PURCHASE AGREEMENT DATED AS OF DECEMBER 1, 2005 AMONG ANSWERS CORPORATION, as Buyer, BRAINBOOST PARTNERSHIP, as Seller, ASSAF ROZENBLATT EDO SEGAL AND JON MEDVED
DATED
AS OF
DECEMBER
1, 2005
AMONG
ANSWERS
CORPORATION,
as Buyer,
BRAINBOOST
PARTNERSHIP, as Seller,
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇
AND
▇▇▇ ▇▇▇▇▇▇
THIS
PURCHASE AGREEMENT (the
“Agreement”) is made and entered into as of December 1, 2005 among
ANSWERS
CORPORATION,
a
Delaware corporation ("Buyer"), BRAINBOOST Partnership, a New York partnership
(the "Seller") and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇ (collectively,
the
"Partners" and individually, a “Partner”).
WHEREAS,
the
Seller owns all of the issued and outstanding membership interests of Brainboost
Technology, LLC, a Delaware limited liability company (the “Company”) which is
engaged in the business set forth on Schedule A of this Agreement (the
“Business”); and
WHEREAS,
the
Seller desires to sell to the Buyer, and the Buyer desires to purchase from
the
Seller, all of the issued and outstanding membership interests of the
Company;
NOW,
THEREFORE,
in
consideration of the mutual promises hereinafter set forth, and for other
good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE
1.
PURCHASE
AND SALE OF THE INTERESTS
1.1.
PURCHASE AND SALE. In accordance with the provisions of this Agreement, the
Seller hereby sells, transfers, assigns and delivers free from all liens,
charges and Encumbrances to the Buyer, and the Buyer hereby purchases, acquires
and accepts from the Seller, the right, title and interest in and to all
of the
membership interests of the Company (the “Interests”).
1.2.
EXCLUDED LIABILITIES. The Buyer shall not assume or be bound by any obligations
or liabilities of the Seller or any affiliate of the Seller (other than the
Company), of any kind or nature, known, unknown, accrued, absolute, contingent
or otherwise, whether now existing or hereafter arising.
1.3.
PURCHASE PRICE.
(a)
PAYMENT OF CONSIDERATION. The aggregate purchase price payable for the Interests
consists of:
(i)
an
aggregate of $4,000,000 in cash (the "Cash Consideration") less $75,000
previously paid to the Seller and the Partners pursuant to the Letter Agreement
dated September 9, 2005, as amended October 31, 2005 and November 17, 2005,
among the Seller, the Buyer and the owners of the partnership interests of
the
Seller; and
(ii)
Four
Hundred and Thirty Nine Thousand (439,000) shares, being such number of shares
of common stock, $0.001 par value per share, of the Buyer (the “Stock
Consideration”) as have an aggregate value of approximately Four Million Five
Hundred Thousand ($4,500,000) Dollars based upon $10.2575 per share (the
“Closing Price”).
(b)
COMMON STOCK PRICE PROTECTION RIGHT.
|
(i)
|
Notwithstanding
anything contained in this Section 1.3 to the contrary, in the
event that
the average closing price of the Buyer’s common stock on the NASDAQ
National Market (or other principal exchange the Buyer’s common stock is
traded on) for the 20 consecutive trading days (“Average Closing Price”)
immediately preceding the one year anniversary of the Closing Date
(the
“Anniversary”), is less than the Closing Price, the Buyer at its option
shall, with respect only to any of the Stock Consideration held
by the
Seller and/or the Partners on the Anniversary (subject to Section
1.3(b)(ii)), either (A) repurchase in cash such portion of the
Stock
Consideration at the Closing Price or (B) pay the Seller in cash
for each
such share the difference between the Closing Price and the Average
Closing Price immediately preceding the Anniversary. The Buyer
shall have
30 days after the Anniversary (the “Election Period”) in which to notify
the Seller of its election whether to repurchase the relevant portion
of
the Stock Consideration or pay such difference between the Closing
Price
and the Average Closing Price immediately preceding the Anniversary
and to
close the transaction (the “Adjustment Closing”). Notwithstanding the
foregoing, the Seller and its Partners may sell any or all of the
Stock
Consideration during the Election Period. For any of the Stock
Consideration sold during the Election Period and prior to the
Adjustment
Closing at a price higher than the Average Closing Price immediately
preceding the Anniversary but lower than the Closing Price, the
Buyer
shall pay the Seller in cash for each such share sold, the difference
between the Average Closing Price immediately preceding the Anniversary
and such higher price. If at any time after the date hereof, the
number of
outstanding shares of Common Stock of the Buyer is (i) increased
by a
stock dividend payable in shares of Common Stock or by a subdivision
or
split of shares of such class of Common Stock or (ii) decreased
by a
combination or reverse split of shares of Common Stock, then, following
the record date fixed for the determination of holders of Common
Stock
entitled to receive the benefits of such stock dividend, subdivision,
split-up, reverse split-up or combination, the Closing Price shall
be
proportionately reduced, in the case of an increase in shares of
Common
Stock outstanding, or proportionately increased, in the case of
a decrease
in shares of Common Stock outstanding, in both cases by the ratio
which
the total number of shares of Common Stock to be outstanding immediately
after such event bears to the total number of shares of Common
Stock
outstanding immediately prior to such
event.
|
1
|
(ii)
|
If
upon written notice, at any time prior to the Anniversary, (A)
the Buyer
notifies the Seller and the Partners (“Notification Date”) that the
Average Closing Price immediately preceding the Notification Date
is 130%
or more of the Closing Price, (B) the Seller was not restricted
from
selling any of the Stock Consideration by Buyer during the 20 consecutive
trading days immediately preceding the Notification Date (the
“Unrestricted Shares”), (C) the Registration Statement (as defined herein)
is effective as to the Unrestricted Shares and (D) the Seller has
not
received notification from the Company that it is not able to sell
under
the Registration Statement as the result of the existence of a
Potential
Material Event (as defined in the Registration Rights Agreement)
, then
such Unrestricted Shares shall not be subject to the Common Stock
Price
Protection Right referred to in Section 1.3(b)(i). Notwithstanding
the
foregoing, in the event that the Seller and/or the Partners fail
to
materially transfer Intellectual Property Rights (including any
related
know-how) the Buyer will be acquiring pursuant to this Agreement,
the
Common Stock Price Protection Right referred to in Section 1.3(b)(i)
shall
be null and void with respect to any of the Stock Consideration
held,
directly or indirectly, by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇. The failure of ▇▇.
▇▇▇▇▇▇▇▇▇▇
to voluntarily terminate his employment with the Buyer prior to
the
Anniversary (for reasons other than disability or death) or the
failure of
the Buyer to terminate his employment pursuant to Sections 3.4(i),
(ii) or
(iv) of the Employment Agreement (as defined herein)) prior to
the
Anniversary, shall constitute an irrebutable presumption and conclusive
proof that the Intellectual Property Rights (including any related
know-how) have been materially transferred. Termination of the
Employment
Agreement by the Buyer pursuant to Sections 3.4(i), (ii) or (iv)
of the
Employment Agreement prior to the Anniversary or the voluntary
termination
by ▇▇. ▇▇▇▇▇▇▇▇▇▇ of his employment with the Company (for reasons
other
than disability or death) prior to the Anniversary shall constitute
an
irrebutable presumption and conclusive proof that the Intellectual
Property Rights (including any related know-how) have not been
materially
transferred.
|
2
(c)
COMMON STOCK LOCK-UP. The Seller agrees not to sell, assign, transfer, pledge,
hypothecate or otherwise dispose of any of the Stock Consideration until
after
the Anniversary (the “Lock-up Agreement”), except that (i) 1/12 of the Stock
Consideration shall be released from the Lock-up Agreement each 30 day period
after the date hereof for the first 6 months after the date hereof, (ii)
an
additional 25% of the Stock Consideration shall be released from the Lock-up
Agreement 270 days after the date hereof and (iii) the remaining Stock
Consideration shall be released from the Lock-up Agreement 365 days after
the
date hereof. By way of clarification, the release of the Stock Consideration
from the Lock-up Agreement shall be cumulative, such that for example, 6
months
after the date hereof 50% of the Stock Consideration shall be eligible for
sale.
Upon notice to the Seller and the Partners, the Buyer has the right, in its
sole
discretion, to terminate the Lock-up Agreement at any time after the
Registration Statement has been declared effective. Notwithstanding the
foregoing, provided the Common Stock Price Protection remains in effect,
the
Seller agrees not to sell any of the Stock Consideration for the 45 days
prior
to the Anniversary.
(d)
REGISTRATION RIGHTS. The Buyer shall file a registration statement with respect
to the Stock Consideration, in accordance with the registration rights agreement
(the “Registration Rights Agreement”) in the form attached hereto as EXHIBIT
A.
(e)
TAXES. Each party hereto shall pay any and all municipal, county, state and
federal sales and documentary transfer taxes, impositions, liens, leases,
assessments and similar charges if any, incurred by such party in connection
with the transaction contemplated by this Agreement. Each party shall in
a
timely manner sign and swear to any return, certificate, questionnaire or
affidavit as to matters within its knowledge required in connection with
the
payment of any such tax.
(f)
ESCROW AGREEMENT.
(i)
Reference is hereby made to the Escrow Agreement to be dated as of the Closing
Date (as defined herein) among the Seller, the Buyer, each of the Partners
and a
mutually agreeable escrow agent (the “Escrow Agent”) substantially in the form
attached hereto as EXHIBIT B (the “Escrow Agreement”). The Escrow Agreement is
to be entered into for the purposes of securing the Seller’s obligation to
materially transfer the Intellectual Property Rights (and related know-how)
and
the indemnification obligations of the Seller and the Partners under Article
7
as more fully set forth in such Escrow Agreement.
(ii)
At
the Closing Date, Buyer shall cause to be deposited with the Escrow Agent
to be
held by the Escrow Agent and distributed subject to the terms of the Escrow
Agreement all of the Stock Consideration to be paid to the Seller and stock
powers duly endorsed by the Seller in blank for transfer of such shares (the
“Escrowed Shares”) shall be held by the Escrow Agent for the purposes of
securing the Seller’s obligation to materially transfer the Intellectual
Property Rights (and related know-how) and the indemnification obligations
of
the Seller and the Partners under Article 7 as more fully set forth in such
Escrow Agreement.
1.4.
CLOSING. The closing of the transactions contemplated hereunder (the "Closing")
will take place on the date hereof (the "Closing Date"), unless another date
is
agreed to in writing by the parties. The Closing shall take place at the
offices
of Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless another place is agreed to in writing by the parties.
At
the Closing,
|
(a)
|
the
Buyer shall:
|
|
(i)
|
pay
the Cash Consideration to the Seller by wire transfer of immediately
available funds to such bank account as the Seller shall direct
in
writing;
|
|
(ii)
|
deliver
to American Stock Transfer and Trust Company, the escrow agent,
pursuant
to the Escrow Agreement entered into on the date hereof among the
Buyer,
the Seller and each of the Partners, an original certificate representing
all of the Stock Consideration, all validly issued, fully paid,
non-assessable, not subject to any preemptive rights and free and
clear of
all liens, claims or Encumbrances other than those created hereby,
but
subject to a restrictive legend and lockup as set forth in Sections
1.3(c)
and 6.1(b);
|
3
|
(iii)
|
deliver
to the Seller the certificates of the Chief Executive Officer of
the Buyer
described in Sections 5.3(a) and (b)
hereof;
|
|
(iv)
|
deliver
to the Seller, the Registration Rights Agreement, the Escrow Agreement,
and the Employment Agreement, each duly executed by the Buyer;
and
|
|
(v)
|
deliver
to the Seller, such other documents as the Seller or Sellers’ counsel may
reasonably request to demonstrate satisfaction of the conditions
and
compliance with the covenants set forth in this Agreement;
and
|
|
(b)
|
the
Seller shall deliver, or cause to be delivered, to the
Buyer:
|
|
(i)
|
instruments
of transfer, assignment and conveyance in form and substance satisfactory
to the Buyer and its counsel, evidencing the sale of the Interests
to the
Buyer;
|
|
(ii)
|
the
certificates of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, on behalf the Seller described
in
Sections 5.2(a) and (b) hereof;
|
|
(iii)
|
the
Registration Rights Agreement and the Escrow Agreement, duly executed
by
the Seller and each of the Partners; the Letter Representation
(as defined
herein), duly executed by the Seller and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇; and
the
Employment Agreement and Employee Confidentiality Agreement, each
duly
executed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇; and
|
|
(iv)
|
such
other documents as the Buyer or its counsel may reasonably request
to
demonstrate satisfaction of the conditions and compliance with
the
covenants set forth in this
Agreement.
|
1.5.
POST-CLOSING ACCESS.
(a) After
the
Closing, the Buyer shall provide to the Seller and its accountants and
attorneys, for any reasonable legal or business purpose, including defending
third party claims and preparing such tax returns of the Seller and the Company
as may be reasonably required after the Closing, copies of relevant portions
of
the books and records of Seller and the Company delivered to the Buyer under
this Agreement.
(b) After
the
Closing, the Seller shall provide to the Buyer and its accountants and
attorneys, for any reasonable legal or business purpose, including defending
third party claims and preparing such tax returns of Buyer as may be reasonably
required after the Closing, copies of relevant portions of the books and
records
of Buyer delivered to the Seller under this Agreement. In addition, Seller
shall
afford Buyer and its accountants and other representatives reasonable access
to
all of Seller’s books and records as Buyer may reasonably request.
1.6.
