EXHIBIT 2.1
MERGER AGREEMENT
DATED AS OF
FEBRUARY 28, 2003
BY AND AMONG
INFOUSA INC., A DELAWARE CORPORATION ("PURCHASER")
CORPORATE T, INC., A DELAWARE CORPORATION ("CORPORATE T")
CMGI, INC., A DELAWARE CORPORATION ("STOCKHOLDER")
AND
YESMAIL, INC., A DELAWARE CORPORATION (THE "COMPANY")
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") is made and entered into as of
the 28th day of February, 2003, by and among Corporate T, Inc., a Delaware
corporation and a wholly-owned subsidiary of Purchaser ("Corporate T"), infoUSA
Inc., a Delaware corporation ("Purchaser"), CMGI, Inc., a Delaware corporation
("Stockholder"), as the owner and registered holder of all of the issued and
outstanding capital stock of Yesmail, Inc., a Delaware corporation (the
"Company"), and the Company.
WITNESSETH
WHEREAS, the Company, with its principal executive offices located at
222 Riverside Plaza, Chicago, Illinois, is engaged in the business of providing
customer acquisition and customer retention email marketing services (the
"Business"); and
WHEREAS, this Agreement contemplates a transaction in which Corporate T
will merge with and into the Company, the Company will become a wholly owned
subsidiary of Purchaser and the Stockholder will receive cash.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
promises made in this Agreement and the representations, warranties, covenants,
conditions and indemnities contained in this Agreement, and intending to be
legally bound, the parties agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the respective meanings ascribed to them in this Section 1.1:
(a) "Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, damages, diminution of value,
penalties, amounts paid in settlement and all other fees, costs and expenses,
including court costs and reasonable attorneys' fees and expenses.
(b) "Affiliate" of any Person means any Person directly or
indirectly controlling, controlled by or under common control with such Person
or related by blood, marriage or adoption to such Person.
(c) "Andover License" has the meaning specified in Section
6.15.
(d) "Authority" means any federal, state, local or foreign
court or governmental or regulatory agency or authority.
(e) "Basket" has the meaning specified in Section 8.2(c).
(f) "Business" has the meaning specified in the recitals of
this Agreement.
(g) "Certificate of Merger" has the meaning specified in
Section 2.2(a).
-2-
(h) "Chicago Leases" means the Great Lakes Lease and the
Riverside Lease.
(i) "Claim" has the meaning specified in Section 8.2(a).
(j) "Closing" has the meaning specified in Section 2.5(a).
(k) "Closing Balance Sheet" has the meaning specified in
Section 2.4(a).
(l) "Closing Date" has the meaning specified in Section
2.5(a).
(m) "COBRA" means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
(n) "Code" means the Internal Revenue Code of 1986, as
amended.
(n) "Company" has the meaning specified in the initial
paragraph of this Agreement.
(o) "Company's Employee Benefit Plans" has the meaning
specified in Section 3.22.
(p) "Domain Names" means all rights in any internet website
and internet web names presently owned by the Company or used in the Business.
(q) "Effective Time" has the meaning specified in Section
2.2(a)
(r) "Employee" means any individual employed by the Company.
(s) "Employee Benefit Plan" means any (i) nonqualified
pension, profit sharing, deferred compensation, stock purchase, stock option,
incentive, bonus, severance, retirement or other type of employee benefit plan,
program or arrangement which is an Employee Pension Benefit Plan; (ii) qualified
defined contribution retirement plan or arrangement which is an Employee Pension
Benefit Plan; (iii) qualified defined benefit retirement plan or arrangement
which is an Employee Pension Benefit Plan (including any Multiemployer Plan); or
(iv) Employee Welfare Benefit Plan or fringe benefit plan, program or
arrangement.
(t) "Employee Pension Benefit Plan" has the meaning specified
in Section 3(2) of ERISA.
(u) "Employee Welfare Benefit Plan" has the meaning specified
in Section 3(1) of ERISA.
(v) "Environmental Laws" means all federal, state, local or
foreign laws (including rules, regulations, codes, plans, ordinances,
injunctions, judgments, orders, decrees, rulings and charges of any Authority
thereunder) concerning pollution or protection of the environment or human
health and safety, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, petroleum or its byproducts or derivatives,
contaminants or chemical, industrial, hazardous or toxic materials or wastes
into ambient air, surface water, ground water or lands or otherwise relating to
the generation, manufacture, processing, distribution, use, treatment, holding,
storage, disposal, transport or handling
of pollutants, petroleum or its byproducts or derivatives, contaminants or
chemical, industrial, hazardous or toxic materials or wastes.
(w) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(x) "Escrow Agent" means Five Points Bank.
(y) "Escrow Agreement" has the meaning specified in Section
2.4.
(z) "Escrow Amount" has the meaning specified in Section
2.2(f).
(aa) "Financial Statement" or "Financial Statements" has the
meaning specified in Section 3.7.
(bb) "Frankowitz Indemnification Agreement" has the meaning
specified in Section 6.8.
(cc) "GAAP" means generally accepted accounting principles in
the United States as in effect from time to time.
(dd) "Great Lakes Lease" means that certain Office/Service
Center Lease, dated as of May 12, 1998, by and between Great Lakes Reit, L.P.
and Superhighway Consulting, Inc., the Sublease dated as of July 24, 2000, by
and between yesmail.com,inc. n/k/a the Company and Object Mentor, Inc., an
Illinois corporation, and the leasehold improvements thereto.
(ee) "Great Lakes Lease Assignment" has the meaning specified
in Section 6.10.
(ff) "Hazardous Substance Release" means any emission,
discharge, release or threatened release into ambient air, surface water, ground
water or lands of any pollutant, petroleum or its byproducts or derivatives,
contaminant or chemical, industrial, hazardous or toxic material or waste,
including those identified or defined in any Environmental Law.
(gg) "IRS Letter" has the meaning specified in Schedule 3.22.
(hh) "Indemnified Party" has the meaning specified in Section
8.2(a).
(ii) "Indemnifying Party" has the meaning specified in Section
8.2(a).
(jj) "Initial Merger Consideration" has the meaning specified
in Section 2.2(e)(ii).
(kk) "Intellectual Property" means (i) all trademarks, service
marks, trade dress, logos, trade names, corporate names and domain names,
together with all abbreviations, translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (ii) all
copyrightable works, all copyrights, and all applications, registrations and
renewals in connection therewith, (iii) all databases and compilation of data
not in database form; (iv) all mask works and all applications, registrations
and renewals in connection therewith, and (v) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information and business and marketing plans and proposals).
(ll) "Intercompany Transactions" means any intercompany
payable or intercompany receivable between the Company and Stockholder.
(mm) "Knowledge of Company" means the actual knowledge of Dave
Menzel, Matt Briesch, Scott Stephens, Larry Mazurkiewicz and Ed Henrich.
(nn) "Leased Real Property" has the meaning specified in
Section 3.13.
(oo) "Liability" means any liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated or whether due or to
become due).
(pp) "Lien" means any lien, charge, claim, security interest,
conditional sale agreement, mortgage, indenture, deed of trust, security
agreement, pledge, hypothecation, option, restriction, condition or other
encumbrance or defect of title of any kind or nature.
(qq) "Material Adverse Effect" means a material adverse effect
upon the business, financial condition, results of operations, prospects or
earnings of the Company.
(rr) "Material Contracts" has the meaning specified in Section
3.21(a).
(ss) "Mediator" means the Chicago, Illinois office of the
accounting firm of PricewaterhouseCoopers, LLP.
(tt) "Merger" has the meaning specified in Section 2.1.
(uu) "Most Recent Balance Sheet" means the balance sheet of
the Company as of January 31, 2003.
(vv) "Most Recent Balance Sheet Date" means January 31, 2003.
(ww) "Multiemployer Plan" has the meaning specified in Section
3(37) of ERISA.
(xx) "Noncompetition Agreement" has the meaning specified in
Section 6.6.
(yy) "Office Furniture and Telephone Equipment" means (i) the
office furniture and cubicles owned by the Company and located at the Riverside
Lease premises and (ii) the telephone system owned by the Company and located at
the Riverside Lease premises, as listed on Schedule 1.2.
(zz) "Patents" means all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions and
reexaminations thereof.
(aaa) "PBGC" means the Pension Benefit Guaranty Corporation,
established pursuant to Subtitle A of Title IV of ERISA, and any successor
thereto or to the functions thereof.
(bbb) "Person" means an individual, a corporation, a
partnership, a limited liability company, an association, an Authority, a trust
or any other entity or organization.
(ccc) "Purchaser" has the meaning specified in the initial
paragraph of this Agreement.
(ddd) "Purchaser's Objection Notice" has the meaning specified
in Section 2.3(b).
(eee) "Rebate Obligations" has the meaning specified in
Section 3.24.
(fff) "Riverside Lease" means that certain Office Space Lease,
dated as of November 2, 1999, by and between Riverside Plaza Corp., a Delaware
corporation, and yesmail.com,inc. n/k/a the Company and the leasehold
improvements thereto.
(ggg) "Riverside Lease Landlord" means 222 S. Riverside
L.L.C., and its successors and assigns.
(hhh) "Riverside Lease Termination Agreement" has the meaning
specified in Section 6.11.
(iii) "San Francisco Lease" means that certain License
Agreement, dated as of March 29, 2002, by and between the Stockholder and the
Company, for premises located at 575 Market Street, San Francisco, California.
(jjj) "San Francisco Lease Amendment" has the meaning
specified in Section 6.9.
(kkk) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
(lll) "Stockholder" has the meaning specified in the initial
paragraph of this Agreement.
(mmm) "Stockholder Leased Equipment" means the equipment and
software leased by Stockholder and used by the Company in the Business, as
listed on Schedule 1.1.
(nnn) "Company's Disclosure Schedule" has the meaning
specified in the initial paragraph of Article III.
(ooo) "Stockholder's Objection Notice" has the meaning
specified in Section 2.3(b).
(ppp) "Series A Preferred Stock" means the 2,850,000 shares of
Series A Preferred Stock, $.01 par value per share, of the Company issued and
outstanding and held by Stockholder.
(qqq) "Software" has the meaning specified in Section 3.15(e).
(rrr) "Surviving Corporation" has the meaning specified in
Section 2.1.
(sss) "Tax Returns" has the meaning specified in Section
3.25(a).
(ttt) "Taxes" means all federal, state, local or foreign
income, gross receipts, license, employment, payroll, withholding, severance,
premium, disability, excise, value-added, accumulated earnings, net worth,
alternate minimum, estimated, sales, use, transfer, real estate, environmental
(including Taxes under Code Section 59A), personal property, use and occupancy,
business and occupation, maritime, mercantile, tariff, duty, capital stock,
franchise, gift or estate and all other taxes or fees of any kind, character,
nature or description, and includes interest, penalties and deficiencies thereon
and estimated taxes.
(uuu) "Transition Services Agreement" has the meaning
specified in Section 6.7.
(vvv) "Working Capital" means the net current assets of the
Company minus the net current liabilities of the Company on the Closing Date,
excluding the Intercompany Transactions and any Liabilities associated with the
Chicago Leases.
