EXHIBIT 2.01
ASSET PURCHASE AGREEMENT
by and among
▇▇▇▇▇▇▇.▇▇▇, LLC,
HIGH SCHOOL ALUMNI, INC.
and
▇▇▇▇▇▇▇▇.▇▇▇, INC.
Dated: January 17, 2002
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
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Page
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ARTICLE I. DEFINITIONS................................................. 1
1.1 Defined Terms............................................... 1
1.2 Other Defined Terms......................................... 8
ARTICLE II. PURCHASE AND SALE OF THE ASSETS............................. 9
2.1 Transfer of Assets.......................................... 9
2.2 Assumption of Liabilities................................... 9
2.3 Nonassumption of Liabilities................................ 9
2.4 Consideration............................................... 9
2.5 Escrow...................................................... 9
ARTICLE III. CLOSING..................................................... 10
3.1 Closing..................................................... 10
3.2 Seller Parties' Deliveries at Closing....................... 10
3.3 Buyer Deliveries at the Closing............................. 11
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER.................... 12
4.1 Organization of the Seller Parties.......................... 12
4.2 Authorization............................................... 12
4.3 Absence of Certain Changes or Events........................ 12
4.4 Assets...................................................... 13
4.5 Contracts and Commitments................................... 13
4.6 Permits..................................................... 15
4.7 No Conflict or Violation.................................... 15
4.8 Financial Statements........................................ 15
4.9 Books and Records........................................... 16
4.10 Litigation.................................................. 16
4.11 Liabilities and Solvency.................................... 16
4.12 Compliance with Law......................................... 16
4.13 No Brokers.................................................. 16
4.14 No Other Agreements to Sell any of the Assets............... 16
4.15 Intellectual Property Rights................................ 17
4.16 Approvals................................................... 19
4.17 Customers and Suppliers..................................... 19
4.18 Registrant Database......................................... 19
4.19 Tax Matters................................................. 19
4.20 Material Misstatements Or Omissions......................... 20
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ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER......................... 20
5.1 Organization................................................... 20
5.2 Authorization.................................................. 20
5.3 No Conflict or Violation....................................... 21
5.4 No Brokers..................................................... 21
ARTICLE VI. COVENANTS OF BUYER AND SELLER.................................. 21
6.1 Confidentiality and Non-Competition............................ 21
6.2 Transition Services............................................ 24
6.3 Access to Books and Records.................................... 25
6.4 Expenses....................................................... 25
6.5 Privacy Policy................................................. 25
6.6 Further Assurances............................................. 25
ARTICLE VII. CONSENTS TO ASSIGNMENT........................................ 26
7.1 Consents to Assignment......................................... 26
ARTICLE VIII. ACTIONS BY THE PARTIES AFTER THE CLOSING..................... 26
8.1 Survival of Representations, Etc............................... 26
8.2 Notice of Damages.............................................. 26
8.3 Agreements to Indemnify........................................ 27
8.4 Conditions of Indemnification of Third Party Claims............ 27
8.5 Contents of Indemnification Notice............................. 28
8.6 Resolution of Indemnification Notice........................... 28
8.7 Limitations.................................................... 30
8.8 Remedies Generally............................................. 31
8.9 Taxes.......................................................... 31
ARTICLE IX. MISCELLANEOUS.................................................. 31
9.1 Assignment..................................................... 31
9.2 Notices........................................................ 32
9.3 Choice of Law.................................................. 33
9.4 Arbitration; Process........................................... 33
9.5 Entire Agreement, Amendments and Waivers....................... 33
9.6 Multiple Counterparts.......................................... 33
9.7 Invalidity..................................................... 34
9.8 Titles; Gender................................................. 34
9.9 Cumulative Remedies............................................ 34
9.10 Representation by Counsel; Equal Construction.................. 34
EXHIBITS
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Exhibit A List of Tangible Assets
Exhibit B Form of Assignment and Assumption of Contract Rights
Exhibit C Form of Assignment of Intellectual Property
Exhibit D Form of ▇▇▇▇ of Sale
Exhibit E Form of Escrow Agreement
Exhibit F List of Excluded Assets
Exhibit G Form of Excluded Intellectual Property License
Exhibit H Financial Statements
Exhibit I Form of Advertising Agreement
Exhibit J Form of Domain Name Transfer Agreement
Exhibit K Form of License Agreement
Exhibit L User Notification
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of January
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17, 2002, is by and among ▇▇▇▇▇▇▇.▇▇▇, LLC, a Delaware limited liability company
("Buyer"), HIGH SCHOOL ALUMNI, INC., a Delaware corporation (the "Sub") and
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▇▇▇▇▇▇▇▇.▇▇▇, INC., a Delaware corporation ("Seller", and together with the Sub,
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the "Seller Parties"). Buyer and the Seller Parties are at times together
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referred to herein as the "Parties" or individually (and without distinction) as
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a "Party."
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RECITALS
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WHEREAS, the Seller Parties wish to sell to Buyer and Buyer wishes to
purchase from the Seller Parties the Assets (as defined below) of the Seller
Parties at the price and under the specified terms and conditions as set forth
herein; and
WHEREAS, effective at the Closing (as defined below), and as a
condition and inducement to each Party's willingness to enter into this
Agreement, the Parties are entering into certain Ancillary Agreements (as
defined below).
AGREEMENT
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NOW, THEREFORE, in consideration of the respective covenants and
promises contained herein and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Parties hereby agree
as follows:
ARTICLE I.
DEFINITIONS
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1.1 Defined Terms. As used herein, the terms below shall have the
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following meanings. Any such term, unless the context otherwise requires, may be
used in the singular or plural, depending upon the reference.
"Action" shall mean any action, claim, suit, litigation, proceeding,
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arbitral action, governmental audit, inquiry, criminal prosecution,
investigation or unfair labor practice charge or complaint.
"Advertising Agreement" shall mean the Advertising Agreement,
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substantially in the form attached hereto as Exhibit 1, to be entered into at
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the Closing by Buyer and Seller.
"Affiliate" shall mean, when used with reference to any specified
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Person, any other Person directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such specified Person. For the
purposes of this definition, "control," when used with respect to any specified
Person, means the power to direct or cause the direction of management or
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
"Ancillary Agreements" shall mean the Assignment of Intellectual
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Property, the Assignment and Assumption of Contract Rights, the Excluded
Intellectual Property License, the License Agreement, the Advertising Agreement,
the Domain Name Transfer Agreement and the Escrow Agreement.
"Assets" shall mean all of the right, title and interest in and to the
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following properties, assets and rights relating to the Business, whether
tangible or intangible:
(a) all accounts and notes receivable (whether current or
noncurrent), of either Seller Party to the extent related to the Business,
prorated in each case with respect to pre-closing and post-closing periods, if
any;
(b) all deposits, prepayments or prepaid expenses of either
Seller Party to the extent related to the Business, if any;
(c) all Contract Rights;
(d) all Books and Records;
(e) all tangible assets set forth on Exhibit A attached hereto,
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and all replacements and additions thereto;
(f) all Inventory, if any;
(g) all Intellectual Property set forth on Part A of Schedule
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4.15(a) and all other Intellectual Property related to the Business that is
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exclusively used in connection with the Business;
(h) all Permits solely related to the Business, if any;
(i) the Registrant Data Base;
(j) all available supplies, sales literature, promotional
literature, customer, supplier and distributor lists and purchasing records
exclusively related to the Business, if any, and if requested, a copy of any of
the foregoing items to the extent any such items do not relate exclusively to
the Business, provided that copies shall only be provided for portions of such
items to the extent related to the Business; and
(k) all rights under or pursuant to all warranties,
representations and guarantees made by suppliers in connection with the Assets
or services furnished to either Seller Party pertaining to the Business or
affecting the Assets, to the extent such warranties, representations and
guarantees are assignable;
but excluding therefrom the Excluded Assets.
"Assignment and Assumption of Contract Rights" shall mean the
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Assignment and Assumption of Contract Rights, substantially in the form attached
hereto as Exhibit B, to be entered into at the Closing by and among the Seller
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Parties and Buyer.
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"Assignment of Intellectual Property" shall mean the Assignment of
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Intellectual Property Rights, substantially in the form attached hereto as
Exhibit C, to be executed at the Closing by the Seller Parties in favor of
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Buyer.
"▇▇▇▇ of Sale" shall mean the ▇▇▇▇ of Sale, substantially in the form
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attached hereto as Exhibit D, to be executed at the Closing by the Seller
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Parties in favor of Buyer.
"Books and Records" shall mean (a) all records and lists primarily
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pertaining to Assets or the Business or the customers or suppliers of the
Business, (b) all product, business and marketing plans of either Seller Party
primarily relating to the Business, and (c) all books, ledgers, files, reports,
plans, drawings and operating records of every kind maintained by either Seller
Party primarily relating to the Business.
"Business" shall mean the HighSchoolAlumni business (including all
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business of the Seller Parties conducted through the ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
website) operated by the Seller Parties.
"Buyer Confidential Information" shall mean all information or material
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relating to the Assets or the Business (other than information primarily related
to the assets of either Seller Party not transferred hereunder) that is not
generally available to or used by others or that could have commercial value or
other utility in the business in which Buyer, its Affiliates or clients are
engaged, or in which they contemplate being engaged. Confidential Information
also includes all information relating to the Assets or the Business the
unauthorized disclosure of which could be detrimental to the interests of Buyer,
its Affiliates or clients, whether or not such information is identified as
Confidential Information. By way of illustration, Confidential Information shall
include, but not be limited to, as the following may relate to the Assets or
Business, know-how, data, data files, computer process systems, computer
software, innovations, marketing plans, business plans, strategies, forecasts,
technical information, manufacturing or marketing information, ideas, methods,
developments, inventions, improvements, trade secrets, scientific or statistical
data, diagrams, drawings, specifications, payroll and financial information,
names, buying habits or practices of any clients of either Seller Party
(primarily related to the Business) or of Buyer, lead lists, names of vendors
and suppliers, names of employees, production costs, product documentation,
development work and other proprietary information relating thereto, together
with all analyses, compilations, studies or other documents, records or data
prepared by either Seller Party (primarily related to the Business) or by Buyer,
as the case may be, or their respective Representatives or Affiliates, which
contain or otherwise reflect or are generated from such information.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Contract" shall mean any of the following which is (or is intended to
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be) a legally binding agreement, contract, note, loan, purchase order, letter of
credit, indenture, security or pledge agreement, lease, franchise agreement,
covenant not to compete, employment agreement, license, instrument, obligation
or commitment and to which either Seller Party is a party or is bound and which
relates primarily to the Business or the Assets, whether oral or written.
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"Contract Rights" shall mean all of the rights and obligations of
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either Seller Party under the Contracts listed on Schedule 4.5 and Schedule 4.15
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assigned to and assumed by Buyer, and under any Contracts not so listed, which
Buyer elects to accept and assume in its sole discretion, subject to Seller's
approval.
"Court Order" shall mean any judgment, decision, consent decree,
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injunction, ruling or order of any federal, state or local court or governmental
agency, department or authority that is binding on any Person or its property
under applicable law.