FURTHER ASSURANCES. Each party shall, from time to time on being reasonably
required to do so by the other party, now or at any time in the future, do
or
procure the doing of all such acts and/or execute or procure the execution
of
all such documents in a form reasonably satisfactory to the other party as
the
other party may reasonably consider necessary for giving full effect to this
Agreement and securing to the other party the full benefit of the rights,
powers
and remedies conferred upon the other party in this Agreement.
4
ARTICLE
2.
REPRESENTATIONS
AND WARRANTIES
As
used
with respect to the Seller or the Buyer, as the case may be, the term "Material
Adverse Effect" or "Material Adverse Change" means (i) any change,
event,
inaccuracy, violation, circumstance or effect, individually or in the aggregate,
that has or is reasonably likely to have a material adverse effect on the
business, assets (including intangible assets), operations, results of
operations, properties or financial condition of the party and its subsidiaries
taken as a whole, other than changes or effects (A) caused by changes
in
general economic or securities markets conditions, (B) that affect
the
business in which such party and its subsidiaries operate in general and
that do
not have a materially disproportionate effect on such party and its subsidiaries
or (C) resulting from the announcement or proposed consummation of
this
Agreement and the transactions contemplated hereby (including any security
holder class action litigation arising from allegations of a breach of fiduciary
duty relating to this Agreement).
2.1.
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE PARTNERS. Except
as
otherwise set forth in the disclosure schedule delivered by the Seller to
the
Buyer concurrently with the execution of this Agreement (the "Seller Disclosure
Schedule"), the Seller and the Partners jointly and severally represent and
warrant to the Buyer as set forth below. Each exception set forth in the
Seller
Disclosure Schedule, and any other information included in the Seller Disclosure
Schedule, is identified by reference to, or has been grouped under a heading
referring to, a specific individual section or subsection of this Agreement
(which grouping shall be for reference purposes only); any disclosure in
the
Seller Disclosure Schedule shall be deemed to be disclosed for the purpose
of
any section or subsection of this Agreement to which the applicability of
such
disclosure is reasonably apparent from such disclosure. Inclusion of any
information in the Seller Disclosure Schedule shall not be construed as an
admission that such information is material to the Seller or any of its
Subsidiaries or was not entered into in the ordinary course of
business.).
(a)
ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. The Seller (i) is a
partnership duly organized, validly existing and in good standing under the
laws
of the State of New York, (ii) has all requisite power and authority to (A)
own,
lease and operate its properties and assets and to carry on its business
as now
being conducted, (B) to enter into this Agreement, (C) to perform its
obligations hereunder and thereunder, and (D) to consummate the transactions
contemplated hereby and thereby, and (iii) is duly qualified and in good
standing to do business in those jurisdictions listed in Section 2.1(a) of
the
Seller Disclosure Schedule being all of the jurisdictions, in which the failure
to be so qualified and in good standing could reasonably be expected to have
a
Material Adverse Effect on the Seller. The Seller has delivered to the Buyer
true, correct and complete copies of the partnership agreement of the Seller,
as
amended to the date hereof. The Company (i) is a limited liability company
duly
organized, validly existing and in good standing under the laws of the State
of
Delaware, (ii) has all requisite limited liability company power and authority
to own, lease and operate its properties and assets and to carry on its business
as now being conducted, and (iii) is duly qualified and in good standing
to do
business in those jurisdictions listed in Section 2.1(a) of the Seller
Disclosure Schedule being all of the jurisdictions, in which the failure
to be
so qualified and in good standing could reasonably be expected to have a
Material Adverse Effect on the Company. The Seller has delivered to the Buyer
true, correct and complete copies of the operating agreement of the Company,
including all amendments (the “Operating Agreement”) and the Certificate of
Formation of the Company.
(b)
AUTHORITY; NO CONSENTS. The execution, delivery and performance by the Seller
of
this Agreement and the consummation of the transactions contemplated hereby
have
been duly and validly authorized by all necessary action on the part of the
Seller; and this Agreement when executed and delivered by the Seller will
be,
duly and validly executed and delivered by the Seller; and this Agreement
is a
valid and binding obligation of the Seller, enforceable against the Seller
in
accordance with its terms, when executed and delivered by the Seller, will
be a
valid and binding obligation of the Seller, enforceable against the Seller
in
accordance with its terms, except as such enforceability may be limited by
equitable principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium and similar laws relating to or affecting the rights
of
creditors generally. Except as set forth in Section 2.1(b) of the Seller
Disclosure Schedule, neither the execution, delivery and performance of this
Agreement nor the consummation by the Seller of the transactions contemplated
hereby, or thereby nor compliance by the Seller with any provision hereof
or
thereof will (A) conflict with, (B) result in any violation of, (C) cause
default under (with or without due notice, lapse of time or both), (D) give
rise
to any right of termination, amendment, cancellation or acceleration of any
obligation contained in or the loss of any material benefit under or (E)
result
in the creation of any Encumbrance on or against any assets, rights or property
of the Seller or the Company under any term, condition or provision of (x)
any
instrument, contract or agreement to which the Seller or the Company is a
party,
or by which the Seller or the Company or any of their respective properties,
assets or rights may be bound, (y) any law, statute, rule, regulation, order,
writ, injunction, decree, permit, concession, license or franchise of any
Governmental Authority applicable to the Seller or the Company or any of
their
respective properties, assets or rights or (z) the Seller's partnership
agreement or the Operating Agreement except with respect to clauses (x) or
(y)
above, any such conflict, violation, default, right of termination, amendment,
cancellation or acceleration or Encumbrance which could not reasonably be
expected to have a Material Adverse Effect. Except as set forth on Section
2.1(b) of the Seller Disclosure Schedule, no permit, authorization, consent
or
approval of or by, or any notification of or filing with, any Governmental
Authority or other person is required in connection with the execution, delivery
and performance by the Seller of this Agreement or the consummation by the
Seller of the transactions contemplated hereby or thereby, except such consents,
waivers, authorizations, filings, approvals and registrations which if not
obtained or made are not reasonably likely to result in a Material Adverse
Effect or materially impair the ability of the Seller and each of the Partners
to consummate the transactions contemplated by this Agreement. As used in
this
Agreement, the term "Encumbrances" shall mean and include security interests,
mortgages, liens, pledges, guarantees, charges, easements, reservations,
restrictions, clouds, equities, rights of way, options, rights of first refusal
and all other encumbrances, whether or not relating to the extension of credit
or the borrowing of money; the term “Encumbrances” shall not mean or include any
claim or liability for any infringement or other violation of any third-party
Intellectual Property Right.
5
(c)
CAPITALIZATION. The
only
equity interests in the Company are the Interests. The Interests are valid
membership interests entitled to the rights, powers and privileges set forth
in
the Operating Agreement. Except for the obligations set forth in this Agreement,
no party has any right or obligation to purchase or sell, or any option or
similar right to purchase, any membership interest in the Company. The Interests
are freely transferable to the Buyer pursuant to the terms of this Agreement.
The Company has not issued any securities other than the Interests. The
Interests were not issued in violation of any federal or state securities
law or
any other legal requirement. Other than this Agreement, there are no outstanding
subscriptions, rights, options, warrants, conversion rights, agreements or
other
claims for the purchase or acquisition from the Company or the Seller of
any
membership interests of the Company or any other securities of the Company
or
obligating the Company to issue, repurchase or otherwise acquire any membership
interests of the Company or any other securities of the Company or any
securities convertible into, exercisable or exchangeable for, or otherwise
entitling the holder to acquire any membership interests of the Company or
any
other securities of the Company.
(d)
RIGHT
TO TRANSFER. The Seller has good and valid legal title to the Interests and
full
beneficial ownership thereof and full legal right and power to transfer and
deliver to the Buyer such Interests in the manner provided in this Agreement,
and upon the purchase of such Interests pursuant to the terms of this Agreement,
the Buyer will receive good and valid legal title thereto and full beneficial
ownership thereof, free and clear of all liens, restrictions, Encumbrances
and
rights of others of any kind other than those created or permitted by the
Buyer.
(e)
OTHER
EQUITY INTERESTS. The Company does not have, and has not had at any time,
any
direct or indirect equity interest in any other corporation, partnership,
joint
venture, limited liability company or other entity or any commitment to acquire
any such equity interest.
(f)
FINANCIAL INFORMATION.
(i)
Attached as Section 2.1(f) to the Seller Disclosure Schedule are the following
financial statements (collectively, the "Seller Financial Statements"):
(1)
the
unaudited balance sheet of the Seller as at August 31, 2005 (the “Seller Interim
Balance Sheet”) and 2004 and the related statements of operations, cash flow and
partners' equity for the nine-month periods then ended, prepared by the Seller
(the "Seller Interim Financial Statements"); and
6
(2)
the
unaudited balance sheets of the Seller as at December 31, 2004 and the interim
balance sheet as of August 31, 2005, the related unaudited statements of
operations, cash flow and partners' equity for the periods then ended, prepared
by the Seller (the “Seller Unaudited Financial Statements”).
(ii)
The
Seller Financial Statements (A) are in accordance with the books and records
of
the Seller and (B) fairly present the financial condition of the Seller as
at
the respective dates indicated and the results of operations of the Seller
for
the respective periods indicated.
(iii)
The
Seller maintains accurate books and records reflecting its assets and
liabilities.
(iv)
The
books of account, membership interest books and other records of the Company,
all of which have been made available to the Buyer by the Seller, are true,
correct and complete.
(g)
ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in Section 2.1(g)
of the
Seller Disclosure Schedule, at December 31, 2004, with respect to the Seller's
Balance Sheet as of such date (the "Current Year-End Balance Sheet"; and
the
date thereof being the "Current Year-End Balance Sheet Date"), and at August
31,
2005, with respect to the Seller Interim Balance Sheet, respectively, (i)
the
Seller had no liability or obligation of any nature (whether known or unknown,
matured or unmatured, fixed or contingent, secured or unsecured, accrued,
absolute or otherwise ("Liability")) required to be set forth on the Current
Year-End Balance Sheet or the Seller Interim Balance Sheet, respectively,
in
order for the Current Year-End Balance Sheet and the Seller Interim Balance
Sheet, respectively, to fairly present the financial condition of the Seller
at
the respective dates thereof, which was not provided for or disclosed thereon,
and (ii) all liability reserves established by the Seller and set forth thereon
were adequate for all such Liabilities at the respective dates thereof. There
were no material loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975 ("FAS No. 5")) which were not adequately provided
for on the Current Year-End Balance Sheet and the Seller Interim Balance
Sheet,
respectively, as required by FAS No. 5. As of the date hereof, the Company
does
not have any Liabilities, except for liability for taxes on revenue received
since its inception on November 23, 2005, which revenue does not exceed $5,000
and will be tendered to Buyer upon receipt.
(h)
ABSENCE OF CHANGES. Except as set forth in Section 2.1(h) of the Seller
Disclosure Schedule, since the Seller Current Year-End Balance Sheet Date,
the
Seller has been operated in the ordinary course, and there has not been:
(i)
any
Material Adverse Change in the business, assets, properties, Liabilities,
operations, results of operations, condition (financial or otherwise), prospects
or affairs of the Seller
(ii)
any
damage, destruction or loss, whether or not covered by insurance, having
or
which are reasonably likely to result in a Material Adverse Effect;
(iii)
any
Liability in excess of $15,000 created, assumed, guaranteed or incurred,
or any
material transaction, contract or commitment entered into, by the Seller,
other
than the license, sale or transfer of the Seller's products to customers
in the
ordinary course of business;
(iv)
any
payment, discharge or satisfaction of any material Encumbrance or Liability
by
the Seller or any cancellation by the Seller of any material debts or claims
or
any amendment, termination or waiver of any rights of material value to the
Seller;
(v)
any
declaration, setting aside or payment of any dividend or other distribution
of
any assets of any kind whatsoever with respect to any partnership interests
of
the Seller, or any direct or indirect redemption, purchase or other acquisition
of any such partnership interests of the Seller;
(vi)
any
issuance by the Seller of any shares of its partnership interests or any
debt
security or any Equity Rights;
7
(vii)
any
license, sale, transfer, pledge, mortgage or other disposition of any material
tangible or intangible asset (including any Intellectual Property Rights)
of the
Seller, other than in the ordinary course of business;
(viii)
any termination of, or written indication of an intention to terminate or
not
renew, any material contract, license, commitment or other agreement between
the
Seller and any other person;
(ix)
any
material write-down or write-up of the value of any asset of the Seller,
or any
material write-off of any accounts receivable or notes receivable of the
Seller
or any portion thereof;
(x)
any
increase in or modification of compensation payable or to become payable
to any
officer employee consultant or agent of the Seller, or the entering into
of any
employment contract with any officer or employee;
(xi)
any
increase in or modification or acceleration of any benefits payable or to
become
payable under any bonus, pension, severance, insurance or other benefit plan,
payment or arrangement made to, for or with any officer, employee, consultant
or
agent of the Seller;
(xii)
any
loan, advance or capital contribution to or investment in any person or the
engagement in any transaction with any employee, officer or securityholder
of
the Seller, other than advances to employees in the ordinary course of business
for travel and similar business expenses
(xiii)
any change in the accounting methods or practices followed by the Seller
or any
change in depreciation or amortization policies or rates theretofore adopted;
(xiv)
any
change in the manner in which the Seller extends discounts or credit to
customers or otherwise deals with customers;
(xvi)
any
amendments or changes in the Seller's partnership agreement dated effective
as
of January 8, 2004 and previously provided to the Buyer;
(xvii)
any labor dispute or any union organizing campaign;
(xviii)
the commencement of any litigation or other action by or against the Seller
or
any threat of commencement of any litigation or other action against the
Seller;
or
(xix)
any
agreement, understanding, authorization or proposal, whether in writing or
otherwise, for the Seller to take any of the actions specified in items (i)
through (xviii) above.
