effective Time) to the members of Company's or any
subsidiary's online membership programs and visitors to Company's or any
subsidiary's web site.
"PERSONAL PROPERTY" means all equipment, machinery, computers, furniture,
leasehold improvements, vehicles, and other personal property owned, leased or
otherwise held by Company or its subsidiaries, other than the Real Property, and
all interests of Company and its subsidiaries therein.
"PLAN" is defined in Section 2.15.
"PROCESS AGENT" is defined in Section 11.15.
"QUALIFIED PLAN" means any Plan subject to (or intended to be subject to) the
qualification requirements of Section 401(a) of the Code.
"QUANTIFIABLE LIABILITY PRICE ADJUSTMENT" is defined in Section 1.6.
"REAL PROPERTY" means all real property (including buildings and structures)
owned or leased by Company and all interests of Company therein.
"REASONABLY EXPECTED CONTINGENT LIABILITIES" means liabilities or obligations of
the Company that Buyer determines in good faith are reasonably expected to occur
and for which Buyer provides the Company a reasonably detailed description and
the reasons for Buyer's determination that such contingent liability is
reasonably expected to occur; provided, however, that Reasonably Expected
Contingent Liabilities shall not include (i) Undisclosed Quantifiable
Liabilities, (ii) liabilities set forth in the June 30 Balance Sheet, (iii)
liabilities disclosed in writing to Buyer prior to the date of this Agreement or
contained in Contracts listed in SCHEDULE 2.10, (iv) liabilities incurred in the
Ordinary Course, or (v) Excluded Losses.
"REGISTRATION RIGHTS AND LOCK UP AGREEMENT" is defined in Section 1.8.
"REGISTRATIONS" is defined in Section 2.12.
"REGULATORY CONTRACTS" is defined in Section 2.23.
"RELATED PARTY INDEBTEDNESS AMOUNT" is defined in Section 1.5(a).
"SCENARIO 1" is defined in Section 1.4(a).
"SCENARIO 2" is defined in Section 1.4(a).
"SERIES A FRACTIONAL INTEREST IN ESCROW FUND" means with respect to the holder
of Company Series A Preferred Stock, under Scenario 2, the quotient of (i) the
Series A Shares Outstanding divided by (ii) the Applicable Shares Outstanding as
of the Effective Time less the Nonaccredited Investors Shares Outstanding. Such
Series A Fractional
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Interest in Escrow Fund shall be divided between cash and Buyer Shares in the
same proportion as the holders of the Company's Series A Preferred Stock
received at Closing pursuant to Section 1.4.
"SERIES A LIQUIDATION PREFERENCE" is defined in Section 1.4.
"SERIES A SHARES OUTSTANDING" means the total number of shares of Company Common
Stock issued or issuable upon conversion of all Shares of Company Series A
Preferred Stock owned by the holder of Company Series A Preferred Stock as of
the Effective Time.
"STOCKHOLDER AGENT" means ▇▇▇ ▇▇▇▇▇.
"SURVIVING CORPORATION" is defined in Section 1.1.
"TAX" or "TAXES" shall mean any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, Medicare, impositions,
levies and liabilities, including, without limitation, taxes based upon or
measured by gross receipts, income, profits, sales, use and occupation, and
value added, ad valorem, transfer, gains, franchise, withholding, payroll,
recapture, employment, excise, social security, business license, occupation,
business organization, stamp, environmental and property taxes, together with
all interest, penalties and additions imposed with respect to such amounts
including, without limitation, any liability for Taxes as a transferee or
successor, by contract or otherwise
"TAX RETURNS" means federal, foreign, state, local, and other tax returns and
reports.
"THREATENED" means, with respect to an action, proceeding or other matter, that
any demand or statement has been made (orally or in writing) or any notice has
been given (orally or in writing), or that any other event has occurred or any
other circumstances exist, that would lead a reasonable person to conclude that
such proceeding or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
"TRANSACTIONS" means the Merger and the other transactions contemplated or
required by this Agreement and the other Transaction Documents.
"TRANSACTION DOCUMENTS" means this Agreement, the Escrow Agreement, the
Registration Rights and Lock-Up Agreement, the Employment Agreements and all
other documents, agreements and certificates contemplated to be executed in
connection with the Transactions.
"UNDISCLOSED QUANTIFIABLE LIABILITIES" means specific, quantifiable liabilities
or obligations of the Company that were not (A) set forth in the June 30 Balance
Sheet, or (B) disclosed in writing to Buyer prior to the date of this Agreement
(including those disclosed on the disclosure schedules hereto) or contained in
Contracts listed in SCHEDULE 2.10, or (C) any continuing existing liability or
obligation of the Company (e.g. monthly payments under a distribution or lease
agreement) incurred in the Ordinary Course and consistent with the Company's
prior practice, or (D) the Excluded Losses.