"Default" shall mean (a) a breach of or default under any Contract, (b)
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the occurrence of an event that with the passage of time or the giving of notice
or both would constitute a breach of or default under any Contract.
"Domain Name Transfer Agreement" shall mean the Domain Name Transfer
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Agreement, substantially in the form attached hereto as Exhibit J, to be entered
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into at the Closing by Buyer and Seller.
"Encumbrance" shall mean any lien, pledge, option, charge, easement,
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security interest, deed of trust, mortgage, right of way, encroachment, building
or use restriction, encumbrance or other right of third parties, whether
voluntarily incurred or arising by operation of law, and includes, without
limitation, any agreement to give any of the foregoing in the future, and any
contingent sale or other title retention agreement or lease in the nature
thereof.
"Equipment Lease" shall mean that certain equipment lease dated as of
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April 30, 1999 by and between Seller and Comdisco, Inc. covering the tangible
assets set forth on Exhibit A attached hereto.
"Escrow Agent" shall mean Allfirst Bank.
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"Escrow Agreement" shall mean that certain Escrow Agreement,
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substantially in the form attached to as Exhibit E, to be executed at the
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Closing by the Seller Parties, Buyer and the Escrow Agent.
"Escrow Release Date" shall mean the date on which (a) all of the
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Assets necessary to operate the highschoolalumni. com website have been
transferred to the facilities specified by Buyer, (b) the ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
website is capable of being operated from Buyer's facilities (with the Assets
and the other assets that Buyer has procured) in the same or reasonably similar
manner and with the same or reasonably similar functionality as such website was
operating from Seller's facilities prior to the date hereof (e.g., such website
shall be able to register members, allow member of access the site, search the
database and send emails), and (c) all Encumbrances (including Permitted
Encumbrances resulting from the Equipment Lease but excluding other Permitted
Encumbrances) shall have been removed from the tangible assets listed on Exhibit
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A or Seller shall have delivered to Buyer assets having equal or superior
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functionality to such encumbered assets free and clear of all Encumbrances
(including Permitted Encumbrances), provided that if Buyer has not acquired and
made available to Seller's transition team assets replacing the Excluded Assets
set forth on Exhibit F or has not followed the reasonable directions of Seller
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to facilitate the completion of the transition, then the Escrow
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Release Date shall be the later of February 16, 2002 or twenty (20) days
following the date that Seller has removed all Encumbrances (including Permitted
Encumbrances resulting from the Equipment Lease but excluding other Permitted
Encumbrances) from the tangible assets listed on Exhibit A or delivered to Buyer
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assets having equal or superior functionality to such encumbered assets free and
clear of all Encumbrances (including Permitted Encumbrances).
"Excluded Assets" shall mean the following assets of the Seller Parties
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which are not transferred to Buyer by the Seller Parties hereunder necessary for
the conduct of the Business: (a) all Permits, to the extent not transferable and
(b) the tangible and intangible assets of the Seller Parties related to the
Business set forth on Exhibit F attached hereto.
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"Excluded Liabilities" shall mean any and all Liabilities of either
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Seller Party (including without limitation, any Liabilities underlying a
Permitted Encumbrance), other than Liabilities arising from Contract Rights
assumed by Buyer under the Assignment and Assumption of Contract Rights to the
extent such Liabilities arising from such Contract Rights arise and relate to
periods after the Closing Date.
"Excluded Intellectual Property License" shall mean that certain
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license agreement, substantially in the form attached hereto as Exhibit G, to be
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executed at the Closing by and among the Seller Parties and Buyer.
"Financial Statements" shall mean the financial statements and other
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financial characteristics of Seller relating to Seller or the Business attached
hereto as Exhibit H.
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"Intellectual Property" shall mean any and all rights in or affecting
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intellectual property, existing now or in the future in the United States or
anywhere in the universe, but notwithstanding any other provision herein,
excluding the Registrant Database and other derivations of the customer list.
Intellectual Property includes, without limitation, any and all rights in, to,
or subsisting in the following:
(a) all issued patents, reissued or reexamined patents, revivals of
patents, divisions, continuations and continuations-in-part of patents, all
renewals and extensions thereof utility models, and certificates of invention,
regardless of country or formal name, if any;
(b) all published or unpublished nonprovisional and provisional
patent applications, including the right to file other or further applications,
reexamination proceedings, invention disclosures and records of invention, if
any;
(c) all copyrights, copyrightable works, including, without
limitation, all rights of authorship, use, publication, reproduction,
distribution, transformation, and ownership of copyrightable works, the right to
create derivative works, and all applications for registration, registrations,
renewals and extensions of registrations, together with all other interests
accruing by reason of international copyright;
(d) all trademarks, service marks, logos, trade names, fictitious
business names, domain names, together with the goodwill of the business
associated therewith, all applications for registration and registrations
thereof, renewals thereof, the right to bring opposition and cancellation
proceedings and any and all rights under the laws of trade dress;
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(e) all business information and materials, whether or not patentable
or copyrightable, and whether or not reduced to practice, including without
limitation all technology, ideas, research and development, inventions, designs,
proprietary information, manufacturing, engineering and operating specifications
and practices, methods, processes, procedures, schematics, know-how, formulae,
supplier lists and information, product surveys, shop rights, designs, drawings,
patterns, plans, prototypes, trade secrets and technical data, research records,
market surveys, computer programs, and all hardware, software and processes; and
(f) all other intangible assets, properties and rights (whether or
not appropriate steps have been taken to protect, under applicable law, such
other intangible assets, properties or rights) including, without limitation,
all claims, causes of action and rights to ▇▇▇ for past, present and future
infringement or unconsented use of any of the Intellectual Property, the right
to file applications and obtain registrations, and all rights arising therefrom
and pertaining thereto and all products, proceeds, revenues and royalties
arising from or relating to any and all of the foregoing.
"Inventory" shall mean all of the inventory held for resale by either
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Seller Party, software and computer related products of either Seller Party, any
other materials or products, all raw materials, work in process, finished
products, spare parts, wrapping, supply and packaging items and similar items,
in each case with respect to the Business wherever the same may be located.
"Knowledge" shall mean, with respect to any fact, circumstance, event
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or other matter in question, the actual knowledge of such fact, circumstance,
event or other matter after reasonable inquiry of any appropriate executive
officer of such Party.
"Liabilities" shall mean any direct or indirect liability,
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indebtedness, obligation, responsibility, commitment, expense, deficiency,
guaranty of or by any Person of any type, whether accrued, absolute, contingent,
matured, unmatured or other.
"License Agreement" shall mean that certain license agreement,
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substantially in the form attached hereto as Exhibit J, to be executed at the
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Closing by and between Seller and Buyer.
"Material Adverse Effect" or "Material Adverse Change" shall mean with
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respect to the Business or the Assets any material adverse effect or change in
the condition (financial or other), business, results of operations, assets,
Liabilities or operations of the Business and/or the Assets or on the ability of
either Seller Party to consummate the transactions contemplated hereby, or any
event or condition which would, with the passage of time, reasonably be expected
to result in a "Material Adverse Effect" or "Material Adverse Change."
"Organizational Documents" shall mean (a) the articles or certificate
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of incorporation, all certificates of determination and designation, and the
bylaws of a corporation; (b) the operating agreement, limited liability company
agreement and the certificate or articles of organization or formation of a
limited liability company; (c) any charter or similar document
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adopted or filed in connection with the creation, formation or organization of
any other Person; and (d) any amendment to any of the foregoing.
"Permits" shall mean all licenses, permits, franchises, approvals,
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authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary for the past, present conduct of, or relating to the operation of the
Business and/or the use of the Assets.
"Permitted Encumbrance" shall mean any liens for Taxes not yet due,
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inchoate mechanics', carriers', workers' or other similar liens arising in the
ordinary course of business and liens resulting from the Equipment Lease.
"Person" shall mean any individual, partnership, firm, corporation,
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association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.
"Registrant Data Base" shall mean the complete list of the registered
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users and paid subscribers of the Business and all other information relating to
such users or subscribers maintained by either Seller Party in connection with
such registered user or paid subscriber's relationship to the Business.
"Regulations" shall mean any laws, statutes, ordinances, regulations,
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executive orders, rules, notice requirements, court decisions, agency
guidelines, principles of law and orders of federal, state or local government
and any other governmental department or agency.
"Representative" shall mean any officer, director, principal, attorney,
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agent, employee or other authorized representative.
"Seller Confidential Information" shall mean all information or
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material relating to the business of the Seller Parties (other than the Assets
or the Business) not generally available to or used by others or that could have
commercial value or other utility in the business in which the Seller Parties,
their Affiliates or clients are engaged, or in which they contemplate being
engaged. Confidential Information also includes all information relating to the
business of the Seller Parties (other than the Assets or the Business) the
unauthorized disclosure of which could be detrimental to the interests of the
Seller Parties, their Affiliates or clients, whether or not such information is
identified as Confidential Information. By way of illustration, Confidential
Information shall include, but not be limited to, as the following may relate to
the business of the Seller Parties (other than the Assets or the Business),
know-how, data, data files, computer process systems, computer software,
innovations, marketing plans, business plans, strategies, forecasts, technical
information, manufacturing or marketing information, ideas, methods,
developments, inventions, improvements, trade secrets, scientific or statistical
data, diagrams, drawings, specifications, payroll and financial information,
names, buying habits or practices of any clients of the Seller Parties, lead
lists, names of vendors and suppliers, names of employees, production costs,
product documentation, development work and other proprietary information
relating thereto, together with all analyses, compilations, studies or other
documents, records or
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data prepared by either Seller Party, as the case may be, or their respective
Representatives or Affiliates, which contain or otherwise reflect or are
generated from such information.
"Tax" shall mean (a) any net income, alternative or add-on minimum tax,
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gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, registration, recording, documentary, conveyancing,
gains, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental, windfall profit, custom duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any governmental authority responsible for the imposition of any such
tax (United States or foreign), (b) in the case of either Seller Party,
liability for the payment of any amount described in clause (a) as a result of
being or having been before the Closing Date a member of an affiliated,
consolidated, combined or unitary group, and (c) liability for the payment of
any amounts of the type described in (a) as a result of being party to any
agreement or any express or implied obligation to indemnify any other Person.
"Tax Returns" shall mean United States federal, state and local and all
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foreign returns, declarations, reports, claims for refund, information returns
or statements required to be filed with, or made available to, any governmental
authority with respect to Taxes.
1.2 Other Defined Terms. The following terms shall have the meanings
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defined for such terms in the Sections set forth below:
Term Section
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Assumed Liabilities 2.2
Buyer Indemnified Parties 8.3(a)
Buyer Restricted Persons 6.1(b)
Claim 8.2
Closing 3.1
Closing Date 3.1
Contested Claim 8.6(b)
Damages 8.3(a)
Escrow Claim 2.5
Escrow Fund 2.5
Expiration Date 8.1
Final Award 8.6(c)(iii)
Indemnification Notice 8.2
Indemnified Party 8.2
Indemnitor 8.2
Other Records 6.4
Purchase Price 2.4
Seller Indemnified Parties 8.3(b)
Seller Restricted Persons 6.1(a)
Restricted Persons 6.1(b)
Transfer Taxes 8.9(b)
Uncontested Claim 8.6(b)
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ARTICLE II.
