ASSET PURCHASE AGREEMENT

Exhibit 10.1

 

 

ASSET PURCHASE AGREEMENT

 

between

W EB M EDIA B RANDS I NC .

and

QUINSTREET, INC.

Dated as of

August 7, 2009

 

 

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ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT (this “ Agreement ”), dated as of August 7 2009, by and between WebMediaBrands Inc. a Delaware corporation (“ Seller ”), and QuinStreet, Inc., a California corporation (“ Purchaser ” and, together with Seller, each a “ Party ” and, collectively, the “ Parties ”).

WHEREAS, among other businesses, Seller is engaged in the business of operating the Websites (collectively, the “ Business ”);

WHEREAS, concurrently with the execution of this Agreement, the Key Transferred Employees shall have accepted offers of employment with Purchaser effective on the Closing;

WHEREAS, concurrently with the execution of this Agreement, certain stockholders of Seller have agreed to enter into Support Agreements in the forms attached hereto as E XHIBIT J , whereby such stockholders have agreed to vote their shares in favor of the Transactions; and

WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller all of the assets of Seller used primarily in connection with the Business (other than the Excluded Assets), in consideration for the payments from Purchaser and Purchaser’s assumption of certain liabilities of Seller related to the Business, each as specified herein.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements and covenants hereinafter set forth, and intending to be legally bound, Seller and the Purchaser hereby agree as follows.

ARTICLE I

DEFINITIONS

1.1 Certain Defined Terms . For purposes of this Agreement:

“ Advertiser ” means a Person who is a party to any Advertising Agreement.

“ Advertising Agreements ” means advertising contracts and insertion orders whereby advertisers or their agents purchase the right to place advertising on (or the right to receive leads generated from) one or more of the Websites.

“ Agreement ” shall have the meaning set forth in the Preamble to this Agreement.

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

“ Allocation Schedule ” shall have the meaning as set forth in Section 7.5(c) of this Agreement.

“ Ancillary Agreements ” means the Transition Services Agreement, the Bill of Sale, the Copyright Assignment Agreement, Transferred Marks Assignment Agreement, the Domain Name Transfer Agreement, the Assumption Agreement, the Noncompetition and Nonsolicitation Agreements, the Seller Closing Certificate and the Purchaser Closing Certificate.

“ Anniversary Payment ” shall have the meaning set forth in Section 3.2(a)(ii) of this Agreement.

“ Assets ” of any Person means all of such Person’s right, title and interest in and to all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible and wherever situated), including Contracts and Intellectual Property.

“ Assets to Liabilities Ratio ” shall mean, as of a particular date, the ratio in which the numerator is the sum of Purchaser’s unrestricted cash, cash equivalents and marketable securities plus trade accounts receivable less than 90 days from invoice date, and the denominator is the sum of Purchaser’s current liabilities, as determined pursuant to GAAP.

“ Assumed Contracts ” shall have the meaning set forth in Section 2.1(c) of this Agreement.

“ Assumed Liabilities ” shall have the meaning set forth in Section 2.3 of this Agreement.

“ Assumption of Liabilities ” shall have the meaning set forth in Section 3.4(c) of this Agreement.

“ Bill of Sale ” shall have the meaning set forth in Section 3.3(b) of this Agreement.

“ Breach ” of a representation, warranty, covenant, obligation or other provision means there is or has been any inaccuracy in or breach of, or any failure to comply with or perform, such representation, warranty, covenant, obligation or other provision.

“ Business ” shall have the meaning set forth in the Preamble to this Agreement.

“ Business Assets ” means all Assets of Seller or any Affiliate of Seller, other than the Excluded Assets, used (or held for use) primarily in connection with the Business.

“ Business Contracts ” means all Contracts of Seller or any Affiliate of Seller used primarily in connection with or primarily related to the Business by which the Business Assets (other than the Excluded Assets) or the Assumed Liabilities are bound or affected in any material respect including, without limitation, all Advertising Agreements, Client Agreements, Subscription Agreements, Media Buying Agreements, customer agreements, partner agreements, insertion orders, license agreements and hosting agreements.

“ Business Database ” means any Database primarily related to or maintained primarily by or for the Business as presently conducted.

“ Business Day ” means any day that is not a Saturday, a Sunday or a scheduled holiday of the Federal Reserve Bank of New York.

“ Business Employee ” means any current employee of Seller who provided services in connection with the operation of the Business.

“ Business Employee Plan ” shall mean any plan, program, policy, practice, Contract or other arrangement providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind, whether written, unwritten or otherwise, funded or unfunded, including each “employee benefit plan,” within the meaning of Section 3(3) of ERISA (whether or not ERISA is applicable to such plan), that is or in the last six years has been maintained, contributed to, or required to be contributed to, by Seller or any ERISA Affiliate for the benefit of any Business Employee or former Business Employee, or with respect to which Seller or any ERISA Affiliate has or may have any liability or obligation with respect to the Business, except such definition shall not include any Employee Agreement.

 

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“ Business Governmental Authorizations ” shall have the meaning set forth in Section 4.14(a).

“ Business IP ” shall mean all Intellectual Property Rights owned (whether exclusively, jointly with another Person, or otherwise) by Seller, which are used primarily in the operation of the Business as currently conducted or currently contemplated to be conducted, including all Intellectual Property Rights in or pertaining to the Business Products and all Business Website Content owned by Seller.

“ Business IP Contract ” shall mean any Business Contract to which Seller is a party or by which Seller is bound, which contains any assignment or license of, or covenant not to assert or enforce, any Intellectual Property Right or that relates to any Business IP.