(i)
TAX
MATTERS. Except as set forth in Section 2.1(i) of the Seller Disclosure
Schedule, the Seller and each other entity (if any) included in any consolidated
or combined tax return in which the Seller has been included (i) have filed
and
will file, in a timely and proper manner, consistent with applicable laws,
all
Federal, state and local tax returns and tax reports required to be filed
by
them through the Closing Date (the "Seller Returns") with the appropriate
governmental agencies in all jurisdictions in which Seller Returns are required
to be filed and have timely paid or will timely pay all amounts shown thereon
to
be due (“Taxes”); (ii) have paid and shall timely pay all Taxes of the Seller
required to have been paid by the Seller on or before the Closing Date; and
(iii) currently are not the beneficiary of an extension of time within which
to
file any Tax return or Tax report. Except as set forth in Section 2.1(i)
of the
Seller Disclosure Schedule, all such Seller Returns were and will be correct
and
complete at the time of filing. Except as set forth in Section 2.1(i) of
the
Seller Disclosure Schedule, all Taxes of the Seller attributable to all taxable
periods ending on or before the Closing Date, to the extent not required
to have
been previously paid, have been adequately provided for on the Current Year-End
Balance Sheet and the Seller Interim Balance Sheet (as appropriate) and the
Seller will not accrue a Tax Liability from the date of the Current Year-End
Balance Sheet up to and including the Closing Date, other than a Tax Liability
accrued in the ordinary course of business or for amounts received from Buyer.
The Seller has not been notified by the Internal Revenue Service or any state,
local or foreign taxing authority that any issues have been raised (and are
currently pending) in connection with any Seller Return, and no waivers of
statutes of limitations have been given with respect to the Seller that are
still in effect. Except as contested in good faith and disclosed in Section
3.1(i) of the Seller Disclosure Schedule, any deficiencies asserted or
assessments (including interest and penalties) made as a result of any
examination by the Internal Revenue Service or by any other taxing authorities
of any Seller Return have been fully paid or are adequately provided for
on the
Current Year-End Balance Sheet and the Seller Interim Balance Sheet (as
appropriate) and the Seller has received no notification that any proposed
additional Taxes have been asserted or proposed. The Seller has not made
an
election to be treated as a "consenting corporation" under Section 341(f)
of the
Code. The Seller has not agreed to, nor is it required to, make any adjustment
under Section 481(a) of the Code by reason of a change in accounting method
or
otherwise. The Seller will not incur a Tax Liability resulting from the Seller
ceasing to be a member of a consolidated or combined group that had previously
filed consolidated, combined or unitary Tax returns. The Seller is not a
party
to any agreement or contract with any "disqualified individual" (as defined
in
Section 280G(c) of the Code) that, by reason of the transactions contemplated
hereby and occurring on or prior to the Closing Date or taking into account
any
other agreements or contracts currently in effect between the Seller and
such
disqualified individual, will result in the disallowance of any deduction
for
any payment under such agreement or contract as an "excess parachute payment"
(as defined in Section 280G(b)(1) of the Code). The Seller is not, and has
not
been during the applicable period specified in Section 897(c)(1)(A)(ii) of
the
Code, a United States real property holding corporation within the meaning
of
Section 897(c) of the Code. Each Partner is a citizen of the United States.
8
As
used
in this Agreement, "Tax" means any of the Taxes and "Taxes" means, with respect
to any entity, (A) all income taxes (including any tax on or based upon net
income, gross income, income as specially defined, earnings, profits or selected
items of income, earnings or profits) and all gross receipts, sales, use,
ad
valorem, transfer, franchise, license, withholding, payroll, employment,
excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties and other taxes, fees,
assessments or charges of any kind whatsoever, together with all interest
and
penalties, additions to tax and other additional amounts imposed by any taxing
authority (domestic or foreign) on such entity and (B) any liability for
the
payment of any amount of the type described in the immediately preceding
clause
(A) as a result of being a "transferee" (within the meaning of Section 6901
of
the Code or any other applicable law) of another entity or a member of an
affiliated or combined group.
(j)
TITLE
TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS. The Company’s assets are
attached hereto on Schedule B to the Representation Letter. Except as set
forth
in Section 2.1(j) of the Seller Disclosure Schedule,
the
Company has good and valid title to all of its assets, properties and interests
in properties, real, personal or mixed. Except as set forth in Section 2.1(j)
of
the Seller Disclosure Schedule, the assets, properties and interests in
properties of the Company includes all assets, properties and interests in
properties (real, personal and mixed, tangible and intangible) and all rights,
leases, licenses and other agreements necessary to enable the Buyer to carry
on
the Business as presently conducted by the Company.
(k)
REAL
PROPERTY-OWNED OR LEASED. Except as set forth in Section 2.1(k) of the Seller
Disclosure Schedule, the Company does not currently own or lease, nor has
it or
any of its predecessors ever owned or leased, any real property.
(l)
INTELLECTUAL PROPERTY.
(i)
Except as disclosed in Section 2.1(l)(i) of the Seller Disclosure Schedule,
the
Company has good and valid title to, and owns free and clear of all
Encumbrances, has the exclusive right to use, sell, transfer, market,
manufacture, license (or sublicense), deliver and dispose of, and has the
right
to bring actions for the infringement of, all Intellectual Property Rights
set
forth in Schedule B of the Representation Letter (collectively, the " Company
Rights").
9
(ii)
Except as disclosed in Section 2.1(l)(ii) of the Seller Disclosure Schedule,
the
execution, delivery and performance of this Agreement and the consummation
of
the transactions contemplated hereby will not breach, violate or conflict
with
any instrument or agreement governing any Company Rights, will not cause
the
forfeiture or termination or give rise to a right of forfeiture or termination
of any Company Right or in any way impair the right of the Company or the
Buyer
to use, sell, market, manufacture, license (or sublicense), deliver, dispose
of,
or to bring any action for the infringement of, any Company Right or portion
thereof.
(iii)
The
Seller and the Company are not aware of and have not entered into any agreements
to pay royalties, honoraria, fees or other payments to any person by reason
of
the ownership, use, license (or sublicense), delivery, sale, or disposition
of
the Company Rights, other than sales commissions paid in the ordinary course
of
business.
(iv)
Except as disclosed in Section 2.1(l)(iv) of the Seller Disclosure Schedule,
neither the manufacture, marketing, license (or sublicense), sale, delivery,
or
use of any product or service currently licensed, sold, manufactured, marketed,
delivered or used by the Company or currently under development by the Company,
violates any license (or sublicense) or agreement of the Company with any
third
party or, to the Knowledge of the Seller and each of the Partners, infringes
any
common law or statutory rights of any other party, including, without
limitation, rights relating to defamation, contractual rights, Intellectual
Property Rights and rights of privacy or publicity; nor, to the Knowledge
of the
Seller and each of the Partners, is any third party infringing upon, or
violating any license (or sublicense), delivery or agreement with the Company
relating to any Company Right; and there is no pending or, to the Knowledge
of
the Seller and each of the Partners, threatened claim or litigation contesting
the validity, ownership or right to use, manufacture, market, sell, license
(or
sublicense), deliver or dispose of any Company Right, nor has the Seller
or the
Company received any notice asserting that any Company Right or the proposed
use, manufacture, marketing, sale, license (or sublicense), delivery or
disposition thereof conflicts or will conflict with the rights of any other
party.
(v)
Other
than professionals bound by ethical obligations of their profession not to
disclose such information, all current and past officers, employees and
consultants of or to the Seller and the Company, as the case may be, have
executed and delivered to and in favor of the Seller and the Company, as
the
case may be, an agreement regarding the protection of confidential and
proprietary information of the Seller and the Company and the assignment
variously to the Seller and the Company, as the case may be, of all Intellectual
Property Rights arising from the services performed for the Seller and the
Company, as the case may be, by such persons (collectively, the "Confidentiality
Agreements", the form of which is attached to Section 2.1(l)(v) of the Seller
Disclosure Schedule). The Company and the Seller each has taken and will
continue through the Closing Date to take all commercially reasonable steps
to
safeguard and maintain the secrecy and confidentiality of, and its proprietary
rights in, all Company Rights.
(vi)
Except as set forth in Section 2.1(l)(vi) of the Seller Disclosure Schedule,
all
works embodying Company Rights that were created, prepared or delivered by
consultants, independent contractors or other third parties for the Seller
(including any materials and elements created, prepared or delivered by such
parties in connection therewith) (A) are and shall constitute "works made
for
hire" specially ordered or commissioned by the Seller within the meaning
of
United States' copyright law, or (B) all right, title and interest therein
(including any materials and elements created, prepared or delivered by such
parties in connection therewith) have been assigned to the Seller or the
Company.
(vii)
Except as disclosed in Section 2.1(l)(vii) of the Seller Disclosure Schedule,
no
person has any marketing rights to any of the Intellectual Property Rights
of
the Company (excluding Intellectual Property Rights licensed to the Company
by
third parties).
(viii)
Section 2.1(l)(viii) of the Seller Disclosure Schedule contains a true and
complete list of all (A) of the Company's patents, patent applications,
trademarks, trademark applications, trade names, service marks, service ▇▇▇▇
applications, copyrights, copyright registrations and copyright applications
and
Internet domain names and applications therefore and (B) other filings and
formal actions made or taken pursuant to Federal, state, local and foreign
laws
by the Company to perfect or protect its interest therein.
10
(ix)
Section 2.1(l)(ix) of the Seller Disclosure Schedule contains a true and
complete list of all options, licenses or other agreements of any kind by
which
Intellectual Property Rights have been granted to the Company from, or granted
by the Company to, any other person, except with respect to generally available
“off-the-shelf” software.
(x)
The
operation of the functional elements identified as (i) “Question to Expected
Answer Translation” (to the extent such element concerns an algorithm learning
process), (ii) “Theme Extraction”, (iii) “Named Entity Expansion” and (iv)
“AnswerRank” (to the extent such element concerns an algorithm learning process)
in the Master Flow Diagram which represents proprietary technology of Seller
embodied in the Brainboost Answers Engine (“BAE”) and which was previously
disclosed to Buyer, were not, prior to June 1, 2005: (i) implemented within
the
BAE on ▇▇▇.▇▇▇▇▇▇▇▇▇▇.▇▇▇<▇▇▇▇://▇▇▇.▇▇▇▇▇▇▇▇▇▇.▇▇▇/>
, or (ii) publicly disclosed by Seller.
(xi)
As
used herein, the term "Intellectual Property Rights" shall mean all industrial
and intellectual property rights, including, without limitation, patents,
patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service ▇▇▇▇ applications, copyrights, copyright registrations,
copyright applications, franchises, licenses, databases, "URL's" and Internet
domain names and applications therefore (and all interest therein), computer
programs and other computer software, user interfaces, know-how, trade secrets,
customer lists, proprietary technology, processes and formulae, source code,
object code, algorithms, architecture, structure, display screens, layouts,
development tools, instructions, templates, marketing materials, inventions,
trade dress, logos and designs and all documentation and media constituting,
describing or relating to the foregoing.
(m)
AGREEMENTS, ETC. Section 2.1(m) of the Seller Disclosure Schedule sets forth
a
true and complete list of all written or oral contracts, agreements and other
instruments not made in the ordinary course of business to which the Company
is
a party, or made in the ordinary course of business and referred to in clauses
(i) through (xvi) of this Section 2.1(m). Except as set forth in Section
2.1(m),
the Company is not a party to any agreement, arrangement or understanding,
whether written or oral, formal or informal, relating to:
(i)
agreements for the development, modification or enhancement of the Company
Rights;
(ii)
any
material distributorship, dealer, sales, advertising, agency, manufacturer's
representative, franchise or similar contract or relationship or any other
contract relating to the payment of a commission or other fee calculated
as or
by reference to a percentage of the profits or revenues of the Company or
of any
business segment of the Company;
(iii)
any
joint venture, partnership or other agreement or arrangement for the sharing
of
profits;
(iv)
any
collective bargaining contract or other contract with or commitment to any
labor
union;
(v)
the
future purchase, sale or license of products, material, supplies, equipment
or
services requiring payments to or from the Company in an amount in excess
of
$15,000 per annum, which agreement, arrangement or understanding is not
terminable on thirty (30) days' notice without cost or other liability at
or at
any time after the Closing Date, or in which the Company has granted or received
manufacturing rights, most favored nations pricing provisions or exclusive
marketing or other rights relating to any product, group of products, services,
technology, assets or territory;
(vi)
any
license (whether as licensor or licensee), or sublicense, royalty, permit,
or
franchise agreement, including, without limitation, any agreement pursuant
to
which the Company licenses any Company Rights to any third party (other than
ordinary course licenses to end-users);
11
(vii)
the
employment of any officer, employee, consultant or agent or any other type
of
contract, commitment or understanding with any officer, employee, consultant
or
agent which (except as otherwise generally provided by applicable law) is
not
immediately terminable without cost or other liability at or at any time
after
the Closing Date;
(viii)
profit-sharing, bonus, stock option, stock appreciation right, pension,
retirement, disability, stock purchase, hospitalization, insurance or similar
plan or agreement, formal or informal, providing benefits to any current
or
former officer, employee, agent or consultant;
(ix)
indenture, mortgage, promissory note, loan agreement, guarantee or other
agreement or commitment for the borrowing of money, for a line of credit
or for
a leasing transaction of a type required to be capitalized in accordance
with
Statement of Financial Accounting Standards No. 13 of the Financial Accounting
Standards Board;
(x)
any
agreement, instrument or other arrangement granting or permitting any
Encumbrance on any of the properties, assets or rights of the Company;
(xi)
any
lease for real property (whether as lessor or lessee) or any other lease
or
agreement under which the Company is lessee of or holds or operates any items
of
tangible personal property owned by any third party;
(xii)
contract or commitment for charitable contributions;
(xiii)
contract or commitment for capital expenditures individually or in the aggregate
in excess of $15,000;
(xiv)
any
agreement or contract with a "disqualified individual" (as defined in Section
280G(c) of the Code), which could result in a disallowance of the deduction
for
any "excess parachute payment" (as defined in Section 280G(b)(i) of the Code)
under Section 280G of the Code as a result of the transactions contemplated
hereby;
(xv)
agreement or arrangement for the sale of any assets, properties or rights
having
a value in excess of $15,000;
(xvi)
agreement which restricts the Company from engaging in any aspect of its
business or competing in any line of business in any geographic area; or
(xvii)
any other agreement, contract or commitment which is material to the Company.
