ASSET PURCHASE AGREEMENT

Exhibit 2.2

ASSET PURCHASE AGREEMENT

effective as of

September 23, 2008

by and among

Bankrate, Inc.,

Blackshore Properties, Inc.

and

Johns Wu

TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

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EXHIBITS AND SCHEDULES

 

 

 

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ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (this “ Agreement ”) dated as of September 23, 2008 (the “ Effective Date ”), is by and among Bankrate, Inc., a Florida corporation (“ Buyer ”), Blackshore Properties, Inc., a California corporation (“ Seller ”), and Johns Wu (“ Shareholder ” along with Buyer and Seller they are sometimes referred to individually as a “ Party ” and collectively as the “ Parties ”).

RECITALS:

A. Seller operates a business which provides various financial services products, services and information to consumers, including, but not limited to, information and products related to certificates of deposit, money market accounts, savings accounts, checking and other banking and deposit accounts, credit card product offers and information, 529 Plans and college savings plans, mortgage rates, mortgage rate and lender information, banking and interest rates and other financial information and research tools over the Internet through Web sites, including certain of Seller’s Domain Names (defined below) (the “ Business ”)

B. Shareholder owns one hundred percent (100%) of the outstanding capital stock of Seller.

C. Buyer desires to purchase certain assets and assume certain Liabilities of the Business from Seller, and Seller desires to sell certain assets and assign certain Liabilities of the Business to Buyer, upon the terms and subject to the conditions set forth in this Agreement, along with the attached Exhibits and Schedules.

NOW, THEREFORE , in consideration of the foregoing and the representations, warranties, covenants and agreements contained in this Agreement, the parties to this Agreement agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions .

(a) The following terms, as used in this Agreement, have the following meanings:

“ Accounts Receivable ” means all trade receivables, accounts receivable, accrued receivable and notes receivable and other monies receivable relating to or arising out of the Business or any Purchased Asset.

“ Affiliate ” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified.

“ Agreement ” has the meaning set forth in the preamble.

“ Allocation Statement ” has the meaning set forth in Section 2.1(b).

“ Ancillary Agreements ” means the Bill of Sale and Assignment and Assumption Agreement, Copyright Assignment, Consulting Agreement, Escrow Agreement, Trademark Assignment, and Domain Name Transfer Agreement, (as each is defined in this Agreement) and all other agreements and instruments executed in connection thereto or hereto.

“ Assumed Contracts ” has the meaning set forth in Section 2.2(c).

“ Audit Referee ” has the meaning set forth in Section 2.8.

“ Business ” has the definition set forth in the Recitals.

“ Business Day ” means a day, other than a Saturday or Sunday, on which commercial banks in New York City, New York are open for the general transaction of business.

“ Business Intellectual Property ” means all Intellectual Property, including but not limited to all intellectual property rights conveyed to Seller under the Business IP Agreements, that is held in connection with the Business, used, or that is being, or has been, or is currently under development for use, in the Business as it is has been, is currently or is currently planned to be conducted.

“ Business IP Agreements ” means (a) licenses of Intellectual Property by Seller to third parties, (b) licenses of Intellectual Property by third parties to Seller, (c) agreements between Seller and third parties relating to the development or use of Intellectual Property, the development or transmission of data, or the use, modification, framing, linking, advertisement or other practices with respect to Internet Web sites and (d) consents, settlements, decrees, orders, injunctions, judgments or rulings concerning the use, validity or enforceability of Business Intellectual Property.

“ Business Systems ” has the meaning set forth in Section 3.10(e).

“ Buyer ” has the meaning set forth in the preamble.

“ Claims ” means any and all administrative, regulatory or judicial actions, suits, petitions, appeals, demands, demand letters, claims, Liens, notices of noncompliance or violation, investigations, proceedings, consent orders or consent agreements.

“ Closing Date ” means the date of the Closing.

“ Code ” means the Internal Revenue Code of 1986, as amended, along with any applicable proposed, temporary or final regulations promulgated thereunder.

“ Contemplated Transactions ” has the meaning set forth in Section 2.1(b).

“ Contracts ” shall mean all contracts, trusts, escrow, agreements, arrangements, undertakings, leases, subleases, licenses, indentures, bonds, notes, mortgages, commitments, sales and purchase orders and other instruments.

“ Customer ” shall mean those customers who have purchased or subscribed for goods or services from Seller or have subscribed for or have been sent or given marketing or sales literature by Seller.

“ Customer Information ” means any and all sales and marketing information of the Customers, including, but not limited to, respective mailing addresses, telephone numbers and email address, credit histories, order histories, and records related to Web site page views.

“ Damages ” means all judgments, losses, penalties, fines and damages (including, without limitation, reasonable attorneys’ fees and expenses in connection with any action, suit or proceeding or in enforcing the terms of this Agreement or any of the Ancillary Agreements subject to Section 8.15).

“ Domain Names ” shall have the definition set forth in Section 2.2(e).