(www) "Working Capital Deficiency" has the meaning specified
in Section 2.4(d).
(xxx) "Working Capital Excess" has the meaning specified in
Section 2.4(d).
ARTICLE 2.
THE TRANSACTION
2.1 MERGER. On and subject to the terms and conditions of this
Agreement, Corporate T will merge with and into the Company (the "Merger") as of
the Closing. The Company will be the corporation surviving the Merger (the
"Surviving Corporation").
2.2 EFFECT OF MERGER.
(a) General. The Merger shall become effective at 11:59 p.m.
EST (the "Effective Time") on the date of filing of the certificate of merger
substantially in the form of Exhibit 2.2(a) (the "Certificate of Merger") with
the Secretary of State of the state of Delaware. The Merger shall have the
effect set forth in the Delaware General Corporation law. The Surviving
Corporation may, at any time after the Effective Time, take any action
(including executing and delivering any documents) in the name and on behalf of
either the Company or Corporate T in order to carry out and effectuate the
transactions contemplated by this Agreement.
(b) Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be amended and restated at and
as of the Effective Time to read as did the Certificate of Incorporation of
Corporate T immediately prior to the Effective Time (except that the name of the
Surviving Corporation will remain unchanged).
(c) Bylaws. The Bylaws of the Surviving Corporation shall be
amended and restated at and as of the Effective Time to read as did the Bylaws
of Corporate T immediately prior to the Effective Time (except that the name of
the Surviving Corporation will remain unchanged).
(d) Directors and Officers. The directors and officers of
Corporate T shall become the directors and officers of the Surviving Corporation
at and as of the Effective Time (retaining their respective positions and terms
of office).
(e) Conversion of Stock. At the Effective Time and without any
action on the part of the holders of the outstanding shares of capital stock of
the Company or Corporate T:
(i) The shares of Series A Preferred Stock issued and
outstanding immediately prior to the Effective Time will be automatically
converted into solely the right to receive in cash, subject to the terms and
conditions of this Agreement, (A) $4,500,000.00 (the "Initial Merger
Consideration"), and (B) the balance of the $500,000.00 held in escrow pursuant
to Section 2.2(f) (the "Escrow Amount").
(ii) Any issued and outstanding shares of common
stock, $.01 par value per share, of the Company shall be cancelled and retired
and shall cease to exist and no consideration shall be delivered in exchange
therefor.
(iii) Each share of Corporate T's common stock issued
and outstanding immediately before the Effective Time will be converted into one
fully paid and nonassessable share of common stock of the Surviving Corporation.
(f) Escrow. On the Closing Date, Purchaser will deposit an
amount equal to the Escrow Amount with the Escrow Agent and such Escrow Amount
will be governed by the terms of the escrow agreement substantially in the form
of Exhibit 2.2(f) (the "Escrow Agreement").
(g) Intercompany Debt. Prior to Closing, the Stockholder and
the Company shall be deemed to have forgiven as a contribution to capital,
cancelled, released and terminated any and all debts and amounts owed,
outstanding and payable to each other as of the Closing Date, including without
limitation the Intercompany Transactions.
2.3 PROCEDURE FOR PAYMENT. On the Closing Date, (a) Stockholder will
deliver to Purchaser certificate(s) evidencing all outstanding shares of stock
in the Company, and (b) Purchaser shall deliver to Stockholder the Initial
Merger Consideration by wire transfer or delivery of other immediately available
United States funds.
2.4 CLOSING BALANCE SHEET ADJUSTMENT.
(a) Purchaser shall cause a balance sheet of the Company as of
the close of business on the Closing Date to be prepared in accordance with the
books and records of the Company and in compliance with GAAP consistently
applied. Such balance sheet shall be adjusted to: (i) exclude all Liabilities
resulting from any accrual on any prior balance sheet of the Company relating to
the residual value of equipment of the Company after the termination of the
current equipment lease (the "Residual Value Accrual Liabilities"), (ii) exclude
the Chicago Leases, (iii) exclude the Intercompany Transactions, (v) exclude all
cash and the restricted cash relating to the Chicago Leases, and (vi) include,
to the extent not already included thereon, all other adjustments agreed to by
the parties or contemplated by the terms of this Agreement (such balance sheet
as so adjusted, the "Closing Balance Sheet"). The Closing Balance Sheet shall be
delivered by Purchaser to Stockholder within 75 days after the Closing Date for
review by Stockholder. All costs and expenses of Purchaser incurred in
connection with the Closing Balance Sheet shall be paid by Purchaser and all
costs and expenses of Stockholder incurred in connection with the Closing
Balance Sheet shall be paid by Stockholder. After Purchaser delivers the Closing
Balance Sheet, Purchaser shall cause the Company to, and the Company shall
provide any information reasonably requested by Stockholder in order to review
the Closing Balance Sheet for the purposes of approving or objecting thereto.
(b) If Stockholder objects to all or part of the Closing
Balance Sheet as delivered by Purchaser, Stockholder must deliver to Purchaser
written notice of such objections ("Stockholder's Objection Notice") not more
than 15 days after the date Stockholder receives the Closing Balance Sheet. If
Stockholder does not deliver a Stockholder's Objection Notice to Purchaser
within such 15-day period, Stockholder shall be deemed to have accepted the
Closing Balance Sheet delivered by Purchaser. If a Stockholder's Objection
Notice is delivered to Purchaser by Stockholder within such 15-day period,
Purchaser shall have 15 days after the date Purchaser receives Stockholder's
Objection Notice to object to Stockholder's objections by delivering a written
notice of objection ("Purchaser's Objection Notice") to Stockholder. If
Purchaser does not deliver a Purchaser's Objection Notice to Stockholder within
such 15-day period, Purchaser shall be deemed to have accepted Stockholder's
objections to the Closing Balance Sheet and Purchaser shall revise the Closing
Balance Sheet in accordance with Stockholder's objections contained in
Stockholder's Objection Notice. If Purchaser does deliver Purchaser's Objection
Notice to Stockholder within such 15-day period, Stockholder and Purchaser shall
use reasonable best efforts to resolve all objections relating to the Closing
Balance Sheet. If Stockholder and Purchaser do not reach a final resolution of
all such objections within 15 days after delivery of Purchaser's Objection
Notice, Stockholder and Purchaser shall submit all unresolved objections to the
Mediator for resolution. Any documents submitted by a party to the Mediator,
either unilaterally or at the Mediator's request, shall be simultaneously
submitted to the other party. The Mediator's decision shall be rendered within
45 days after submittal. The determination of the Mediator shall be set forth in
writing and shall be conclusive and binding upon Stockholder and Purchaser. The
Closing Balance Sheet shall be revised by Purchaser as appropriate to reflect
the resolution of any such objections among the parties or by the Mediator.
(c) In the event Stockholder and Purchaser submit any
unresolved objections to the Closing Balance Sheet to the Mediator for
resolution as provided herein, Purchaser and Stockholder shall share
responsibility for the fees and expenses of the Mediator as follows:
(i) if the Mediator resolves all of the unresolved
objections in favor of Purchaser, Stockholder shall be responsible for all of
the fees and expenses of the Mediator;
(ii) if the Mediator resolves all of the unresolved
objections in favor of Stockholder, Purchaser shall be responsible for all of
the fees and expenses of the Mediator; and
(iii) if the Mediator resolves some of the unresolved
objections in favor of Purchaser and the rest of the unresolved objections in
favor of Stockholder, Purchaser shall be responsible for a proportionate amount
of the fees and expenses of the Mediator based on the dollar amount of the
unresolved objections resolved against Purchaser compared to the total dollar
amount of all unresolved objections submitted to the Mediator and Stockholder
shall be responsible for a proportionate amount of the fees and expenses of the
Mediator based on the dollar amount of the unresolved objections resolved
against Stockholder compared to the total dollar amount of all unresolved
objections submitted to the Mediator.
(d) Based on the Closing Balance Sheet, the Initial Merger
Consideration shall be adjusted as follows: (i) if the Company's Working
Capital, as reflected on the Closing Balance Sheet, is less than $500,000.00
(the amount of such deficiency referred to as the "Working Capital Deficiency"),
Stockholder shall be obligated to pay back to Purchaser an amount equal to the
Working Capital Deficiency; (ii) if the Working Capital, as reflected on the
Closing Balance Sheet, is greater than $500,000.00 (the amount of such excess
referred to as the "Working Capital Excess"), Purchaser shall be obligated to
pay to Stockholder an additional
amount equal to the sum of the Working Capital Excess, or (iii) if the Working
Capital, as reflected on the Closing Balance Sheet, is equal to $500,000.00,
there shall be no adjustment made to the Initial Merger Consideration. Any
amounts payable under this Section 2.4(d) shall be paid in cash, together with
interest at the prime rate of interest as reported in the Wall Street Journal,
Midwest Edition, on the Closing Date, beginning on the Closing Date and ending
on the date of payment, within 3 business days after the date on which the
Closing Balance Sheet is finally determined pursuant to Section 2.4(b).
(e) Purchaser shall make the work papers and back-up materials
used in preparing the Closing Balance Sheet available to Stockholder and
Stockholder's other representatives, and to the Mediator in the event any
unresolved objections to the Closing Balance Sheet are submitted to the
Mediator.
2.5 THE CLOSING.
(a) The Closing; the Closing Date; Location of the Closing.
The closing of the transactions contemplated by this Agreement (the "Closing")
shall take place at 4:00 p.m. Central Time, on February 28, 2003, or at such
other time or on such other date as mutually agreed upon by the parties to this
Agreement (the "Closing Date") at the offices of Koley Jessen P.C., 1128 S.
103rd Street, Suite 800, Omaha, Nebraska 68124 or at such other place as may be
mutually agreed upon by the parties to this Agreement. All transactions which
are to take place at the Closing shall be considered to have taken place
simultaneously, and no delivery or payment shall be considered to have been made
until all the transactions have been completed.
(b) Deliveries at the Closing. At the Closing, (i) the Company
and the Stockholder shall deliver the various certificates, instruments,
documents or items referred to in this Agreement, including Section 7.1, (ii)
Purchaser and Corporate T shall deliver the various certificates, instruments,
documents or items, and the payments referred to in this Agreement, including
Section 7.2. and (iii) Purchaser will file with the Secretary of state of
Delaware the Certificate of Merger.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF COMPANY
Except as set forth on the schedules attached hereto (collectively, the
"Company Disclosure Schedules"), the schedule numbers of which are numbered to
correspond to the section number of this Agreement to which they refer, the
Company represents and warrants to Purchaser as of the date of this Agreement
and as of the Closing Date as follows:
3.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware. The Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
in which either the ownership or use of its assets, or the nature of its
activities, requires such qualification, except where the failure to be so
qualified or in good standing would not have a Material Adverse Effect. The
state of incorporation of the Company, and each state in which the Company is
qualified to do business as a foreign corporation are set forth on Schedule 3.1.
The Company has full corporate power and authority to carry on the business in
which it is engaged and to own and use the assets and properties owned and used
by it. The Company is not in default under or in violation of any provision of
its certificate of incorporation or bylaws, as amended.