“ Business Privacy Policy ” means each privacy policy of Seller relating to the Business in effect at any time within the two-year period preceding the Closing Date, including any policy relating to (i) the privacy of users of the Business Products or other users of the Business or of any of the Websites or (ii) the collection, storage, disclosure and transfer of any User Data or Personal Data.

“ Business Product ” shall mean any product or service that is (i) marketed, distributed, licensed or sold by or on behalf of Seller primarily in connection with the Business as presently conducted or (ii) currently under development by or on behalf of Seller and intended by Seller to be marketed, distributed, licensed or sold by or on behalf of Seller in connection with the Business as presently conducted or presently intended to be conducted in the future.

“ Business Records ” means Seller’s accounting, business, customer, advertiser, financial and Tax records to the extent that they exist and primarily relate to the Business Assets or the Business, other than Excluded Assets, for the four years immediately preceding the Closing.

“ Business Software ” shall have the meaning set forth in Section 4.10(l) of this Agreement.

“ Business Tangible Property ” means all furniture, fixtures, improvements, equipment, computers, computer hardware (including computer servers), computer software, office equipment and apparatuses, tools, machinery and other tangible property of every kind (wherever located, whether or not carried on the Business Records and whether or not leased), other than office supplies and tangible property which individually or in the aggregate have de minimis value, together with any express or implied warranty by the manufacturers, sellers or lessors of any item or component part thereof and all maintenance records and other documents relating thereto, in each case that relate primarily to the Business, the Business Assets, the Business Contracts or the Assumed Liabilities or that are primarily used by Transferred Employees in the Ordinary Course of Business, and that are not otherwise listed as Excluded Assets.

“ Business Trademarks ” shall have the meaning set forth in Section 4.10(h)(ii) of this Agreement.

“ Business Website Content ” means all content on the Websites (whether placed thereon by Seller, users or other third parties).

“ Cash ” means cash and cash equivalents (including marketable securities and short term investments).

 

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“ CERCLA ” shall mean the Comprehensive Environmental Response, Compensation and Liability Act, as amended.

“ Challenged IO ” shall have the meaning set forth in Section 6.8 of this Agreement.

“ Client Agreement ” means any Contract or license (written or oral) between a Person and Seller pursuant to which such Person obtains Business Products from Seller.

“ Clients ” means a Person who is a party to any Client Agreement, including Persons who participate in the Guaranteed-Effective Marketing Solutions (GEMS) program.

“ Closing ” shall have the meaning set forth in Section 3.1 of this Agreement.

“ Closing Date ” means the date of the Closing.

“ Closing Net Working Capital ” shall have the meaning set forth in Section 3.5(a) of this Agreement.

“ Closing Payment ” shall have the meaning set forth in Section 3.2(a)(i) of this Agreement.

“ Closing Statement ” shall have the meaning set forth in Section 3.5(a) of this Agreement.

“ COBRA ” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

“ Code ” means the Internal Revenue Code of 1986, as amended through the date hereof.

“ Confidentiality Agreement ” shall have the meaning set forth in Section 6.5(a) of this Agreement.

“ Contract ” means any legally binding agreement, written commitment, arrangement, lease, license, understanding or contract.

“ control ” (including the terms “ controlled by ” and “ under common control with ”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by Contract, credit arrangement or otherwise.

“ Copyright Assignment Agreement ” shall have the meaning set forth in Section 3.3(c) of this Agreement.

“ Copyrights ” means all works of authorship, and all copyrights therein.

“ Current Assets ” means the current assets primarily associated with the Business, as determined pursuant to GAAP, as applied on a consistent basis, and as calculated pursuant to the methodology set forth in E XHIBIT H .

“ Current Liabilities ” means the current liabilities primarily associated with the Business, as determined pursuant to GAAP, as applied on a consistent basis, and as calculated pursuant to the methodology set forth in E XHIBIT H .

 

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“ Databases” means all proprietary databases and other data sets and compilations, whether written, electronic or in another form, and all documentation relating to the foregoing, including manuals, memoranda and records.

“ Debt ” shall mean, as of a particular date, the aggregate amount of all outstanding indebtedness of Purchaser, excluding current liabilities incurred in the ordinary course of business.

“ Deductible ” shall have the meaning set forth in Section 9.4(b)(ii) of this Agreement.

“ Delaware Law ” means the General Corporation Law of the State of Delaware.

“ Domain Name Transfer Agreement ” shall have the meaning set forth in Section 3.3(e) of this Agreement.

“ EBITDA ” shall mean with respect to any fiscal period an amount equal to the sum of Purchaser’s earnings before depreciation, amortization, non-cash stock compensation, net interest and taxes, but excluding one-time acquisition costs related to the Financial Accounting Standards Board Statement No. 141(R), measured on a trailing four fiscal quarter basis.

“ Employee Agreement ” shall mean each management, employment, severance, consulting, relocation, repatriation or expatriation agreement or other Contract between Seller or any ERISA Affiliate and any Business Employee.

“ Encumbrance ” means any security interest, pledge, hypothecation, mortgage, lien, lease, license, option, exception, reservation, limitation, impairment, imperfection of title, condition or restriction of any nature or similar encumbrance.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ ERISA Affiliate ” means any other corporation or trade or business controlled by, controlling or under common control with Seller (within the meaning of Section 414 of the Code or Section 4001(a)(14) or 4001(b) of ERISA).

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Excluded Assets ” shall have the meaning set forth in Section 2.2 of this Agreement.