“ Earn-Out Payment ” means the amount, if any, payable to Seller pursuant to Section 2.8, subject to the provisions of Schedule 2.8 .

“ Earn-Out Period ” means Earn-Out Year One.

 

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“ Earn-Out Year One ” means the one year period beginning on the Closing Date and ending on September 22, 2009.

“ Effective Date ” has the meaning set forth in the preamble.

“ ERISA Affiliate ” has the meaning set forth in Section 2.5(a).

“ Escrow Deposit ” means the sum of $500,000, which Buyer will deposit in escrow with the Escrow Agent at the Closing in accordance with Section 2.1(c) as partial security for the performance of Seller’s and Shareholder’s obligations under this Agreement.

“ Escrow Fund ” means the escrow fund established pursuant to the Escrow Agreement.

“ Excluded Assets ” has the meaning set forth in Section 2.3.

“ Excluded Contracts ” has the meaning set forth in Section 2.3(b).

“ Excluded Liabilities ” has the meaning set forth in Section 2.5.

“ GAAP ” means United States generally accepted accounting principles.

“ Governmental Body ” means any: (a) nation, state, province, county, city, town, village, district, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

“ Indebtedness ” means indebtedness for borrowed money, whether or not contingent, or any capitalized lease obligation.

“ Insider ” means any stockholder, partner, officer or director (or similar official) of Seller, any Affiliate or natural or adoptive member of the immediate family of any of the foregoing Persons, or any Person in which any of the foregoing Persons directly or indirectly owns any material beneficial interest. The “immediate family” of any individual means such individual’s (and such individual’s present or former spouse’s) grandparents, spouse, siblings, children or grandchildren.

“ Intellectual Property ” means all tangible or intangible proprietary information and materials, including without limitation:

(i) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereon, and all patents, patent applications and patent disclosures, together with all re-issuances, continuations, continuations-in-part, divisions, revisions, extensions and re-examinations thereof;

(ii) all trademarks, services marks, trade dress, logos, trade names, domain names, Web sites (and underlying software and contents contained in such Web sites) and corporate names, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith;

(iii) all copyrights and all applications, registrations and renewals in connection therewith;

(iv) all mask works and all applications, registrations and renewals in connection therewith;

 

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(v) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methods, schematics, technology, technical data, designs, drawings, flowcharts, block diagrams, specifications, customer and supplier lists, customer data, mailing lists pricing and cost information and business and marketing plans and proposals);

(vi) all software (in both source and object code form) and firmware (including data, databases and related documentation);

(vii) all Web site content, data, Software, the “look and feel,” design, and organization related thereto;

(viii) all documents, records, instructions and files relating to design, end user documentation, manufacturing, quality control, sales, marketing or customer support for, and tangible embodiments of, all Intellectual Property;

(ix) all books, articles, pamphlets and other publications whether in tangible or electronic form; and

(x) all licenses, agreements and other rights in any third party product or any third party intellectual property described in (i) and (ii) above.

“ Key Customer ” has the meaning set forth in Section 3.15.

“ Law ” means any law, statute, rule, regulation, judgment, injunction, order, decree, ordinance and other pronouncement having the effect of law of the United States of America, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental Body.

“ Liability ” means any liability, claim or obligation (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether determined or determinable and whether due or to become due), including, but not limited to, any liability for Taxes.

“ Licensed Intellectual Property ” means Intellectual Property licensed to Seller pursuant to the Business IP Agreements.

“ Lien ” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest, encumbrances, right of first refusal or other similar restriction in respect of such asset, excluding any Permitted Lien.

“ Material Adverse Effect ” when used with respect to the Business or Seller means any result, occurrence, fact, change, event or effect that, individually or in the aggregate with any such other results, occurrences, facts, changes, events or effects, is or would reasonably be expected to have a materially adverse effect on (a) the business, operations, prospects, assets, liabilities, condition (financial or otherwise), results of operations, or cash flow of the Business taken as a whole or (b) the ability of Seller or Shareholder to consummate any transaction contemplated by this Agreement or any Ancillary Agreements.

“ Ordinary Course of Business ” means an action taken by a Person will be deemed to have been taken in the Ordinary Course of Business only if that action: (a) is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person; and (b) does not require authorization by the board of directors or stockholders of such Person (or by any Person or group of Persons exercising similar authority) and does not require any other separate or special authorization of any nature.

 

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“ Owned Intellectual Property ” means all Intellectual Property owned by Seller.

“ Party ” and “ Parties ” have the respective definitions set forth in the preamble.

“ Permit ” means any Governmental Body authorization, license, permit, membership, approval, concession or franchise.

“ Permitted Liens ” means: (a) Liens on Purchased Assets arising by operation of Law and securing the payment of Taxes which are not yet due and payable; and (b) mechanics’, carriers’, workers’, repairers’ and similar and non-consensual Liens arising by operation of Law and relating to obligations that are incurred in the Ordinary Course of Business and which secure only Assumed Liabilities which are not yet due and payable.