PURCHASE AND SALE OF THE ASSETS
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2.1 Transfer of Assets. Upon the terms and subject to the conditions
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contained herein, at the Closing, the Seller Parties will sell, convey,
transfer, assign and deliver to Buyer, and Buyer will acquire from the Seller
Parties, the Assets, free and clear of all Encumbrances other than Permitted
Encumbrances. Intellectual Property and any subscriber or registrant data shall
be transferred to Buyer via electronic transmission to the extent possible. If
the Seller Parties are unable to transfer title to the tangible assets set forth
on Exhibit A free and clear of all Encumbrances (including Permitted
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Encumbrances resulting from the Equipment Lease but excluding other Permitted
Encumbrances), the Seller Parties shall either remove such Encumbrances or
substitute assets having the same or superior functionality for such encumbered
assets free and clear of all Encumbrances (including Permitted Encumbrances)
prior to February 16, 2001 (or such earlier date as Buyer is denied access to or
full use of such encumbered assets).
2.2 Assumption of Liabilities. Upon the terms and subject to the
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conditions contained herein, at the Closing, Buyer agrees to assume all
Liabilities accruing, arising out of, or relating to periods, events or
occurrences happening after the Closing Date under the Contracts listed on
Schedule 4.5 that Buyer has elected to assume or under the Contracts that are
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not listed on Schedule 4.5 but which Buyer elects to accept and assume, but not
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including any Liability for any Default under any such Contract occurring on or
prior to the Closing Date (the "Assumed Liabilities").
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2.3 Nonassumption of Liabilities. Notwithstanding any other provisions of
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this Agreement, except for the Assumed Liabilities expressly specified in
Section 2.2 above, Buyer shall not assume or otherwise be responsible for any of
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the Excluded Liabilities.
2.4 Consideration. On the Closing Date (as defined below), upon the terms
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and subject to the conditions set forth herein and subject further to the
provisions of Section 2.5 hereof, in consideration for the transfer of the
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Assets pursuant to Section 2.1 of this Agreement, Buyer shall assume the Assumed
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Liabilities and pay an aggregate purchase price of One Million Dollars
($1,000,000.00) (the "Purchase Price") in cash of which Seven Hundred Thousand
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Dollars ($700,000.00) shall be payable at the Closing by certified or bank
cashier's check or by wire transfer of immediately available funds to an account
designated by Seller and Three Hundred Thousand Dollars ($300,000.00) shall be
paid to an escrow account (the "Escrow Fund") as set forth below in Section 2.5.
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2.5 Escrow. On the Escrow Release Date, the Parties shall jointly instruct
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the Escrow Agent to release the Escrow Fund to Seller; provided that Buyer shall
not be required to so instruct the Escrow Agent if Buyer delivers an
Indemnification Notice alleging (a) a breach of Seller's representation and
warranty in Section 4.4(b) that would entitle Buyer to recover Damages (taking
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into account the limitations set forth in the first sentence of Section 8.7(a)),
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(b) a breach of Seller's obligation under the last sentence of Section 2.1
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and/or (c) that it is entitled to indemnification pursuant to Section 8.3(a)(iv)
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(each, an "Escrow Claim"). If the amount of funds in the Escrow Fund exceed the
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amount of Damages alleged in the Escrow Claim, the
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Parties shall jointly instruct the Escrow Agent to release any undisputed
portion of the Escrow Fund (i.e., the amount by which the amount in the Escrow
Fund exceeds the amount of alleged Damages) to Seller on the Escrow Release
Date, and the portion of the Escrow Fund representing the amount of alleged
Damages alleged in the Escrow Claim shall remain in the Escrow Fund until
release is authorized by the joint instructions of the Parties or in accordance
with a judgment of a court of competent jurisdiction or in accordance with a
decision of an arbitrator made pursuant to Section 9.4 (with such remaining
-----------
portion of the Escrow Fund allocated between the Parties to reflect the
agreement of the Parties with respect to the Escrow Claim or the decision of an
arbitrator with respect to the amount of Damages, if any, to which Buyer is
entitled as a result of the Escrow Claim). The Escrow Fund shall be governed by
the terms set forth herein and in the Escrow Agreement.
ARTICLE III.
CLOSING
-------
3.1 Closing. The consummation of the purchase and sale transactions
-------
contemplated by this Agreement (the "Closing") shall take place at the offices
-------
of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ effective as of 12:01 a.m. on the date hereof (the "Closing Date").
------------
3.2 Seller Parties' Deliveries at Closing. Subject to the terms and
-------------------------------------
conditions of this Agreement, in reliance upon the representations, warranties
and agreements of Buyer contained herein and in consideration of the sale of the
Assets by the Seller Parties, the Seller Parties agree to deliver (or cause to
be delivered) to Buyer at the Closing on the Closing Date the following
agreements and documents, all satisfactory in form and substance to Buyer and
its legal counsel:
(a) certificates of the Secretary of State of the State of
Delaware certifying the good standing of each Seller Party, each dated of the
most recent date;
(b) certificates executed by the Secretary of each Seller
Party certifying as of the Closing Date as to (i) a true and complete copy of
the Organizational Documents of the applicable Seller Party, certified as of a
recent date by the Secretary of State of the State of Delaware, (ii) a true and
complete copy of the resolutions of the Board of Directors of the applicable
Seller Party authorizing the execution, delivery and performance of this
Agreement by the applicable Seller Party and the consummation of the
transactions contemplated hereby and (iii) incumbency matters;
(c) all Permits and any other third party consents
required, if any, for the valid transfer of the Assets as contemplated by this
Agreement and operation of the Business following the Closing Date by Buyer;
(d) subject to Section 7.1, the Assignment and Assumption
-----------
of Contract Rights with respect to the Contract Rights;
(e) the Assignment of Intellectual Property, in recordable
form to the extent necessary to assign such rights;
10
(f) the ▇▇▇▇ of Sale;
(g) the Advertising Agreement;
(h) the Domain Name Transfer Agreement;
(i) the Excluded Intellectual Property License Agreement;
(j) the License Agreement; and
(k) any clearance certificates, receipts or similar
documents that may be required by any state taxing authority in order to relieve
Buyer of any obligation to withhold any portion of the Purchase Price.
3.3 Buyer Deliveries at the Closing. Subject to the terms and conditions
-------------------------------
of this Agreement, in reliance on the representations, warranties and agreements
of Seller contained herein and the covenants regarding confidentiality and
non-solicitation contained or referred to in Sections 6.1 hereof, in
------------
consideration of the sale, assignment and transfer of the Assets, Buyer agrees
to deliver to Seller at the Closing the following, all satisfactory in form and
substance to Seller and its legal counsel:
(a) Certificate of the Secretary of State of the State of
Delaware certifying the good standing of Buyer, dated not more than three (3)
days prior to the Closing Date;
(b) Certificate executed by a Manager of Buyer certifying
as of the Closing Date as to (i) a true and complete copy of the Organizational
Documents of Buyer, certified as of a recent date by the Secretary of State of
the State of Delaware, (ii) a true and complete copy of the resolutions of the
Board of Managers of Buyer, authorizing the execution, delivery and performance
of this Agreement by Buyer, and the consummation of the transactions
contemplated hereby;
(c) the Advertising Agreement;
(d) the Domain Name Transfer Agreement;
(e) the Excluded Intellectual Property License Agreement;
(f) the License Agreement; and
(g) subject to Section 7.1, the Assignment and Assumption
-----------
of Contract Rights with respect to the Contract Rights.
11
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller hereby represents and warrants to Buyer, except as otherwise
set forth on the Disclosure Letter, that the following representations and
warranties are true and correct:
4.1 Organization of the Seller Parties. Each Seller Party is a corporation
----------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware with full corporate power and authority to conduct the
Business and to own and lease its properties and the Assets. Each Seller Party
is duly authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required except where the failure
to be in good standing will not have a Material Adverse Effect. Copies of the
Organizational Documents of each Seller Party, and all amendments thereto, have
been made available to Buyer and are accurate and complete as of the date
hereof.
4.2 Authorization. Each Seller Party has all requisite corporate power and
-------------
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement and the Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement- and the Ancillary
Agreements by each Seller Party and the consummation by each Seller Party of the
transactions contemplated hereby and thereby have been duly approved by the
board of directors of the applicable Seller Party and the stockholder of the
Sub. No other proceedings or other actions on the part of either Seller Party
are necessary to authorize this Agreement and the Ancillary Agreements and the
transactions contemplated hereby and thereby. This Agreement and each Ancillary
Agreements to which either Seller Party is a party have been duly executed and
delivered by the applicable Seller Party and are legal, valid and binding
obligations of each such Seller Party enforceable against it in accordance with
their terms, in each case, except as such enforceability may be limited by (a)
bankruptcy, insolvency, moratorium, reorganization and other similar laws
affecting creditors' rights generally and (b) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law.
4.3 Absence of Certain Changes or Events. Since June 30, 2001, there has
------------------------------------
not been any:
(a) material adverse change in the Assets;
(b) material downward revaluation by either Seller Party of
any of the Assets other than as a result of depreciation or amortization;
(c) waiver or release of any right or claim of either
Seller Party relating to the Business which had or will have a material adverse
effect on any of the Assets;
(d) amendment, cancellation or termination of any Contract,
commitment, agreement, transaction or Permit relating to any of the Assets which
is not in the ordinary course of business;
12
(e) mortgage, pledge or other encumbrance of any of the
Assets other than in the ordinary course of business;
(f) sale, assignment or transfer of any of the material
Assets;
(g) failure to pay or satisfy when due any material Liability
of either Seller Party pertaining to the Assets;
(h) existence of any other event or condition which in any
one case or in the aggregate would reasonably be expected to have a material
adverse effect on the Assets; or
(i) agreement by either Seller Party to do any of the things
described in the preceding clauses (a) through (h) other than as expressly
provided for herein.
4.4 Assets.
------
(a) Each Seller Party is transferring to Buyer, pursuant to
the transactions contemplated herein, all of its right, title and interest in
the Assets, free and clear of any lien, pledge, option, security interest,
license, deed of trust, or mortgage, whether voluntarily or incurred or arising
by operation of law, and includes, without limitation, any agreement to give any
of the foregoing in the future, and any contingent sale, lease or license of any
nature other than Permitted Encumbrances; provided that if the Seller Parties
are unable to transfer title to the tangible assets set forth on Exhibit A free
---------
and clear of Encumbrances (including Permitted Encumbrances resulting from the
Equipment Lease but excluding other Permitted Encumbrances), the Seller Parties
shall either remove such Encumbrances or substitute assets having the same or
superior functionality for such encumbered assets free and clear of all
Encumbrances (including Permitted Encumbrances) prior to February 16, 2001 (or
such earlier date as Buyer is denied access to or full use of such encumbered
assets). The Assets and the Excluded Assets include all Intellectual Property
relating primarily to the Business in which either Seller Party has any right,
title or interest.