For
purposes of this Section 2.1(m), the term "material" shall mean and refer
to
those agreements, contracts, instruments or arrangements (as applicable)
that
involve payments or expenditures by or to the Company, or otherwise have
an
aggregate value, of at least $15,000. The Seller or the Company has furnished
to
the Buyer true and complete copies of all such agreements or electronic
standardized versions of such agreements, listed in Section 2.1(m) of the
Seller
Disclosure Schedule and (x) each such agreement (A) is the legal, valid and
binding obligation of the Company and, to the best knowledge of the Seller
and
each of the Partners, the legal, valid and binding obligation of each other
party thereto, in each case enforceable in accordance with its terms, except
as
such enforceability may be limited by equitable principles and by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium and similar
laws
relating to or affecting the rights of creditors generally (B) is to the
best
knowledge of Seller and each of the Partners in full force and effect and
(y) to
the Knowledge of the Seller and each of the Partners, except as set forth
in
Section 2.1(m) of the Seller Disclosure Schedule, the other party or parties
thereto is or are not in material default thereunder.
12
(n)
NO
DEFAULTS. Each of the Seller and the Company has in all material respects
performed all the obligations required to be performed by it to date and
is not
in default or alleged to be in default under (i) its partnership agreement
with
respect to the Seller and its Operating Agreement with respect to the Company
or
(ii) any material agreement, lease, license, contract, commitment, instrument
or
obligation to which the Seller or the Company is a party or by which any
of its
properties, assets or rights are or may be bound or affected and, to the
best
knowledge of the Seller and each of the Partners, there exists no event,
condition or occurrence which, with or without due notice or lapse of time,
or
both, would constitute such a default by it of any of the foregoing.
(o)
LITIGATION, ETC. There are no (i) actions, suits, claims, investigations
or
legal or administrative or arbitration proceedings pending, or to the best
knowledge of the Seller and each of the Partners, threatened against either
the
Seller or the Company, whether at law or in equity, or before or by any Federal,
state, local, municipal, foreign or other governmental court, department,
commission, board, bureau, agency or instrumentality ("Governmental Authority"),
(ii) judgments, decrees, injunctions or orders of any Governmental Authority
or
arbitrator against either the Seller or the Company or (iii) disputes with
customers or vendors. There are no Actions pending or, to the Knowledge of
the
Seller and each of the Partners, threatened against either the Company or
the
Seller, with respect to (A) the current employment by, or association with,
the
Seller or the Company of any of the present officers or employees of, or
consultants to, either the Seller or the Company (collectively, the "Designated
Persons") or (B) the use, in connection with any business presently conducted
by
the Seller, the Company or the Buyer, of any information, techniques or
processes presently utilized by the Seller, the Company, the Buyer or any
of the
Designated Persons, that the Seller, the Company, the Buyer or any of the
Designated Persons are or would be prohibited from using as the result of
a
violation or breach of, or conflict with any agreements or arrangements between
any Designated Person and any other person, or any legal considerations
applicable to unfair competition, trade secrets or confidential or proprietary
information. The Seller has delivered to the Buyer all material documents
and
correspondence relating to such matters referred to in Section 2.1(o) of
the
Seller Disclosure Schedule.
(p)
ACCOUNTS AND NOTES RECEIVABLE. All the accounts receivable and notes receivable
owing to the Company as of the date hereof constitute, and as of the Closing
Date will constitute, valid and enforceable claims arising from bona fide
transactions in the ordinary course of business, and there are no known or
asserted claims, refusals to pay or other rights of set-off against any thereof.
There is (i) no account debtor or note debtor delinquent in its payment by
more
than sixty (60) days, (ii) no account debtor or note debtor that has refused
(or, to the best knowledge of the Seller and each of the Partners, threatened
to
refuse) to pay its obligations for any reason, (iii) to the best knowledge
of
the Seller and each of the Partners, no account debtor or note debtor that
is
insolvent or bankrupt and (iv) no account receivable or note receivable which
is
pledged to any third party by the Seller.
(q)
COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS. Each of the Seller and the Company
has
complied and is presently in compliance in all material respects with all
Federal, state, local or foreign laws, ordinances, regulations and orders
applicable to it or its business (including, without limitation, laws,
ordinances, regulations and orders applicable to labor, employment and
employment practices, terms and conditions of employment and wages and hours).
Except as set forth in Section 2.1(q) of the Seller Disclosure Schedule,
(i)
each of the Seller and the Company has all Federal, state, local and foreign
governmental authorizations, consents, approvals, licenses and permits necessary
in the conduct of its business as presently conducted , (ii) such
authorizations, consents, approvals, licenses and permits are in full force
and
effect, (iii) no violations are or have been recorded in respect of any thereof
and no proceeding is pending or, to the best knowledge of the Seller and
each of
the Partners, threatened to revoke or limit any thereof. Section 2.1(q) of
the
Seller Disclosure Schedule contains a true and complete list of all such
governmental licenses, authorizations, consents, approvals, permits, orders,
decrees and other compliance agreements under which each of the Seller and
the
Company is operating, each of the Seller and the Company is not in default
or
alleged to be in default under any thereof and the Seller has furnished to
the
Buyer true and complete copies thereof. Except as set forth in Section 2.1(q)
of
the Seller Disclosure Schedule, none of such authorizations, consents,
approvals, licenses and permits shall be affected in any material respect
by the
transactions contemplated hereby.
(r)
ENVIRONMENTAL MATTERS. Each of the Seller and the Company is in compliance
with
all federal, state, local and foreign laws, common law, rules, codes,
administrative orders and regulations relating to pollution or protection
of
human health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including without limitation, laws, common law, rules, codes, administrative
orders and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws") and, to the best knowledge of the Seller and each of
the
Partners, there are no events or circumstances that could form the basis
of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting either
the
Seller or the Company relating to any Hazardous Materials or the violation
of
any Environmental Law.
13
(s)
LABOR
RELATIONS; EMPLOYEES.
(i)
Section 2.1(s) of the Seller Disclosure Schedule sets forth the name, title,
department, start date, salary for 2004 and 2005, option grant, any special
benefits and termination dates, if applicable, for each employee of the Seller
since its inception. Neither the Seller nor the Company employs any employees.
Except as set forth in Section 2.1(s) of the Seller Disclosure Schedule,
(A) the
Seller is not delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them to date or amounts required to be reimbursed to such
employees, (B) upon termination of the employment of any such employees,
neither
the Seller, nor the Buyer will by reason of anything done prior to the Closing
be liable to any of such employees for so-called "severance pay" or any other
payments, (C) there is no unfair labor practice complaint against the Seller
pending before the National Labor Relations Board or any comparable Governmental
Authority, (D) there is no labor strike, dispute, slowdown or stoppage actually
pending or, to the best knowledge of the Seller and each of the Partners,
threatened against or involving the Seller, (E) no labor union has taken
any
action with respect to organizing the employees of the Seller, (F) neither
any
grievance nor any arbitration proceeding arising out of or under collective
bargaining agreements is pending and no claim therefor has been asserted
against
the Seller and (G) no employee has informed any officer of the Seller that
such
employee will terminate his or her employment or engagement with the Seller
or
the Buyer and the Seller has no reason to believe that the key employees
that
accept employment with the Buyer will not remain employees of the Buyer for
at
least ninety (90) days after the Closing. No employee of the Seller is in
violation of any term of any employment contract, patent disclosure agreement
or
any other contract or agreement relating to the relationship of such employee
with the Seller or any other party because of the nature of the business
conducted or proposed to be conducted by the Seller or the execution and
delivery of the Confidentiality Agreement by such employee.
(t)
EMPLOYEE BENEFIT PLANS AND CONTRACTS.
(i)
Section 2.1(t) of the Seller Disclosure Schedule identifies each "employee
benefit plan", as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all other written or formal
plans or agreements involving direct or indirect compensation (including
any
employment agreements entered into between the Seller and any Employee, but
excluding workers' compensation, unemployment compensation, other
government-mandated programs and the Seller's salary and wage arrangements)
currently or previously maintained, contributed to or entered into by the
Seller
or any ERISA Affiliate thereof for the benefit of any Employee or former
Employee under which the Seller or any ERISA Affiliate thereof has any present
or future material obligation or liability (the "Employee Plans"). Neither
the
Company nor the Seller has nay Employee Plans. The Seller has made available
to
the Buyer true and complete copies of all Employee Plans (and, if applicable,
related trust agreements) and all amendments thereto and written interpretations
thereof. For purposes of the preceding sentence, "ERISA Affiliate" shall
mean
any entity which is a member of (A) a "controlled group of corporations",
as
defined in Section 414(b) of the Code, (B) a group of entities under "common
control", as defined in Section 414(c) of the Code or (C) an "affiliated
service
group", as defined in Section 414(m) of the Code or treasury regulations
promulgated under Section 414(o) of the Code, any of which includes the Seller.
Any Employee Plans that individually or collectively would constitute an
"employee pension benefit plan", as defined in Section 3(2) of ERISA, but
which
are not Multiemployer Plans (collectively, the "Pension Plans"), are identified
as such in the Seller Disclosure Schedule. For purposes of Section 2.1(t),
"Employee" means any common law employee, consultant or officer of the Seller.
14
(ii)
Each
Employee Plan that is intended to be qualified under Section 401(a) of the
Code
is so qualified and has been so qualified during the period from its adoption
to
the date hereof, and each trust forming a part thereof is exempt from tax
pursuant to Section 501(a) of the Code. The Seller has made available to
the
Buyer copies of the most recently filed Internal Revenue Service Form 5500,
the
most recent annual or periodic accounting of plan assets and provided the
Buyer
with copies of the most recent Internal Revenue Service determination letters
with respect to any such Employee Plan. Each Employee Plan has been maintained
substantially in compliance with its terms and with the requirements prescribed
by any and all statutes, orders, rules and regulations, including, without
limitation, ERISA and the Code, which are applicable to such Employee Plans.
(iii)
Except as set forth in Section 2.1(t) of the Seller Disclosure Schedule,
no
Employee Plan constitutes or since the enactment of ERISA has constituted
a
"multiemployer plan", as defined in Section 3(37) of ERISA (a "Multiemployer
Plan"), (B) a plan covered under Title IV of ERISA, or (C) a "multiple employer
plan," as defined in Section 413(c) of the Code. The Seller has not within
the
past five years incurred any material liability under Title IV of ERISA arising
in connection with the termination of any Pension Plan or the complete or
partial withdrawal from any Multiemployer Plan. Except as disclosed in Schedule
2.1 (t) of the Seller Disclosure Schedule, if a "complete withdrawal" by
the
Seller were to occur as of the Closing with respect to all Multiemployer
Plans,
the Seller would not incur any withdrawal liability under Title IV of ERISA.
(iv)
Section 2.1(t) of the Seller Disclosure Schedule lists each employment,
severance or other similar contract, arrangement or policy and each plan
or
arrangement (written or oral) providing for insurance coverage (including
any
self-insured arrangements), workers' benefits, vacation benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, options or other
forms
of incentive compensation or post-retirement insurance, compensation or benefits
which (A) is not an Employee Plan, (B) is entered into, maintained or
contributed to, as the case may be, by the Seller on behalf of any Employee,
(C)
covers any Employee or former Employee, and (D) under which the Seller or
any
ERISA Affiliate has any present or future obligation or liability (excluding
workers' compensation, unemployment compensation or other government-mandated
programs and the Seller's salary and wage arrangements). Such contracts,
plans
and arrangements as are described above, are hereinafter referred to
collectively as the "Benefit Arrangements". Each Benefit Arrangement has
been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all material laws, statutes, rules, regulations, orders
and judgments which are applicable to such Benefit Arrangements.
(v)
Each
Employee Plan which is a "group health plan" (as defined in Section 5000
of the
Code) has to the extent applicable been maintained in compliance with Section
4980B of the Code and Title I, Subtitle B, Part 6 of ERISA, and no tax payable
on account of Section 4980B of the Code has been or is expected to be incurred
with respect to any current or former Employees of the Seller.
(vi)
All
contributions due and payable on or before the Closing Date in respect of
any
Employee Plan or Benefit Arrangement have been made in full and proper form,
or
adequate accruals have been provided for in the Seller Unaudited Financial
Statements for all other contributions or amounts in respect of the Employee
Plans or Benefit Arrangements for periods ending on the Closing Date.
(vii)
Except as required by Section 4980B of the Code and Section 601 of ERISA,
no
Employee Plan or Benefit Arrangement currently or previously maintained by
the
Seller or its ERISA Affiliates provides any post-retirement health or life
insurance benefits, and neither the Seller nor its ERISA Affiliates maintains
any obligations to provide any post-retirement benefits in the future.
15
(viii)
The consummation of the transactions contemplated by this Agreement will
not (A)
entitle any individual to severance or separation pay, or (B) except as set
forth in the Section 2.1(q)(viii) of the Seller Disclosure Schedule, accelerate
the time of payment or vesting, or increase the amount, of compensation due
to
any individual. No payment made or contemplated under any Employee Plan or
Benefit Arrangement constitutes an "excess parachute payment" within the
meaning
of Section 280G of the Code.