“ Person ” means an individual, corporation, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“ Post-Closing Tax Period ” means any Tax period (or portion thereof) beginning after the Closing Date.

“ Pre-Closing Tax Period ” means any Tax period (or portion thereof) ending on or before the Closing Date.

“ Property Tax ” means a real property tax (other than a real property transfer tax), a personal property tax and any other ad valorem tax imposed by any Governmental Body upon Seller or Seller’s assets by reason of Seller’s ownership thereof.

“ Purchase Price ” has the meaning set forth in Section 2.1.

“ Purchased Assets ” has the meaning set forth in Section 2.2.

“ Required Consent ” has the meaning set forth in Section 3.3(b).

“ Seller ” has the meaning set forth in the preamble.

“ Seller’s Knowledge ,” “ Known to Seller ” and words of similar import mean the knowledge that Shareholder, or Seller’s officers and directors possess or are aware of or the knowledge that a reasonably prudent Person, in such Person’s capacity as a shareholder, officer, employee or member of a board of directors, would reasonably be expected to discover or otherwise become aware of, in the course of performing such person’s duties for Seller.

“ SEO Methods ” has the meaning set forth in Section 2.2(h).

“ Shareholder ” has the meaning set forth in the preamble.

“ Sites ” has the meaning set forth in Section 2.2(g).

“ Software ” means computer software, programs and data in any form, including Internet web sites, web content and links, source code, object code, operating systems, specifications, data, databases, database management code, utilities, graphical user interfaces, menus, images, icons, forms, methods of processing, software engines, platforms and data formats, all versions, updates, corrections, enhancements and modifications thereof, and all related documentation, developer notes, comments and annotations.

“ Tangible Personal Property ” has the meaning set forth in Section 3.6(a).

 

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“ Tax ” means any federal, state, local or foreign net income, alternative or add-on minimum, gross income, gross receipts, sales, use, value-added, franchise, capital, paid-up capital, profits, lease, service, transfer, bulk sales, greenmail, license, withholding, estimated, payroll, employment, excise, severance, stamp, occupation, premium, environmental or windfall profit tax, customs duty or other tax, governmental fee or other like governmental assessment or charge of any kind whatsoever (including liability for Taxes imposed on another Person, whether incurred or borne as a transferee or successor or by contract or otherwise), but not including any Property Tax; together with any interest or any penalty, addition to tax or additional amount imposed by any governmental authority (domestic or foreign) responsible for the imposition of any such tax.

“ Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“ Total Purchase Price ” means the Purchase Price plus any amounts paid or payable to Seller pursuant to Section 2.8.

“ Traffic Calculation ” shall have the meaning set forth on Schedule 2.8 .

“ Transfer Taxes ” has the meaning set forth in Section 5.9(c).

(b) Definitions for the other defined terms used herein are set forth in this Agreement.

(c) In this Agreement, unless a clear contrary intention appears:

(i) the singular number includes the plural number and vice versa;

(ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

(iii) reference to any gender includes each other gender;

(iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

(v) reference to any Law means such Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Law means that provision of such Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

(vi) “hereunder,” “hereof,” “hereto,” “herein” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof;

(vii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term;

(viii) “or” is used in the inclusive sense of “and/or”;

(ix) with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding”; and

(x) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

 

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(d) Unless otherwise specified herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP, as defined herein.

(e) All references to “Dollars” or “$” shall mean U.S. Dollars unless otherwise specified.

(f) The capitalized terms set forth on Schedule 2.8 , not otherwise defined, shall have the definitions set forth in this Agreement.

ARTICLE II

PURCHASE AND SALE AND CLOSING

2.1 Purchase Price .

(a) Purchase Price . The purchase price to be paid by Buyer to Seller for the Purchased Assets is up to $14,900,000, consisting of (i) $12,400,000 in cash, and (ii) the assumption of the Assumed Liabilities (the “ Purchase Price ”), plus any additional payments pursuant to Section 2.8, all subject to adjustment pursuant to the terms and conditions of this Agreement. The Purchase Price, less the Escrow Deposit, shall be paid by Buyer to Seller at Closing by wire transfer in immediately available funds to an account designated by Seller.