(b) Except for the Excluded Assets listed on Exhibit F
---------
attached hereto and the Intellectual Property licensed to Buyer under the
Excluded Intellectual Property License, the Assets include, without limitation,
all assets necessary for the conduct of the Business as conducted by the Seller
Parties prior to the date hereof.
(c) All tangible assets and properties which are part of the
Assets are in good working condition and repair and are usable in the ordinary
course of business.
4.5 Contracts and Commitments.
-------------------------
(a) Contracts. Schedule 4.5 sets forth a complete and
--------- ------------
accurate list of all material Contracts that primarily pertain to the Assets,
including, without limitation, those in the following categories:
(i) Contracts not made in the ordinary course of
business;
13
(ii) Any Contract between either Seller Party and a ten
percent (10%) stockholder of Seller or an Affiliate thereof,
(iii) Vendor, distribution, equipment lease, franchise,
license, technical assistance, sales, commission, consulting, agency or
advertising contracts primarily related to the Assets or the Business;
(iv) Any licensing, website hosting, website linking,
content or data sharing, data feed, information exchange, advertising,
distribution, fee sharing, lead or customer referral, commerce, co-branding,
escrow services, order or transaction processing or similar Contract primarily
related to the Assets or the Business;
(v) Options with respect to any of the Assets, whether
either Seller Party shall be the grantor or grantee thereunder;
(vi) Contracts involving future expenditures or
Liabilities, actual or potential, in excess of Ten Thousand Dollars
($10,000.00);
(vii) Contracts or commitments relating to commission
arrangements with others primarily related to the Assets or the Business;
(viii) Promissory notes, loans, agreements, indentures,
evidences of indebtedness, letters of credit, guarantees, or other instruments
relating to an obligation to pay money, whether either Seller Party shall be the
borrower, lender or guarantor thereunder or whereby any of the Assets are
pledged;
(ix) Contracts containing covenants limiting the
freedom of either Seller Party or any of its Affiliates, or that will limit the
freedom of Buyer, to engage in the Business or in any business related thereto;
and
(x) Any Contract with the United States, state or
local government or any agency or department thereof.
Seller has delivered to Buyer and its legal counsel true, correct and complete
copies of all of the Contracts listed on Schedule 4.5, including all amendments
------------
and supplements thereto.
(b) Absence of Defaults. Each of the Contracts set forth on
-------------------
Schedule 4.5 is valid, binding and enforceable against the applicable Seller
------------
Party in accordance with their terms. Each Seller Party has fulfilled, or taken
all action necessary to enable it to fulfill when due, all of its obligations
under each of such Contracts. Each Seller Party has, and to the Knowledge of
Seller, all parties to such Contracts have complied in all material respects
with the provisions thereof, neither Seller Party is, and to the Knowledge of
Seller, no party is in Default thereunder and no notice of any claim of Default
has been given to either Seller Party.
(c) Breach of Warranties. Neither Seller Party has not
--------------------
committed any act, and there has been no omission, which may result in, and
there has been no occurrence which may give rise to Liability for breach of
warranty (whether covered by insurance or not) on
14
the part of either Seller Party, with respect to services rendered by either
Seller Party in connection with the Business prior to or on the Closing Date.
4.6 Permits.
-------
(a) Schedule 4.6 sets forth a complete list of all Permits pertaining
------------
to the Assets or Business used or held by either Seller Party. Each Seller Party
has, and at all times has had, all Permits required under any Regulation that
regulates the use and/or ownership of the Assets, and owns or possesses such
Permits free and clear of all Encumbrances other than Permitted Encumbrances.
Neither Seller Party is in Default, nor has either Seller Party received any
notice of any claim of Default, with respect to any such Permit. Except as
otherwise governed by law, all such Permits are renewable by their terms or in
the ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees
and will not be adversely affected by the completion of the transactions
contemplated by this Agreement. No present or former stockholder, director,
officer or employee of either Seller Party or any Affiliate thereof, or any
other Person owns or has any proprietary, financial or other interest (direct or
indirect) in any of the Permits set forth in Schedule 4.6.
------------
(b) No notice to, declaration, filing or registration with, or Permit
from, any domestic or foreign governmental or regulatory body or authority, or
any other Person is required to be made or obtained by either Seller Party in
connection with the execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby.
4.7 No Conflict or Violation. None of the execution, delivery or
------------------------
performance of this Agreement or any of the Ancillary Agreements, the
consummation of the transactions contemplated hereby or thereby, or compliance
by either Seller Party with any of the provisions hereof, will (a) violate or
conflict with any provision of the Organizational Documents of either Seller
Party or any resolution or other action adopted or taken by the board of
directors or stockholders of either Seller Party, (b) violate, conflict with, or
result in or constitute a Default under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any of the
Assets under, any of the terms, conditions or provisions of any Contract or
Permit, (i) to which either Seller Party is a party or (ii) by which the Assets
are bound, (c) violate any Court Order or any Regulation, (d) impose any
Encumbrance on any of the Assets, or (e) violate or conflict with any privacy
policy or privacy right of any Person so long as Buyer is in compliance with
Section 6.5 of this Agreement, except for any violation in the case of (b), (c)
-----------
and (e) that would not result in a Material Adverse Effect.
4.8 Financial Statements. Seller has delivered the Financial Statements
--------------------
to Buyer. Such Financial Statements, as of the date or dates specified therein,
are true and correct in all material respects. The Financial Statements were
prepared in a consistent basis in accord with Seller's business and accounting
practices consistently applied and fairly and accurately represent the cash flow
and the number of the subscribers and users of the Business for the periods
covered thereby. Since May 2001, there have not been more than 250 cancellations
of subscription agreements by subscribers of the Business. There are no material
claims,
15
obligations or Liabilities of either Seller Party related to the Assets
or Business required to be reflected in the Financial Statement other than those
set forth in the Financial Statements. There are no events or circumstances that
have occurred or come into existence since the date or dates specified in the
Financial Statements that may reasonably be expected, individually or in the
aggregate, to have or constitute a Material Adverse Effect on the Assets or the
Business or on either Seller Party's ability to sell the Assets to Buyer and
consummate the transactions contemplated hereunder.
4.9 Books and Records. Seller has given Buyer access to any and all Books
-----------------
and Records and accounts that refer or relate to the Assets or the Business.
Neither Seller Party has engaged in any transaction involving the Assets or the
Business except for those transactions which have been and are reflected in the
Books and Records of the applicable Seller Party.
4.10 Litigation. There are no Actions pending, or to the Knowledge of
----------
Seller, threatened (a) against, related to or affecting the Business or any of
the Assets, (b) seeking to delay, limit or enjoin the transactions contemplated
by this Agreement, or (c) against either Seller Party or any Affiliate thereof
that involve the risk of criminal liability. Neither Seller Party is in Default
with respect to or subject to any Court Order, and there are no unsatisfied
judgments against either Seller Party, the Business or any of the Assets. There
is not a reasonable likelihood of an adverse determination of any pending
Actions.
4.11 Liabilities and Solvency. Except for the Equipment Lease and trade
------------------------
debt incurred in the ordinary course of business (none of which is in Default),
neither Seller Party is obligated under any loans, promissory notes, indentures,
evidences of indebtedness, letters of credit, guarantees or other agreements or
instruments relating to an obligation to pay money to any Person or other
Liabilities which, individually or in the aggregate, are material with respect
to Business or the Assets. Neither Seller Party is currently insolvent or has
been insolvent within the last year.
4.12 Compliance with Law. Each Seller Party and the conduct of the Business
-------------------
have not violated and are in compliance with all Regulations and Court Orders
relating to the Assets and the Business, the violation of which would reasonably
be expected to result in a material Liability to the Assets or the Business.
Neither Seller Party has received any notice to the effect that, or otherwise
been advised that, either Seller Party is not in compliance with any such
Regulations or Court Orders, and Seller has no reason to anticipate that any
existing circumstances are likely to result in violations of any of the
foregoing.
4.13 No Brokers. Neither Seller Party nor any of the officers, directors,
----------
employees, stockholders or Affiliates of either Seller Party have employed or
made any agreement with any broker, finder or similar agent or any Person or
firm which will result in the obligation of Buyer or any of its Affiliates to
pay any finder's fee, brokerage fees or commission or similar payment in
connection with the transactions contemplated hereby.
4.14 No Other Agreements to Sell any of the Assets. Neither Seller Party
---------------------------------------------
nor any of the officers, directors, stockholders or Affiliates of either Seller
Party have any commitment or legal obligation, absolute or contingent, to any
other Person or firm other than Buyer to sell or effect a
16
sale of the Assets or the Business (or any portion thereof) or to enter into any
agreement or cause the entering into of any agreement with respect to any of the
foregoing.
4.15 Intellectual Property Rights.
----------------------------
(a) Schedule 4.15(a) sets forth a true and complete list
----------------
of all of the Intellectual Property used by either Seller Party in connection
with the Business that is material to the Business other than the Excluded
Assets. Except for the Intellectual Property listed on Parts A and B of Schedule
--------
4.15(a) and the Excluded Assets, there is no Intellectual Property primarily
-------
used in the Business that is material to the Business. The Intellectual Property
listed on the Schedule 4.15(a) and the Excluded Assets is the only Intellectual
----------------
Property used by either Seller Party in connection with the Business that is
material to the Business. True and correct copies of all patents and patent
applications, trademark and service ▇▇▇▇ applications and registrations,
copyright applications and registrations and domain name registrations owned by,
controlled, created or used by or on behalf of either Seller Party or in which
either Seller Party has any interest whatsoever have been provided to Buyer.
(b) With respect to each item of Intellectual Property
required to be identified on Schedule 4.15(a):
----------------
(i) all licenses, sublicenses or agreements set
forth on Schedule 4.15(a) are legal, valid, binding, enforceable and in full
----------------
force and effect;
(ii) upon consummation of the transactions
contemplated by this Agreement, all licenses, sublicenses or agreements will
continue to be legal, valid, binding, enforceable and in full force and effect
on terms identical to those in effect as of the date of this Agreement;
(iii) neither Seller Party nor any other party to
any license, sublicense or agreement is in breach or default under any such
license, sublicense or agreement or has performed any act or omitted to perform
any act, with notice or lapse of time or both, which will become a material
breach or default thereunder;
(iv) no party to any license, sublicense or
agreement has given notice of termination or repudiated any provision thereof,
(v) with respect to each sublicense, the representations and warranties set
forth above in subsections 4.15(b)(i)-(iv) are true and correct with respect to
---------------------------
the underlying license;
(vi) the underlying item of Intellectual Property
is not subject to any outstanding injunction, judgment, order, decree or ruling;
(vii) neither Seller Party has granted any
sublicense or similar right with respect to any license, sublicense or
agreement;
17
(viii) except as set forth on Schedule 4.15(b),
----------------
neither Seller Party is obligated or under any liability whatsoever to make any
payments by way of royalties, fees or otherwise to any owner or licensee of, or
other claimant to, any Intellectual Property; and
(ix) no Action, suit, proceeding, hearing,
investigation or complaint is pending or is threatened, nor has any claim or
demand been made, which challenges the legality, validity, enforceability or
ownership of the underlying item of Intellectual Property.