(ix)
Except as set forth in Section 2.1(t)(ix) of the Seller Disclosure Schedule,
with respect to each Employee Plan and Benefit Arrangement: (A) no breach
of
fiduciary duty has occurred with respect to which the Seller or any such
plan or
arrangement may be liable or otherwise materially damaged; (B) no disputes
are
pending or, to the best knowledge of the Seller and each of the Partners,
threatened; (C) no prohibited transaction has occurred with respect to which
the
Seller or any such plan or arrangement may be liable or otherwise materially
damaged; (D) the Seller has expressly reserved in itself the right to amend,
modify or terminate any such written plan or arrangement, or any portion
of it;
and (E) the Seller has satisfied any bond coverage requirement of ERISA.
(u)
CERTAIN AGREEMENTS. Neither the execution and delivery of this Agreement
nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute, bonus or otherwise) becoming due to any officer or employee
of
the Seller from the Seller, under any Employee Plan, Benefit Arrangement
or
otherwise, (ii) with respect to any current or former officer or key employee
of
the Seller materially increase any benefits otherwise payable under any Employee
Plan or the Benefit Arrangement or (iii) result in the acceleration of the
time
of payment or vesting of any such benefits.
(v)
INSURANCE. Section 2.1(v) of the Seller Disclosure Schedule contains a list
of
all policies of liability, theft, fidelity, fire, product liability, errors
and
omissions, workmen's compensation, indemnification of officers and other
forms
of insurance held by each of the Seller and the Company (specifying the insurer,
the amount of coverage, the type of insurance, the policy number and any
pending
claims thereunder) and a history of all claims made by each of the Seller
and
the Company thereunder and the status thereof. All such policies of insurance
are in full force and effect and all premiums with respect thereto are currently
paid. Each of the Seller and the Company has not, since its inception, been
denied or had revoked or rescinded any policy of insurance.
(w)
BANK
ACCOUNTS; POWERS OF ATTORNEY. Section 2.1(w) of the Seller Disclosure Schedule
sets forth a true and complete list of (i) all bank accounts and safe deposit
boxes of the Company and all persons who are signatories thereunder or who
have
access thereto and (ii) the names of all persons, firms, associations,
corporations or business organizations holding general or special powers
of
attorney from the Company and a summary of the terms thereof.
(x)
BROKERS. Except as disclosed in Section 2.1(x) of the Seller Disclosure
Schedule, neither the Seller nor the Company has, or has had any of its
officers, securityholders or employees, employ any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
(y)
RELATED TRANSACTIONS. Except as disclosed in Section 2.1(y) of the Seller
Disclosure Schedule, no current or former officer or securityholder of either
the Seller or the Company that is an affiliate of the Seller or the Company
or
any associate (as defined in the rules promulgated under the Exchange Act)
thereof, is now, or has been since the inception of the Seller, a party to
any
transaction with either the Seller or the Company (including, but not limited
to, any contract, agreement or other arrangement providing for the furnishing
of
services by, or rental of real or personal property from, or borrowing money
from, or otherwise requiring payments to, any such officer or affiliated
security holder of either the Seller or the Company or associate thereof),
or
the direct or indirect owner of an interest in any corporation, firm,
association or business organization which is a present or potential competitor,
supplier or customer of either the Seller or the Company (other than
non-affiliated holdings in publicly-held companies), nor does any such person
receive income from any source other than the Seller or the Company which
relates to the business of, or should properly accrue to, the Seller or the
Company, as the case may be.
16
(z)
MINUTE BOOKS. There are no minute books for either Seller or the Company.
All
actions have been taken by the unanimous agreement of the Partners, copies
of
all written agreements of the Partners have been provided to Buyer.
(aa)
OTHER NAMES. Except as set forth on Section 2.1(aa) of the Seller Disclosure
Schedule, the business conducted by the Seller prior to the date hereof has
not
been conducted under any corporate, trade or fictitious name.
(bb)
VOTE
REQUIRED. The affirmative vote of all of the outstanding partnership interests
of the Seller approving this Agreement is the only vote of the holders of
any
class or series of the Seller's equity interests necessary to approve this
Agreement and the transactions contemplated hereby and thereby.
(cc)
SELLER EXPENSES. The Schedule of Expenses (as defined herein) being delivered
at
the Closing sets forth a true, correct and complete schedule of all Seller
Expenses that have been incurred or paid by or on behalf of the Seller (whether
or not theretofore billed) through the Closing Date and there are no Seller
Expenses other than as set forth therein.
(dd)
OFFICERS. Set forth on Section 2.1(dd) of the Seller Disclosure Schedule
is a
list of the current officers of the Seller.
(ee)
DISCLOSURE. Neither Section 2.1 of this Agreement (including the Seller
Disclosure Schedule) nor any document, written information, statement, financial
statement, certificate or exhibit furnished or to be furnished to the Buyer
by
or on behalf of the Seller, the Company or any securityholder pursuant hereto
or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact or omits or will omit to
state a
material fact necessary in order to make the statements or facts contained
herein and therein not misleading in light of the circumstances under which
they
were made. There is no fact internal to the business of either the Seller
or the
Company known to the Seller or each of the Partners that has not been disclosed
to the Buyer in writing that (i) is reasonably likely to result in a Material
Adverse Effect or (ii) adversely affects or could adversely affect the ability
of the Seller or any of the Partners to perform its or their respective
obligations under this Agreement or the Related Agreements.
(ff)
KNOWLEDGE DEFINITION. As used in this Article 2, the term "Knowledge" shall
mean
and include the actual knowledge (with no duty or obligation to investigate
a
matter) of those persons set forth in Section 2.1(dd) of the Seller Disclosure
Schedule.
(gg)
NO
DISCRIMINATION. Neither the Seller nor the Company has not and does not in
any
manner or form discriminate, ▇▇▇▇▇▇ discrimination or permit discrimination
against any person, whether as to race, sex, religion, or other legally
protected classes of persons.
2.2.
REPRESENTATIONS AND WARRANTIES OF EACH OF THE PARTNERS. Each of the Partners
represent and warrant to the Buyer with respect to himself or herself as
follows:
(a)
AUTHORITY - GENERAL. Such Partner has full and absolute power and authority
to
enter into this Agreement and each Related Agreement to which such Partner
is a
party and this Agreement and each Related Agreement to which such Partner
is a
party have been duly executed and delivered by such Partner, and are valid
and
binding obligations of such Partner, enforceable against such Partner in
accordance with their respective terms, except as such enforceability may
be
limited by equitable principles and by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium and similar laws relating to or
affecting the rights of creditors generally. Neither the execution, delivery
and
performance of this Agreement and each Related Agreement to which such Partner
is a party, nor the consummation of the transactions contemplated hereby
or
thereby nor compliance by such Partner with any of the provisions hereof
or
thereof will (i) (A) conflict with, (B) result in any violations of, (C)
cause a
default under (with or without due notice, lapse of time or both), (D) give
rise
to any right of termination, amendment, cancellation or acceleration of any
obligation contained in or the loss of any material benefit under or (E)
result
in the creation of any Encumbrance upon or against any assets, rights or
property of the Seller (or against any partnership interest of the Seller),
under any term, condition or provision of (x) any agreement or instrument
to
which such Partner is a party, or by which such Partner or any of his or
her
properties, assets or rights may be bound, or (y) any law, statute, rule,
regulation, order, writ, injunction, decree, permit, concession, license
or
franchise of any Governmental Authority applicable to such Partner or any
of his
or her properties, assets or rights, which conflict, breach, default or
violation or other event would prevent the consummation of the transactions
contemplated by this Agreement or any Related Agreement to which such Partner
is
a party. Except as set forth in Section 2.2(a) of the Seller Disclosure Schedule
(which, if so disclosed shall have been effectively made or obtained (as
the
case may be) on or prior to the Closing, unless otherwise waived by the Buyer)
no permit, authorization, consent or approval of or by, or any notification
of
or filing with, any Governmental Authority or other person is required in
connection with the execution, delivery and performance by such Partner of
this
Agreement and each Related Agreement to which such Partner is a party or
the
consummation by such Partner of the transactions contemplated hereby or thereby.
17
(b)
BROKERS. Except as disclosed on Section 2.2(b) of the Seller Disclosure
Schedule, such Partner has not employed any broker or finder or incurred
any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
(c)
REPRESENTATION BY LEGAL COUNSEL. Such Partner has been advised by legal counsel
in connection with the negotiation, execution and delivery of this Agreement
and
the Related Agreements and the performance of the transactions contemplated
hereby and thereby.
2.3.
REPRESENTATIONS AND WARRANTIES OF THE BUYER.
Except
(i) as otherwise disclosed in the Buyer’s SEC Documents (as defined below)
filed with the SEC prior to the date hereof (other than any risk factors
or
forward looking statements contained therein, which shall not modify, qualify
or
otherwise affect the representations and warranties set forth in this
Section 2.3) or (ii) as otherwise set forth in the disclosure
schedule
delivered by the Buyer to the Seller and the Partners concurrently with the
execution of this Agreement (the "Buyer Disclosure Schedule"), the Buyer
represents and warrants to the Seller and each of the Partners as set forth
below. Each exception set forth in the Buyer Disclosure Schedule, and any
other
information included in the Buyer Disclosure Schedule, is identified by
reference to, or has been grouped under a heading referring to, a specific
individual section or subsection of this Agreement and shall be deemed to
be
disclosed solely for the purpose of such section or subsection of this Agreement
and not to another section or subsection of this Agreement; provided that
any
disclosure in the Buyer’s SEC Documents or the Buyer Disclosure Schedule shall
also be deemed to be disclosed for the purpose of any section or subsection
of
this Agreement to which the applicability of such disclosure is reasonably
apparent from such disclosure. Inclusion of any information in the Buyer
Disclosure Schedule shall not be construed as an admission that such information
is material to the Buyer or any of its respective Subsidiaries or was not
entered into in the ordinary course of business.
(a)
ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. The Buyer (i) is a
corporation duly organized, validly existing and in good standing under the
laws
of the State of Delaware, and (ii) has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry
on
its business as now being conducted, to enter into this Agreement and each
of
the Related Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby
and thereby. The Buyer has delivered to the Seller true and complete copies
of
the Charter and by-laws of the Buyer. Except as disclosed in Section 2.3(a)
of
the Buyer Disclosure Schedule, the Buyer is qualified to do business and
is in
good standing in each in jurisdiction in which the nature of its business
requires it to be so qualified except where the failure to so qualify would
not
have a Material Adverse Effect.
(b)
CAPITAL STOCK. The Buyer’s Quarterly Report on Form 10-QSB for the three months
ended September 30, 2005 filed with the SEC (the "Form 10-QSB") sets forth
a
true and complete description of the authorized and outstanding shares of
capital stock of the Buyer as of November 1, 2005. Since November 1, 2005,
except as disclosed in Section 2.3(b) of the Buyer Disclosure Schedule, the
Buyer has not (a) increased the number of shares of the Buyer’s capital stock
reserved under its stock option plans, (b) issued in excess of 50,000 shares
of
capital stock or (c) made any commitments which in the aggregate would involve
the issuance in excess of 50,000 shares of capital stock. The Buyer has duly
authorized the Stock Consideration and, when issued in accordance with the
terms
of Article 1, the Stock Consideration will be validly issued, fully paid
and
nonassessable and free of Encumbrances and preemptive rights. All outstanding
shares of capital stock of the Buyer are validly issued, fully paid and
non-assessable and not subject to preemptive rights and Encumbrances created
by
the Buyer. All such shares of capital stock have been issued in compliance
with
and pursuant to an exemption from all applicable federal and state securities
or
"blue sky" laws.
18
(c)
AUTHORITY. The execution, delivery and performance by the Buyer of this
Agreement and each of the Related Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been
duly
authorized by all necessary corporate action on the part of the Buyer. This
Agreement and each of the Related Agreements to which the Buyer is a party
when
executed and delivered by Buyer will be duly and validly executed and delivered
by the Buyer and are valid and binding obligations of the Buyer, enforceable
against the Buyer in accordance with their respective terms, except as such
enforceability may be limited by equitable principles and by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium and similar
laws
relating to or affecting the rights of creditors, generally. Neither the
execution, delivery and performance by the Buyer of this Agreement and the
Related Agreements to which the Buyer is a party, nor the consummation of
the
transactions contemplated hereby or thereby nor compliance by the Buyer with
any
provision hereof or thereof, will in any respect (A) conflict with, (B) result
in any violation of, (C) cause a default under (with or without due notice,
lapse of time or both), (D) give rise to any right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of
any
material benefit under, (E) result in the creation of any Encumbrance on
or
against any assets, rights or property of the Buyer, as the case may be,
under
any term, condition or provision of (x) any instrument, contract or agreement
to
which the Buyer is a party, or by which the Buyer or any of its properties,
assets or rights may be bound, (y) any law, statute, rule, regulation, order,
writ, injunction, decree, permit, concession, license or franchise of any
Governmental Authority applicable to the Buyer or any of its properties,
assets
or rights or (z) the Buyer’s Charter or by-laws, as amended through the date
hereof, except with respect to clauses (x) or (y) above, any such conflict,
violation, default, right of termination, amendment, cancellation or
acceleration or Encumbrance which could not reasonably be expected to have
a
Material Adverse Effect. Except as set forth on Section 2.3(c) of the Buyer’s
Disclosure Schedule, no permit, authorization, consent or approval of or
by, or
any notification of or filing with, any Governmental Authority or other person
is required in connection with the execution, delivery and performance by
the
Buyer of this Agreement or the Related Agreements to which they are a party
or
the consummation of the transactions contemplated hereby or thereby, other
than
(i) the filing with the SEC of such reports and information under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated by the SEC thereunder, as may be required in connection
with this Agreement and the transactions contemplated hereby, (ii) the filing
of
such documents with, and the obtaining of such orders from, various state
securities and blue-sky authorities as are required in connection with the
transactions contemplated hereby, (iii) the filing with the NASDAQ National
Market of such applications and documents as may be required in connection
with
the transactions contemplated hereby and (iv) such other consents, waivers,
authorizations, filings, approvals and registrations which if not obtained
or
made are not reasonably likely to result in a Material Adverse Effect or
would
materially impair the ability of the Buyer to consummate the transactions
contemplated by this Agreement, (each of the filings set forth in clauses
(i),
(ii), (iii) and (iv) have been or will be made by the Buyer when due).