3.2 AUTHORITY AND ENFORCEABILITY. The Company has full power and
authority, including full corporate power and authority, to execute, deliver and
perform this Agreement and the execution, delivery and performance of this
Agreement by the Company has been duly authorized by all necessary corporate
action on the part of the Company. This Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding
obligation of the Company, enforceable in accordance with its terms. Except as
set forth on Schedule 3.2, the Company is not required to give any notice to,
make any filing with or obtain any authorization, consent or approval of any
Authority or Person in order for the parties to consummate the transactions
contemplated by this Agreement, except where the failure to give such notice,
make such filing or obtain such authorization, consent or approval would not
have a Material Adverse Effect.
3.3 NONCONTRAVENTION. The execution or delivery of this Agreement (or
the consummation of the transactions contemplated by this Agreement) will not
(a) violate any law, constitution, code, statute or ordinance, or any
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any Authority to which the Company is subject, (b) violate any
provision of the certificate of incorporation or bylaws, as amended, or any
resolution adopted by the board of directors or shareholder of the Company, or
(c) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, give any Person the right to accelerate, terminate, modify
or cancel, or require any notice under, any material agreement, license, permit,
authorization, instrument or other arrangement to which the Company is a party
or by which the Company is bound or to which any of the assets or properties of
the Company are subject (or result in the imposition of any Lien upon any of
such assets).
3.4 CAPITAL. The Company's authorized capital stock consists of
60,000,000 shares of $0.01 par value Common Stock, none of which have been
issued, and 5,000,000 shares of $0.01 par value Preferred Stock, of which (a)
2,000,000 shares have been designated as $0.01 par value Series B Convertible
Preferred Stock, none of which have been issued, and (b) 2,850,000 shares have
been designated as $0.01 par value Series A Preferred Stock, of which 2,850,000
shares have been duly authorized, validly issued, fully paid and nonassessable,
and are held of record by Stockholder. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights or other agreements or commitments that could require the
issuance or sale of or otherwise cause to become outstanding, any of the capital
stock of the Company which is unissued or which is issued but not outstanding.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to the Company. There are no voting
trusts, proxies or other agreements or arrangements with respect to the voting
of the Series A Preferred Stock.
3.5 SUBSIDIARIES. The Company has no subsidiaries.
3.6 [INTENTIONALLY OMITTED]
3.7 FINANCIAL STATEMENTS. The books of account and related records of
the Company correctly, accurately and completely reflect, in all material
respects, all of its assets, Liabilities and transactions in compliance with
GAAP, applied on a consistent basis throughout the periods covered. Schedule 3.7
contains correct, accurate and complete copies of the unaudited balance sheets,
statements of income, changes in stockholder's equity and cash flows of the
Company as of and for the fiscal years ended July 31, 2001, and 2002, and the
unaudited balance sheet and statements of income, changes in stockholder's
equity and cash flows as of and for the six (6) months ended January 31, 2003
(collectively the "Financial Statements"), each of which (a) has been prepared
based on, and in accordance with, the
books of account and related records of the Company, (b) has been prepared in
compliance with GAAP applied on a consistent basis for the periods covered
(subject, however, to the absence of notes required by GAAP) and (c) correctly,
accurately and completely presents, in all material respects, the financial
condition, financial position, results of operations, assets and Liabilities of
the Company for the periods covered.
3.8 [INTENTIONALLY OMITTED.]
3.9 ABSENCE OF CHANGE. Since the Most Recent Balance Sheet Date, there
has been no event or occurrence which has caused or could reasonably be expected
to cause a Material Adverse Effect. Since the Most Recent Balance Sheet Date,
except as disclosed in Schedule 3.9, there has not been:
(a) any sale, lease, transfer or assignment by the Company of
any of its assets or properties, other than for fair consideration in the
ordinary course of business consistent with past practice;
(b) any agreement, lease, license or other arrangement (or
series of related agreements, leases, licenses or other arrangements) entered
into by the Company either involving more than $50,000.00 or which is outside
the ordinary course of business consistent with past practice;
(c) any acceleration, termination, modification or
cancellation by any Person (including the Company) of any agreement, lease,
license or other arrangement (or series of related agreements, leases, licenses
or other arrangements) involving more than $30,000.00 to which the Company is a
party or by which it is bound;
(d) any Lien imposed upon any of the assets or properties of
the Company;
(e) any capital expenditure (or series of related capital
expenditures) made by the Company either involving more than $50,000.00 or which
is outside the ordinary course of business consistent with past practice;
(f) any capital contribution to or investment in, any loan to,
or any acquisition of the securities or assets of, any other Person (or series
of related investments, loans or acquisitions) by the Company;
(g) any note, bond or other debt security issued or any
indebtedness for borrowed money or capitalized lease obligation created,
incurred, assumed or guaranteed by the Company;
(h) any delay or postponement in the payment of accounts
payable or other Liabilities of the Company either involving more than
$30,000.00 or which is outside the ordinary course of business consistent with
past practice;
(i) any cancellation, compromise, waiver or release of any
right or claim (or series of related rights or claims) by the Company either
involving more than $30,000.00 or which is outside the ordinary course of
business consistent with past practice;
(j) any disposition by the Company of or failure to keep in
effect any rights in, to or for the use of any Intellectual Property, except
where the disposition or failure would not have a Material Adverse Effect;
(k) any change made to, or authorized to be made to, the
certificate of incorporation or bylaws of the Company;
(l) any issuance, sale or other disposition of, or grant of
any options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights or other agreements or commitments that could require the
issuance or sale of, or otherwise cause to become outstanding, any of the
Company's capital stock;
(m) any dividend declared, set aside or paid or any
distribution by the Company with respect to its capital stock (whether in cash
or in kind) or any redemption, purchase or other acquisition of any of its
capital stock;
(n) any damage, destruction or loss experienced by the Company
with respect to its assets or properties involving more than $30,000.00;
(o) any loan or other transaction between the Company and any
of its directors, officers, Employees or independent contractors of the Company,
as applicable;
(p) any employment or collective bargaining agreement entered
into by the Company, or any termination, modification or cancellation of the
terms of any such existing agreement;
(q) any increase in the base compensation of, or any other
change by the Company in the employment terms for, any of the directors or
officers of the Company, any of the Employees or independent contractors of the
Company which is outside of the ordinary course of business consistent with past
practice;
(r) any payment of bonus compensation to any of the directors
or officers of the Company or any of the Employees which is outside of the
ordinary course of business consistent with past practice;
(s) any adoption of, amendment or modification to or
termination of any Employee Benefit Plan or other plan, agreement, commitment or
arrangement for the benefit of any of the directors or officers of the Company
or any of the Employees;
(t) any change by the Company in its accounting methods,
principles or practices;
(u) any tax election which is outside the ordinary course of
business consistent with past practice;
(v) any charitable pledge or contribution by the Company which
is outside of the ordinary course of business consistent with past practice; or
(w) any other material occurrence, event, incident, action,
failure to take action or transaction involving the Company which is outside of
the ordinary course of business consistent with past practices and which could
reasonably be expected to cause a Material Adverse Effect.
3.10 UNDISCLOSED LIABILITIES. The Company does not have any Liability,
except for (a) Liabilities set forth on the Most Recent Balance Sheet; (b)
Liabilities set forth on Schedule 3.10 and (c) Liabilities incurred in the
ordinary course of business consistent with past practices.
3.11 CLAIMS. Except as set forth on Schedule 3.11, (a) there are no
actions, suits, proceedings, hearings, investigations, charges, complaints,
claims or demands of any kind pending or, to the Knowledge of Company,
threatened against or affecting the Company; (b) there are no injunctions,
judgments, orders or decrees of any kind which are outstanding against or
unsatisfied by the Company; and (c) the Company is not charged or, to the
Knowledge of Company, threatened with, or under investigation with respect to,
any alleged violation of any provision of any law, constitution, code, statute
or ordinance or any regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restriction of any Authority relating to the Company or
any aspect of the Business.
3.12 LEGAL COMPLIANCE. Except as set forth on Schedule 3.12, and except
for environmental matters which shall be governed by Section 3.14, (a) the
Company has complied with all applicable laws, constitutions, codes, statutes or
ordinances, or any regulations, rules, injunctions, judgments, orders, decrees,
rulings, charges or other restrictions of all Authorities applicable to the
Company; and (b) the Company has obtained all franchises, approvals, permits,
licenses, orders, registrations, certificates, variances or similar rights
required to be obtained by the Company from an Authority in order to conduct the
Business, except where the failure to obtain such franchises, approvals,
permits, licenses, orders, registrations, certificates, variances or similar
rights would not have a Material Adverse Effect, and such franchises, approvals,
permits, licenses, orders, registrations, certificates, variances or similar
rights are current and have not been revoked, suspended, canceled or terminated.
3.13 REAL PROPERTY. The Company does not own any real property. Set
forth on Schedule 3.13 is a list and brief description, including address
location, of all real property leased or subleased to or by the Company,
excluding the Andover License, San Francisco Lease, the San Francisco Lease
Amendment and the Chicago Leases (the "Leased Real Property"). Correct, accurate
and complete copies of the leases and subleases for the Leased Real Property, as
amended to date, are attached to Schedule 3.13. With respect to each lease or
sublease for the Leased Real Property:
(a) the lease or sublease is legal, valid, binding,
enforceable and in full force and effect;
(b) the lease or sublease will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms immediately
following the consummation of the transactions contemplated hereby;
(c) neither the Company, nor, to the Knowledge of Company, any
other party to the lease or sublease is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default by the Company or permit termination, modification or acceleration
thereunder;
(d) neither the Company, nor, to the Knowledge of Company, any
other party to the lease or sublease has overtly repudiated any provision
thereof;
(e) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(f) to the Knowledge of Company, all buildings, improvements
or facilities leased or subleased thereunder have received all approvals of
Authorities (including licenses, permits, certificates, authorizations or
registrations) required in connection with the operation
thereof and have been operated and maintained in accordance with applicable
laws, statutes, constitutions and ordinances and all applicable rules and
regulations of Authorities;
(g) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, imposed a Lien on or encumbered any interest in the
leasehold or subleasehold;
(h) all buildings, improvements or facilities leased or
subleased thereunder are supplied with utilities and other services necessary
for the operation of said facilities as presently conducted; and
(i) none of the Leased Real Property contains any patent
defects, or to the Knowledge of Company, latent defects.
3.14 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.14, (a)
the Company has complied with the Environmental Laws in all respects (and no
notice, citation, summons, charge or order has been issued, to the Knowledge of
Company, no complaint has been filed, no penalty has been assessed and no
action, suit, proceeding, hearing, investigation or review is pending or, to the
Knowledge of Company, threatened by any Authority against the Company alleging
any such failure to comply); (b) the Company has obtained and been in compliance
with all of the terms and conditions of all licenses, permits, certificates,
approvals, authorizations and registrations which are required to be obtained by
the Company from an Authority under the Environmental Laws; (c) the Company has
complied in all respects with all other applicable limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables which are contained in the Environmental Laws; and (d) to the
Knowledge of Company, no Hazardous Substance Release is occurring on any of the
Leased Real Property, and to the Knowledge of Company, no Hazardous Substance
Release has occurred in the past on or at any real property, including the
Leased Real Property, occupied or used by the Company.