"VESTED COMPANY OPTIONS" means the Company Options that are vested, unexpired
and exercisable as of the Closing Date under the Company Option Plan.
"UNAUDITED JUNE 30 PROFIT AND LOSS STATEMENT" means the Company's unaudited
profit and loss statement as of June 30,2001 set forth as EXHIBIT D.
"WELFARE PLANS" is defined in Section 2.15.
"YAHOO! CONSENT" is defined in Section 1.6(e).
"YAHOO! ESCROW DEPOSIT" is defined in Section 1.6(e).
"YAHOO! HISTORICAL REVENUE SCHEDULE" is defined in Section 1.6(e).
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"YAHOO LICENSE AGREEMENT" shall mean the License Agreement, between QSpace,
Inc., and Yahoo!, Inc., dated September 15, 1999, and any amendments thereto.
"YAHOO! MONTHLY REVENUE" is defined in Section 1.6(e).
"YAHOO! PURCHASE PRICE ADJUSTMENT" is defined in Section 1.6(e).
"YAHOO TERMINATION AMOUNT" is defined in Section 1.6(e).
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EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated as of August 7, 2001
by and between (i) ▇▇▇▇▇▇▇▇▇.▇▇▇, Inc, a Delaware corporation (the "Company"),
and (ii) the shareholders listed in Schedule 1 attached hereto (collectively,
the "Investors").
R E C I T A L S
A. The Company and the Investors have entered into a Merger Agreement dated as
of August 6, 2001 (the "Merger Agreement"), pursuant to which the Investors may
acquire from the Company shares of the Company's capital stock (together with
any shares of capital stock of the Company issued as a dividend or distribution
thereon or in exchange therefor, the "Shares") pursuant to Article 1 thereof.
B. It is a condition precedent to the closing of the Merger Agreement (the
"Closing") that this Agreement be entered into between the Company and the
Investors.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and
covenants contained herein, the Investors and the Company (collectively, the
"Parties") agree as follows:
1. Definitions. For purposes of this Agreement:
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute.
"Holder" means (i) the Investors and (ii) any person or entity to whom the
Investors or their respective Permitted Transferees sells, transfers or assigns
at least 50% of such person's Registrable Securities, other than in a sale
pursuant to Rule 144 under the Securities Act or a registration effected
pursuant to this Agreement.
"Register," "registered," and "registration" refer to an underwritten
registration effected by preparing and filing with the Securities and Exchange
Commission (the "Commission") a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering by the
Commission of effectiveness of such registration statement or document.
"Registration Expenses" means all expenses incurred by Company in connection
with the Company's performance of its registration obligations under this
Agreement, including all (i) registration, qualification and filing fees; (ii)
fees, costs and expenses of compliance with securities or blue sky laws
(including reasonable fees, expenses and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities under the laws of such jurisdictions as the managing underwriter or
underwriters in a registration may designate, subject to the limitation as set
forth in subsection (e) of Section 4 hereof); (iii) printing expenses; (iv)
messenger, telephone and delivery expenses; (v) fees, expenses and disbursements
of counsel for the Company and of all independent certified public accountants
retained by the Company (including the expenses of any special audit and "cold
comfort" letters required by or
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54
incident to such performance); (vi) Securities Act liability insurance if the
Company so desires; (vii) fees, expenses and disbursements of any other
individuals or entities retained by the Company in connection with the
registration of the Registrable Securities; (viii) fees, costs and expenses
incurred in connection with the listing of the Registrable Securities on each
national securities exchange or automated quotation system on which the Company
has made application for the listing of its Common Stock; (ix) internal expenses
of the Company (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties and expenses of any
annual audit); and (x) fees, expenses and disbursements of one firm of counsel
for the Company, but only as to such fees, expenses and disbursements amounting
to, in the aggregate, not more than $20,000. Registration Expenses shall not
include selling commissions, discounts or other compensation paid to
underwriters or other agents or brokers to effect the sale of Registrable
Securities, or counsel fees and any other expenses incurred by Holders in
connection with any registration that are not specified in the immediately
preceding sentence.