(e)
SEC
DOCUMENTS.
(i)
The
Buyer has furnished or made available to the Seller and the Partners a correct
and complete copy of the Form 10-KSB and Form 10-KSB/A for the year ended
December 31, 2004 and each other report, schedule, registration statement
and
definitive proxy statement filed by the Buyer with the SEC on or after the
date
of filing of the Form 10-KSB/A for the year ended December 31, 2004 which
are
all the documents that the Buyer was required to file (or otherwise did file)
with the SEC in accordance with Sections 13, 14 and 15(d) of the Exchange
Act on
or after the date of filing with the SEC of the Form 10-KSB/A for the year
ended
December 31, 2004 (collectively,
the "Buyer’s SEC Documents"). As of their respective filing dates, the Buyer's
SEC Documents complied when filed in all material respects with the then
applicable requirements of the Securities Act or the Exchange Act, as the
case
may be, and the rules and regulations promulgated by the SEC thereunder.
(ii)
As
of their respective filing dates, none of the Buyer's SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(iii)
The
financial statements (including the notes thereto) of the Buyer included
in the
Form 10-KSB/A for the year ended December 31, 2004 complied as to form in
all
material respects with the then applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP during the periods involved (except as may have been
indicated in the notes thereto), are in accordance with the books and records
of
the Buyer, and fairly present the financial position of the Buyer as at the
dates thereof and the results of its operations, stockholders' equity and
cash
flows for the period then ended.
19
(iv)
Since the date of filing of the Form 10-QSB, except as disclosed in Section
2.3(e)(iv) of the Buyer Disclosure Schedule or disclosed in the Buyer’s SEC
Documents, no event has occurred as of the date hereof which is required
to be
reported by the Buyer by filing a Current Report on Form 8-K under the Exchange
Act.
(v)
The
Buyer’s disclosure controls and procedures (as defined in sections 13a-15(e) and
15d-15(e) of the Exchange Act) effectively enable the Buyer to comply with,
and
the appropriate officers of the Buyer to make all certifications required
under,
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the regulations promulgated
thereunder.
(f)
ABSENCE OF CHANGES. From September 30, 2005 through the date hereof, there
has
not been any material adverse change in the business, properties, operations
or
condition (financial or otherwise) of the Buyer (a “Buyer Material Adverse
Change”); provided, however, that a change in the market price or trading volume
of the common stock of Buyer shall not be deemed, in and of itself, to
constitute a Buyer Material Adverse Change.
(g)
BROKERS. Neither the Buyer, nor any of its officers, directors or employees
have
employed any broker or finder or incurred any liability for any brokerage
fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
ARTICLE
3.
RELATED
AGREEMENTS
3.1.
RELATED AGREEMENTS. At the Closing, the following agreements (such agreements
being herein collectively referred to as the "Related Agreements") will be
executed and delivered by the respective parties thereto:
(a)
REGISTRATION RIGHTS AGREEMENT. The Buyer, Seller and the Partners shall enter
into a registration rights agreement, in the form attached hereto as EXHIBIT
A,
pursuant to which the Buyer shall file a registration statement with respect
to
the Stock Consideration.
(b)
ESCROW AGREEMENT. The Buyer, Seller and the Partners shall enter into an
Escrow
Agreement substantially in the form of EXHIBIT B, pursuant to which the Buyer
shall deposit with the Escrow Agent (as defined in the Escrow Agreement)
all of
the Stock Consideration.
(c)
EMPLOYMENT AGREEMENT. The Buyer shall enter into an Employment Agreement
with
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, substantially in the form attached hereto as EXHIBIT C
(the
"Employment Agreement"), pursuant to which, among other things, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
will become an employee of the Buyer, at the discretion of the Buyer.
(d)
EMPLOYEE CONFIDENTIALITY AND ASSIGNMENT OF INVENTIONS AGREEMENT. ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ shall enter into a non-competition, confidentiality and assignment
of
inventions agreement with the Buyer, effective as of the Closing Date, in
the
form of EXHIBIT D attached hereto (the "Employee Confidentiality Agreement"),
providing for, among other things, restrictions upon such person from competing
with the business of the Buyer, non-disclosure of confidential information
and
ownership of proprietary information and rights.
(e)
REPRESENTATION LETTER. The Seller and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ shall provide the
Representation Letter (the “Representation Letter”) substantially in the form
attached hereto as EXHIBIT D.
20
ARTICLE
4.
CONDUCT
AND TRANSACTIONS PRIOR
TO
CLOSING DATE; ADDITIONAL AGREEMENTS
4.1.
LEGAL CONDITIONS TO TRANSACTIONS. Each party hereto shall use its reasonable
best efforts to comply promptly with all legal requirements that may be imposed
on such party with respect to the transactions contemplated hereunder and
will
take all action necessary to cooperate with and furnish information to the
other
party in connection with any such requirements imposed upon such other party
in
connection with the transactions contemplated hereunder. Each party hereto
shall
take all reasonable actions necessary (a) to obtain (and will take all
reasonable actions necessary to promptly cooperate with the other party in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Authority, or other third party, required to be obtained
or
made by such party (or by the other parties) in connection with the taking
of
any action contemplated by this Agreement, (b) to defend, lift, rescind or
mitigate the effect of any lawsuit, order, injunction or other action adversely
affecting the ability of such party to consummate the transactions contemplated
hereby and (c) to fulfill all conditions precedent applicable to such party
pursuant to this Agreement.
4.2.
CONSENTS. Each party hereto shall use its best efforts, and the other parties
shall cooperate with such efforts, to obtain any consents and approvals of,
or
effect the notification of or filing with, each person or authority, whether
private or governmental, whose consent or approval is required in order to
permit the consummation of the transactions contemplated hereby and to enable
the Buyer to conduct and operate the business of the Seller as presently
conducted and as proposed to be conducted.
4.3.
EFFORTS TO CONSUMMATE. Subject to the terms and conditions herein provided,
the
parties hereto shall use their reasonable best efforts to do or cause to
be done
all such acts and things as may be necessary, proper or advisable, consistent
with all applicable laws and regulations, to consummate and make effective
the
transactions contemplated hereby and to satisfy or cause to be satisfied
all
conditions precedent that are set forth in Article 6 as soon as reasonably
practicable.
4.4.
NOTICE OF BREACH. Within a reasonable time period following such event, each
party hereto shall notify the other parties in writing upon the occurrence
of
any act, event, circumstance or thing that would cause or result in a
representation or warranty hereunder being untrue at the Closing, the failure
of
a closing condition to be achieved at the Closing, or any other breach or
violation hereof or default hereunder.
4.5.
SUPPORT OF TRANSACTION BY OFFICERS, DIRECTORS AND PARTNERS. Each party hereto
shall use its reasonable best efforts to cause all of its officers, directors
and partners, as the case may be, to support the transactions contemplated
hereunder and to take all actions and execute all documents reasonably requested
by the other parties hereto to carry out the intent of the parties with respect
to the transactions contemplated hereby.
4.6.
SUPPORT OF TRANSACTION BY PARTNERS. Each of the Partners shall use its
reasonable efforts to cause the Seller to duly observe and perform its
obligations under this Agreement.
4.7 TERMINATION
OF AGREEMENTS. Prior to or upon the Closing Date, all of the hosting and
ad
revenue agreements set forth on Section 4.7 of the Sellers Disclosure Schedule
shall have been terminated, except that Seller agrees that the hosting agreement
between Seller and ServerBeach will be maintained for three (3) business
days
after the Closing Date.
4.8 QUALIFICATION
TO DO BUSINESS IN NEW YORK. The Seller and the Partners agree that subsequent
to
the Closing, they will be responsible (including payment of expenses and
fees
related thereto) for filing with the State of New York an Application for
Authority to do Business in the State of New York on behalf of the
Company.
21
ARTICLE
5.
CONDITIONS
PRECEDENT
5.1.
CONDITIONS TO EACH PARTY'S OBLIGATIONS. The obligations of each party hereto
to
perform this Agreement is subject to the satisfaction of the following
conditions unless waived (to the extent such conditions can be waived) by
all
parties hereto:
(a)
APPROVALS. The Buyer and the Seller and their respective subsidiaries and
each
of the Partners shall have timely obtained from each Governmental Authority
all
approvals, waivers and consents, if any, necessary for consummation of the
transactions contemplated hereby, including such approvals, waivers and consents
as may be required under the Securities Act and under state securities laws.
(b)
LEGAL
ACTION. No temporary restraining order, preliminary injunction or permanent
injunction or other order preventing the consummation of the transactions
contemplated hereunder shall have been issued by any Federal or state court
or
other Governmental Authority and remain in effect.
(c)
LEGISLATION. No Federal, state, local or foreign statute, rule or regulation
shall have been enacted which prohibits, restricts or delays the consummation
of
the transactions contemplated by this Agreement or any of the conditions
to the
consummation of such transactions.
5.2.
CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the Buyer to perform
this Agreement and the Related Agreements to which it is a party is subject
to
the satisfaction of the following conditions unless waived (to the extent
such
conditions can be waived) by the Buyer at the Closing:
(a)
REPRESENTATIONS AND WARRANTIES OF THE SELLER. The representations and warranties
of the Seller and each of the Partners set forth in Sections 2.1 and 2.2
hereof
shall be true and correct as of the Closing Date (except to the extent any
such
representation or warranty expressly speaks as of an earlier date, which
representations and warranties shall be true and correct as of such date
in the
same manner as specified above), and the Buyer shall have received a certificate
signed on behalf of the Seller by one of the Partners of the Seller to such
effect.
(b)
PERFORMANCE OF OBLIGATIONS OF THE SELLER AND EACH OF THE PARTNERS. The Seller
and each of the Partners shall have performed in all material respects the
obligations required to be performed by each of them under this Agreement
prior
to or as of the Closing Date, and the Buyer shall have received a certificate
signed by one of the General Partners of the Seller to that effect.
(c)
CONSENTS AND APPROVALS. Duly executed copies of all consents and approvals
contemplated by this Agreement or the Seller Disclosure Schedule, in form
and
substance satisfactory to the Buyer, shall have been delivered by the Seller.
(d)
GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. Copies of all consents,
authorizations, orders or approvals of, and filings or registrations with,
any
Governmental Authority which are required for or in connection with the
execution and delivery by the Seller and each of the Partners of this Agreement
and the Related Agreements and the consummation by the Seller and each of
the
Partners of the transactions contemplated hereby, shall have been delivered
by
the Seller.
(e)
RELATED AGREEMENTS. Each of the Related Agreements shall be in full force
and
effect as of the Closing Date and become effective in accordance with the
respective terms thereof and the actions required to be taken thereunder
by the
parties thereto immediately prior to the Closing Date shall have been taken,
and
each person or entity who or which is required or contemplated by the parties
hereto to be a party to any Related Agreement who or which did not theretofore
enter into such Related Agreement shall execute and deliver such Related
Agreement.
22
5.3.
CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of the Seller and
each
of the Partners to perform this Agreement and the Related Agreements to which
they are a party are subject to the satisfaction of the following conditions
unless waived (to the extent such conditions can be waived) by the Seller
at the
Closing:
(a)
REPRESENTATIONS AND WARRANTIES OF THE BUYER. The representations and warranties
of the Buyer set forth in Section 2.3 hereof shall be true and correct as
of the
Closing Date as though made on and as of the Closing Date (except to the
extent
any such representation or warranty expressly speaks as of an earlier date,
which representations and warranties shall be true and correct as of such
date
in the same manner as specified above), and the Seller shall have received
a
certificate signed on behalf of the Buyer by the Chief Executive Officer
of the
Buyer to such effect.
(b)
PERFORMANCE OF OBLIGATIONS OF THE BUYER. The Buyer shall have performed in
all
material respects its obligations required to be performed by it under this
Agreement prior to or as of the Closing Date and the Seller shall have received
a certificate signed by the Chief Executive Officer of the Buyer to that
effect.
(c)
GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. Copies of all consents,
authorizations, orders or approvals of, and filings or registrations with,
any
Governmental Authority which are required for or in connection with the
execution and delivery by the Buyer of this Agreement and the Related Agreements
and the consummation by the Buyer of the transactions contemplated hereby
or
thereby, shall have been delivered by the Buyer.
(d)
RELATED AGREEMENTS. Each of the Related Agreements shall be in full force
and
effect as of the Closing Date and become effective in accordance with the
respective terms thereof and the actions required to be taken thereunder
by the
parties thereto immediately prior to the Closing Date shall have been taken,
and
each person or entity who or which is required or contemplated by the parties
hereto to be a party to any Related Agreement who or which did not theretofore
enter into such Related Agreement shall execute and deliver such Related
Agreement.
(e)
PURCHASE PRICE. The delivery of the Cash Consideration and the Stock
Consideration deliverable at the Closing Date in the manner and otherwise
in
accordance with Article 1 hereof, shall have been made by the Buyer.