(b) Allocation of Purchase Price . As soon as practicable after the Closing, Buyer shall deliver to Seller a statement (the “ Allocation Statement ”), setting forth the value of the Purchased Assets which shall be used for the allocation of the Purchase Price and the Assumed Liabilities among the Purchased Assets and the Assumed Liabilities, and which shall comply with Section 1060 of the Code; provided , however , Buyer and Seller agree that a portion of the Purchase Price shall be allocated to the services to be performed by the Shareholder under the Consulting Agreement (as defined herein) as set forth on Schedule 2.1(b) . Seller shall have a period of thirty (30) Business Days after the delivery of the Allocation Statement to present in writing to Buyer notice of any objections Seller may have to the allocation set forth in the Allocation Statement. Unless Seller timely objects, the Allocation Statement shall be binding on the Parties without further adjustment. If Seller shall raise any objections within the fifteen (15) Business Day period, Seller and Buyer shall negotiate in good faith and use their best efforts to resolve such dispute. If Seller and Buyer fail to agree within five (5) Business Days after the delivery of the notice of objection, then the disputed items shall be resolved by Audit Referee (defined below). The Audit Referee shall resolve the dispute (the “ Accounting Determination ”) within thirty (30) days of having the item referred to it and such Accounting Determination shall be final and binding on the parties hereto. The costs, retainers, fees and expenses of the Audit Referee shall be borne equally by Seller and Buyer. Any payments made be either Buyer or Seller pursuant to Section 2.8 of this Agreement shall be allocated in accordance with the determination mutually agreed by Seller and Buyer. The Parties acknowledge that the allocations set forth on the Allocation Statement shall be binding upon the Parties for all applicable federal, state, local and foreign Tax purposes. Seller and Buyer agree to report the allocation of the Purchase Price among the Purchased Assets in a manner that is entirely consistent with the Allocation Statement and agree to act in accordance with such Allocation Statement in the preparation of financial statements and filing of all Tax Returns (including, without limitation, filing Form 8594 with its federal income Tax Return for the taxable year that includes the date of the Closing) and in the course of any Tax audit, Tax review or Tax litigation relating thereto. No later than ten (10) days prior to the filing of their respective Forms 8594 relating to the transactions contemplated by this Agreement (together with the transactions contemplated by the Ancillary Agreements, (the “ Contemplated Transactions ”), the Buyer and Seller shall deliver to each other a copy of its respective Form 8594. In addition, no later than ten (10) days prior to filing, Buyer and Seller shall also deliver to each other copies of any supplemental statements or subsequent amendments to such initial Forms 8594 that may be filed by Buyer and Seller as a result of any payments that may be made pursuant to Section 2.8 of this Agreement or otherwise.

(c) Escrow Deposit . At or prior to the Closing, Seller and Buyer shall enter into an escrow with Wells Fargo Bank, National Association (the “ Escrow Agent ”) in substantially the form attached hereto as Exhibit A (the “ Escrow Agreement ”). On the Closing Date, Buyer shall deliver the Escrow Deposit to the Escrow Agent by wire transfer of immediately available funds to an account to be administered by the Escrow Agent in accordance with the terms of this Agreement and the Escrow Agreement (the “ Escrow Account ”).

 

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2.2 Purchase and Sale . Upon the terms and subject to the conditions of this Agreement, Buyer shall purchase from Seller and Seller shall sell, transfer, assign and deliver, or cause to be sold, transferred, assigned and delivered, to Buyer at Closing, all of the assets, rights, properties and business, of every kind and description, wherever located, real, personal or mixed, tangible or intangible, owned, held or used in the conduct of the Business by Seller or any Affiliate of Seller, as the same shall exist on the Closing Date, other than the Excluded Assets, including, without limitation, all right, title and interest of Seller and its Affiliates, to and under, each of the foregoing as more specifically described below (the “ Purchased Assets ”):

(a) all personal property and interests therein used by Seller or held by Seller for use in connection with the Business, including furniture, office equipment, communications equipment, computers, servers, software and other tangible property;

(b) all supplies and other inventories, if any, wherever situated used by Seller or held by Seller for use in connection with the Business;

(c) all rights under the Contracts, used by Seller or held by Seller for use in connection with the Business, other than the Excluded Contracts (collectively, the “ Assumed Contracts ”);

(d) all prepaid expenses and deposits held by Seller for use in connection with the Business;

(e) all of the Business Intellectual Property, including without limitation the trademarks and names used in the Business listed on Schedule 2.2(e)(i) , the logos listed on Schedule 2.2(e)(ii) , and the domain names of Seller, including those Web sites listed on Schedule 2.2(e)(iii) (the “ Domain Names ”);

(f) all transferable Permits affecting, or relating in any way to, the Business, including without limitation the items listed on Schedule 3.3(b) ;

(g) all materials, content, property and interests used by Seller and/or necessary for the operation and maintenance of the Web sites owned by Seller (collectively, the “ Sites ”), including, without limitation, all content on the Sites, tools, testimonials, and calculators owned or licensed by Seller for use on the Sites;

(h) all books, records, files and papers, whether in hard copy or computer format used by Seller or held by Seller for use in connection with the Business, including, without limitation, accounting and contract records, sales and promotional literature, manuals and data, sales and purchase correspondence, lists of present and former suppliers, lists of present and former Customers, Customer Information, Internet traffic records, files, logic and search engine optimization analysis and methods (“ SEO Methods ”), all databases, mailing lists and related information pertaining to prospective Customers, personnel and employment records, and all information relating to Taxes imposed on or with respect to the Business or the Purchased Assets and all telephone and fax numbers related to the Business; and

(i) all goodwill associated with the Business or the Purchased Assets, together with the right to represent to third parties that Buyer is the successor to the Business.