“ Excluded Liabilities ” shall have the meaning set forth in Section 2.4 of this Agreement.

“ Final Net Working Capital ” shall have the meaning set forth in Section 3.5(b) of this Agreement.

“ Financial Statements ” shall have the meaning set forth in Section 4.4(b) of this Agreement.

“ GAAP ” means United States generally accepted accounting principles and practices in effect from time to time as consistently applied.

“ Governmental Authority ” means any federal, national, supranational, state, provincial, local, foreign or other government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body with applicable jurisdiction.

 

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“ Governmental Authorization ” shall mean any: (a) permit, license, certificate, franchise, concession, approval, consent, ratification, permission, clearance, confirmation, endorsement, waiver, certification, designation, rating, registration, qualification or authorization that is, has been or may in the future be issued, granted, given or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Legal Requirement; or (b) right under any Contract with any Governmental Authority.

“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“ Hazardous Material ” includes: (a) any petroleum, waste oil, crude oil, asbestos, urea formaldehyde or polychlorinated biphenyl; (b) any waste, gas or other substance or material that is explosive or radioactive; (c) any “hazardous substance,” “pollutant,” “contaminant,” “hazardous waste,” “regulated substance,” “hazardous chemical” or “toxic chemical” as designated, listed or defined (whether expressly or by reference) in any statute, regulation or other Legal Requirement (including CERCLA, any other so called “superfund” or “superlien” law, the Resource Conservation Recovery Act, the Federal Water Pollution Control Act, the Toxic Substances Control Act, the Emergency Planning and Community Right to Know Act and the respective regulations promulgated thereunder) or (d) any other substance or material (regardless of physical form) or form of energy that, due to its hazardous characteristics, is subject to any Legal Requirement which regulates or establishes standards of conduct in connection with, or which otherwise relates to, the protection of human health or the environment.

“ Indemnification Claim Dispute ” shall have the meaning set forth in Section 9.5(c) of this Agreement.

“ Indemnification Claim Notice ” shall have the meaning set forth in Section 9.5(a) of this Agreement.

“ Indemnified Party ” means a Purchaser Indemnified Party or a Seller Indemnified Party, as the case may be.

“ Indemnifying Party ” means Seller pursuant to Section 9.2 and Purchaser pursuant to Section 9.3, as the case may be.

“ Intellectual Property ” shall mean and include all algorithms, application programming interfaces, databases and data collections, diagrams, formulae, inventions (whether or not patentable), know-how, logos, marks (including brand names, product names, logos, and slogans), methods, network configurations and architectures, lists, processes, proprietary information, protocols, schematics, specifications, software, software code (in any form including source code and executable or object code), subroutines, test results, user interfaces, techniques, URLs, web sites, works of authorship and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing such as instruction manuals, laboratory notebooks, prototypes, samples, studies and summaries).

“ Intellectual Property Rights ” means any and all intellectual property rights and other similar proprietary rights in any jurisdiction, whether registered or unregistered, whether owned or held for use under license, including all rights and interests pertaining to or deriving from: (a) Patents, inventions, invention disclosures, discoveries and improvements, whether or not patentable; (b) Software; (c) Copyrights; (d) Trade Secrets; (e) Trademarks; (f) Databases; (g) Internet Properties; (h) publicity rights; and (i) moral rights; including in each case of (a) through (i) any registrations of, applications to register, and renewals and extensions, continuations, continuations-in-part, counterparts, divisions, or reissues of, and applications for, any of the foregoing with or by any governmental authority in any jurisdiction.

 

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“ Internet Properties ” means all rights to Uniform Resource Locators and domain names.

“ IRS ” means the United States Internal Revenue Service.

“ Key Transferred Employees ” shall mean the five Business Employees identified on Section 1.1 of the Schedule of Exceptions.

“ Knowledge of Seller ” or similar terms used in this Agreement means any fact, matter or circumstance of which Alan Meckler, Don O’Neill, Mitch Eisenberg, Scott Bialous or Tom Kitt had actual knowledge after due inquiry.

“ Leased Real Property ” means the real property leased by Seller as tenant and used exclusively in the operation of the Business, together with, to the extent leased by Seller, all buildings and other structures, facilities or improvements currently or hereafter located thereon, and all easements, licenses, rights and appurtenances relating to the foregoing.

“ Legal Requirement ” shall mean any federal, state, local, municipal, foreign or other law, statute, legislation, constitution, principle of common law, resolution, ordinance, code, edict, decree, proclamation, treaty, convention, rule, regulation, ruling, directive, pronouncement, requirement, specification, determination, decision, opinion or interpretation.

“ Liabilities ” means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including those arising under any Legal Requirement, Proceeding or Governmental Order and those arising under any Contract, arrangement, commitment or undertaking.

“ Loss ” shall have the meaning set forth in Section 9.2 of this Agreement.