3.15 INTELLECTUAL PROPERTY.
(a) Except as set forth on Schedule 3.15(a), the Company owns
or has the right to use pursuant to license, sublicense, agreement, permission
or otherwise, all Intellectual Property and, to the Knowledge of the Company,
all Patents used by the Company in the operation of the Business as presently
conducted. Each item of Intellectual Property and each Patent owned by the
Company or used by the Company in the operation of the Business as of the
Closing will be owned or available for use by the Company on identical terms and
conditions immediately subsequent to the Closing, except where a failure of the
foregoing would not have a Material Adverse Effect. The Company has taken
reasonable measures to maintain and protect each item of Intellectual Property
and each Patent owned by the Company or used by the Company in the operation of
the Business.
(b) (i) The Company has not infringed upon, misappropriated,
or otherwise violated any Intellectual Property rights of any other Person, and
the Company has not received any charge, complaint, claim, demand, or notice
alleging any such infringement, misappropriation or violation (including any
claim that the Company must license or refrain from using any Intellectual
Property rights of any other Person). To the Knowledge of Company, no other
Person has interfered with, infringed upon, misappropriated or otherwise
conflicted with any Intellectual Property rights of the Company.
(ii) Except as set forth on Schedule 3.15(b), to the
Knowledge of Company, the Company has not infringed upon, interfered with,
misappropriated, or otherwise violated any existing Patent rights of any other
Person enforceable in the United States, and the Company has not received any
charge, complaint, claim, demand, or notice alleging any such infringement,
misappropriation or violation (including any claim that the Company must license
or refrain from using any Patent rights of any other Person). To the Knowledge
of Company, no other Person has infringed upon, interfered with, misappropriated
or otherwise violated any Patent rights of the Company.
(c) Set forth on Schedule 3.15(c) is (i) a list of each Patent
or Patent registration which has been issued to or submitted by the Company, the
date of issuance of each Patent or registration and the item or invention to
which each patent or registration corresponds; (ii) a list of each pending
Patent application or application for registration which has been made with
respect to any of the Patents owned by the Company, the date of each application
and the item or invention which is referenced in each application; and (iii)
except for licenses granted to the Company's clients in the ordinary course of
business allowing the client to use one or more of the Company's products or
services, a list of each license, agreement or other permission which has been
granted by the Company to any other Person with respect to any of the
Intellectual Property or Patents of the Company (together with any exceptions)
and the date of each license, agreement or permission and the item of
Intellectual Property or Patent which is the subject of each license, agreement
or permission. With respect to each item of Intellectual Property or Patent set
forth on Schedule 3.15(c):
(w) the Company possesses all right, title and
interest in and to the item, free and clear of all Liens or licenses;
(x) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, charge or other restriction of any
Authority;
(y) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
Knowledge of Company, threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(z) the Company has not agreed to indemnify any other
Person for or against any infringement, misappropriation or other conflict with
respect to the item, except in connection with licenses granted to the Company's
clients in the ordinary course of business allowing the client to use one or
more of the Company's products or services.
(d) Set forth on Schedule 3.15(d) is a list of each item of
Intellectual Property and each Patent that any other Person owns and that the
Company uses pursuant to license, sublicense, agreement, permission or otherwise
and is material to the Business and a description of each such license,
sublicense, agreement, permission or other right to use. With respect to each
item of Intellectual Property or Patent set forth on Schedule 3.15(d).
(i) the license, sublicense, agreement, permission or
other right to use covering the item is legal, valid, binding, enforceable and
in full force and effect;
(ii) the license, sublicense, agreement, permission
or other right to use will continue to be legal, valid, binding, enforceable and
in full force and effect on substantially identical terms following the
consummation of the transactions contemplated by this Agreement;
(iii) neither the Company nor, to the Knowledge of
Company, any other party to the license, sublicense, agreement, permission or
other right to use is in breach or default, and to the Knowledge of Company, no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification or acceleration thereunder;
(iv) neither the Company nor, to the Knowledge of
Company, any other party to the license, sublicense, agreement, permission or
other right to use has repudiated any provision thereof;
(v) the Company's use of the item is not subject to
any outstanding injunction, judgment, order, decree, ruling, charge or
restriction of any Authority;
(vi) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the
Knowledge of Company, threatened which challenges the legality, validity or
enforceability of the Company's use of the item which would have a Material
Adverse Effect; and
(vii) the Company has not granted any sublicense or
similar right with respect to the license, sublicense, agreement, permission or
other right to use, except as permitted.
(e) Set forth on Schedule 3.15(e) is a list of, and number of
licenses, if applicable, for all computer software (including data and related
documentation) used in connection with the Business as presently conducted (the
"Software"). The number of licenses owned by the Company for each item of
Software is sufficient to conduct the Business as presently conducted with
respect to each item of Software set forth on Schedule 3.15(e), except where a
failure of the foregoing would not have a Material Adverse Effect. With respect
to each item of Software set forth on Schedule 3.15(e):
(i) neither of the Company nor any Employee, agent of
the Company or any independent contractor engaged by the Company has developed
or assisted in the enhancement of the item or in the development of any program
or product based on the item or any part thereof where such enhancement or
development would be considered a derivative work of such Software and owned by
the vendor of such Software; and
(ii) to the Knowledge of Company, no Employee, agent
of the Company or any independent contractor engaged by the Company is now in
default under any term of any agreement, noncompetition arrangement or
restrictive covenant relating to the item or its development or exploitation.
In addition with respect to Software set forth on Schedule 3.15(e) that
the Company is developing or has developed, or which is being developed or was
developed for the Company, the Company has kept secret and has not disclosed the
source code to any other Person other than certain Employees who are subject to
the terms of a binding confidentiality agreement with respect thereto. The
Company has taken all appropriate measures to protect the confidential and
proprietary nature of such Software, including the use of confidentiality
agreements with all of its Employees having access to the source and object code
of such Software.
(f) Schedule 3.15(f) contains a complete and accurate list and
summary description of all Domain Names, including the date of expiration of
each Domain Name. With respect to each Domain Name set forth on Schedule
3.15(f):
(i) the Domain Name has been registered in the name
of the Company;
(ii) the Domain Name while registered in the name of
the Company has not been and is not now involved in any dispute, opposition,
invalidation or cancellation proceeding and, to the Knowledge of Company, no
such action is threatened with respect to the Domain Name;
(iii) to the Knowledge of Company, there is no
registered domain name owned by any other Person which is confusingly similar to
the Domain Name which has drawn customers or potential customers away in
material numbers from the web site(s) used by the Company; and
(iv) the Domain Name does not infringe and, to the
Knowledge of Company, is not alleged to infringe the trademark or service mark
of any other Person.
(g) Set forth on Schedule 3.15(g) is a list of the top 15
customers, by dollar volume, of the Company and the top 15 suppliers, by dollar
volume, of the Company for each of the last 3 calendar years. To the Knowledge
of Company, none of the customers or suppliers intend to cease doing business
with, or materially alter the amount or nature of the business that each is
doing with, the Company.
3.16 ASSETS; CONDITION OF TANGIBLE ASSETS. Except (a) for Intellectual
Property, Patents and Software which shall be governed by Section 3.15 above,
(b) as set forth on Schedule 3.16(a), (c) for the Chicago Leases and the San
Francisco Lease, and (d) for the Stockholder Leased Equipment, the assets of the
Company as of the Closing Date includes all assets and properties which are
necessary for the operation of the Business. Each such tangible asset has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), is suitable for the
purposes for which it presently is used and contains no patent defects or, to
the Knowledge of Company, latent defects, either of which could reasonably be
expected to render such asset unsuitable for the purposes for which it presently
is used.
3.17 TITLE TO ASSETS. Except (a) for Intellectual Property, Patents and
Software which shall be governed by Section 3.15 above, (b) as set forth on
Schedule 3.16(a), (c) for the Chicago Leases and the San Francisco Lease, and
(d) for the Stockholder Leased Equipment, the Company owns, leases or has the
right to use (via license, permission or other rights), all tangible and
intangible assets and properties of every kind, character and description used
in the Business, free and clear of all Liens (except for Liens on leased
equipment as set forth on Schedule 3.17), and including, but not limited to, the
assets listed on Exhibit "A" to that certain Lease Termination Agreement dated
as of the 28th day of February, 2003 by and between 222 South Riverside, LLC and
the Company.
3.18 [INTENTIONALLY OMITTED.]
3.19 EMPLOYEES; EMPLOYMENT MATTERS.
(a) Set forth on Schedule 3.19(a) is a complete and accurate
list of the following information for each of the Employees, including each
Employee on leave of absence or layoff status: name, job title, current
compensation paid or payable and any change in compensation since July 31, 2002,
vacation accrued and service credited for purposes of vesting or eligibility to
participate under any of the Employee Benefit Plans.
(b) Set forth on Schedule 3.19(b) is a complete and accurate
list of the following information for each retired Employee or his dependents
receiving benefits or scheduled to receive benefits in the future: name,
Employee benefit, Employee benefit option election, retiree medical insurance
coverage, retiree life insurance coverage and other benefits.
(c) Except as set forth on Schedule 3.19(c), to the Knowledge
of Company, no executive, officer or key Employee or group of Employees has any
plans to terminate employment with the Company.
(d) The Company is not a party to or bound by any collective
bargaining agreement and has not experienced any strikes, grievances, claims of
unfair labor practices or other collective bargaining disputes. The Company has
not committed any unfair labor practice. No organizational effort is presently
being made or, to the Knowledge of Company, threatened by or on behalf of any
labor union with respect to the Employees.
3.20 SALES REPRESENTATIVES, DEALERS AND DISTRIBUTORS. Except as set
forth on Schedule 3.20, the Company is not a party to any contract or agreement
with any Person under which such other Person is a sales agent, representative,
dealer or distributor of any of the products or services of the Company, and
which by its terms cannot be terminated at-will or on not more than 30 days'
prior notice, and there has been no change in the rate of compensation paid or
payable to any such Person since July 31, 2002.
3.21 MATERIAL CONTRACTS.
(a) Set forth on Schedule 3.21 is a list of the following
contracts and other agreements, whether written or oral, to which the Company is
a party (collectively, the "Material Contracts"):
(i) any agreement (or group of related agreements)
for the lease of personal property to or from any Person providing for lease
payments in excess of $50,000.00 per year;
(ii) any agreement (or group of related agreements)
for the purchase or sale of commodities, supplies, products or other personal
property, or for the furnishing or receipt of services, the performance of which
will extend over a period of more than 1 year, result in a loss to the Company
or involve consideration in excess of $75,000.00;
(iii) any agreement concerning a partnership or joint
venture with any Person;
(iv) any agreement (or group of related agreements)
under which any indebtedness for borrowed money or capitalized lease obligation
has been created, incurred, assumed or guaranteed;
(v) any agreement (or group of related agreements)
pursuant to which any Lien has been granted or imposed on any assets or
properties of the Company;
(vi) any agreement concerning noncompetition,
noninterference, nondisclosure or confidentiality obligations imposed on the
Company;
(vii) any agreement with Stockholder or any other
Affiliate of Stockholder or the Company;
(viii) any Employee Benefit Plan or other plan,
contract, commitment or arrangement for the benefit of the Company's current or
former directors or officers or its current or former Employees;
(ix) any collective bargaining agreement or other
labor agreement;
(x) any agreement for the employment of any
individual on a full-time, part-time, consulting or other basis or providing for
severance benefits or payments of any kind upon termination of employment of any
individual;
(xi) any agreement under which the Company has
advanced or loaned any amount to any of its directors or officers or to any of
its Employees;
(xii) any agreement under which the consequences of a
default or termination is reasonably likely to have a Material Adverse Effect;
or
(xiii) any other agreement (or group of related
agreements) the performance of which involves consideration in excess of
$50,000.00 per year.