(c) Ownership and Protection of Intellectual Property.
-------------------------------------------------
Except as set forth on Schedule 4.15(c), the Seller Parties own exclusively or,
----------------
in the case of licensed Intellectual Property, have the right to use each of the
Intellectual Property used in connection with the Business that is material to
the Business, and the Intellectual Property will not cease to be valid rights of
either Seller Party by reason of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby. All of
the pending applications have been duly filed. Neither Seller Party has received
any notice of invalidity or infringement of any rights of others with respect to
such Intellectual Property used in connection with the Business. Each Seller
Party has taken all reasonable and prudent steps to protect the Intellectual
Property used in connection with the Business that is material to the Business
from infringement by any other Person. No other Person (i) has the right to use
any trademarks or service marks of either Seller Party used in connection with
the Business on the goods and/or services in connection with which they are now
being used either in identical form or in such near resemblance thereto as to be
likely, when applied to the goods or services of any such Person, to cause
confusion with such trademarks or service marks or to cause a mistake or to
deceive, (ii) has notified either Seller Party that it is claiming any ownership
of or right to use any of the Intellectual Property used in connection with the
Business, or (iii) is infringing upon any such Intellectual Property used in
connection with the Business that is material to the Business in any way. The
Intellectual Property used in connection with the Business that is material to
the Business does not and will not conflict with, infringe upon or otherwise
violate the valid rights of any third party in or to such Intellectual Property
used in connection with the Business that is material to the Business, and no
Action has been instituted against or notices received by either Seller Party
that are presently outstanding alleging that either Seller Party's use of the
Intellectual Property used in connection with the Business infringes upon or
otherwise violates any rights of a third party in or to such Intellectual
Property. There are not, and it is reasonably expected that after the Closing
there will not be, any restrictions on either Seller Party's or Buyer's, as the
case may be, right to offer services provided by either Seller Party or Buyer,
as the case may be, in connection with the operation of the Business.
(d) No Required Consents. There are no agreements
--------------------
relating to the Intellectual Property that require a consent or waiver for
assignment of such agreements to Buyer.
(e) Liabilities. Neither Seller Party has a reasonable
-----------
basis to believe that it has any present or future liability under any agreement
to provide indemnification for infringement of any third party rights or
otherwise, or provide updates, enhancements, modifications, bug fixes, support
or maintenance for any products or technology.
18
(f) Trade Secrets. Each Seller Party has taken reasonable
-------------
security measures to protect the secrecy, confidentiality and value of all of
its trade secrets and confidential information, including without limitation
entering into written agreements with its employees and other persons who may
have participated in the development, discovery or invention of any trade
secret, or have knowledge of or access to any trade secret or confidential
information, which such agreements provide for the non-disclosure of trade
secrets and confidential information and the transfer of all rights in and to
the same to such Seller Party.
4.16 Approvals.
---------
(a) The execution, delivery and performance by each Seller
Party of this Agreement and each Ancillary Agreements to which either Seller
Party is a party do not require the authorization, consent or approval of any
non-governmental third party.
(b) The execution, delivery and performance by each Seller
Party of this Agreement and each Ancillary Agreements to which either Seller
Party is a party do not require the authorization, consent, approval,
certification, license or order of, or any filing with, any court or
governmental body.
4.17 Customers and Suppliers. Schedule 4.17 sets forth a complete and
----------------------- -------------
accurate list of the names and addresses of (a) the twenty largest customers
primarily related to the Business (including distribution partners, advertisers
and other strategic partners) of the Seller Parties based on dollar revenues to
the Seller Parties as they relate to the Business, during Seller's last fiscal
year, showing the approximate total revenues in dollars to the Seller Parties
from each such customer during such fiscal year; and (b) the ten largest
suppliers primarily related to the Business based on dollar purchases during
Seller's last fiscal year, showing the approximate total purchases in dollars by
the Seller Parties from each such supplier during such fiscal year. Since date
or dates specified in the Financial Statements, outside the ordinary course of
business, there has been no adverse change in the business relationship of
either Seller Party with any customer or supplier named on Schedule 4.17.
-------------
Outside the ordinary course of business, neither Seller Party has received any
communication from any customer or supplier named on Schedule 4.17 of any
-------------
intention to terminate or materially reduce purchases from or supplies to either
Seller Party.
4.18 Registrant Database. The Seller Parties own the Registrant Database (it
-------------------
being understood that Seller Parties' ownership is of the Registrant Database as
a whole and not of the specific items of information relating to users or
subscribers which belong to the applicable users or subscribers) and have the
right to transfer to Buyer the Registrant Data Base as contemplated by this
Agreement. Use of the Registrant Database in connection with the Business does
not infringe, misappropriate or otherwise violate the rights of others, and
neither Seller Party has received any notice of any such infringement,
misappropriation or violation or that any other Person owns or has the right to
use the Registrant Data Base. Each Seller Party has taken reasonable security
measures to protect the secrecy, confidentiality and value of the Registrant
Data Base. This Section 4.18 shall not be deemed to limit any other
------------
representations or warranties in this Agreement to the extent they relate to the
Registrant Data Base.
4.19 Tax Matters.
-----------
19
(a) No material deficiencies for Taxes, have been claimed,
proposed or assessed by any taxing or other governmental authority against
either Seller Party in connection with the Business and there are no pending or,
to the Knowledge of Seller, threatened, any audits, examinations, investigations
or other proceedings in respect of Taxes or Tax matters. No extension of a
statute of limitations relating to Taxes is in effect with respect to either
Seller Party.
(b) There are no liens for Taxes (other than for current
Taxes not yet due and payable) on the Assets.
(c) None of the Assets is property that is required to be
treated as being owned by any other person pursuant to the so-called safe harbor
lease provisions of former Section 168(f)(8) of the Code.
(d) None of the Assets directly or indirectly secures any
debt the interest on which is tax-exempt under Section 103(a) of the Code.
(e) None of the Assets is "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
(f) Neither Seller Party is a person other than a United
States person within the meaning of the Code. Neither Seller Party has or has
had a permanent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States and such foreign
country.
(g) The transaction contemplated herein is not subject to the
tax withholding provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code or of any other provision of law.
4.20 Material Misstatements Or Omissions. No representations or warranties
-----------------------------------
by Seller in this Agreement and the Ancillary Agreements contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary to make the statements or facts contained therein
not misleading.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller that the following
representations and warranties are true and correct:
5.1 Organization. Buyer is a limited liability company duly organized,
------------
validly existing and in good standing under the laws of the State of Delaware.
5.2 Authorization. Buyer has all requisite corporate power and authority,
-------------
and has taken all action necessary, to execute and deliver this Agreement and
the Ancillary Agreements to which Buyer is a party. The execution and delivery
by Buyer of this Agreement and the
20
Ancillary Agreements to which Buyer is a party and the consummation by Buyer of
the transactions contemplated hereby and thereby have been duly approved by the
board of managers of Buyer. No proceedings on the part of Buyer are necessary to
authorize this Agreement and the Ancillary Agreements to which Buyer is a party
and the transactions contemplated hereby and thereby. This Agreement has been
duly executed and delivered by Buyer and is, and upon execution and delivery the
Ancillary Agreements to which Buyer is a party will be, legal, valid and binding
obligations of Buyer, enforceable against Buyer, in accordance with their terms,
in each case except as such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting
creditors' rights generally and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law.
5.3 No Conflict or Violation. None of the execution, delivery or
------------------------
performance of this Agreement or any of the Ancillary Agreements, the
consummation of the transactions contemplated hereby or thereby, or compliance
by Buyer with any of the provisions hereof, will (a) violate or conflict with
any provision of the Organizational Documents of Buyer or any resolution or
other action adopted or taken by the board of managers or members of Buyer, (b)
violate, conflict with, or result in or constitute a Default under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
Encumbrance upon any of Buyer's assets under, any of the terms, conditions or
provisions of any contract, indebtedness, note, bond, indenture, security or
pledge agreement, commitment, license, lease, franchise, permit, agreement,
authorization, concession, or other instrument or obligation to which Buyer is a
party or (c) violate any Regulation or Court Order.
5.4 No Brokers. Neither Buyer nor any of Buyer's managers, directors,
----------
employees, members or Affiliates have employed or made any agreement with any
broker, finder or similar agent or any Person or firm which will result in the
obligation of Buyer or any of its Affiliates to pay any finder's fee, brokerage
fees or commission or similar payment in connection with the transactions
contemplated hereby.
ARTICLE VI.
COVENANTS OF BUYER AND SELLER
-----------------------------
Seller and Buyer each covenant with the other as follows:
6.1 Confidentiality and Non-Competition.
-----------------------------------
(a) Each Seller Party acknowledges that it has knowledge of
certain Buyer Confidential Information and that such Buyer Confidential
Information is confidential and proprietary to Seller and constitutes valuable
trade secrets of Seller, which affect, among other things, the successful
conduct, furtherance and protection of the Business and related goodwill. Each
Seller Party acknowledges that the unauthorized use or disclosure of such Buyer
Confidential Information is likely to be highly prejudicial to the interests of
Buyer or its customers, clients and patrons, an invasion of privacy, or an
improper disclosure of trade secrets. Each Seller Party agrees that a
substantial portion of the Purchase Price is being paid for such
21
Buyer Confidential Information and that it represents a substantial investment
having great economic and commercial value to Buyer, and constitutes a
substantial part of the value to Buyer of the Business. Each Seller Party
further acknowledges that Buyer would be irreparably damaged if any of the Buyer
Confidential Information was disclosed to, or used or exploited on behalf of,
any Person other than Buyer or any of its Affiliates. Accordingly, each Seller
Party covenants and agrees that it shall not, directly or indirectly, and shall
use its commercially reasonable efforts to ensure that any agents,
Representatives, Affiliates and any other Persons acting on either Seller
Party's behalf (the Seller Parties and such agents, Representatives, Affiliates
and other Persons with respect to either of Seller Parties being collectively
referred to as the "Seller Restricted Persons") do not, without the prior
-------------------------
written consent of Buyer, disclose, use, exploit, furnish or make accessible to
anyone or any other entity, any such Confidential Information, for the benefit
of any such Seller Restricted Person or of any third party, at any time for so
long as such information shall remain secret or confidential or otherwise remain
wholly or partially protectable.
(b) Buyer acknowledges that it has knowledge of certain
Seller Confidential Information and that such Seller Confidential Information is
confidential and proprietary to Seller and constitutes valuable trade secrets of
Seller, which affect, among other things, the successful conduct, furtherance
and protection of the Seller's business and related goodwill. Buyer acknowledges
that the unauthorized use or disclosure of such Seller Confidential Information
is likely to be highly prejudicial to the interests of Seller or its customers,
clients and patrons, an invasion of privacy, or an improper disclosure of trade
secrets. Buyer further acknowledges that Seller would be irreparably damaged if
any of the Seller Confidential Information was disclosed to, or used or
exploited on behalf of, any Person other than Seller or any of its Affiliates.