“ Material Adverse Effect ” means any circumstance, change, event, development or effect that is, individually or in the aggregate, material and adverse to (i) the Business, the Business Assets, or the Business’ liabilities, operations or financial performance or (ii) the ability of Seller to consummate the Transactions (other than Purchaser’s ability to obtain financing for the Transactions); provided , however , that none of the following shall be deemed to constitute, or be taken into account in determining whether there has been, a Material Adverse Effect: (a) changes in conditions in the U.S. or global economy or capital or financial markets generally, including changes in interest or exchange rates, (b) changes after the date hereof in any applicable Legal Requirement or in GAAP, (c) changes resulting from the announcement or pendency of this Agreement or the Transactions, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, vendors or employees, (d) acts of war, armed hostilities, sabotage or terrorism occurring after the date of this Agreement, or any escalation or worsening of any such acts of war, armed hostilities, sabotage or terrorism threatened or underway as of the date of this Agreement, (e) acts of God such as lightning, earthquakes, floods, storms, hurricanes, freezes, cyclones, tidal waves, tornadoes, unusual weather conditions, epidemics, or plagues, (f) any failure by Seller to meet any internal or external projections, forecasts or estimates of revenues or earnings, in and of itself, for any period ending on or after the date hereof; provided, however, that the exceptions in this clause (f) shall not apply to facts and circumstances underlying any such failure, (g) any action by Purchaser or any of its Affiliates or the omission of an action that was required to be taken by Purchaser or any of its Affiliates, (h) changes after the date hereof in the industry in which the Business is operated or (i) any action taken by Seller or its Affiliates at the request or with the consent of Purchaser

 

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(but only if with respect to the foregoing effects in (a), (b), (d), (e) or (h), the Business is not disproportionately affected thereby relative to other Persons in the industry in which the Company and its Subsidiaries are engaged). For the avoidance of doubt, any material adverse effect solely and exclusively on any business or division of Seller other than the Business shall not be taken into account in determining whether a Material Adverse Effect exists. Purchaser bears the burden of proof that any circumstance, change, event, development or effect is, individually or in the aggregate, material and adverse to (i) the Business, the Business Assets, or the Business’ liabilities, operations or financial performance or (ii) the ability of Seller to consummate the Transactions. Seller bears the burden of proof that any exception to the definition of Material Adverse Effect applies.

“ Media Buying Agreements ” means advertising contracts and insertion orders whereby the Business purchases the right to place advertising on (or the right to receive leads generated from) one or more third-party websites.

“ Net Working Capital ” means the amount of the Current Assets as of the Closing Date less the Current Liabilities as of the Closing Date, each as adjusted pursuant to the terms set forth on E XHIBIT H . Net Working Capital as of May 31, 2009 is calculated as set forth in E XHIBIT H attached hereto, and the parties hereto agree that any determination of Net Working Capital shall be made in a manner consistent with E XHIBIT H , including with consistent classifications, judgments, calculations and estimation methodologies as those used in the preparation of E XHIBIT H .

“ Noncompetition and Nonsolicitation Agreements ” shall have the meaning set forth in Section 3.3(j) of this Agreement.

“ Offer Recipient ” shall have the meaning set forth in Section 6.13(a) of this Agreement.

“ Open Source Code ” means any software code that is distributed as “free software” or “open source software” or is otherwise distributed publicly in source code form under terms that permit modification and redistribution of such software. Open Source Code includes software code that is licensed under the GNU General Public License, GNU Lesser General Public License, Mozilla License, Common Public License, Apache License, BSD License, Artistic License, or Sun Community Source License.

“ Ordinary Course of Business ” means, with respect to the operation by Seller of the Business, the operation thereof in the ordinary course of business consistent with prior practices with respect to the operation thereof.

“ Organizational Documents ” means, with respect to a particular Person, the limited liability company agreement, limited partnership agreement, partnership agreement, certificate of formation, certificate of incorporation, bylaws or any other similar organizational document of such Person.

“ Patents” means all patents and patent applications.

“ Party ” and “ Parties ” shall have the meanings set forth in the Preamble to this Agreement.

“ Permitted Encumbrances ” means (a) Encumbrances for Taxes and other governmental charges and assessments that are (i) not yet due and payable or (ii) being contested by appropriate proceedings in good faith, in the case of clause (ii), for which an appropriate reserve has been established on Seller’s Financial Statements in accordance with GAAP, (b) statutory Encumbrances of landlords, lessors, carriers, warehousemen, mechanics and materialmen and other similar statutory Encumbrances imposed by Legal Requirements, in each case that are arising in the Ordinary Course of Business, that are not

 

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material individually or in the aggregate to Seller and, secure obligations not more than 60 days past due, (c) Encumbrances created by this Agreement or any of the Ancillary Agreements, or in connection with the Transactions, or by the actions of Purchaser and (d) Encumbrances set forth in Section 1.1 of the Schedule of Exceptions.

“ Person ” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Exchange Act.

“ Personal Data ” shall mean a natural person’s name, street address, telephone number, e-mail address, photograph, social security number, driver’s license number, passport number, or customer or account number, or any other piece of information that allows the identification of a natural person.

“ Proceeding ” shall mean any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding and any informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination or investigation commenced, brought, conducted or heard by or before, or that otherwise has involved or may involve, any Governmental Authority or any arbitrator or arbitration panel.

“ Proposed Allocation Schedule ” shall have the meaning as set forth in Section 7.5(a) of this Agreement.

“ Proxy Statement ” shall mean a definitive form proxy statement relating to Seller Stockholders’ Meeting to be held in connection with the Sale.

“ Purchase Price ” shall have the meaning set forth in Section 3.2(a) of this Agreement.

“ Purchaser ” shall have the meaning set forth in the Preamble to this Agreement.

“ Purchaser Closing Certificate ” shall have the meaning set forth in Section 3.4(h) of this Agreement.

“ Purchaser Indemnified Party ” shall have the meaning set forth in Section 9.2 of this Agreement.

“ Registered IP ” shall mean (a) all Intellectual Property Rights that are registered, filed, or issued under the authority of any Governmental Authority, including all registered Patents, registered Copyrights and registered Trademarks, (b) all Internet Properties and (c) all applications for any of the foregoing.