2.3 Excluded Assets . Buyer expressly understands and agrees that the following assets, properties and rights of Seller (the “ Excluded Assets ”) shall be excluded from the Purchased Assets:

(a) all rights of Seller and Shareholder under this Agreement and the Ancillary Agreements;

(b) all Accounts Receivable;

 

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(c) all Contracts set forth on Schedule 2.3(b) (collectively, the “ Excluded Contracts ”) and all rights of Seller thereunder;

(d) the corporate charter, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, minute books relating to the organization, maintenance and existence of Seller as a company;

(e) any records relating to Excluded Assets and Excluded Liabilities (including all Tax Returns and financial statements of Seller), and any work papers or materials in the possession of Seller or any of their Affiliates or any of their respective shareholders, members, officers, directors, employees, agents or attorneys relating to the evaluation and consideration by Seller of the Contemplated Transactions or the sale of assets of Seller or the Business to other Persons, or all personnel records and other records that Seller is required by Law to retain in their possession or is not permitted under Law to provide to Buyer;

(f) all cash and cash equivalents;

(g) all other properties, bank accounts, rights and assets of Seller which are not used by Seller in Seller’s operation of the Business which are set forth on Schedule 2.3(g) ;

(h) all rights, claims, counterclaims, credits, causes of action and rights of set-off against third parties to the extent relating primarily to the Excluded Assets or the Excluded Liabilities;

(i) all rights of Seller or Shareholder to receive Tax refunds, credits or similar payments attributable to Taxes that are Excluded Liabilities; and

(j) the other assets identified on Schedule 2.3(j) hereto.

2.4 Assumption of Liabilities . Upon the terms and subject to the conditions of this Agreement, Buyer agrees, effective as of the Closing Date, to assume, subject to the respective conditions thereof, only the following Liabilities (the “ Assumed Liabilities ”):

(a) all Liabilities of Seller arising after the Closing Date under the Contracts set forth on Schedule 2.4(a) (other than Liabilities attributable to any failure by Seller to comply with the terms thereof); and

(b) all Liabilities resulting from the ownership of the Purchased Assets and the operation of the Business by Buyer that arise after the Closing Date.

2.5 Excluded Liabilities . Notwithstanding any provision in this Agreement or any other writing to the contrary, Buyer is assuming only the Assumed Liabilities and is not assuming any other Liability of Seller or any Affiliate of Seller (or any predecessor owner of all or part of its business and assets) or the Business of whatever nature whether presently in existence or arising or asserted hereafter, including but not limited to, any debt owed to any party and all such other Liabilities shall be retained by and remain obligations and liabilities of Seller or its Affiliates (all such Liabilities not being assumed are referred to as the “ Excluded Liabilities ”). Without limiting the generality of the foregoing, the following Liabilities of Seller shall be Excluded Liabilities for the purpose of this Agreement, all Liabilities:

(a) relating to or arising under or in connection with any Plan, any “employee benefit plan” (as each is defined herein), or any other benefit plan, program or arrangement of any kind at any time maintained, sponsored or contributed or required to be contributed to by Seller or any Person that is or has ever been under common control, or that is or has ever been treated as a single employer, with Seller under the Code (“ ERISA Affiliate ”) or with respect to which Seller or any ERISA Affiliate has any Liability, including but not limited to, any accrued obligations owed or owing to any Person, including but not limited to, the employee benefits listed on Schedule 2.5(a) ;

 

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(b) pertaining to the pre-Closing Date employment or service with, or termination from employment or service from, Seller or any ERISA Affiliate, of any individual;

(c) relating to any claims (whether asserted before or after the Closing Date) for any breach of a representation, warranty or covenant, or for any claim for indemnification, contained in any Assumed Contract agreed to be performed pursuant to this Agreement by Buyer, to the extent that such breach or claim arises out of or by virtue of Seller’s performance or nonperformance thereunder prior to the Closing Date, it being understood that, as between the Parties hereto, this subsection shall apply notwithstanding any provision which may be contained in any form of consent to the assignment of any such Assumed Contract, which by its terms, imposes such Liabilities upon Buyer and which assignment is accepted by Buyer notwithstanding the presence of such a provision;

(d) arising under product warranty or other warranty Liabilities of Seller with respect to any products, merchandise or services of the Business sold or rendered on or prior to the Closing Date; it being understood and agreed that any such claim or Liability asserted after the Closing Date arising out of any such sale or service prior to the Closing Date shall be considered to be a claim against or a Liability of Seller and therefore not assumed hereunder by Buyer;

(e) with respect to Seller’s failure to take reasonable steps to safeguard the Business Systems;

(f) for injury to or death of persons or damage to or destruction of property (including, without limitation, any worker’s compensation claim) with respect to acts or omissions by Seller that occur on or prior to the Closing Date regardless of when said claim or Liability is asserted, including, without limitation, any claim for consequential damages in connection with the foregoing; it being understood and agreed that any such claim or Liability asserted after the Closing Date, but arising from acts or omissions by Seller which occur before the Closing Date shall be considered to be a claim against or a Liability of Seller for injury to or death of persons or damages to or destruction of property and therefore not assumed hereunder by Buyer;