ARTICLE
6.
ADDITIONAL
AGREEMENTS
6.1.
RESTRICTIONS ON TRANSFER.
(a)
The
shares of the Buyer’s common stock to be issued to the Seller at the Closing
Date and any shares of capital stock or other securities received with respect
thereto (collectively, the "Restricted Securities") shall not be sold,
transferred, assigned, pledged, encumbered or otherwise disposed of (each,
a
"Transfer") except upon the conditions specified in this Section 6.1, which
conditions are intended to insure compliance with the provisions of the
Securities Act. The Seller shall observe and comply with the Securities Act
and
the rules and regulations promulgated by the SEC thereunder as now in effect
or
hereafter enacted or promulgated, and as from time to time amended, in
connection with any Transfer of Restricted Securities beneficially owned
by the
Seller.
(b)
Each
certificate representing the Restricted Securities issued to the Seller and
each
certificate for such securities issued to subsequent transferees of any such
certificate shall (unless otherwise permitted by the provisions of Sections
6.1(c) and 6.1(d) hereof) be stamped or otherwise imprinted with a legend
in
substantially the following form:
23
"THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY
APPLICABLE STATE SECURITIES OR "BLUE-SKY" LAWS. THESE SECURITIES MAY NOT
BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF
IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. ADDITIONALLY, THE
TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN SECTIONS
1.3 AND 6.1 OF THE PURCHASE AGREEMENT DATED AS OF DECEMBER 1, 2005 AMONG
ANSWERS
CORPORATION, BRAINBOOST PARTNERSHIP AND THE OTHER SIGNATORIES THERETO AND
NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS
HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH CONDITIONS,
ANSWERS
CORPORATION HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW CERTIFICATE,
NOT
BEARING THIS LEGEND, FOR THE SECURITIES REPRESENTED HEREBY REGISTERED IN
THE
NAME OF THE HOLDER HEREOF. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO
COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF ANSWERS CORPORATION"
(c)
The
Seller agrees, prior to any Transfer of Restricted Securities, to give written
notice to the Buyer of the Seller’s intention to effect such Transfer and to
comply in all other respects with the provisions of this Section 6.1. Each
such
notice shall describe the manner and circumstances of the proposed Transfer
and
shall be accompanied by the written opinion, addressed to the Buyer, of counsel
for the holder of such Restricted Securities, stating that in the opinion
of
such counsel (which opinion and counsel shall be reasonably satisfactory
to the
Buyer) such proposed transfer does not involve a transaction requiring
registration or qualification of such Restricted Securities under the Securities
Act or the securities or "blue-sky" laws of any relevant state of the United
States. The holder thereof shall thereupon, with the written consent of the
Buyer, be entitled to Transfer such Restricted Securities in accordance with
the
terms of the notice delivered by it to the Buyer. Each certificate or other
instrument evidencing the securities issued upon the Transfer of any such
Restricted Securities (and each certificate or other instrument evidencing
any
untransferred balance of such Restricted Securities) shall bear the legend
set
forth in Section 6.1(b) unless (x) in such opinion of counsel of the Buyer
registration of any future Transfer is not required by the applicable provisions
of the Securities Act or (y) the Buyer shall have waived the requirement
of such
legends. The Seller shall not Transfer any Restricted Securities until such
opinion of counsel has been given (unless waived by the Buyer or unless such
opinion is not required in accordance with the provisions of this Section
6.1(c)).
(d)
Notwithstanding the foregoing provisions of this Section 6.1, the restrictions
imposed by this Section 6.1 upon the transferability of Restricted Securities
shall cease and terminate when (i) any such shares are sold or otherwise
disposed of pursuant to an effective registration statement under the Securities
Act or as otherwise contemplated by Section 6.1(c) and, pursuant to Section
6.1(c), the securities so transferred are not required to bear the legend
set
forth in Section 6.1(b) or (ii) the holder of such Restricted Securities
has met
the requirements for Transfer of such Restricted Securities pursuant to Rule
144. Whenever the restrictions imposed by this Section 7.1 shall terminate,
as
herein provided, the holder of Restricted Securities as to which such
restrictions have terminated shall be entitled to receive from the Buyer,
without expense, a new certificate not bearing the restrictive legend set
forth
in Section 6.1(b) and not containing any other reference to the restrictions
imposed by this Section 6.1.
(e)
Notwithstanding anything contained in this Section 6.1 and Section 1.3 (c)
to
the contrary, the Seller shall be permitted to transfer the Restricted
Securities to the Partners (and family members of any of the Partners), after
providing the Buyer with notice in accordance with Section 6.1(c), so long
as
the Partners (and family members of any of the Partners) shall agree to be
subject to the restrictions set forth in this Section 6.1 and Section
1.3(c).
(f)
The
Seller understands and agrees that the Buyer, at its discretion, may cause
stop
transfer orders to be placed with its transfer agent with respect to
certificates for Restricted Securities owned by Seller but not as to
certificates for such shares of the Buyer’s common stock as to which the legend
set forth in Section 6.1(b) is no longer required because one or more of
the
conditions set forth in Section 6.2(d) shall have been satisfied.
24
6.2.
CONFIDENTIALITY. Each party hereto agrees that any information obtained by
such
party (the "Receiving Party") pursuant to or in connection with this Agreement,
the Related Agreements and the transactions contemplated hereby and thereby
which may be proprietary or otherwise confidential to any other party hereto
(the "Disclosing Party") will not except (i) to the extent required by law,
(ii)
pursuant to legal process, (iii) as required for financial disclosure or
(iv) as
required for tax purposes, be disclosed by the Receiving Party without the
prior
written consent of the Disclosing Party. Each party further acknowledges
and
understands that any information obtained which may be considered "inside"
non-public information will not be utilized by such party in connection with
purchases and/or sales of the Buyer Common Stock except in compliance with
applicable state and federal anti-fraud statutes. The provisions of this
Section
6.2 shall not be in limitation of any rights which the Buyer may have with
respect to the books and records of the Seller, or to inspect its properties
or
discuss its affairs, finances and accounts, under the laws of the jurisdiction
in which it is incorporated.
ARTICLE
7.
INDEMNIFICATION
7.1.
DEFINITIONS. As used in this Agreement, the following terms shall have the
following meanings:
(a)
"AFFILIATE" as to any person means any entity, directly or indirectly, through
one or more intermediaries, controlling, controlled by or under common control
with such person.
(b)
"EVENT OF INDEMNIFICATION" shall mean the following:
(i)
the
untruth, inaccuracy or breach of any representation or warranty of the Seller
or
any of the Partners (including the fact and circumstances underlying such
untruth, inaccuracy or breach) contained in Section 2.1 of this Agreement,
or in
the Seller Disclosure Schedule, any Exhibit or Schedule hereto or any other
document delivered in connection herewith or therewith (without giving effect
to
any "Material Adverse Effect" or other materiality qualification contained
or
incorporated directly or indirectly in such representation or warranty other
than the representations and warranties set forth in Section 2.1 (ee));
(ii)
the
untruth, inaccuracy or breach of any representation or warranty of any of
the
Partners (including the fact and circumstances underlying such untruth,
inaccuracy or breach) contained in Section 2.2 of this Agreement, or in the
Seller Disclosure Schedule, any Exhibit or Schedule hereto or any other document
delivered in connection herewith or therewith (without giving effect to any
"Material Adverse Effect" or other materiality qualification contained or
incorporated directly or indirectly in such representation or warranty other
than the representations and warranties set forth in Section 2.1 (ee));
(iii)
the
breach of any agreement or covenant of the Seller or any of the Partners
contained in this Agreement, the Related Agreements (except the Employment
Agreement) or in the Seller Disclosure Schedule, any Exhibit hereto or any
other
document delivered in connection herewith or therewith;
(iv)
the
untruth, inaccuracy or breach of any representation or warranty of the Buyer
(including the fact and circumstances underlying such untruth, inaccuracy
or
breach) contained in Section 2.3 of this Agreement, or in the Buyer Disclosure
Schedule, any Exhibit or Schedule hereto or any other document delivered
in
connection herewith (without giving effect to any "Material Adverse Effect"
or
other materiality qualification contained or incorporated directly or indirectly
in such representation or warranty, other than the representation and warranty
set forth in Section 2.3 (e) (ii)) or
(v)
the
breach of any agreement or covenant of the Buyer contained in this Agreement,
the Related Agreements (except the Employment Agreement) or in the Buyer
Disclosure Schedule, any Exhibit hereto or any document delivered in connection
herewith.
25
(c)
"INDEMNIFIED PERSONS" shall mean and include (A) with respect to an
Indemnification Event described in subsections 7.1(b)(i) and 7.1(b)(iii)
hereof
(each a “Seller Event of Indemnification”), the Buyer and its Affiliates,
successors and assigns, and the officers, directors and agents of the Buyer
(the
“Buyer Indemnified Persons”), (B) with respect to an Indemnification Event
described in subsection 7.1(b)(ii) hereof (each, a “Partner Event of
Indemnification”), the Buyer Indemnified Persons or (C) with respect to an
Indemnification Event described in subsections 7.1(b)(iv) and 7.1(b)(v) hereof
(each, a “Buyer Event of Indemnification”), the Partners and the Seller and
their respective Affiliates, successors and assigns, and the respective
officers, directors and agents of each of the foregoing (the “Seller Indemnified
Persons”).
(d)
"INDEMNIFYING PERSONS" shall mean and include (A) with respect to an
Indemnification Event described in subsections 7.1(b)(i) and 7.1(b)(iii)
hereof,
each of the Partners and their respective successors, assigns, heirs and
legal
representatives and estates, as the case may be (the “Seller Indemnifying
Persons”), (B) with respect to an Indemnification Event described in Section
7.1(b)(ii) hereof, such Partner who breached a representation or warranty
contained in Section 2.2 hereof or provided inaccurate or untrue information
in
connection with the representations set forth in Section 2.2 hereof (the
“Partner Indemnifying Persons”), and (C) with respect to an Indemnification
Event described in subsections 7.1(b)(iv) and 7.1(b)(v) hereof, the Buyer
and
its successors and assigns (the “Buyer Indemnifying Persons”).
(e)
"LOSSES" shall mean any and all losses, claims, damages, liabilities, expenses
(including reasonable attorneys', accountants' and experts' fees) sustained,
suffered or incurred by any Indemnified Person arising from or in connection
with any such matter that is the subject of indemnification under Section
7.2
hereof.
7.2.
INDEMNIFICATION GENERALLY. Subject to Section 7.6 hereof, (a) the Partners
shall
severally but not jointly indemnify the Buyer Indemnified Persons for, and
hold
each of them harmless from and against, any and all Losses arising from or
in
connection with any Seller Event of Indemnification, (b) the Partner
Indemnifying Persons shall indemnify the Buyer Indemnified Person for, and
hold
each of them harmless from and against, any and all Losses arising from or
in
connection with a Partner Event of Indemnification and (c) the Buyer
Indemnifying Persons shall jointly and severally indemnify the Seller
Indemnified Persons for, and hold each of them harmless from and against,
any
and all Losses arising from or in connection with a Buyer Event of
Indemnification.
7.3.
ASSERTION OF CLAIMS. No claim shall be brought under this Article 7 unless
the
Indemnified Persons, or any of them, at any time prior to sixty (60) days
after
the applicable Survival Date (“Indemnification Notice Period”), give the
Partners or the Buyer , as applicable, (a) written notice of the existence
of
any such claim, specifying the nature and basis of such claim and the amount
or
estimated amount thereof, to the extent known, or (b) written notice pursuant
to
Section 7.4 of any third party claim, the existence of which might give rise
to
such a claim but the failure so to provide such notice to the Partners will
not
relieve the Indemnifying Persons from any liability that they may have to
the
Indemnified Persons under this Agreement or otherwise (unless and only to
the
extent that such failure results in the loss or compromise of any rights
or
defenses of the Indemnifying Persons and they were not otherwise aware of
such
action or claim or unless the notice has not been provided during the applicable
Indemnification Notice Period). Upon the giving of such written notice as
aforesaid, the Indemnified Persons, or any of them, shall have the right
to
commence legal proceedings prior or subsequent to the Survival Date for the
enforcement of their rights under Section 7.2 hereof.
7.4.
NOTICE AND DEFENSE OF THIRD PARTY CLAIMS. Losses resulting from the assertion
of
liability by third parties (each, a "Third Party Claim") shall be subject
to the
following terms and conditions:
(a)
The
Indemnified Persons shall promptly give written notice to the Partners or
the
Buyer, as applicable, of any Third Party Claim that might give rise to any
Loss
by the Indemnified Persons, or any of them, stating the nature and basis
of such
Third Party Claim, and the amount thereof, to the extent known. Copies of
all
relevant documentation with respect to such Third Party Claim shall promptly
follow, including, without limitation, any summons, complaint or other pleading
that may have been served, any written demand or any other document or
instrument. Notwithstanding the foregoing, the failure to provide notice
as
aforesaid will not relieve the Indemnifying Persons from any liability which
they may have to the Indemnified Persons under this Agreement or otherwise
(unless and only to the extent that such failure results in the loss or
compromise of any rights or defenses of the Indemnifying Person and they
were
not otherwise aware of such action or claim or unless the notice has not
been
provided during the applicable Indemnification Notice Period).