“ Registered Business IP ” shall mean all Business IP that is Registered IP.

Each of the following shall be deemed to be a “ Related Party ”: (a) Alan Meckler, Don O’Neill, Mitch Eisenberg, Tom Kitt and each individual who is a director of Seller or any of its Affiliates; (b) each member of the immediate family of each of the individuals referred to in clause (a) above; (c) any Entity in which any one of the individuals referred to in clauses (a) and (b) above holds or held (or in which more than one of such individuals collectively hold or held), beneficially or otherwise, a controlling voting interest; and (d) each Business Employee.

“ Remaining IO ” shall have the meaning set forth in Section 6.8 of this Agreement.

 

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“ Representative ” of a Person means such Person’s members, directors, controlling Persons, officers, employees, agents, partners and advisors (including attorneys, accountants, consultants, bankers, financial advisors and prospective sources of financing for the Transactions), as applicable.

“ Review Period ” shall have the meaning set forth in Section 3.5(b) of this Agreement.

“ Sale ” means the sale by Seller of the Business Assets to Purchaser pursuant to this Agreement.

“ Schedule of Exceptions ” means the Schedule of Exceptions attached hereto as E XHIBIT A , dated as of the date hereof and as amended or supplemented by Seller pursuant to the terms hereof, delivered by Seller to Purchaser in connection with this Agreement.

“ SEC ” means the Securities and Exchange Commission.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Seller ” shall have the meaning set forth in the Preamble to this Agreement.

“ Seller Board Recommendation ” means the recommendation of Seller’s board of directors that the stockholders of Seller approve the Sale.

“ Seller Closing Certificate ” shall have the meaning set forth in Section 3.3(g) of this Agreement.

“ Seller Indemnified Party ” shall have the meaning set forth in Section 9.3 of this Agreement.

“ Seller’s Organizational Documents ” shall have the meaning set forth in Section 2.2(e) of this Agreement.

“ Seller SEC Documents ” means (i) Seller’s Annual Reports on Form 10-K for the 2007 and 2008 fiscal years, (ii) its Quarterly Reports on Form 10-Q for each of the first three fiscal quarters in fiscal year 2007 and 2008 and for the first fiscal quarter of the 2009 fiscal year of Seller, (iii) all proxy statements relating to Seller’s meetings of stockholders (whether annual or special) held since the beginning of the first fiscal year referred to in clause (i) above, (iv) its Current Reports on Form 8-K filed since the beginning of fiscal year 2007, and (v) all other forms, reports, registration statements, financial statements and other documents filed or submitted by Seller with or to the SEC since the beginning of fiscal year 2007.

“ Seller Stockholder Approval ” shall mean the affirmative vote of the holders of at least a majority of the votes of the outstanding shares of Seller’s equity stock entitled to vote thereon to approve the Sale.

“ Seller Stockholders’ Meeting ” shall have the meaning set forth in Section 6.6(b)(i) of this Agreement.

“ Settlement Accountant ” shall have the meaning set forth in Section 3.5(b) of this Agreement.

“ Software ” means all computer software and firmware, including data files, source code, object code and software-related specifications and documentation.

“ Specified Representations ” shall have the meaning set forth in Section 9.1 of this Agreement.

“ Statement of Objections ” shall have the meaning set forth in Section 3.5(b) of this Agreement.

 

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“ Straddle Period ” shall have the meaning set forth in Section 7.2 of this Agreement.

“ Subscriber ” means a Person who has registered on the Websites or who has the right to use the services provided by the Business pursuant to a Subscription Agreement.

“ Subscription Agreement ” means any Contract or license between a Subscriber and Seller pursuant to which the Subscriber uses the services provided by the Business.

“ Subsidiary ” means, with respect to any Person, any and all corporations, partnerships, limited liability companies, joint ventures, associations and other entities controlled by such Person.

“ Superior Proposal ” means a bona fide, written Takeover Proposal (on its most recently amended and modified terms, if amended and modified) made by a Third Party (i) on terms which Seller’s board of directors determines in good faith (after receiving advice of its legal advisors and independent financial advisors) to be more favorable to Seller’s stockholders from a financial point of view than the transactions provided for in this Agreement, taking into account at the time of determination any binding, written offer by Purchaser to amend the terms and conditions of this Agreement, the ability of the Person making such Takeover Proposal to consummate the transactions contemplated by such Takeover Proposal and all legal, financial (including any financing contingency and commitment letters related thereto) and regulatory aspects of such Takeover Proposal and (ii) which, in the good faith, reasonable judgment of Seller’s board of directors, is reasonably likely to be consummated within a reasonable time; provided, however, for purposes of this definition, the term Takeover Proposal shall have the meaning assigned to such term herein, except that the references to “twenty-five percent (25%)” in such definition shall be deemed to be references to “fifty percent (50%).”

“ Takeover Proposal ” means any inquiry, proposal or offer, whether in writing or otherwise, from a Third Party to acquire (a) beneficial ownership (as defined under Rule 13(d) of the Exchange Act) of any of the Business Assets or any of the other Assets of Seller that constitute 25% or more of the consolidated revenues, net income or Assets of Seller and its Subsidiaries or (b) 25% or more of any class of equity securities of Seller or any of its Subsidiaries pursuant to a merger, consolidation or other business combination, sale of shares of capital stock, sale of Assets, tender offer, exchange offer or similar transaction with respect to either Seller or any of its Subsidiaries, including any single or multi-step transaction or series of related transactions, that, if consummated, would result in such Third Party or another Third Party acquiring beneficial ownership of Assets that constitute 25% or more of the consolidated revenues, net income or Assets of Seller and its Subsidiaries, or 25% or more of the equity interest in either Seller or any of its Subsidiaries.