(g) arising out of infringement for misappropriation of or other conflict with the Intellectual Property of any Person to the extent the same arise out of acts or omissions occurring on or prior to the Closing Date;

(h) arising out of any violation by Seller of any Laws, including any Environmental Law occurring on or prior to the Closing Date;

(i) in respect of any Claim of Seller or related to the Business or any Purchased Asset arising on or prior to the Closing Date (whether asserted or commenced before or after the Closing Date);

(j) relating to or arising out of the Excluded Assets;

(k) with respect to Indebtedness of Seller or dividends payable by Seller whether incurred or accrued before or after the Closing Date;

(l) relating to the capital stock of Seller or the partnership interests, membership interests or any shareholder or partnership operating agreements to which Seller is party;

(m) relating to obligations of Seller under this Agreement or any Transaction Document;

(n) relating to claims or items set forth on Schedule 3.8 ;

(o) relating to any transactions between Seller and any of its Insiders whether occurring before or after the Closing Date;

 

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(p) any Taxes that are not included in the definition of Assumed Liabilities and that relate to the Purchased Assets or the Business and that arose before the Effective Date (excluding any Transfer Taxes and excluding Property Taxes to the extent specified in Assumed Liabilities);

(q) relating to Liens on the Purchased Assets arising before the Effective Date, to the extent not an obligation arising on or after the Effective Date under the Assumed Contracts or that constitute Assumed Liabilities;

(r) any amounts payable for fees or expenses incurred by Seller in respect to this Agreement, the agreements contemplated hereby and/or the Contemplated Transactions or otherwise in connection with Seller’s sale of the Business, including, all amounts payable to Weston Benshoof Rochefort Rubalcava MacCuish LLP, Alston & Bird LLP, Founders Investment Bankers, LLC (“ Founders ”) or any of their respective Affiliates and all amounts payable in connection with any employee or consultant transaction bonuses;

(s) any amounts payable to any Affiliate of Seller; and

(t) without limitation by the specific enumeration of the foregoing, any other obligation or Liability not expressly included in the definition of Assumed Liabilities.

2.6 Assignment of Contracts and Rights .

(a) General . Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any Purchased Asset or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without consent of a third party thereto, would constitute a breach or other contravention thereof or in any way adversely affect the rights of Buyer or Seller thereunder.

(b) In the Event a Consent is Not Obtained . In the event any such consent is not obtained on or before the Closing Date, the Parties to this Agreement will use their best efforts (but without any payment of money by Seller or Buyer) to obtain the consent of any other Person to any such Purchased Asset or claim or right or any benefit arising thereunder for the assignment thereof to Buyer as Buyer may request. If such consent is not obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of Seller thereunder so that Buyer would not in fact receive all such rights, the Parties will cooperate in a mutually agreeable arrangement under which Buyer would obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including subcontracting, sub-licensing, or subleasing to Buyer, or under which Seller would enforce for the benefit of Buyer, with Buyer assuming Seller’s obligations, any and all rights of Seller against a third party thereto.

(c) Payment of Monies Received . Seller will promptly pay to Buyer when received all monies received by Seller under any Purchased Asset or any claim or right or any benefit arising thereunder, except to the extent the same represents an Excluded Asset. In such event, Seller and Buyer shall, to the extent the benefits therefrom and obligations thereunder have not been provided by alternate arrangements satisfactory to Buyer and Seller, negotiate in good faith an adjustment in the consideration paid by Buyer for the Purchased Assets.

2.7 Closing . The closing of the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities pursuant to the terms of this Agreement (the “ Closing ”) shall take place on the date hereof via facsimile or electronic mail, or at such other time or place or by such other method as Buyer and Seller may agree. At the Closing simultaneously with the execution of this Agreement:

(a) Deliverables to Buyer . Buyer shall have received copies of the following documents:

(i) the Bill of Sale and Assignment and Assumption Agreement in the form attached hereto as Exhibit B (the “ Bill of Sale and Assignment and Assumption Agreement ”) executed by Seller;

 

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(ii) the Consulting Agreement in the form attached hereto as Exhibit C (the “ Consulting Agreement ”) executed by Shareholder;

(iii) the Escrow Agreement executed by Seller and Escrow Agent;

(iv) the Copyright Assignment in the form attached hereto as Exhibit D (the “ Copyright Assignment ”) executed by Seller;

(v) the Trademark Assignment in the form attached hereto as Exhibit E (the “ Trademark Assignment ”) executed by Seller;

(vi) the Domain Name Transfer Agreement in the form attached hereto as Exhibit F (the “ Domain Name Transfer Agreement ”) executed by Seller;

(vii) [Reserved];

(viii) Schedules to this Agreement;

(ix) [Reserved];