"Registrable Securities" means (a) the Shares and (b) any securities of the
Company issuable or issued with respect to the Shares by way of a merger,
consolidation, stock split, stock dividend, recapitalization of the Company or
similar transaction. As to any particular Registrable Securities, once issued
such securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act, (ii) such Registrable Securities shall have
been sold as permitted by, and in compliance with, Rule 144 (or any successor
provision) promulgated under the Securities Act, (iii) such Registrable
Securities shall have been otherwise transferred, new certificates for them not
bearing a legend restricting further transfer under the Securities Act shall
have been delivered by the Company and subsequent public distribution of them
shall not require registration of them under the Securities Act or (iv) such
Registrable Securities shall have ceased to be outstanding.
"Securities Act" means the Securities Act of 1933, as amended, or any successor
statute. 2. Registration of Registrable Securities. Prior to 120 days after the
Closing, the Company shall file with the Commission a registration statement
with respect to the Registrable Securities on any form that may be utilized by
the Company and that shall permit the disposition of the Registrable Securities
in accordance with the intended method or methods of disposition thereof, and
use its best reasonable efforts to cause such registration statement to become
effective 120 days after the Closing and remain effective thereafter as provided
herein, provided that prior to filing a registration statement or prospectus or
any amendments or supplements thereto, including documents incorporated by
reference after the initial filing of any registration statement, the Company
will furnish to each of the Investors whose Registrable Securities are covered
by such registration statement, their counsel and the underwriters copies of all
such documents proposed to be filed sufficiently in advance of filing to provide
them with a reasonable opportunity to review such documents.
Company will notify Investors at any time (but not more often than twice) (a
"Suspension Period") when the board of directors in its good faith judgment has
determined that it would be seriously detrimental to the Company or its
stockholders for the Investors to be selling under the Registration Statement
and Investors agree not to sell Registrable Securities during any Suspension
Period until the Company advises in writing that the Investors may do so;
provided that the Company may not initiate Suspension Periods consisting of in
excess of forty-five (45) days in the aggregate (and not longer than thirty (30)
days in any one instance) , and the time during which such Registration
Statement shall remain effective pursuant to Section 4(a) will be extended by
the number of days that the Investors are prevented from selling.
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3. Expense of Registration. All Registration Expenses incurred in connection
with the registration and other obligations of the Company pursuant to Sections
2 shall be borne by Company.
4. Registration Procedures. Following the filing of the registration statement
filed pursuant to Section 2, the Company shall:
(a) promptly prepare and prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective and current and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all Registrable Securities covered by such registration statement, including
such amendments (including post-effective amendments) and supplements as may be
necessary to reflect the intended method of disposition by the prospective
seller or sellers of such Registrable Securities, provided that such
registration statement need not be kept effective and current for longer than
360 days subsequent to the effective date of such registration statement;
(b) promptly notify the selling holders of Registrable Securities and any
underwriters and confirm such advice in writing, (i) when such registration
statement or the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and, with respect to such
registration statement or any post-effective amendment, when the same has become
effective, (ii) of any comments by the Commission, by the National Association
of Securities Dealers Inc. ("NASD"), and by the blue sky or securities
commissioner or regulator of any state with respect thereto or any request by
any such entity for amendments or supplements to such registration statement or
prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of such registration
statement or the initiation or threatening of any proceedings for that purpose,
(iv) if at any time the representations and warranties of the Company cease to
be true and correct in all material respects, (v) of the receipt by the Company
of any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (vi) at any time when a
prospectus is required to be delivered under the Securities Act, that such
registration statement, prospectus, prospectus amendment or supplement or
post-effective amendment, or any document incorporated by reference in any of
the foregoing, contains an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading;
(c) furnish to each selling holder of Registrable Securities being offered, and
any underwriters, prospectuses or amendments or supplements thereto, in such
quantities as they may reasonably request and as soon as practicable, that
update previous prospectuses or amendments or supplements thereto;
(d) use reasonable diligent efforts to (i) register or qualify the Registrable
Securities to be included in a registration statement hereunder under such other
securities laws or blue sky laws of such jurisdictions within the United States
of America as any selling holder of such Registrable Securities or any
underwriter of the securities being sold shall reasonably request, (ii) keep
such registrations or qualifications in effect for so long as the registration
statement remains in effect and (iii) take any and all such actions as may be
reasonably necessary or advisable to enable such holder or underwriter to
consummate the disposition in such jurisdictions of such Registrable Securities
owned by such holder; provided, however, that the Company shall not be required
for
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any such purpose to (x) qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not otherwise be required to
qualify but for the requirements of this Section 4(e), (y) subject itself to
taxation in any such jurisdiction or (z) consent to general service of process
in any such jurisdiction; and
(e) cause all such Registrable Securities to be listed or accepted for quotation
on each securities exchange or automated quotation system on which the Company's
Common Stock then trades.