“ Tax ” or “ Taxes ” means all taxes, assessments, charges, duties, fees, levies, imposts or other governmental charges, including all federal, state, local, municipal, county, foreign and other income, franchise, profits, capital gains, capital stock, capital structure, transfer, gross receipt, sales, use, transfer, service, occupation, ad valorem, property, excise, severance, windfall profits, premium, stamp, license, payroll, employment, social security, unemployment, disability, environmental (including taxes under Code Section 59A), alternative, minimum, add-on, value-added, withholding and other taxes, assessments, charges, duties, fees, levies, imposts or other governmental charges of any kind whatsoever in the nature of a tax (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return), and all estimated taxes, deficiency assessments, additions to tax, additional amounts imposed by any governmental authority (domestic or foreign), and any penalties and interest with respect thereto.

“ Tax Period ” means any period prescribed by any taxing or Governmental Authority for which a Tax Return is required to be filed or a Tax is required to be paid.

 

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“ Tax Return ” means any report, return, election, document, estimated tax filing, declaration or other filing required to be supplied to any taxing authority or jurisdiction with respect to Taxes, including any amendments thereto.

“ Termination Fee ” means $720,000.

“ Third Party ” means any Person or group other than a Party hereto.

“ Third Party Claim ” shall have the meaning set forth in Section 9.6 of this Agreement.

“ Trademarks ” means all registered and common law trademarks, trade names, service marks, certification marks, service names, brands, trade dress and logos, trademark and service mark registrations and applications, and the goodwill associated therewith.

“ Trade Secrets ” means all trade secrets, business, technical and know-how information, non-public information and confidential information and rights to limit the use or disclosure thereof by any Person.

“ Transaction Expenses ” means all of the reasonable, actual and documented out-of-pocket fees and expenses incurred on or prior to the termination of this Agreement in connection with the Transactions; provided, that in no event shall the Purchaser’s Transaction Expenses exceed $180,000 in the aggregate for purposes of reimbursement by Seller under Section 10.3 hereof.

“ Transaction Taxes ” shall have the meaning set forth in Section 7.1 of this Agreement.

“ Transactions ” means the transactions contemplated by this Agreement and the Ancillary Agreements, including the Sale.

“ Transition Services Agreement ” shall have the meaning set forth in Section 3.3(a) of this Agreement.

“ Transferred Trademark Assignment Agreement ” shall have the meaning set forth in Section 3.3(d) of this Agreement.

“ Transferred Employee ” shall have the meaning set forth in Section 6.13(a) of this Agreement.

“ Treasury Regulations ” means the Treasury Regulations (including Temporary Regulations) promulgated by the United States Department of Treasury with respect to the Code or other federal tax statutes.

“ Unaudited Interim Balance Sheet ” shall have the meaning set forth in Section 4.6 of this Agreement.

“ URL ” means a uniform resource locator.

“ User Data ” means any Personal Data or other data or information collected by or on behalf of Seller from users of the Business Products or of any Website.

“ WARN Act ” shall have the meaning set forth in the Section 4.16(h) of this Agreement.

“ Websites ” means the Internet Properties identified in Section 2.1(a) of the Schedule of Exceptions.

 

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1.2 Interpretation and Rules of Construction . In this Agreement, except to the extent otherwise provided or the context otherwise requires:

(a) when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated;

(b) the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

(c) whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;

(d) the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

(e) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

(f) when a reference is made in this Agreement to Seller having delivered a document to the Purchaser, such reference shall include Seller having included such document on the virtual data site created for purposes of the Transactions; and

(g) references to a Person are also to its successors and permitted assigns.

ARTICLE II

PURCHASE AND SALE OF BUSINESS ASSETS

2.1 Transfer of Business Assets . At the Closing, and upon the terms and conditions herein set forth, Seller shall sell to Purchaser, and Purchaser shall acquire from Seller, all of Seller’s right, title and interest in, to and under the Business Assets, free and clear of any Encumbrances other than Permitted Encumbrances. Such Business Assets shall include all of Seller’s properties, goodwill and assets of every kind, nature and description, existing on the Closing Date (including Assets acquired after the date hereof) and used primarily in connection with the Business, whether real, personal or mixed, tangible or intangible, in electronic form or otherwise, wherever located and whether or not reflected on Seller’s books and records, in each case other than the Excluded Assets. Without limiting the generality of the foregoing, the Business Assets shall include all of Seller’s right, title and interest in and to the following property, but shall exclude the Excluded Assets:

(a) all domain names used primarily in connection with the Business (including all of the Websites listed in Section 2.1(a) of the Schedule of Exceptions);

(b) all Current Assets excluding cash and cash equivalents;

(c) subject to Section 6.7(b) and (c), all of Seller’s rights under all Business Contracts identified in Section 2.1(c) of the Schedule of Exceptions (the “ Assumed Contracts ”);

(d) all Business IP used primarily in connection with the Business, including all goodwill of the Business appurtenant thereto;

 

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(e) all Business Databases and all other customer and advertiser lists showing all customers and advertisers for the two years prior to the Closing and any information that exists related to the following: customer or advertiser contract amounts, pricing (CPM or price per lead, as applicable), contact information for the signatory of the contract, a summary of the relevant business terms, and name and contact information of the agency if Seller’s relationship with the customer or advertiser was via an agency;

(f) all Client and Subscriber lists;