(x) certificate issued by the Secretary of State of California as to Seller’s legal existence and good standing;

(xi) certificates of an appropriate officer of Seller as to the incumbency and signatures of Seller’s officers executing this Agreement and the Ancillary Agreements;

(xii) copies of the resolutions duly adopted by the board of directors of Seller and Shareholder authorizing Seller to enter into and perform this Agreement and the Ancillary Agreements, and to consummate the Contemplated Transactions certified by an appropriate officer of Seller;

(xiii) the Bylaws and Articles of Incorporation of Seller certified by a proper officer of Seller as in full force and effect on and as of the Closing Date;

(xiv) the Required Consents;

(xv) a certificate of non-foreign status pursuant to Section 1.1445-2(b)(2) of the Code satisfactory to Buyer;

(xvi) a certificate pursuant to Section 5.9;

(xvii) fully executed UCC-3 termination statements and other terminations, pay-offs and/or releases, or, at Buyer’s option, assignments, necessary to terminate, release or assign, as the case may be, all Liens on any Purchased Asset;

(xviii) To the extent not previously delivered to Buyer, Seller shall deliver a true and complete index of all computer files used in the Business and electronic copies of all such computer files in a form acceptable to Buyer; and

(xix) all other agreements, certificates, instruments and documents reasonably requested by Buyer in order to fully consummate the Contemplated Transactions and carry out the purposes and intent of this Agreement.

 

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(b) Deliverables to Seller . Seller, shall have received each of the following:

(i) the Purchase Price less the Escrow Deposit (which shall be delivered to Escrow Agent by Buyer);

(ii) the Assignment and Assumption Agreement executed by Buyer;

(iii) the Consulting Agreement for Shareholder executed by Buyer;

(iv) the Domain Name Transfer Agreement executed by Buyer;

(v) the Trademark Assignment executed by Buyer;

(vi) the Copyright Assignment executed by Buyer;

(vii) the Escrow Agreement executed by Buyer and Escrow Agent;

(viii) [Reserved]; and

(ix) all other agreements, certificates, instruments and documents reasonably requested by Seller in order to fully consummate the Contemplated Transactions and carry out the purposes and intent of this Agreement.

2.8 Earn-Out Payments .

(a) Earn-Out Determination .

(i) After the Earn-Out Period, but in no event later than ninety (90) days after the Earn-Out Period, Buyer shall deliver to Seller a written statement setting forth Buyer’s determination as to whether the Traffic Calculation for the Earn-Out Period either exceeded the Target Amount (therefore resulting in Buyer being obligated to make the Earn-Out Payment for the Earn-Out Period pursuant to the terms of this Section 2.8 and Schedule 2.8 ) or in the alternative, was equal to or less than the Target Amount (therefore resulting in Buyer not being obligated to make the Earn-Out Payment for the Earn-Out Period), along with the Buyer’s determination of the Traffic Calculation for the Earn-Out Period (the “ Buyer Earn-Out Determination ”).

(ii) If Seller disagrees with the Buyer Earn-Out Determination, Seller shall deliver a dispute notice (the “ Dispute Notice ”) to Buyer within thirty (30) days of receiving the Buyer Earn-Out Determination along with the Seller’s determination of the Traffic Calculation for the Earn-Out Period.

(iii) If Seller does not deliver a Dispute Notice to Buyer within thirty (30) days of receiving the Buyer Earn-Out Determination, then the Buyer Earn-Out Determination shall control for purposes of determining whether Buyer is or is not obligated to make the Earn-Out Payment pursuant to this Agreement.

(iv) If Seller does deliver a Dispute Notice to Buyer within such 30-day period commencing on the date that Seller receives the Buyer Earn-Out Determination from Buyer, Buyer and Seller will use reasonable efforts to resolve the dispute during the 30-day period commencing on the date Buyer receives the Dispute Notice from Seller.

(v) The only basis on which Seller may dispute the Buyer Earn-Out Determination are: (1) the inaccuracy of such determination, (2) the Buyer’s determination of the Traffic Calculation for the Earn-Out Period, or any element thereof, or both, was not prepared as provided in this Agreement, or (3) a breach by Buyer of any other provision of this Section 2.8, including Schedule 2.8 .

 