Accordingly, Buyer covenants and agrees that it shall not, directly or
indirectly, and shall use its commercially reasonable efforts to ensure that any
agents, Representatives, Affiliates and any other persons acting on Buyer's
behalf (Buyer and such agents, Representatives, Affiliates and other persons
with respect to Buyer being collectively referred to as the "Buyer Restricted
----------------
Persons") do not, without the prior written consent of Seller, disclose, use,
-------
exploit, furnish or make accessible to anyone or any other entity, any such
Confidential Information, for the benefit of any such Buyer Restricted Person or
of any third party, at any time for so long as such information shall remain
secret or confidential or otherwise remain wholly or partially protectable.
References in this Section 6.1 to "Confidential Information" which relates to
----------- ------------------------
information that: (i) any Buyer Restricted Person is obligated to keep
confidential shall be deemed references to "Seller Confidential Information" and
(ii) any Seller Restricted Person is obligated to keep confidential shall be
deemed references to "Buyer Confidential Information." References in this
Section 6.1 to a "Restricted Person" when used with respect to Buyer shall be
---------- -----------------
deemed a reference to a "Buyer Restricted Person" and when used with respect to
Seller shall be deemed a reference to a "Seller Restricted Person."
(c) Notwithstanding anything to the contrary in Section 6.1
-----------
(a) or Section 6.1 (b) above, the Parties may use or exploit a particular item
--- ---------------
of Confidential Information if and to the extent (but only if and to the extent)
that such item is:
(i) or becomes generally known on a non-confidential
basis to persons in the industry, through no wrongful act of any Restricted
Person, in which a Party is engaged and is part of the public domain;
22
(ii) or was within a Restricted Person's possession prior to
its being furnished to such Restricted Person by or on behalf of the Seller
Parties or Buyer, provided that the source of such information was not known by
such Restricted Person to be bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Seller
Parties or Buyer or any other Person with respect to such information;
(iii) or becomes available to a Restricted Person on a
nonconfidential basis from a source other than the Seller Parties or Buyer or
any of their respective Representatives, provided that such source is not bound
by a confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the Seller Parties or Buyer or any other Person
with respect to such information; or
(iv) disclosed in the context of negotiations of a potential
reorganization, merger, consolidation of either Party, provided that such
potential acquirer or merger partner shall sign confidentiality agreement
relative to the Confidential Information.
(d) Each Seller Party hereby acknowledges that Buyer will invest
substantial time, money and resources in acquiring the Business, as well as in
the development and retention of Seller's inventions, Confidential Information,
customers, accounts and business partners of the Business. Therefore, each
Seller Party hereby agrees that, if allowed to participate in a competitive
business in violation of this Section 6.1(d), Seller would substantially impair
--------------
the value of the Business being acquired by Buyer. Each Seller Party agrees that
for a three (3) year period following the Closing Date, neither Seller Party
shall in any capacity, or in association with others, directly or indirectly, as
advisor, agent, owner, partner, shareholder, beneficial owner or in any other
capacity, and each Seller Party shall use its commercially reasonable efforts to
ensure that the Seller Restricted Persons do not, directly or indirectly, for
the benefit of any of such Seller Restricted Persons or their respective
Affiliates:
(i) engage in the business of providing online college, high
school or other alumni directories or services or any other business activities
substantially similar to those conducted by either Seller Party through the
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ website on or prior to the date hereof in any state of the
United States or elsewhere;
(ii) solicit for employment any person who is currently
employed or becomes employed by Buyer or an Affiliate of Buyer in connection
with the Business (it being understood that this clause (ii) shall not prohibit
Seller from employing an employee of Buyer or an Affiliate of Buyer that
initiates contact with Seller and seeks employment from Seller); or
(iii) solicit or entice suppliers or customers of Buyer or an
Affiliate of Buyer to cease doing business with or reduce its relationship with
Buyer or an Affiliate of Buyer; provided that this clause (iii) will not apply
to the solicitation of advertisers by Seller or any of its Affiliates.
Notwithstanding anything to the contrary, in the event that all or substantially
all of Seller's business is acquired by a third party (including as a result of
a merger where Seller's
23
stockholders immediately prior to such merger retain less than fifty percent
(50%) of the voting stock of the surviving entity immediately following such
merger), the restrictions set forth in this Section 6.1(d) shall not apply to
-------------
such third party or to any Affiliate of such third party. If a court determines
that the restrictions set forth in Section 6.1(d) above are too broad or
-------------
otherwise unreasonable under applicable law, including with respect to time or
geographical scope, the court is hereby requested and authorized by the parties
without further action by the parties hereto to revise the restrictions in
Section 6.1(d) to include the maximum restrictions allowed under the applicable
-------------
law.
(e) Buyer agrees that for a three (3) year period following
the Closing Date, Buyer shall not in any capacity, or in association with
others, directly or indirectly, as advisor, agent, owner, partner, member,
beneficial owner or in any other capacity, and shall use its commercially
reasonable efforts to ensure that the Buyer Restricted Persons do not, directly
or indirectly, for the benefit of any of such Buyer Restricted Persons or their
respective Affiliates solicit for employment any person who is currently
employed or becomes employed by either Seller Party or an Affiliate of either
Seller Party in connection with the Business (it being understood that this
Section 6.1(e) shall not prohibit Buyer from employing an employee of either
-------------
Seller Party or an Affiliate of either Seller Party that initiates contact with
Buyer and seeks employment from Buyer).
(f) Both Parties hereby expressly acknowledge that the
covenants contained in this Section 6.1 are integral to the purchase of the
-----------
Assets by Buyer and the sale if the Assets by the Seller and that without the
protection of such covenants, neither Party would not have entered into this
Agreement. Each Party hereby further acknowledges that money damages will be
impossible to calculate and may not adequately compensate the other Party in
connection with an actual or threatened breach by a Restricted Person of the
provisions of this Section 6.1. In addition, both Parties shall be entitled to
-----------
pursue any other available remedies at law or equity, including the recovery of
money damages, in respect of the actual or threatened breach of the provisions
of this Section 6.1. Both Parties hereby expressly waive any right to assert
-----------
inadequacy of consideration as a defense to enforcement of the confidentiality
covenants in this Section 6.1 should such enforcement ever become necessary.
-----------
6.2 Transition Services. Seller hereby expressly acknowledges and agrees
-------------------
that, at Buyer's sole option, Seller shall provide services related to the
continued operation of the Business so as to enable the Business to continue to
be operated as it is presently conducted from the Closing Date until the Escrow
Release Date (or such earlier date as may be specified by Buyer, in its sole
discretion). All revenues of the Business during such period shall be for the
account for Buyer. Buyer shall pay Seller a fixed rate in the amount of Four
Hundred Dollars ($400.00) for each day that Seller operates the Business on
Buyer's behalf during such period. Seller shall promptly pay to Buyer all
revenues of the Business net of the fee owed to Seller pursuant to the preceding
sentence during such transition period. Prior to the Escrow Release Date, Seller
shall cooperate with Buyer and make available to Buyer its personnel, technical
support, technical specifications and other data useful for core functionality
or necessary, in each case for the purposes of transitioning the operations of
the Business to Buyer. For a period of up to forty-five (45) days following the
Escrow Release Date, Seller hereby expressly acknowledges and agrees that Seller
shall cause its employees or consultants responsible for or knowledgeable about
the technical operations of the Business to provide Buyer forty (40) additional
hours (but
24
limited to a maximum of ten (10) hours per week) of technical consultation and
support, which services shall be provided at the times reasonably requested by
Buyer in a prompt manner during Seller's regular business hours and as available
at other non-business hours. Of those forty (40) additional hours, ten (10)
hours of support shall be provided at no charge to Buyer, and the remaining
thirty (30) hours of support shall be provided to Buyer at a fixed rate of Two
Hundred Dollars ($200.00) per hour. The Parties shall cooperate and use their
commercially reasonable efforts to cause the Escrow Release Date to occur prior
to February 16, 2002.
6.3 Access to Books and Records. To the extent that the Books and Records
---------------------------
exclude any of Seller's books and records related to the Business that are not
transferred to Buyer because such books and records are not "primarily" related
to the Business (the "Other Records"), each Seller Party acknowledges and agrees
-------------
that it shall, upon reasonable notice, and for a three (3) year period after the
Closing Date, provide Buyer and its Representatives reasonable access at
reasonable times to the Other Records for the purpose of inspecting the same as
may be reasonably requested. Buyer acknowledges and agrees that it shall, upon
reasonable notice, and for a three (3) year period after the Closing Date,
provide Seller and its Representatives reasonable access at reasonable times to
the Other Records for the purpose of inspecting the same as may be reasonably
requested.
6.4 Expenses. All costs and expenses incurred in connection with this
--------
Agreement and the transactions contemplated hereby shall be paid by the Party
incurring such expense. If any Party to this Agreement brings an action to
enforce its rights under this Agreement, the prevailing Party shall be entitled
to recover its costs and expenses, including, without limitation, reasonable
attorneys' fees, incurred in connection with such action, including any appeal
of such action.
6.5 Privacy Policy. With respect to each paid subscriber of the Business,
--------------
Buyer agrees and acknowledges that it shall not change Seller's Privacy Policy
with respect to each user agreement assumed by Buyer during the term of each
such paid subscription period. With respect to any registered users who are not
paid subscribers to the Business, Buyer agrees and acknowledges that it shall
not change Seller's Privacy Policy with respect to each user agreement assumed
by Buyer without first providing such registrants notice of the change as
contemplated by Seller's Privacy Policy. Upon the Closing, the Parties agree and
acknowledge that an email in form attached hereto as Exhibit L shall be sent to
---------
each paid subscriber and registered user of the Business.
6.6 Further Assurances. Upon the terms and subject to the conditions
------------------
contained herein, the Parties agree (a) to use all commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement and the Ancillary Agreements,
(b) to execute any documents, instruments or conveyances of any kind which may
be reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder or thereunder, and (c) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, the Parties agree
to use their respective commercially reasonable efforts (a) to obtain all
necessary waivers, consents and approvals necessary or desirable for the
consummation of the transactions contemplated by this Agreement or the Ancillary
Agreements from other parties to the Contracts, provided that that Buyer shall
25
not be required to make any payments, commence litigation or agree to
modifications of the terms thereof in order to obtain any such waivers, consents
or approvals, and (b) to give all notices to, and make all registrations and
filings with third parties, including; without limitation, submissions of
information requested by governmental authorities.
ARTICLE VII.
CONSENTS TO ASSIGNMENT
7.1 Consents to Assignment. Anything in this Agreement to the contrary
----------------------
notwithstanding, this Agreement shall not constitute an agreement to assign any
of the Assets or any claim or right or any benefit arising thereunder or
resulting therefrom if an attempted assignment thereof, without the consent of a
third party thereto, would constitute a Default thereof or in any way adversely
affect the rights of Buyer thereunder or thereto. If such consent
is not obtained, or if an attempted assignment thereof would be ineffective
or would affect the rights thereunder so that Buyer would not receive all such
rights, Seller will use its commercially reasonable efforts to provide to Buyer
the benefits of such Assets, including, without limitation, enforcement for the
benefit of Buyer of any and all rights of either Seller Party against a third
party thereto arising out of the Default or cancellation by such third party or
otherwise.