(g) all Business Tangible Property, including any tangible property set forth in Section 2.1(g) of the Schedule of Exceptions;

(h) the Leased Real Property, including prepaid rents, deposits and income related thereto;

(i) all transferable telephone exchange numbers used primarily in connection with the Business;

(j) to the extent transferable under applicable Legal Requirements, all Business Governmental Authorizations;

(k) originals or copies of all Business Records (other than Seller’s Organizational Documents);

(l) to the extent transferable, all claims, demands, deposits, refunds, rebates, causes of action, choses in action, rights of recovery, rights of set-off and rights of recoupment related primarily to the Business, the Business Assets or the Assumed Liabilities, including (i) rights under or pursuant to all warranties, representations and guarantees made by suppliers or service providers in connection with the Business, the Business Assets or the Assumed Liabilities, (ii) proceeds from insurance policies that relate primarily to the Business, the Business Assets or the Assumed Liabilities and (iii) for the breach, infringement or misappropriation, as the case may be, of any of the foregoing;

(m) all of Seller’s rights, if any, related to the Business under noncompetition, nonsolicitation, assignment of intellectual property and inventions, and similar agreements between Seller and the Business Employees or former Business Employees; and

(n) without limiting the foregoing, all of the assets listed in Section 2.1(n) of the Schedule of Exceptions.

2.2 Excluded Assets . The Business Assets do not include the Assets of Seller listed or described in this Section 2.2 (all Assets not being acquired by Purchaser are herein referred to as the “ Excluded Assets ”):

(a) any Assets of Seller that are not primarily used in the Business;

(b) all Cash, bank deposits and bank accounts of Seller whether related to the Business or otherwise;

(c) any rights to receive refunds with respect to (i) any and all Taxes of Seller related to the Business paid on or prior to the Closing Date, and (ii) any and all Taxes of Seller not related to the Business paid at any time, in each case including any interest received with respect thereto;

 

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(d) all rights of Seller arising under this Agreement and any Ancillary Agreement;

(e) Seller’s corporate seal, minute book, charter documents, stock certificates, stock records and other Organizational Documents (together, the “ Seller’s Organizational Documents ”);

(f) all personnel records and other records that Seller is required by applicable Legal Requirements to retain in its possession or is not permitted under applicable Legal Requirements to provide to Purchaser; provided, that Seller shall provide copies of any portions of such retained information that relate to either (i) the Business or (ii) the Business Assets, except to the extent prohibited by applicable Legal Requirements;

(g) all claims, demands, deposits, refunds, rebates, causes of action, choses in action, rights of recovery, rights of set-off and rights of recoupment to the extent relating to any Excluded Assets or the Excluded Liabilities;

(h) any capital stock of Seller;

(i) all equity interests Seller holds in any other Person, including any of Seller’s Subsidiaries; and

(j) any assets set forth in Section 2.2(j) of the Schedule of Exceptions.

2.3 Assumption of Liabilities . At the Closing, Purchaser shall assume, and Purchaser shall hereafter pay, perform, satisfy and discharge when due, the following Liabilities of Seller (collectively, the “ Assumed Liabilities ”):

(a) all liabilities and obligations of Seller under the Assumed Contracts (including Assumed Contracts subject to Sections 6.7(b) or (c) below), but only to the extent such liabilities and obligations (A) arise after the Closing Date, (B) do not arise from or relate to any Breach by Seller of any provision of any of such Assumed Contracts, and (C) do not arise from or relate to any event, circumstance or condition occurring or existing on or prior to the Closing Date that, with notice or lapse of time, would constitute or result in a Breach of any of such Assumed Contracts;

(b) all Liabilities for Taxes relating to or arising out of the Business Assets or the operation of the Business after the Closing Date except for such Taxes that are the responsibility of Seller pursuant to Article VII;

(c) the Current Liabilities of Seller identified on E XHIBIT K;

(d) to the extent expressly provided for under the Transition Services Agreement, all Liabilities arising out of or relating to the Business or Business Assets incurred after the Closing Date; and

(e) the Liabilities set forth on Section 2.3(e) of the Schedule of Exceptions.

2.4 Excluded Liabilities . Seller shall retain and shall hereafter pay, perform, satisfy and discharge when due, all Liabilities other than Assumed Liabilities, including, without limitation, the following Liabilities (the “ Excluded Liabilities ”):

(a) all Liabilities relating to or arising out of the Excluded Assets;

 

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(b) all Liabilities arising out of any transaction or obligation incurred by Seller on or after the Closing Date, except for Liabilities arising out of or related to the Business or Business Assets to the extent expressly provided for under the Transition Services Agreement;

(c) all Liabilities for or in connection with any dividends, distributions or redemptions with respect to any security of Seller or its Affiliates;

(d) any expenses or fees incident to or arising out of the negotiation, preparation, approval or authorization of this Agreement or the Ancillary Agreements and the consummation of the Transactions, except as provided in Section 11.13;

(e) all Liabilities for Taxes relating to or arising out of the Business Assets or the operation of the Business prior to the Closing Date except for such Taxes that are the responsibility of Purchaser pursuant to Article VII;

(f) any Liability of Seller to any Business Employee or former Business Employee of Seller under or with respect to any Employee Agreement or Business Employee Plan, including for severance pay and accrued vacation payments due to termination of employment by Seller on or prior to the Closing Date;

(g) any Liability of Seller to any Affiliate of Seller; and

(h) any other Liability that is not referred to specifically in Section 2.3.