The Company has delivered to Purchaser a correct and complete copy of
each written Material Contract, as amended to date, and a written summary
setting forth the terms and conditions of each oral Material Contract. With
respect to each Material Contract: (i) the Material Contract is legal, valid,
binding and enforceable and in full force and effect; (ii) the consummation of
the transactions contemplated by this Agreement will not result in a breach, or
constitute a default under the Material Contract and will not give any Person
the right to accelerate, terminate or modify the Material Contract; (iii)
neither the Company nor, to the Knowledge of Company, any other party is in
breach or default, and to the Knowledge of Company, no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification or acceleration, under the Material Contract; and (iv)
to the Knowledge of Company, no party to a Material Contract has repudiated any
provision of the Material Contract.
3.22 EMPLOYEE BENEFIT PLANS.
(a) Set forth on Schedule 3.22 is a true and complete list of
each Employee Benefit Plan of the Company or the Stockholder providing benefits
to any Employee, retiree, former Employee, director or consultant of the
Company, or any of their dependents, survivors or beneficiaries, to which the
Company is a party, which is maintained or contributed to by the Company or the
Stockholder, or with respect to which the Company could incur material liability
under Section 4069, 4201 or 4212(c) of ERISA (the "Company's Employee Benefit
Plans"). Each of the Company's Employee Benefit Plans complies in form and in
operation in all material respects with the applicable requirements of ERISA,
COBRA, the Code and any other applicable laws, statutes, constitutions or
ordinances, or rules or regulations of all Authorities. The Company shall not be
required to "gross up" or otherwise compensate any Person because of the
imposition of any excise Taxes on a payment pursuant to an Employee Benefit Plan
to such Person.
(b) Attached to Schedule 3.22 are correct, accurate and
complete copies of (i) all documents evidencing each of the Company's Employee
Benefit Plans, as amended (or correct, accurate and complete written summaries
of such Employee Benefit Plans to the extent not evidenced by such documents);
(ii) all documents evidencing trusts relating to Company's Employee Benefit
Plans, as amended; (iii) where applicable, the last filed Form 5500 or 5500-C
with respect to each of the Company's Employee Benefit Plans; (iv) the Form
PBGC-1 filed in each of the most recent three plan years for each such Employee
Pension Benefit Plan that is subject to Title IV of ERISA, and (v) where
applicable, the audited financial statements of each of the Company's Employee
Benefit Plans, and all schedules and exhibits to all such documents listed in
Subsections (i)-(v). Attached to Schedule 3.22 are correct, complete and
accurate copies of the actuarial reports performed on the last valuation date
for each such Employee Pension Benefit Plan. The Company or the Stockholder, as
applicable, has timely filed all Forms 5500, 5500-C or PBGC-1, as applicable,
required to be filed for each of the Company's Employee Benefit Plans.
(c) Each of the Company's Employee Benefit Plans which is
intended to qualify under Section 401(a) of the Code or under Section 501(c)(9)
of the Code has received a favorable determination letter, and the related
trusts have been determined to be exempt from taxation. Attached to Schedule
3.22 is a copy of the most recent determination letter with respect to each of
the Company's Employee Benefit Plans and nothing has occurred since the date of
such determination letter that would cause the loss of such qualification or
exemption, and no assessment of any Taxes has been made or, threatened in
writing against the Company or the Stockholder, or any related trust of any of
the Company's Employee Benefit Plans on the basis of a failure of such
qualification or exemption. Except as set forth on Schedule 3.22(c), the
consummation of the transactions contemplated by this Agreement shall not result
in the payment, vesting or acceleration of any benefit under the Company's
Employee Benefit Plans.
(d) With respect to each Employee Pension Benefit Plan of the
Company or the Stockholder in which the Company participates or has
participated, except as provided on Schedule 3.22(d) (i) neither the Company nor
the Stockholder has withdrawn from such Employee Pension Benefit Plan during a
plan year in which it was a "substantial employer" (as defined in Section
4001(a)(2) of ERISA) where such withdrawal could result in liability of such
substantial employer pursuant to Section 4062(e) or 4063 of ERISA, (ii) neither
the Company nor the Stockholder has filed a notice of intent to terminate any
such Employee Pension Benefit Plan or adopted any amendment to treat any such
Employee Pension Benefit Plan as terminated, (iii) the PBGC has not instituted
proceedings to terminate any such Employee Pension Benefit Plan, (iv) no other
event or condition has occurred which might constitute grounds under Section
4042 of ERISA for termination of, or the appointment of a trustee to administer,
any such Employee Pension Benefit Plan (v) no accumulated funding deficiency,
whether or not waived, exists with respect to any such Employee Pension Benefit
Plan, and no condition has occurred or exists which with the passage of time
would be expected to result in an accumulated funding deficiency as of the last
day of the current plan year of any such Employee Pension Benefit Plan, (vi)
since the last valuation date for each Employee Pension Benefit Plan no event
has occurred or circumstances exist that would increase the amount of benefits
under any such Employee Pension Benefit Plan or that would cause the excess of
plan assets over benefit liabilities (as defined in Section 4001 of ERISA) to
decrease, or the amount by which benefit liabilities exceed plan assets to
increase, (vii) all required premium payments to the PBGC have been paid when
due, and (viii) within the three-year period ending on the date of this
Agreement, no reportable event, as described in Section 4043 of ERISA, has
occurred with respect to any such Employee Pension Benefit Plan.
(e) All costs of any of the Company's Employee Benefit Plans
which are sponsored by the Company and subject to Title IV of ERISA have been
provided for on the basis of consistent methods in accordance with sound
actuarial assumptions and practices.
(f) Each Employee Welfare Benefit Plan included in the
Company's Employee Benefit Plans has, to the extent applicable, at all times
been in compliance in all
material respects with the provisions of Section 4980B of the Code and Parts 6
and 7 of Title I of ERISA. Except as disclosed on Schedule 3.22, none of the
Employee Welfare Benefit Plans provides or promises post-retirement health or
life benefits to current Employees or retirees of the Company beyond their
retirement date or other termination of service, except as required by
applicable law.
(g) Except as disclosed on Schedule 3.22, (1) all
contributions by the Company which are due under the terms of each of the
Company's Employee Benefit Plans have been made by the due date thereof and all
contributions by the Company for any period ending on or before the Closing Date
which are not yet due have been paid or properly accrued in the Financial
Statements in accordance with applicable law and will be accrued on the Closing
Balance Sheet and (2) all contributions by the Stockholder which are due under
the terms of each of the Company's Employee Benefit Plans have been made by the
due date thereof and all contributions by the Stockholder for any period ending
on or before the Closing Date which are not yet due will be paid by the
Stockholder by the due date. All premiums or other payments for all periods
ending on or before the Closing Date have been (or prior to the Closing Date
will be) paid with respect to each of the Company's Employee Benefit Plans.
(h) No Person under common control with the Company (as common
control is determined pursuant to Section 414(b) or (c) of the Code) has
maintained or contributed to or in any way directly or indirectly has any
Liability (whether contingent or otherwise) with respect to any "multiemployer
plan", within the meaning of Section 3(37) or 4001(a)(3) of ERISA, or any other
benefit plan subject to Title IV of ERISA or Section 412 of the Code.
(i) With respect to the Company's Employee Benefit Plans, no
event has occurred and there exists no condition or set of circumstances, in
connection with which the Company could be subject to any Liability under the
terms of the Company's Employee Benefit Plans, ERISA, the Code or any other
applicable law which Liability would have a Material Adverse Effect on the
Company. No legal action, suit or claim is pending or threatened in writing with
respect to any of the Company's Employee Benefit Plans (other than routine
claims for benefits in the ordinary course).
(j) No "prohibited transaction" as such term is defined in
Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to
any of the Company's Employee Benefit Plans.
3.23 INSURANCE. Set forth on Schedule 3.23 is a complete and correct
list of all policies of insurance under which Company is insured, specifying for
each policy the carrier, the risks insured, the amounts of coverage, the
deductible, the premium rate, the expiration date and any pending claims
thereunder. All such policies are outstanding and in full force and effect and
will remain so until the Closing and, to the Knowledge of Company, any pending
claims under such policies do not exceed the policy limits of such policies.
Schedule 3.23 describes any self-insurance arrangements affecting or maintained
by the Company.
3.24 WORK PRODUCT. Except as set forth on Schedule 3.24, the Company
has not entered into, or offered to enter into, any agreement, contract,
commitment or other arrangement (whether written or oral) pursuant to which the
Company is or will be obligated to make any rebates, discounts, promotional
allowances or similar payments or arrangements to any customer ("Rebate
Obligations"). Schedule 3.24 sets forth a true and correct listing of all
warranty claims made with respect to products or services of the Company sold to
others over the last 5 years to which any purchaser may return any products or
demand a refund on services provided. All Rebate Obligations set forth on
Schedule 3.24 are reflected in the
Financial Statements or have been incurred after the date thereof in the
ordinary course of business consistent with past practice and will be reflected
in the Closing Balance Sheet.
3.25 TAXES.
(a) Except as set forth on Schedule 3.25(a), (i) all returns
of or for Taxes of the Company, including all information returns, required to
be filed by or with respect to the Company (collectively, "Tax Returns") have
been filed on a timely basis, (ii) all Taxes which are shown to be due on such
Tax Returns have been paid, and all other Taxes as are due have been paid,
except such Taxes as are being contested in good faith by appropriate
proceedings (to the extent that any such proceedings are required) and with
respect to which the Company is maintaining reserves or accruals in its
Financial Statements in an amount equal to the Taxes being contested, (iii)
accruals and reserves for Taxes of the Company have been maintained in
accordance with GAAP, and (iv) all consolidated federal and combined and/or
unitary state income tax returns of or for Taxes of the Stockholder required to
be filed by or with respect to the Stockholder and which include the income or
loss of the Company have been filed on a timely basis and all Taxes which are
shown to be due on such tax returns have been paid except such Taxes as are
being contested in good faith by appropriate proceedings (to the extent that any
such proceedings are required), and the Company shall not incur any Liability
for any Taxes relating to periods prior to the Closing, except as accrued for on
the Closing Balance Sheet.
(b) All Tax Returns have been prepared in all material
respects in accordance with all applicable federal, state, local or foreign
laws, constitutions, codes, statutes or ordinances and accurately reflect the
taxable income or other measure of Tax. To the Knowledge of Company, no claim
has ever been made by an Authority in a jurisdiction where Tax Returns are not
filed by or with respect to the Company that the Company is or may be subject to
taxation in that jurisdiction.