26
(b)
If
the Indemnifying Person acknowledges in writing its obligation to indemnify
the
Indemnified Persons hereunder against any Losses that may result from such
Third
Party Claims, then the Indemnifying Person shall be entitled, at its option,
to
assume and control the defense of such Third Party Claim at its expense and
through counsel of its reasonable choice if it gives notice to the Indemnified
Persons within twenty (20) calendar days of the receipt of notice of such
Third
Party Claim from the Indemnified Persons of its intention to do so. If the
Indemnifying Person elects to assume and control the defense of any such
Third
Party Claim, the Indemnified Persons shall have the right to employ separate
counsel and to participate in (but not control) the defense, compromise or
settlement of the Third Party Claim, but the fees and expenses of such counsel
will be at the expense of the Indemnified Persons, unless (i) the Indemnifying
Person has agreed to pay such fees and expenses, or (ii) the Indemnified
Persons
has been advised by its counsel that there may be one or more defenses
reasonably available to it which are different from or additional to those
available to the Indemnifying Person, and in any such case that portion of
the
fees and expenses of such separate counsel that are reasonably related to
matters covered by the indemnification provided by this Article 7 will be
paid
by the Indemnifying Person. Expenses of counsel to the Indemnified Persons
shall
be reimbursed on a current basis by the Indemnifying Person if there is no
dispute as to the obligation of the Indemnifying Person to pay such amounts
pursuant to this Article 7. In the event the Indemnifying Person exercises
its
right to undertake the defense against any such Third Party Claim as provided
above, the Indemnified Persons shall cooperate with the Indemnifying Person
in
such defense and make available to the Indemnifying Person, at the Indemnifying
Person's expense, all witnesses, pertinent records, materials and information
in
its possession or under its control relating thereto as is reasonably required
by the Indemnifying Person. Similarly, in the event the Indemnified Persons
is,
directly or indirectly, conducting the defense against any such Third Party
Claim, the Indemnifying Person shall cooperate with the Indemnified Persons
in
such defense and make available to it, at the Indemnifying Person's expense,
all
such witnesses, records, materials and information in its possession or under
its control relating thereto as is reasonably required by the Indemnified
Persons. No such Third Party Claim, except the settlement thereof which involves
the payment of money only (by a party or parties other than the Indemnified
Persons) and for which the Indemnified Persons is released by the third party
claimant and is totally indemnified by the Indemnifying Person without admission
of fault of liability, may be settled by the Indemnifying Person without
the
written consent of the Indemnified Persons. No Third Party Claim which is
being
defended in good faith by the Indemnifying Person shall be settled by the
Indemnified Persons without the written consent of the Indemnifying Person.
7.5.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to the further provisions
of
this Section 7.5, the respective representations and warranties of (a) the
Partners set forth in Sections 2.1 and 2.2 shall survive the Closing Date
until
one (1) year following the Closing Date, except that the representations
and
warranties contained in (i) Section 2.1(d) (Right to Transfer) shall not
so
terminate but shall survive the Closing until the applicable statute of
limitation shall have expired and (ii) Section 2.1(i) (Tax Matters) shall
not so
terminate but shall survive the Closing until sixty (60) days after the
applicable statute of limitations shall have expired with respect to all
matters
referenced therein and (b) the Seller and the Buyer shall survive the Closing
Date until one (1) year following the Closing Date, except that the
representations and warranties contained in Section 2.1(i) (Tax Matters)
shall
not so terminate but shall survive the Closing until sixty (60) days after
the
applicable statute of limitations shall have expired with respect to all
matters
referenced therein. For convenience of reference, the date upon which any
representation or warranty contained herein shall terminate is referred to
herein as the "Survival Date." All covenants and agreements of the Buyer
or the
Partners contained herein shall survive the Closing in accordance with their
respective terms. Anything contained herein to the contrary notwithstanding,
the
representations and warranties of the Seller contained in this Agreement
(including, without limitation, the Seller Disclosure Schedule) (i) are being
given by the Seller on behalf of the Partners and for the purpose of binding
the
Partners to the terms and provisions of this Article 7, and as an inducement
to
the Buyer to enter into this Agreement (and the Seller and the Partners
acknowledge that the Buyer has expressly relied thereon) and (ii) are solely
for
the benefit of the Buyer Indemnified Persons and each of them. Accordingly,
no
third party (including, without limitation, the Partners or anyone acting
on
behalf of any thereof) other than the Buyer Indemnified Persons, and each
of
them, shall be a third party or other beneficiary of such representations
and
warranties and no such third party shall have any rights of contribution
against
the Seller with respect to such representations or warranties or any matter
subject to or resulting in indemnification under this Article 7 or otherwise.
27
7.6.
LIMITATION ON INDEMNIFICATION.
(i) The
Indemnifying Persons shall not be obligated to indemnify the Indemnified
Persons
pursuant to this Article 7 with respect to any Losses pursuant to Section
7.2
until the aggregate amount of such Losses exceeds fifteen thousand dollars
($15,000) (the "Basket Amount"), whereupon the Indemnifying Persons shall
be
obligated to indemnify the Indemnified Persons for all Losses in excess of
the
Basket Amount; provided, however, that the Indemnifying Persons shall be
obligated to indemnify the Indemnified Persons for the first dollar of all
Losses arising out of or related to a breach of the representations and
warranties contained in Sections 2.1(c), 2.1(d), 2.1(f), 2.1(g), 2.1(i),
2.1(j)
and 2.1(l); provided, further, that the aggregate maximum indemnification
liability of the Indemnifying Persons pursuant to this Article 7, shall not
exceed Two Million Two Hundred and Fifty Thousand Dollars ($2,250,000) (the
“Indemnification Liability Cap”); provided, further, that the aggregate maximum
indemnification liability of each of the Partner Indemnifying Persons pursuant
to this Article 7 shall not exceed their pro rata portion of the Indemnification
Liability Cap (based on their relative ownership of the partnership interests
of
the Seller).
(ii) For
purposes of satisfying an indemnification obligation of the Seller Indemnifying
Persons or the Partner Indemnifying Persons under this Article 7, each share
of
the Buyer’s common stock tendered by or on behalf of the Seller Indemnifying
Persons or the Partner Indemnifying Persons in satisfaction of a Seller Event
of
Indemnification or a Partner Event of Indemnification under this Article
7 shall
have a value equal to the Closing Price.
(iii) Each
Indemnifying Person’s liability for any Losses shall be limited to the amount of
such Losses net of the difference between any insurance proceeds received
by the
Indemnified Person in respect thereof minus the amount of premiums paid for
such
insurance by the Indemnified Person.
(iv) Notwithstanding
any other provision of this Agreement, Losses related to the matters set
forth
in Section 2.1(d), Losses attributable to fraud and Losses related to Buyer’s
covenants and agreements set forth in Section 1.3(b) (which Losses shall
not be
subject to the Indemnification Liability Cap set forth in Section 7.6(i),
the
indemnities set forth in this Article 7 shall be the exclusive remedies of
the
Indemnified Persons for any misrepresentation or breach of any representation
or
warranty or covenant or agreement contained in this Agreement or in the Related
Agreements.
(vi) The
Seller Indemnifying Persons and the Partner Indemnifying Persons shall satisfy
indemnification obligations by payment, at their election, in either cash
or
shares of the Stock Consideration issued hereunder with a value based on
the
Closing Price and equal to the Losses for which indemnification is claimed.
(vii) To
the
extent the Escrowed Shares have not been or would not be exhausted, unless
in
the Buyer Indemnified Persons reasonable discretion it would be deemed to
limit
or prejudice the Buyer Indemnified Persons rights (other than the right to
seek
satisfaction of Losses other than from the Escrowed Shares, the Buyer
Indemnified Persons shall first seek satisfaction of Losses from the Escrowed
Shares.
ARTICLE
8.
MISCELLANEOUS
8.1.
ENTIRE AGREEMENT. This Agreement (including the Seller Disclosure Schedule
and
the Exhibits attached hereto), the Related Agreements and the other writings
referred to herein contain the entire agreement among the parties hereto
with
respect to the transactions contemplated hereby and supersede all prior or
contemporaneous agreements or understandings, written or oral, among the
parties
with respect thereto. All covenants and agreements of the Buyer or the Partners
contained herein shall survive the Closing in accordance with their respective
terms.
28
8.2.
DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only and shall
not control or affect the meaning or construction of any provision of this
Agreement.
8.3.
PUBLIC ANNOUNCEMENTS. The parties hereto agree that, to the maximum extent
feasible, but subject, in the case of the Buyer, to its public disclosure
and,
as to all parties, other legal and regulatory obligations, they shall advise
and
confer with each other prior to the issuance (and provide copies to the other
party prior to issuance) of any public announcements, reports, statements
or
releases pertaining to the transactions contemplated hereunder.
8.4.
NOTICES. All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent
by
nationally-recognized overnight courier or by registered or certified mail,
postage prepaid, return receipt requested, or by facsimile, with confirmation
as
provided above addressed as follows:
(a)
if to
the Buyer, to:
Answers
Corporation
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, CEO
Telephone:
▇▇▇▇ (▇) ▇▇▇-▇▇▇▇
Telecopier:
▇▇▇▇ (▇) ▇▇▇-▇▇▇▇
with
a
copy (not constituting notice) to:
Sichenzia
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
1065
Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopier:
(▇▇▇) ▇▇▇-▇▇▇▇
(b)
if to
the Seller, to:
Brainboost
Partnership
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
▇▇
▇▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopier:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy (not constituting notice) to:
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇
#▇▇▇
▇▇▇
▇▇▇▇,
▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopier:
(▇▇▇) ▇▇▇-▇▇▇▇
29
(c)
if to
the Partners, to
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
▇▇
▇▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopier:
(▇▇▇) ▇▇▇-▇▇▇▇
(d)
All
such notices or communications shall be deemed to be received (i) in the
case of
personal delivery or facsimile, on the date of such delivery, (ii) in the
case
of nationally-recognized overnight courier, on the next Business Day after
the
date when sent and (iii) in the case of mailing, on the third Business Day
following the date on which the piece of mail containing such communication
was
posted.
8.5.
COUNTERPARTS. This Agreement may be executed in any number of counterparts
by
original or facsimile signature, each such counterpart shall be an original
instrument, and all such counterparts together shall constitute one and the
same
agreement.
8.6.
GOVERNING LAW. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to
be
performed wholly therein (without regard to principles of conflicts of laws).
8.7.
BENEFITS OF AGREEMENT. All the terms and provisions of this Agreement shall
be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
8.8.
PRONOUNS. As used herein, all pronouns shall include the masculine, feminine,
neuter, singular and plural thereof whenever the context and facts require
such
construction.
8.9.
AMENDMENT, MODIFICATION AND WAIVER. This Agreement shall not be altered or
otherwise amended except pursuant to an instrument in writing signed by (i)
the
Buyer, (ii) the Seller and (iii) the Partners; provided, however, that any
party
to this Agreement may waive any obligation owed to it by any other party
under
this Agreement. The waiver by any party hereto of a breach of any provision
of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach.
8.10.
SEVERABILITY. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy,
all
other conditions and provisions of this Agreement shall nevertheless remain
in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to
any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate
in
good faith to modify this Agreement so as to effect the original intent of
the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the greatest extent possible.
8.11.
FURTHER ASSURANCES. Each party agrees to cooperate fully with the other parties
and to execute such further instruments, documents and agreements and to
give
such further written assurances as may be reasonably requested by any other
party to evidence and reflect the transactions described herein and contemplated
hereby and to carry into effect the intents and purposes of this Agreement.
8.12.
CONSENT TO JURISDICTION; WAIVERS. Each of the parties hereto irrevocably
submits
to the exclusive jurisdiction of (a) the Supreme Court of the State of New
York,
New York County, and (b) the United States District Court for the Southern
District of New York, for the purposes of any Action (as defined below) arising
out of this Agreement or any Related Agreement or any transaction contemplated
hereby or thereby. Each of the parties hereto agrees to commence any Action
relating hereto either in the United States District Court for the Southern
District of New York or if such Action may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New
York
County. Each of the parties hereto irrevocably and unconditionally waives
any
objection to the laying of venue of any Action arising out of this Agreement
or
any Related Agreement or any transaction contemplated hereby or thereby in
(i)
the Supreme Court of the State of New York, New York County, or (ii) the
United
States District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in
any
such court that any such Action brought in any such court has been brought
in an
inconvenient forum. For purposes of this Agreement, "Action" means any claim,
action, suit or arbitration, or any other proceeding, in each instance by
or
before any Governmental Authority or any nongovernmental arbitration, mediation
or other nonjudicial dispute resolution body.
8.13.
WAIVER OF JURY TRIAL. Each of the parties hereto irrevocably and unconditionally
waives trial by jury in any Action relating to this Agreement, the Related
Agreements or any transaction contemplated hereby or thereby, and for any
counterclaim with respect thereto.
30
IN
WITNESS WHEREOF, each of the parties hereto has caused this Asset Purchase
Agreement to be executed on its behalf as of the day and year first above
written.
| ANSWERS CORPORATION | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ |
||
| Title: Chief Financial Officer | ||
| BRAINBOOST PARTNERSHIP | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ |
||
| Title: General Partner | ||
| PARTNERS: | |
| /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ | |
|
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ |
|
| /s/ ▇▇▇ ▇▇▇▇▇ | |
|
▇▇▇ ▇▇▇▇▇ |
|
| /s/ ▇▇▇ ▇▇▇▇▇▇ | |
|
▇▇▇ ▇▇▇▇▇▇ |
|
31
SCHEDULE
A
Business
of the Company
The
Brainboost Answer Engine
(BAE)
is a robust answer extraction engine that receives a natural language
question such as "Who was the first man on the moon" and returns an answer
in
plain English such as " The first man on the moon was ▇▇▇▇ ▇▇▇▇▇▇▇▇▇". These
answers are derived from a set of search results retrieved from a search
engine.
The BAE transforms the user query, queries the search engine or engines,
retrieves the results, retrieves the underlying documents, analyzes them,
extracts the possible answers and finally uses AnswerRank TM to score the
answers and present them to the user in the most probable order.
32