5. Indemnification. With respect to the registration statement filed under this
Agreement:
(a) the Company will indemnify each Holder who participates in such
registration, each of its officers and directors and partners and such Holder's
separate legal counsel and independent accountants, and each person controlling
such Holder within the meaning of Section 15 of the Securities Act, and each
underwriter, if any, and each person who controls any underwriter within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors and partners and such Holder's separate legal counsel and independent
accountants and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly executed by or on behalf of such Holder and stated to be
specially for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder are included
in the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors and officers and
its legal counsel and independent accountants, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statement therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration
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statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
(c) Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought provided
that failure to give such prompt notice shall not relieve the Indemnifying Party
of its obligations hereunder unless it is materially prejudiced thereby, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld). Such Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be that of such Indemnified Party unless
(i) the Indemnifying Party has agreed to pay such fees and expenses or (ii) the
Indemnifying Party shall have failed to assume the defense of such action or
proceeding and employ counsel reasonably satisfactory to such Indemnified Party
in any such action or proceeding or (iii) the named parties to any such action
or proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party and such Indemnified Party shall have been
advised by counsel that there may be one or more legal defenses available to
such Indemnified Party which are different from or additional to those available
to the Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing of an election to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying Party
then shall have the right to employ separate counsel at its own expense and to
participate in the defense thereof, and shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time for all Indemnified
Parties, which firm shall be designated in writing by a majority of the
Indemnified Parties who are eligible to select such counsel). No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. No Indemnified Party may
consent to entry of any judgment or enter into any settlement without the prior
written consent of the Indemnifying Party.
(d) If the indemnification provided for in this Section 5 is held by a court of
competent jurisdiction to be unavailable to an Indemnified Party with respect to
any loss, liability, claim, damage or expense referred to herein, then the
Indemnifying Party, in lieu of indemnifying the Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party with respect
to such loss, liability, claim, damage or expenses in the proportion that is
appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Party in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense, as well as any other
relevant equitable considerations. The relative fault of the Indemnifying Party
and the Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party, and the parties'
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relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
6. Information To Be Provided by the Holders. Each Holder whose Registrable
Securities are included in any registration pursuant to this Agreement shall
furnish the Company such information regarding such Holder and the distribution
proposed by such Holder as may be reasonably requested in writing by the Company
and as shall be required in connection with such registration or the
registration or qualification of such securities under any applicable state
securities law.
7. Lock-Up. The Investors shall not (i) sell, pledge, hypothecate or otherwise
transfer any Shares during the period commencing on the date hereof and ending
on 120 days after the date hereof or (ii) enter into any swap or other
derivatives transaction including short sales, cashless collars or other hedging
activities. Thereafter, each Investor may sell during each calendar month not
more than 1/12th of the Shares owned by such Investor; provided, that there must
be at least ten (10) trading days between sales. MemberWorks and the other
Accredited Investors (each as defined in the Merger Agreement) shall sell their
Shares using as its broker one of the four largest investment bank traders (in
terms of number of shares traded) in Company's Common Stock, who are ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
8. Miscellaneous.
(a) Notices. All notices, requests and other communications hereunder shall be
in writing and shall be deemed to have been duly given at the time of receipt if
delivered by hand or by facsimile transmission or three days after being mailed,
registered or certified mail, return receipt requested, with postage prepaid, to
the address or facsimile number (as the case may be) listed for such Party in
the Purchase Agreement or if any Party shall have designated a different address
or facsimile number by notice to the other Parties given as provided above, then
to the last address or facsimile number so designated.
(b) Severability. In the event one or more of the provisions of this Agreement
should, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed and
interpreted in such manner as to be effective and valid under applicable law.
(c) Waiver or Modification. Any amendment or modification of this Agreement
shall be effective only if evidenced by a written instrument executed by the
Company and by Investors that hold a majority of the total Registrable
Securities.
(d) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to the
principles of conflicts of laws thereof.
(e) Further Assurances. Each Party agrees to act in accordance herewith and not
to take any action that is designed to avoid the intention hereof.
(f) Sucessors and Assigns. This Agreement and the rights and obligations of the
Parties hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives.
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IN WITNESS WHEREOF, the undersigned Parties have executed this Agreement as of
the day and year first above written.
▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: ____________________________
Name: __________________________
Title: __________________________
Investors
By:____________________________
Name:__________________________
Title:___________________________
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Schedule 1
Investors
9