(c) No Tax Return filed by or with respect to the Company has
been audited by an Authority and there are no pending or, to the Knowledge of
Company, threatened actions, suits, proceedings, disputes, investigations,
charges, claims or demands of any kind relating to Taxes of the Company or the
Tax Returns.
(d) No waiver of any statute of limitations with respect to,
or any extension of a period for the assessment of, any Tax of the Company has
been granted.
(e) Except as set forth on Schedule 3.25(e), the Company does
not have any Liability for the Taxes of any Person (other than the Company)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law) as a transferee or successor by contract or otherwise.
3.26 INTERCOMPANY TRANSACTIONS. Except as set forth on Schedule 3.26,
no Employee, director, officer or Affiliate of the Company or any entity in
which any such Person owns any beneficial interest, is a party to any agreement,
contract, commitment or other form of transaction or arrangement with the
Company or has an interest in any of the assets or any property used by the
Company in connection with the Business as presently conducted.
3.27 BROKERS. Except for Petsky Prunier LLC, whose fees and other costs
and expenses shall be the sole responsibility of Stockholder, the Company
represents and warrants that there are no other brokers or finders involved with
this transaction, and the Company has not made any agreement or taken any other
action which might cause any Person, except for
Petsky Prunier LLC, to become entitled to a broker's or finder's fee or
commission as a result of this transaction.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Each of Purchaser and Corporate T represents and warrants to the
Company and Stockholder as of the date of this Agreement and as of the Closing
Date as follows:
4.1 ORGANIZATION AND GOOD STANDING. Each of Purchaser and Corporate T
is a corporation duly incorporated, validly existing and in good standing under
the laws of the state of Delaware.
4.2 AUTHORITY AND ENFORCEABILITY. Each of Purchaser and Corporate T has
full corporate power and authority to execute, deliver and perform this
Agreement and the execution, delivery and performance of this Agreement by each
of Purchaser and Corporate T have been duly authorized by all necessary
corporate action on the part of Purchaser and Corporate T. This Agreement has
been duly executed and delivered by each of Purchaser and Corporate T and
constitutes the valid and legally binding obligation of each of Purchaser and
Corporate T, enforceable in accordance with its terms. Except as set forth on
Schedule 4.2, neither Purchaser nor Corporate T is required to give any notice
to, make any filing with or obtain any authorization, consent or approval of any
Authority or Person in order for the parties to consummate the transactions
contemplated by this Agreement.
4.3 NONCONTRAVENTION. The execution or delivery of this Agreement (or
the consummation of the transactions contemplated hereby) will not (a) violate
any law, constitution, code, statute or ordinance or any regulation, rule,
injunction, judgment, order, decree, ruling, charge or other restriction of any
Authority to which Purchaser or Corporate T is subject, (b) violate any
provision of the certificate of incorporation or bylaws, as amended, or any
resolution adopted by the board of directors or shareholders of Purchaser or
Corporate T or (c) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, give any Person the right to accelerate,
terminate, modify or cancel, or require any notice under, any agreement,
license, permit, authorization, instrument or other arrangement to which
Purchaser or Corporate T is a party or by which it is bound or to which any of
its assets or properties are subject (or result in the imposition of a Lien upon
any of its assets).
4.4 OWNERSHIP AND OPERATIONS OF CORPORATE T. Corporate T has engaged in
no business activities other than the transactions contemplated hereby and has
conducted its operations only as contemplated hereby. All of the issued and
outstanding shares of capital stock of Corporate T are owned by Purchaser and
there are no other outstanding shares of capital stock of Corporate T or any
outstanding securities convertible into or exchangeable for shares of capital
stock of Corporate T.
4.5 BROKERS. Except as set forth in Section 3.27, there are no brokers
or finders known to Purchaser or Corporate T to be involved with this
transaction and neither Purchaser nor Corporate T has made any agreement or
taken any other action which might cause any Person to become entitled to a
broker's or finder's fee or commission as a result of this transaction.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES
OF STOCKHOLDER
Stockholder represents and warrants to the Purchaser as of the date of
this Agreement and as of the Closing Date as follows:
5.1 ORGANIZATION AND GOOD STANDING. The Stockholder is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
5.2 AUTHORITY AND ENFORCEABILITY. Stockholder has full power and
authority, including full corporate power and authority, to execute, deliver and
perform this Agreement and the execution, delivery and performance of this
Agreement by Stockholder has been duly authorized by all necessary corporate
action on the part of Stockholder. This Agreement has been duly executed and
delivered by Stockholder and constitutes the valid and legally binding
obligation of Stockholder, enforceable in accordance with its terms. Stockholder
is not required to give any notice to, make any filing with or obtain any
authorization, consent or approval of any Authority or Person in order for the
parties to consummate the transactions contemplated by this Agreement.
5.3 NONCONTRAVENTION. The execution or delivery of this Agreement (or
the consummation of the transactions contemplated by this Agreement) will not
(a) violate any law, constitution, code, statute or ordinance, or any
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any Authority to which Stockholder is subject, (b) violate any
provision of the certificate of incorporation or bylaws, as amended, or any
resolution adopted by the board of directors or shareholders of Stockholder, or
(c) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, give any Person the right to accelerate, terminate, modify
or cancel, or require any notice under, any material agreement, license, permit,
authorization, instrument or other arrangement to which Stockholder is a party
or by which Stockholder is bound or to which any of the assets or properties of
Stockholder are subject (or result in the imposition of any Lien upon any of
such assets).
5.4 TITLE TO SERIES A PREFERRED STOCK. Stockholder is the sole and
exclusive record and beneficial holder and owner of the Series A Preferred
Stock, free and clear of all Liens.
5.5 BROKERS. Except as set forth in Section 3.27, there are no brokers
or finders known to Stockholder to be involved with this transaction and
Stockholder has not made any agreement or taken any other action which might
cause any Person to become entitled to a broker's or finder's fee or commission
as a result of this transaction.
ARTICLE 6.
CLOSING AND POST-CLOSING COVENANTS
The parties agree as follows with respect to the period as of and
following the Closing:
6.1 GENERAL. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the parties shall take such further action (including the execution and delivery
of such further instruments and documents) as any other party reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under Article 8).
Stockholder acknowledges and agrees that from and after the Closing Purchaser
shall be entitled to possession of all documents, books, records (including Tax
records), agreements and financial data of any sort relating to the Company.
6.2 POST-CLOSING COOPERATION, ACCESS TO INFORMATION AND RETENTION OF
RECORDS.
(a) Without limiting the generality of Section 6.1,
Stockholder and Purchaser shall cooperate fully with each other after the
Closing so that each party has access to the business records, contracts and
other information existing at the Closing Date and relating in any manner to the
conduct of the Business (whether in the possession of Stockholder or Purchaser).
No files, books or records existing at the Closing Date and relating in any
manner to the conduct of the Business shall be destroyed by any party for a
period of 6 years after the Closing Date without giving the other party at least
30 days' prior written notice, during which time such other party shall have the
right (subject to the provisions of Section 6.2(b)) to examine and to remove any
such files, books and records prior to their destruction. Without limiting the
foregoing, following the Closing, Purchaser agrees to cause the Company to
provide such information and data with respect to the Company as from time to
time may be reasonably requested by the Stockholder with respect to matters
relating to the Stockholder's financial reporting and financial statements, SEC
filings, compliance with the Sarbanes-Oxley Act of 2002, tax returns and audits,
any current and future litigation, and other related matters.
(b) The access to files, books and records contemplated by
Section 6.2(a) shall be during normal business hours and upon not less than 2
days' prior written request, and shall be subject to such reasonable limitations
as the party having custody or control thereof may impose to preserve the
confidentiality of information contained therein.
6.3 STOCKHOLDER LEASED EQUIPMENT. The Stockholder shall use
commercially reasonable best efforts to transfer to the Surviving Corporation
good and marketable title to the Stockholder Leased Equipment by July 31, 2003,
which efforts shall include, but not be limited to, purchasing such equipment at
the sole expense of the Stockholder; provided, however, that Stockholder shall
have no obligation to physically locate, possess, secure or deliver any item
comprising the Stockholder Leased Equipment and shall have no liability to any
party for any failure to so physically locate, possess, secure or deliver any
item comprising the Stockholder Leased Equipment.
6.4 EMPLOYEE MATTERS.
(a) Stockholder shall cause the Company to, prior to the
Closing, pay, or properly and fully accrue on the Closing Balance Sheet as and
to the extent required by GAAP, any and all obligations to any Employees with
respect to any periods prior to the Closing including any obligations arising
out of, or provided by, Company's Employee Benefit Plans.
(b) Purchaser may elect to cause Company to terminate the
employment of Dave Menzel, Scott Stephens, Matt Briesch or Larry Mazurkiewicz
after the Closing. Should Company terminate these Employees without cause within
60 days of the Closing (or 75 days in the case of Matt Briesch and 90 days in
the case of Larry Mazurkiewicz), Stockholder shall reimburse the Company for all
severance obligations it incurs with regard to such Employees arising from the
agreements between such Employees and the Company existing prior to the Closing
listed on Schedule 6.4(b), provided that such agreements are not modified,
amended or altered following the Closing in a manner that would increase the
severance benefits payable thereunder, and provided further that the Company
shall immediately return to the Stockholder all sums paid by the Stockholder
hereunder with respect to any of such Employees that the Company rehires or
engages as an employee, consultant, advisor, director, or otherwise, within one
year following a termination of employment giving rise to such reimbursement
obligation. In
addition, should any of such Employees sign a severance agreement with
Stockholder, Stockholder shall make the Company a third party beneficiary to
such agreement(s).
6.5 TAX MATTERS.
(a) Notwithstanding any other provision herein or in any
confidentiality agreement by and among the parties, in no event shall any
information relating to the structure and tax aspects of the transactions
contemplated by this Agreement be subject to confidentiality if such
confidentiality provisions would reasonably be deemed by any Authority to be a
tax shelter.
(b) The Stockholder shall prepare and file, or cause to be
prepared and filed, all tax returns with respect to all periods through and
including the Closing Date, and Stockholder shall include the income or loss of
the Company (including any deferred items triggered into income by Reg. Section
1.1502-13 and any excess loss account taken into income under Reg. Section
1.1502-19) in Stockholder's consolidated federal income tax returns and in its
combined and/or unitary state tax returns for all periods through the Closing
Date and pay any Taxes shown to be due on such tax returns. The income or loss
attributable to such periods shall be determined by closing the books of the
Company as of the Closing Date. Purchaser shall have the right to review and
comment on any such tax returns prepared by Stockholder. Purchaser shall cause
the Company to furnish information to Stockholder as reasonably requested by
Stockholder to allow Stockholder to satisfy its obligations under this section
in accordance with past custom and practice. The Company and Purchaser shall
consult and cooperate with Stockholder as to any elections to be made on tax
returns of the Company for periods ending on or before the Closing Date. The
Company shall retain all books and records related to Taxes pertinent to the
Company relating to any taxable period prior to the Closing Date until the
expiration of the relevant statute of limitations. The Purchaser shall prepare
and file, or cause to be prepared and filed, all tax returns with respect to the
Company for all periods following the Closing Date, and Purchaser shall include
the income or loss of the Company in its combined or consolidated income tax
returns for periods other than periods ending on or before the Closing Date and
the Purchaser shall be responsible for paying any Taxes shown to be due on such
tax returns.