ARTICLE VIII.
ACTIONS BY THE PARTIES AFTER THE CLOSING
----------------------------------------
8.1 Survival of Representations, Etc. All of the representations and
--------------------------------
warranties made by each Party in this Agreement shall survive the Closing for a
period of (and claims based upon or arising out of such representations and
warranties may be asserted at any time before the date which shall be) one (1)
year following the Closing Date; provided, however, that the representations and
warranties set forth in Section 4.1 and Section 4.2 shall survive indefinitely.
----------- -----------
Each Party hereto shall be entitled to rely upon the representations and
warranties of the other Party(ies) set forth in this Agreement. The termination
of the representations and warranties provided herein shall not affect the
rights of a Party in respect of any Claim (as defined below) made by such Party
in a writing received by the other Party prior to the expiration of the
applicable survival period provided herein. The applicable date of expiration of
a representation or warranty is referred to as the "Expiration Date."
----------------
8.2 Notice of Damages. A party or parties, seeking indemnity hereunder
-----------------
will give the party(ies) from whom indemnity is sought hereunder notice
(hereinafter, the "Indemnification Notice") of any demands, claims, actions or
----------------------
causes of action (collectively, the "Claims") asserted against the Indemnified
------
Party (as defined below) by no later than the applicable Expiration Date and,
and if raised by such date, such Claim shall survive the Expiration Date until
final resolution thereof. For purposes of this Article VIII, "Indemnified Party"
-------------
shall mean the Buyer Indemnified Parties (or one or more of them) or the Seller
Indemnified Parties (or one or more of them), as applicable, each as defined
below and "Indemnitor" shall mean Buyer or Seller, as applicable.
26
8.3 Agreements to Indemnify.
-----------------------
(a) Subject to the terms and conditions of this Article VIII,
------------
Seller covenants and agrees to indemnify, defend and hold harmless Buyer and its
Affiliates (including any officer, director, stockholder, partner, principal,
member, attorney, employee, agent or Representative of any thereof)
(collectively, the "Buyer Indemnified Parties") from and against all costs,
-------------------------
losses, Liabilities, obligations, damages, lawsuits, deficiencies, claims,
demands and expenses (whether or not arising out of third party Claims),
including without limitation interest, penalties, costs of mitigation,
reasonable attorneys' fees, all reasonable amounts paid in investigation of any
of the foregoing, and all amounts paid in defense or settlement of any of the
foregoing (collectively, "Damages"), incurred by any Buyer Indemnified Parties
-------
arising out of or in connection with or resulting from or incident to (i) any
breach of any representation or warranty made by Seller in this Agreement; (ii)
any breach of any covenant or agreement made by Seller in this Agreement; (iii)
any Excluded Liabilities or Encumbrances (including Permitted Encumbrances)
relating thereto; and (iv) the Equipment Lease, including any Claims resulting
from the lessor under the Equipment Lease resulting from the transfer to or use
by Buyer of any Assets subject to the Equipment Lease. The term "Damages" as
-------
used in this Section 8.3 is not limited to matters asserted by third parties
-----------
against any Indemnified Party, but includes Damages incurred or sustained by any
Indemnified Party in the absence of third party Claims. Payments by any
Indemnified Party of amounts for which such Indemnified Party is indemnified
hereunder shall not be a condition precedent to recovery.
(b) Subject to the terms and conditions of this Article VIII,
-------------
Buyer covenants and agrees to indemnify, defend and hold harmless Seller and its
Affiliates (including any successor or assign, officer, director, stockholder,
partner, principal, member, attorney, employee, agent or Representative thereof)
(collectively, the "Seller Indemnified Parties") from and against all Damages
--------------------------
imposed upon or incurred by such Indemnified Party arising out of or in
connection with or resulting from or incident to (i) any breach of any
representation or warranty made by Buyer in this Agreement; (ii) any breach of
any covenant or agreement made by Buyer in this Agreement; and (iii) any Assumed
Liabilities.
8.4 Conditions of Indemnification of Third Party Claims. The obligations
----------------------------------------------------
and Liabilities of an Indemnitor under Section 8.3 hereof with respect to
-----------
Damages resulting from Claims by Persons not party to this Agreement shall be
subject to the following terms and conditions:
(a) Promptly after delivery of an Indemnification Notice in
respect of a Claim and subject to subsection (c) of this Section 8.4, if the
------------
Indemnitor shall acknowledge in writing to the Indemnified Party that the
Indemnitor shall be obligated for Damages under the terms of its indemnity
hereunder in connection with such lawsuit or action, the Indemnitor may elect,
by written notice to the Indemnified Party, to undertake the defense thereof
with counsel reasonably satisfactory to the Indemnified Party, at the sole cost
and expense of Indemnitor; provided that Indemnitor shall not enter into a
settlement agreement of such Claim without the Indemnified Party's consent,
which shall not be unreasonably withheld. If the Indemnitor chooses to defend
any Claim, the Indemnified Party shall cooperate with all reasonable requests of
the Indemnitor and shall make available to the Indemnitor any books, records or
other documents within its control that are necessary or appropriate for such
defense.
27
(b) In the event that the Indemnitor, within a reasonable time
after receipt of an Indemnification Notice, does not so elect to defend such
Claim or, after undertaking the defense of such Claim, fails to continue the
defense of such Claim, the Indemnified Party will have the right (upon further
notice to the Indemnitor) to undertake the defense, compromise or settlement of
such Claim for the account of the Indemnitor, provided that, the Indemnified
Party shall not enter into a settlement or compromise of such claim without
consent of the Indemnitor, which will not be unreasonably withheld.
(c) Anything in this Section 8.4 to the contrary
-----------
notwithstanding, (i) (i) if the `Indemnified Party believes there is a
reasonable probability that a Claim may materially and adversely affect the
Indemnified Party, the Indemnified Party shall have the right to participate in
the defense, compromise or settlement of such Claim, provided that the
Indemnitor shall not be liable for expenses of separate counsel of the
Indemnified Party engaged for such purpose, unless the named parties to the
action or proceeding regarding such Claim (including any impleaded parties)
include both the Indemnitor and the Indemnified Party and the Indemnified Party
has been advised in writing by counsel that (a) there is a conflict of interest
between the Indemnitor and the Indemnified Party or (b) there are one or more
legal defenses available to such Indemnified Party that are different from or
additional to those available to the Indemnitor and have not been asserted by
counsel selected by the Indemnified Party, in which event the Indemnified Party
shall be entitled, at the Indemnitor's cost, risk and expense, to separate
counsel of its own choosing reasonably satisfactory to the Indemnitor, and (ii)
no Person who has undertaken to defend a Claim under Section 8.4(a) hereof
--------------
shall, without written consent of all Indemnified Parties, settle or compromise
any Claim or consent to entry of any judgment which does not include as an
unconditional term thereof the release by the claimant or the plaintiff of all
Indemnified Parties from all Liability arising from events which allegedly give
rise to such Claim.
8.5 Contents of Indemnification Notice. Each Indemnification Notice given
----------------------------------
pursuant to Section 8.5 will contain the following information:
-----------
(a) that the Indemnified Party has incurred, paid or properly
accrued (in accordance with generally accepted accounting principles) or, in
good faith, believes it will have to incur, pay or accrue, Damages in an
aggregate stated amount arising from such Claim (which amount may be the amount
of damages claimed by a third party in an action brought against any Indemnified
Party based on alleged facts, which if true, would give rise to liability for
Damages to such Indemnified Party under Article VIII); provided that such amount
-------------
may subsequently be increased in one or more subsequent Indemnification Notices
with respect to such Claims if the Indemnified Party has a good faith basis for
believing such increase is appropriate (or if the Damages actually incurred
exceed the amount set forth in the prior Indemnification Notice(s)); and
(b) a brief description, in reasonable detail (to the extent
reasonably available to the Indemnified Party), of the facts, circumstances or
events giving rise to the alleged Damages based on such Indemnified Party's good
faith belief thereof.
8.6 Resolution of Indemnification Notice. Any Indemnification Notice
------------------------------------
given to the Indemnitor will be resolved as follows:
28
(a) Uncontested Claims. In the event that, within thirty (30)
-------------------
calendar days after an Indemnification Notice is received by the Indemnitor, the
Indemnitor does not contest such Indemnification in writing to the Indemnified
Party as provided in Section 8.6(b) (an "Uncontested Claim"), the Indemnitor,
------------- -----------------
subject to the limitations set forth in Section 8.6(b), will be conclusively
--------------
deemed to have consented, to the recovery by the Indemnified Party the full
amount of Damages specified in the Indemnification Notice in accordance with
this Article VIII, and, without further notice, to have stipulated to the entry
-------------
of a final judgment for damages against the Indemnitor for such amount in any
court having jurisdiction over the matter where venue is proper.
(b) Contested Claims. In the event that the Indemnitor gives
----------------
the Indemnified Party written notice contesting all or any portion of an
Indemnification Notice (a "Contested Claim") within the thirty (30)-day period
---------------
specified in Section 8.6(a), then: (i) such Contested Claim will be resolved by
--------------
either (A) a written settlement agreement executed by the Indemnified Party and
the Indemnitor after settlement discussions to take place over a maximum of
twenty (20) days or (B) in the absence of such a written settlement agreement
executed by the Indemnified Party and the Indemnitor within the twenty (20)-day
period, by binding arbitration between the Indemnified Party and the Indemnitor
in accordance with the terms and provisions of Section 8.6(c); provided that if
--------------
such notice denies the validity of only part of such Claim, the Indemnitor will
be conclusively deemed to have consented, to the recovery by the Indemnified
Party the portion of Damages that is uncontested, and, without further notice,
to have stipulated to the entry of a final judgment for such damages against the
Indemnitor for such amount in any court having jurisdiction over the matter
where venue is proper.
(c) Arbitration of Contested Claims. Each of Buyer and Seller
-------------------------------
agrees that any Contested Claim will be submitted to mandatory, final and
binding arbitration in the County of San Francisco, California, in accordance
with the with the Commercial Arbitration Rules of the American Arbitration
Association then in effect. Either the Indemnified Party or the Indemnitor may
commence the arbitration process called for by this Agreement by filing a
written demand for arbitration and giving a copy of such demand to each of the
other parties to this Agreement. The Parties covenant that they will participate
in the arbitration in good faith, and that they will share in its costs in
accordance with subsection (i) below. The provisions of this Section 8.6(c) may
--------------
be enforced by any Federal or State Court in San Francisco, California having
competent jurisdiction over the subject matter of the controversy, and the party
seeking enforcement will be entitled to an award of all costs, fees and
expenses, including reasonable attorneys' fees, to be paid by the party against
whom enforcement is ordered.