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(vi) If Buyer and Seller do not obtain a final resolution within the 30-day period commencing on the date Buyer receives a Dispute Notice from Seller, then the determination of the Traffic Calculation shall be submitted immediately to the Audit Referee. Buyer and Seller shall jointly instruct Ernst & Young (or if such firm declines to act in such capacity, or if such firm cannot provide its review in a timely fashion acceptable to both Buyer and Seller, or if either party believes such firm would have a conflict of interest, then by such other firm of independent nationally recognized auditors having no material relationship with any Party and reasonably acceptable to both Seller and Buyer) (the “ Audit Referee ”) that it shall act as an auditor and not as an arbitrator, to resolve, in accordance with this Agreement, the Traffic Calculation for the Earn-Out Period, and (2) shall deliver to Buyer and Seller a written decision of its determination of Traffic Calculation as promptly as practicable and, in any event, within seventy-five (75) days following the submission of such matter to the Audit Referee for resolution. Each Party agrees to execute, if requested by the Audit Referee, a reasonable engagement letter. The cost of such review and decision by the Audit Referee (including any retainer) shall be borne (x) by Buyer if the Audit Referee determines that the Traffic Calculation exceeded the Target Amount for the Earn-Out Period and therefore, Buyer is obligated to make the Earn-Out Payment for the Earn-Out Period pursuant to the terms of this Section 2.8 and Schedule 2.8 , or (y) by Seller if the reverse is true. However, initially, any retainer charged by the Audit Referee shall be paid 50% by Buyer and 50% by Seller. All determinations made by the Audit Referee shall be final, conclusive and binding on the Parties, and the Traffic Calculation for the Earn-Out Period, as determined by the Audit Referee, shall be deemed to be the Traffic Calculation for the Earn-Out Period.

(vii) If the Traffic Calculation for the Earn-Out Period (determined pursuant to Sections 2.8(a)(iii) or 2.8(a)(vi), as applicable exceeds the Target Amount, then within five (5) days after final determination of such Traffic Calculation for the Earn-Out Period pursuant to Sections 2.8(a)(iii) and 2.8(a)(vi), as applicable, Buyer shall deliver to Seller the Earn-Out Payment by wire transfer in immediately available funds.

(viii) Buyer shall make its business records regarding the determination of the Traffic Calculation available to Seller and its representatives during normal business hours at any time during and following the Earn-Out Period, including, without limitation, for the review by Seller of, and the resolution of any objections with respect to, the Buyer Earn-Out Determination or in connection with the preparation of the Dispute Notice. Seller shall not disclose or make use of any such information other than to the extent necessary to review the determination of the Buyer Earn-Out Determination and enforce its rights under this Agreement.

(b) Additional Earn-Out Provisions . The provisions of Schedule 2.8 are incorporated herein.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the disclosure schedules dated as of the date of this Agreement and delivered herewith to Buyer (which disclosure schedules identify the section and subsection to which each disclosure therein relates), Seller and Shareholder together, jointly and severally, hereby represent and warrant to Buyer that:

3.1 Corporate Existence and Power. Seller is a corporation duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on the Business as now conducted. Seller has heretofore delivered to Buyer true and complete copies of the Bylaws and Articles of Incorporation of Seller as currently in effect.

3.2 Authorization; Qualification .

(a) Authorization . The execution, delivery and performance by Seller of this Agreement and each of the Ancillary Agreements to which Seller is a party, and the consummation by Seller of the transactions contemplated hereby and thereby are within Seller’s corporate powers and have been duly authorized by all necessary corporate action on the part of Seller. Each of this Agreement and each Ancillary Agreement to which Seller and Shareholder, as applicable, is a party has been duly executed and delivered by Seller and Shareholder, as applicable, and constitutes a valid and binding agreement of Seller and Shareholder, as applicable, enforceable in accordance with its terms.

 

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(b) Qualification . Except as set forth on Schedule 3.2(b)(i) , Seller is duly qualified to do business in each jurisdiction listed on Schedule 3.2(b)(ii) , and Seller is not required to be qualified in any other jurisdiction.

3.3 Governmental Authorization; Consents .

(a) No Required Action . The execution, delivery and performance by Seller and Shareholder of this Agreement and each of the Ancillary Agreements to which Seller and Shareholder, as applicable, is a party require no action by or in respect of, or filing with, any Governmental Body.

(b) No Required Consents . Except as set forth in Schedule 3.3(b) , no consent, approval, waiver or other action (a “ Required Consent ”) by any Person under any Contract to which Seller or Shareholder is a party or is bound is required or necessary for the execution, delivery and performance by Seller and Shareholder of this Agreement and each Ancillary Agreement to which Seller or Shareholder, as applicable, is a party, or for the consummation of the Contemplated Transactions.

3.4 Non-Contravention . The execution, delivery and performance by Seller and Shareholder of this Agreement and each Ancillary Agreement to which Seller and Shareholder is a party, as applicable, and the consummation of the Contemplated Transactions, do not and will not (a) contravene or conflict with the Bylaws and Articles of Incorporation of Seller, (b) assuming compliance with the matters referred to in Section 3.3(a), contravene or conflict with any provision of any Law or Permit binding upon or applicable to Seller, Shareholder or the Business, except where such contravention or conflict would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (c) assuming the receipt of all Required Consents, constitute a default (with or without notice or lapse of time, or both) under or give rise to any right of termination, cancellation or acceleration of any right or obligation of Seller, or to a loss of any benefit, relating to the Business to which Seller or Shareholder is entitled under any provision of any Contract binding upon Seller or Shareholder, or (d) except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Lien on any of the Purchased Assets pursuant to, any Contract or Permit to which any of Seller or Sha