(c) Stockholder shall allow the Company and its counsel to
participate in any audit of Stockholder's consolidated federal income tax
returns to the extent that such returns relate to the Company.
(d) Stockholder shall not settle any audit of a Stockholder
consolidated federal income tax return to the extent that such audit relates to
the Company in a manner which would adversely affect the Company after the
Closing Date, without the prior written consent of the Purchaser whose consent
shall not be unreasonably withheld.
6.6 NONCOMPETITION, NONINTERFERENCE AND CONFIDENTIALITY AGREEMENT. At
the Closing, Stockholder, the Company and Purchaser shall enter into a 5 year
noncompetition, noninterference and confidentiality agreement, substantially in
the form of Exhibit 6.6 (the "Noncompetition Agreement").
6.7 TRANSITION SERVICES AGREEMENT. At the Closing, the Company and
Stockholder shall enter into a Transition Services Agreement, substantially in
the form of Exhibit 6.7 (the "Transition Services Agreement").
6.8 FRANKOWITZ INDEMNIFICATION AGREEMENT. At or prior to the Closing,
the Company and Stockholder shall enter into an Agreement regarding the
indemnification by Stockholder with respect to the lawsuit entitled Helen
Frankowitz v. CMGI, Inc., Yesmail, Inc., Mars Acquisition, Inc. and David
Tolmie, Case No. 02-60822-CIV-MORENO/GARBER, pending in the United States
District Court for the Southern District of Florida, substantially in the form
of Exhibit 6.8 (the "Frankowitz Indemnification Agreement").
6.9 SAN FRANCISCO LEASE AMENDMENT. At or prior to the Closing, the
Company and Stockholder shall enter into an Amendment to the San Francisco
Lease, substantially in the form of Exhibit 6.9 (the "San Francisco Lease
Amendment").
6.10 GREAT LAKES LEASE ASSIGNMENT. At or prior to the Closing, the
Company and Stockholder shall enter into an Assignment and Assumption Agreement,
substantially in the form of Exhibit 6.10 (the "Great Lakes Lease Assignment").
6.11 RIVERSIDE LEASE TERMINATION AGREEMENT. At or prior to the Closing,
the Company and the Riverside Lease Landlord shall enter into a Termination
Agreement, substantially in the form of Exhibit 6.11 (the "Riverside Lease
Termination Agreement").
6.12 OFFICE FURNITURE AND TELEPHONE EQUIPMENT. Purchaser shall not
remove any Office Furniture and Telephone Equipment from the Riverside Lease
premises at any time or for any reason without the prior written consent of the
Riverside Lease Landlord. Purchaser shall cause Surviving Corporation not to
remove any Office Furniture and Telephone Equipment from the Riverside Lease
premises at any time or for any reason without the prior written consent of the
Riverside Lease Landlord.
6.13 RIVERSIDE LEASE PREMISES. Following the Closing, Purchaser shall
cause Surviving Corporation to perform all of its obligations under the
Riverside Lease and the Riverside Lease Termination Agreement, including without
limitation vacating the Riverside Lease premises prior to May 31, 2003, and
Purchaser shall cause Surviving Corporation to not take any action or omit to
take any action that would result in a breach or default under either the
Riverside Lease or the Riverside Lease Termination Agreement.
6.14 401(k) ACCOUNTS. Purchaser will not assume any obligations of
Stockholder under any Employee Benefit Plans of the Stockholder, and will not
merge any individual Employee 401(k) accounts with or into any Employee Benefit
Plan of Purchaser.
6.15 ANDOVER LICENSE. At or prior to the Closing, the Company and
Stockholder shall enter into a License Agreement, substantially in the form of
Exhibit 6.15 (the "Andover License").
ARTICLE 7.
CONDITIONS PRECEDENT TO THE CLOSING
7.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION. The obligation of
Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to the satisfaction, at or prior to the Closing, of
all of the conditions set forth in this Section 7.1. Purchaser may waive any or
all of these conditions in whole or in part without prior notice.
(a) No action, suit or proceeding shall be pending or, to the
Knowledge of Company, threatened before any Authority wherein an unfavorable
injunction, judgment, order, decree, ruling or charge would (i) prevent the
consummation by the Company or the
Stockholder of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling
or charge shall be in effect).
(b) Purchaser shall have received a certificate from the
Company, dated as of the Closing Date, certifying that the conditions specified
in Section 7.1(a) have been satisfied in all respects.
(c) Purchaser shall have received the stock certificates
representing the Series A Preferred Stock.
(d) The Company shall have taken all actions required under,
and shall have procured and delivered to Purchaser all third party consents
contemplated by Section 3.2.
(e) Purchaser shall have received certificates of good
standing or existence for the Company and Stockholder from the secretary of
state of each such entity's state of incorporation and from the secretary of
state for each state where the Company is qualified to do business as a foreign
corporation as set forth on Schedule 3.1, each of which shall be satisfactory to
Purchaser in its reasonable discretion.
(f) Purchaser shall have received the resignations, effective
as of the Closing, of each director of the Company and the resignation of each
officer of the Company from his respective office, but not as an Employee of the
Company.
(g) Stockholder and the Escrow Agent shall have each executed
and delivered to Purchaser the Escrow Agreement, dated as of the Closing Date.
(h) Stockholder and the Company shall have executed and
delivered to Purchaser the Noncompetition Agreement, dated as of the Closing
Date.
(i) Purchaser shall have received documentation from the
Company evidencing the Company's termination of its 2000 Stock Incentive Plan,
which shall be satisfactory to Purchaser in its reasonable discretion.
(j) Stockholder shall have executed and delivered to Purchaser
documentation, to the reasonable satisfaction of Purchaser, releasing all Liens
against the Company from all liability it may have to Stockholder as a result of
any Intercompany Transaction or as a result of its status as an Affiliate of
Stockholder, including, but not limited to, UCC-3 Termination Statement.
(k) The Company and the Riverside Lease Landlord shall have
executed and delivered the Riverside Lease Termination Agreement.
(l) Stockholder and the Company shall have executed and
delivered the San Francisco Lease Amendment.
(m) Stockholder and the Company shall have executed and
delivered the Great Lakes Lease Assignment.
(n) Stockholder and the Company shall have executed and
delivered to Purchaser the Transition Services Agreement, dated as of the
Closing Date, (the "Transition Services Agreement").
(o) Stockholder and the Company shall have executed and
delivered the Frankowitz Indemnification Agreement.
(p) The form and substance of all statements, certificates,
instruments, opinions and other documents or items delivered to Purchaser under
this Agreement shall be satisfactory in all reasonable respects to Purchaser and
its counsel.
7.2 CONDITIONS PRECEDENT TO STOCKHOLDER'S OBLIGATION. The obligation of
Stockholder to consummate the transactions to be performed by it in connection
with the Closing is subject to the satisfaction, at or prior to the Closing, of
all of the conditions set forth in this Section 7.2. Stockholder may waive any
or all of these conditions in whole or in part without prior notice.
(a) No action, suit or proceeding shall be pending or
threatened before any Authority wherein an unfavorable injunction, judgment,
order, decree, ruling or charge would (i) prevent the consummation by the
Purchaser or Corporate T of any of the transactions contemplated by this
Agreement or (ii) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation (and no such injunction, judgment, order,
decree, ruling or charge shall be in effect).
(b) Stockholder shall have received a certificate from
Purchaser, dated as of the Closing Date, certifying that the conditions
specified in Section 7.2(a) have been satisfied in all respects.
(c) Stockholder shall have received from Purchaser the Initial
Merger Consideration and Purchaser shall have delivered to Escrow Agent the
Escrow Amount.
(d) Purchaser shall have taken all actions required under, and
shall have procured and delivered to Stockholder all third party consents
contemplated by Section 4.2.
(e) Purchaser shall have executed and delivered to Stockholder
the Noncompetition Agreement, dated as of the Closing Date.
(f) Purchaser and Escrow Agent shall have each executed and
delivered to Stockholder the Escrow Agreement, dated as of the Closing Date.
(g) The form and substance of all statements, certificates,
instruments, opinions or other documents or items delivered to Stockholder under
this Agreement shall be satisfactory in all reasonable respects to Stockholder
and its counsel.
ARTICLE 8.
INDEMNIFICATION
8.1 GENERAL INDEMNIFICATION OBLIGATIONS.
(a) Stockholder shall indemnify and defend Purchaser and the
Surviving Corporation and hold Purchaser and the Surviving Corporation harmless
from and against any and all Adverse Consequences arising out of, resulting
from, relating to, in the nature of or caused by:
(i) any misrepresentation or breach of any
representation or warranty made by the Company or by the Stockholder in this
Agreement or in any statement, certificate,
instrument or other document or item furnished or delivered or to be furnished
or delivered by the Company or by the Stockholder to Purchaser pursuant to this
Agreement;
(ii) any failure by Stockholder to perform any
covenant or agreement of the Stockholder in this Agreement or in any statement,
certificate, instrument or other document or item furnished or delivered or to
be furnished or delivered by Stockholder to Purchaser pursuant to this
Agreement;
(iii) the Chicago Leases (other than Adverse
Consequences related to or arising from breaches by the Surviving Corporation of
the Riverside Lease or the Riverside Lease Termination Agreement following the
Closing);
(iv) the Company's 2000 Stock Incentive Plan; or
(v) the Stockholder's failure to obtain the IRS
Letter.
(b) Purchaser shall indemnify and defend Stockholder and hold
Stockholder harmless from and against any and all Adverse Consequences arising
out of, resulting from, relating to, in the nature of or caused by:
(i) any misrepresentation or breach of any
representation or warranty made by Purchaser in this Agreement or in any
statement, certificate, instrument or other document or item furnished or
delivered or to be furnished or delivered by Purchaser to Stockholder pursuant
to this Agreement;
(ii) any failure by Purchaser to perform any covenant
or agreement of the Purchaser in this Agreement or in any statement,
certificate, instrument or other document or item furnished or delivered or to
be furnished or delivered by Purchaser to Stockholder pursuant to this
Agreement;
(iii) the Liabilities of the Company set forth on the
face of the Closing Balance Sheet, but only in the amounts set forth on the face
of the Closing Balance Sheet,
(iv) the ownership or operation of the Company on or
after the Closing Date; or
(v) the Residual Value Accrual Liabilities..
(c) Any payments made by Stockholder to an Indemnified Party
pursuant to this Article 8 shall be treated as an adjustment to the Initial
Merger Consideration.