(i) Payment of Costs. The costs of arbitration (including
-----------------
the arbitrators' fees) initially will be borne equally (50/50) between the
petitioner(s) and respondent(s), and each Party will bear its own attorneys'
fees. The arbitrator may, at his or her discretion, reallocate some or all of
costs of arbitration (including the arbitrator's fees, but not including
attorneys' fees) of the prevailing party based upon the arbitrator's
determination, and only to the extent that the arbitrator finds, that the
arbitration was commenced in bad faith by the initiating party.
(ii) Burden of Proof. Except as may be otherwise
---------------
expressly provided herein, for any Contested Claim submitted to arbitration, the
burden of proof will be as
29
it would be if the Claim were litigated in a judicial proceeding governed by
California law exclusively.
(iii) Award. Upon the conclusion of any arbitration
-----
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a final written arbitration award setting forth the basis
and reasons for any decision reached (the "Final Award") and will deliver the
Findings to the ----------- Indemnified Party and Indemnitor, together with a
signed copy of the Final Award. The Final Award will constitute a conclusive
determination of all issues in question, binding upon Buyer and Seller, and will
include an affirmative statement to such effect. Judgment upon the award
rendered by the arbitrator may be entered in any court having competent
jurisdiction.
(iv) Timing. Buyer, Seller and the arbitrator will
------
conclude each arbitration pursuant to this Section 8.6 as promptly as possible
-----------
for the Contested Claim being arbitrated.
(v) Terms of Arbitration. The arbitrator chosen in
--------------------
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement.
(vi) Exclusive Remedy. Following the Closing Date, except
----------------
as specifically otherwise provided in this Agreement (including, without
limitation, as provided in Section 6.1(f)), arbitration conducted in accordance
---------------
with this Agreement will be the sole and exclusive means of resolution of any
Contested Claim made pursuant to Article VIII.
------------
8.7 Limitations.
-----------
(a) With respect to any breaches of Seller's representation
and warranty in Section 4.4(b), Seller shall not be liable to Buyer unless (i)
--------------
the Damages relating to any individual claim are greater than Five Thousand
Dollars ($5,000.00) or (ii) the aggregate amount of Damages exceeds an
accumulated total of Twenty-Five Thousand Dollars ($25,000.00) (it being
understood that all individual claims in clause (i) shall be aggregated for
purposes of determining the threshold in this clause (ii)). In addition,
Seller's total liability under Section 8.3(a)(i) shall not exceed Five Hundred
-----------------
Thousand Dollars ($500,000.00); provided, however, that this limitation shall
not apply to any breaches of Seller's representations and warranties set forth
in Section 4.1, Section 4.2, Section 4.4(a) and Section 4.7, in which case such
------------ ------------ -------------- ------------
liability shall not exceed One Million Dollars ($1,000,000.00). The limitations
set forth in the preceding sentence shall also apply to breaches by either
Seller Party of Section 6.6 if and to the extent such breaches are primarily
-----------
attributable to a breach of one or more representations or warranties.
(b) Notwithstanding anything in this Agreement to the
contrary, Buyer's total liability under Section 8.3(b)(i) shall not exceed Five
-----------------
Hundred Thousand Dollars ($500,000.00); provided, however, that this limitation
shall not apply to any breaches of Buyer's representations and warranties set
forth in Section 5.1 and Section 5.2, in which case such liability shall not
----------- ------------
exceed One Million Dollars ($1,000,000.00). The limitations set forth in the
30
preceding sentence shall also apply to breaches by Buyer of Section 6.6 if and
-----------
to the extent such breaches are primarily attributable to a breach of one or
more representations or warranties.
8.8 Remedies Generally. Except with respect to Claims for fraudulent
------------------
misrepresentation or fraudulent conduct, the terms and conditions contained in
this Article VIII shall apply to and be the sole remedy for any claim for money
------------
Damages available to the Buyer Indemnified Parties, on the one hand, or the
Seller Indemnified Parties, on the other hand, for breach of any of the
representations, warranties, covenants and agreements contained herein;
provided, however, that nothing herein shall preclude a Party from exercising
equitable remedies (including in accordance with Section 6.1(f)) (including
--------------
without limitation specific performance and injunctions). Except as specifically
limited in accordance with the immediately preceding sentence, the remedies
provided to any Indemnified Party herein shall be cumulative and shall not
preclude an Indemnified Party from asserting any other rights or seeking any
other remedies against an Indemnitor or his, her or its respective heirs,
successors and assigns, including, without limitation, the right to seek
equitable relief in accordance with Section 6.1(f) above.
--------------
8.9 Taxes.
-----
(a) Buyer and the Seller Parties agree to furnish or cause
to be furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the Assets (including, without
limitation, access to books and records) as is reasonably necessary for the
filing of all Tax Returns, the making of any election relating to Taxes, the
preparation for any audit by any taxing authority, and the prosecution or
defense of any claim, suit or proceeding relating to any Tax. Buyer and the
Seller Parties shall retain all books and records with respect to Taxes
pertaining to the Assets for a period of at least six (6) years following the
Closing Date. At the end of such period, each Party shall provide the other
Party with at least ten (10) days' prior written notice before destroying any
such books and records, during which period the Party receiving such notice can
elect to take possession, at its own expense, of such books and records. Buyer
and the Seller Parties shall cooperate with each other in the conduct of any
audit or other proceeding relating to Taxes involving the Assets.
(b) All excise, sales, use, value added, registration
stamp, recording, documentary, conveyancing, franchise, property, transfer,
gains and similar Taxes, levies, charges and fees (collectively, "Transfer
--------
Taxes") incurred in connection with the transactions contemplated by this
-----
Agreement shall be borne by Seller. Buyer and the Seller Parties shall cooperate
in providing each other with any appropriate resale exemption certifications and
other similar documentation. The Party that is required by applicable law to
make the filings, reports, or returns with respect to any applicable Transfer
Taxes shall do so, and the other Parties shall cooperate with respect thereto as
necessary.
ARTICLE IX.
MISCELLANEOUS
-------------
9.1 Assignment. Neither this Agreement nor any of the rights or
----------
obligations hereunder may be assigned by any Party without the prior written
consent of the other Parties, except in the event of a reorganization, merger,
consolidation, assignment all of a Party's rights to any
31
Affiliate of such Party, or sale of all or substantially all of its assets
related to this Agreement, in which event no consent will be required so long as
the assignee or surviving entity agrees to be bound by the terms of. this
agreement; provided, however, that no such assignment shall relieve the
assigning Party of its obligations hereunder. Any permitted assignee of a Party
shall be subject to the assignment restrictions of this Section 9.1. Subject to
-----------
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the Parties hereto and their respective successors and permitted assigns, and no
other Person shall have any right, benefit or obligation under this Agreement as
a third party beneficiary or otherwise. Any consent required under this Section
-------
9.1 will not be unreasonably withheld. Any assignment in violation of this
---
Section 9.1 will be null and void.
-----------
9.2 Notices. All notices, requests, demands and other communications which
-------
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given when received if personally delivered; the day
after it is sent, if sent for next day delivery to a domestic address by
recognized overnight delivery service (e.g., Federal Express); upon receipt, if
sent by certified or registered mail, return receipt requested; and upon
confirmed transmission if sent by telecopier. In each case notice shall be sent
to:
If to the Seller Parties, addressed to:
▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with an additional copy to:
Fenwick & West LLP
Embarcadero Center West
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer, addressed to:
▇▇▇▇▇▇▇.▇▇▇, LLC
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
32
with an additional copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: W. ▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other place and with such other copies as any Party may designate as
to itself by written notice to the others.
9.3 Choice of Law. This Agreement shall be construed, interpreted and the
-------------
rights of the Parties determined in accordance with the laws of the State of
California (without giving effect to its conflicts of law principles).
9.4 Arbitration; Process. In the event any controversy or claim arising
-------------------
out of or relating to this Agreement or the making, performance or
interpretation thereof shall be settled by arbitration in the County of San
Francisco, California, in accordance with the with the Commercial Arbitration
Rules of the American Arbitration Association then in effect, and judgment on
the arbitration award may be entered in any Federal or State Court in San
Francisco, California having competent jurisdiction over the subject matter of
the controversy. Notwithstanding anything in this Section to the contrary, any
of the Parties hereto may apply to a court of competent jurisdiction for interim
relief or a provisional remedy pending the decision of the arbitrator. The costs
of arbitration (including the arbitrators' fees) initially will be borne equally
(50/50) between the petitioner(s) and respondent(s), and all Parties will bear
their own attorneys fees. The arbitrator may, at his or her discretion,
reallocate some or all of costs of arbitration (including the arbitrator's fees,
but not including attorneys' fees) of the prevailing party based upon the
arbitrator's determination, and only to the extent that the arbitrator finds,
that the arbitration was commenced in bad faith by the initiating party. Process
in any arbitration or proceeding referred to in this Section 9.4 may be served
-----------
on any Party anywhere in the world.
9.5 Entire Agreement, Amendments and Waivers. This Agreement and the
----------------------------------------
Ancillary Agreements, together with all exhibits and schedules hereto and
thereto (including the Disclosure Letter), constitutes the entire agreement
among the Parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the Parties hereto. No
amendment, supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the Party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
9.6 Multiple Counterparts. This Agreement may be executed in one or more
---------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
33
9.7 Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
9.8 Titles; Gender. The titles, captions or headings of the Articles and
--------------
Sections herein, and the use of a particular gender, are for convenience of
reference only and are not intended to be a part of or to affect or restrict the
meaning or interpretation of this Agreement.
9.9 Cumulative Remedies. All rights and remedies of any Party hereto are
-------------------
cumulative of each other and of every other right or remedy such Party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
9.10 Representation by Counsel; Equal Construction. Each Party hereto
---------------------------------------------
represents and agrees with each other Party that it has been represented by or
had the opportunity to be represented by, independent counsel of its own
choosing, and that it has had the full right and opportunity to consult with its
respective attorney(s), that to the extent, if any, that it desired, it availed
itself of this right and opportunity, that it or its authorized officers (as the
case may be) have carefully read and fully understood this Agreement in its
entirety and have had it fully explained to them by such Party's respective
counsel, that each is fully aware of the contents thereof and its meaning,
intent and legal effect, and that it or its authorized officer (as the case may
be) is competent to execute this Agreement and has executed this Agreement free
from coercion, duress or undue influence. The Parties agree that each Party and
such Party's counsel have reviewed and revised this Agreement and the other
Ancillary Agreements and that any rule of construction to the effect that
ambiguities are to be resolved against the drafting Party shall not apply in the
interpretation of this Agreement or any Ancillary Agreement or any amendment
hereto or thereto or exhibits herein or therein.
(Signature page follows)
34
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed or duly executed on their respective behalf by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
BUYER: SELLER:
▇▇▇▇▇▇▇.▇▇▇, LLC, ▇▇▇▇▇▇▇▇.▇▇▇, INC.,
a Delaware limited liability company a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇
------------------------------- --------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇
Title: Manager Title: CEO
SUB:
HIGH SCHOOL ALUMNI, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CFO
S-1