8.2 GENERAL INDEMNIFICATION PROCEDURES.
(a) A party seeking indemnification pursuant to this Article 8
(an "Indemnified Party") shall give notice to the party from whom such
indemnification is sought (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any action, suit or proceeding, in respect of
which indemnity may be sought pursuant to this Article 8 (a "Claim") and will
give the Indemnifying Party such information with respect thereto as the
Indemnifying Party may reasonably request, but failure to give such notice shall
not relieve the Indemnifying Party of any Liability hereunder (except to the
extent that the Indemnifying Party has suffered actual prejudice thereby). The
Indemnifying Party will be entitled to assume the defense of such Claim,
including the employment of counsel and the payment of expenses in connection
with such Claim. Upon written notice by the Indemnifying Party to the
Indemnified
Party that the Indemnifying Party elects to assume such defense, the
Indemnifying Party shall not be liable hereunder for fees and disbursements of
counsel to the Indemnified Party subsequently incurred, other than as provided
herein. Any Indemnified Party may participate in the defense of such Claim at
its own expense. Notwithstanding the assumption of such defense by the
Indemnifying Party, the Indemnified Party will have the right to employ its own
counsel and the Indemnifying Party shall bear the reasonable fees and
disbursements of such counsel only if (i) the Indemnifying Party authorizes the
employment of such counsel, (ii) the Indemnifying Party has failed in its
obligation to employ counsel to take charge of such defense, or (iii) in the
written opinion of the Indemnified Party's counsel, the use of joint counsel
presents a conflict of interest or prevents adequate representation of the
interests of both the Indemnified Party and the Indemnifying Party. Any survival
period time limitation specified in Section 10.4 shall not apply to a Claim
which has been the subject of notice from the Indemnified Party to the
Indemnifying Party given prior to the expiration of such period. For purposes of
this Article 8, including the determination of Claims by Purchaser, any and all
references to a "Material Adverse Effect" or "material" limitations or
limitations as to "Knowledge" in Company's representations and warranties which
determine whether a breach has occurred shall not, if it is ultimately
determined that a breach has occurred, be considered a deductible or a separate
basket (i.e., if it is ultimately determined that a breach has occurred, the
Adverse Consequences shall be calculated from the first dollar of loss).
(b) The Indemnified Party shall not settle or compromise any
Claim for which it is entitled to indemnification hereunder without the prior
written consent of the Indemnifying Party. For purposes of calculating the
monetary amount of Adverse Consequences for which any Claim may be made, a
credit will be given to the extent of any insurance or other recovery received
by an Indemnified Party resulting from such Adverse Consequences or from the
subject matter giving rise to such Adverse Consequences.
(c) Notwithstanding anything to the contrary herein, (1) the
aggregate liability of the Stockholder for Adverse Consequences under this
Agreement shall not exceed $2,500,000.00, and (2) the Stockholder shall not be
liable for Adverse Consequences under this Agreement unless and until the
aggregate amount of Adverse Consequences exceeds $50,000.00 (the "Basket"). Once
the Adverse Consequences exceed $50,000.00, Purchaser shall be entitled to
indemnification for all Adverse Consequences, including the initial $50,000.00;
provided, however, said $2,500,000.00 limitation and the Basket shall not apply
to (i) Claims under Section 8.1(a) relating to a breach of the representation
and warranty of the Company contained in Section 3.25; (ii) Claims under Section
8.1(a) relating to a breach of the representation and warranty of the
Stockholder contained in Section 5.4; (iii) any breach of a covenant of
Stockholder; or (iv) Claims under Section 8.1(a)(iii)-(iv). The rights of the
Indemnified Parties under this Article 8 shall be the sole and exclusive remedy
of the Indemnified Parties with respect to any Claim resulting from or related
to any misrepresentation, breach of warranty or failure to perform any covenant
or agreement contained in this Agreement or in any statement, certificate,
instrument or other document or item furnished or delivered or to be furnished
or delivered pursuant to this Agreement, except with respect to (i) Claims under
Section 8.1(a) relating to a breach of the representation and warranty of the
Company contained in Section 3.25; (ii) Claims under Section 8.1(a) relating to
a breach of the representation and warranty of the Stockholder contained in
Section 5.4; (iii) any breach of a covenant; (iv) Claims under Section
8.1(a)(iii)-(iv); or (v) Claims under Section 8.1(b)(iii)-(v). In addition, the
$2,500,000.00 limitation shall not apply to any Claim under Section 8.1(a)(v).
(d) In no event shall the provisions of this Article 8 in any
way modify or otherwise limit the rights and remedies available to any of the
parties with regard to a claim of fraud. The parties shall be entitled as a
result of misrepresentation, breach or default under this
Agreement, to pursue any and all non-monetary relief to which any of them may
otherwise be entitled at law, in equity or otherwise.
ARTICLE 9. [INTENTIONALLY OMITTED]
ARTICLE 10.
MISCELLANEOUS
10.1 EXPENSES. Except as otherwise set forth in this Agreement,
Stockholder shall pay (without the use of the Company's funds) all costs and
expenses incurred or to be incurred by Stockholder or the Company in the
negotiation and preparation of this Agreement and in closing and carrying out
the transactions contemplated by this Agreement, including all attorneys' fees,
accountants' fees (if any) and related costs and expenses. Except as otherwise
set forth in this Agreement, Purchaser shall pay all costs and expenses incurred
or to be incurred by Purchaser and Corporate T in the negotiation and
preparation of this Agreement and in closing and carrying out the transactions
contemplated by this Agreement, including all attorneys' fees, accountants' fees
and related costs and expenses.
10.2 [INTENTIONALLY OMITTED]
10.3 OTHER PROSPECTIVE PURCHASERS. Purchaser shall not incur any
Liability in connection with the transactions contemplated by this Agreement to
any other Person with whom Stockholder or the Company, or their agents or
representatives, have had negotiations or discussions regarding any potential
merger, sale or exchange of capital stock or other business combination
involving the Company or any proposal or offer to acquire in any manner a
substantial equity interest in the Company or all or a substantial portion of
the assets of the Company.
10.4 SURVIVAL. All representations and warranties of Purchaser,
Corporate T, Stockholder and the Company contained in this Agreement or any
statement, certificate, instrument or other document or item delivered or
furnished pursuant to this Agreement shall survive the Closing and continue
until two years after the Closing Date, except for the representations and
warranties contained in Sections 3.14, 3.15 and 3.25, which shall survive for
the applicable statute of limitations period, and except for the representations
and warranties contained in Section 5.4, which shall survive ad infinitum.
10.5 NOTICES. All notices, consents, requests, instructions, approvals,
demands and other communications provided for herein shall be validly given,
made or served if in writing and delivered personally by hand, by a nationally
recognized overnight courier service (i.e., FedEx or United Parcel Service), or
by United States certified or registered first class mail, postage prepaid with
return receipt requested. Each such notice, consent, request, instruction,
approval, demand or other communication shall be effective if delivered (a)
personally by hand or by a nationally recognized overnight courier service, when
delivered at the address specified in this Section 10.5, or (b) by United States
certified or registered first class mail, on the date appearing on the return
receipt therefor. In the event that a party is unable to deliver a notice,
consent, request, instruction, approval, demand, or other communication due to
the inaccuracy of the address provided by the other party pursuant to this
Section 10.5, or the other party's failure to notify the party of a change of
its address as specified pursuant to this Section 10.5, such notice, consent,
request, instruction, approval, demand, or other communication shall be deemed
to be effective upon confirmation by a nationally recognized overnight courier
service of its failure to complete delivery to the other party's address as set
forth in this Section 10.5 (or other address duly given to the party by the
other party in accordance with this Section 10.5).
Addresses for notices (unless and until written notice is given of any
other address or facsimile transmission number):
If to Purchaser, to: If to Stockholder, to:
infoUSA Inc. CMGI, Inc.
5711 S. 86th Circle 100 Brickstone Square
Omaha, NE 68127 Andover, MA 01810
Attention: Vinod Gupta Attention: General Counsel
with a copy to: with a copy to:
Koley Jessen P.C., Browne Rosedale & Lanouette LLP
A Limited Liability Organization 100 Brickstone Square
One Pacific Place, Suite 800 Andover, MA 01810
1125 South 103rd Street Attention: Kevin P. Lanouette
Omaha, NE 68124-1079
Attention: Roberta L. Christensen
10.6 CONSTRUCTION. Any reference to any federal, state, local or
foreign law, constitution, code, statute or ordinance shall be deemed to include
all rules and regulations promulgated thereunder (by any Authority or
otherwise), any amendments thereto and any successor law, unless the context
otherwise requires. "Including" means "including without limitation" and does
not limit the preceding words or terms. The words "or" and "nor" are inclusive
and include "and". The singular shall include the plural and vice versa. Each
word of gender shall include each other word of gender as the context may
require. References to "Articles" or "Sections" or "Schedules" or "Exhibits"
shall mean Articles or Sections of this Agreement or Schedules or Exhibits
attached to this Agreement, unless otherwise expressly indicated. The title of
each Article and the headings or titles preceding the text of the Sections are
inserted solely for convenience of reference, and shall not constitute a part of
this Agreement, nor shall they affect the meaning, construction or effect of
this Agreement. The parties have each participated in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
10.7 ENTIRE AGREEMENT. This Agreement, including the recitals to this
Agreement, together with all Schedules and Exhibits attached to this Agreement,
including that certain Confidentiality Agreement between Stockholder and
Purchaser dated January 10, 2003, attached as Exhibit 10.7, each of which are
made a part of this Agreement by this reference, constitutes the entire
understanding of the parties and supersedes any prior agreements or
understandings, written or oral, between the parties with respect to the subject
matter of this Agreement, including that certain Letter of Intent between
Stockholder and Purchaser dated January 24, 2003, as amended. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by all of the parties to this Agreement. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
10.8 RIGHTS OF PARTIES. Nothing in this Agreement, whether express or
implied, is intended to confer any benefit, right or remedy under or by reason
of this Agreement on any Persons other than the parties to this Agreement and
their respective successors and permitted assigns, nor is anything in this
Agreement intended to relieve or discharge the obligation or
Liability of any other Person to any party to this Agreement, nor shall any
provision give any other Person any right of subrogation or action over or
against any party to this Agreement.
10.9 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon,
and inure to the benefit of, the parties to this Agreement and their respective
representatives, successors and permitted assigns. None of the parties to this
Agreement may assign either this Agreement or any of the rights, interests or
obligations hereunder without the prior written approval of the other parties;
provided, however, that Purchaser may assign any or all of its rights, interests
or obligations under this Agreement to one or more of its Affiliates (in any or
all of which cases Purchaser nonetheless shall remain responsible to Stockholder
for the performance of all of its obligations under this Agreement).
10.10 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the state of Delaware, without
giving effect to conflict of law principles thereof.
10.11 COUNTERPARTS; EXECUTION BY FACSIMILE. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
but which together shall constitute one and the same instrument. The parties may
execute this Agreement and all other agreements, certificates, instruments and
other documents contemplated by this Agreement and exchange on the Closing Date
counterparts of such documents by means of facsimile transmission and the
parties agree that the receipt of such executed counterparts shall be binding on
such parties and shall be construed as originals. After the Closing the parties
shall promptly exchange original versions of this Agreement and all other
agreements, certificates, instruments and other documents contemplated by this
Agreement that were executed and exchanged by facsimile transmission pursuant to
this Section 10.11.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
infoUSA Inc., a Delaware corporation,
Purchaser
By:
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Its:
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Corporate T, a Delaware corporation,
Corporate T
By:
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Its:
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CMGI, Inc., a Delaware corporation,
Stockholder
By:
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Its:
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Yesmail, Inc., a Delaware corporation, the
Company
By:
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Its:
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