ARTICLE III

CLOSING; CONSIDERATION

3.1 Closing . Subject to the terms and conditions of this Agreement, the sale and purchase of the Business Assets contemplated by this Agreement shall take place at a closing (the “ Closing ”) to be held at the offices of Howard Rice Nemerovski Canady Falk & Rabkin, a Professional Corporation, San Francisco, California at 10:00 a.m. California time on (a) the second Business Day following the satisfaction or waiver of the conditions to the obligations of the Parties set forth in Article VIII or (b) at such other place or at such other time or on such other date as Seller and Purchaser may mutually agree.

3.2 Consideration . The aggregate consideration for the sale and transfer of the Business Assets shall be:

(a) $18,000,000 (the “ Purchase Price ”), as such Purchase Price may be adjusted pursuant to Section 3.5 and Article IX below, payable as follow:

(i) on the Closing Date, Purchaser shall pay to Seller an amount in cash equal to $16,000,000 (the “ Closing Payment ”); and

(ii) on the first anniversary of the Closing Date, Purchaser shall pay to Seller an amount in cash equal to $2,000,000 (the “ Anniversary Payment ”), subject to adjustment pursuant to Section 3.5 and Article IX below; and

(b) the assumption by Purchaser of the Assumed Liabilities.

All payments of the Purchase Price shall be made by wire transfer or as otherwise directed by Seller in writing when due pursuant to the terms of this Agreement.

 

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3.3 Seller’s Deliveries . On the Closing Date, Seller shall deliver to Purchaser:

(a) the Transition Services Agreement in substantially the form attached hereto as E XHIBIT  B (the “ Transition Services Agreement ”), executed by an authorized officer of Seller;

(b) a Bill of Sale and Assignment in substantially the form attached hereto as E XHIBIT  C (the “ Bill of Sale ”), executed by an authorized officer of Seller;

(c) a Copyright Assignment Agreement in substantially the form attached hereto as E XHIBIT  D transferring all of the Copyrights primarily related to the Business and comprised in the Business IP to Purchaser (the “ Copyright Assignment Agreement ”), executed by an authorized officer of Seller;

(d) a Trademark Assignment Agreement in substantially the form attached hereto as E XHIBIT  E transferring all of the Trademarks primarily related to the Business and comprised in the Business IP to Purchaser (the “ Transferred Marks Assignment Agreement ”, executed by an authorized officer of Seller);

(e) a Domain Name Transfer Agreement in substantially the form attached hereto as E XHIBIT  F transferring all of the Websites to Purchaser (the “ Domain Name Transfer Agreement ”), executed by an authorized officer of Seller;

(f) a docket report prepared by Seller’s counsel in the ordinary course based on a review of the information and files provided by Seller that identifies and describes each action, filing and payment that must be taken or made on or before the date that is 90 days after the Closing Date in order to maintain each item of Registered Business IP in full force and effect;

(g) a certificate (the “ Seller Closing Certificate ”) executed by the Chief Executive Officer of Seller certifying that the conditions specified in Sections 8.1(a), 8.3(b), 8.3(c), 8.3(d) and 8.3(e) have been fulfilled;

(h) a certificate of a Secretary, Assistant Secretary or other similar officer of Seller certifying as to (i) the resolutions of the board of directors of Seller approving and authorizing this Agreement, the Ancillary Agreements to which Seller is a party and the Transactions and (ii) the requisite approval and authorization of this Agreement and the Transactions by the stockholders of Seller;

(i) a good standing certificate of Seller issued by the Secretary of State of the State of Delaware, dated as of a recent date;

(j) executed noncompetition and nonsolicitation agreements in the forms attached hereto as E XHIBIT I (together, the “ Noncompetition and Nonsolicitation Agreements ”); and

(k) a completed and executed certificate of evidence of non-foreign status that complies with Treasury Regulation Section 1.1445-2(b)(2).

3.4 Purchaser’s Deliveries . On the Closing Date, Purchaser shall deliver:

(a) to Seller, the Closing Payment, as identified in Section 3.2;

(b) the Transition Services Agreement in substantially the form attached hereto as E XHIBIT  B , executed by an authorized officer of Purchaser;

 

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(c) an executed instrument of assumption of liabilities with respect to the Assumed Liabilities substantially in the form of the Assumption of Liabilities attached hereto as E XHIBIT  G (the “ Assumption of Liabilities ”);

(d) a Copyright Assignment Agreement in substantially the form attached hereto as E XHIBIT  D , executed by an authorized officer of Purchaser;

(e) a Transferred Marks Assignment Agreement in substantially the form attached hereto as E XHIBIT  E , executed by an authorized officer of Purchaser;

(f) a Domain Name Transfer Agreement in substantially the form attached hereto as E XHIBIT  F , executed by an authorized officer of Purchaser;

(g) Noncompetition and Nonsolicitation Agreements in substantially the forms attached hereto as E XHIBIT I , executed by an authorized officer of Purchaser;

(h) a certificate (the “ Purchaser Closing Certificate ”) executed by an authorized officer of the Purchaser certifying that the conditions specified in Sections 8.2(b) and 8.2(c) have been fulfilled;

(i) a certificate, in form and substance reasonably satisfactory to Seller, of a Secretary, Assistant Secretary or other similar officer of Purchaser certifying as to the resolutions of the board of directors of Purchaser approving and authorizing this Agreement, the Ancillary Agreements to which Purchaser is a party and the Transactions; and

(j) a good standing certificate of Purchaser issued by the Secretary of State of the State of California, dated as of a recent date.

3.5 Purchase Price Adjustment .

(a) Post-Closing Statements . As promptly as practicable, but no later than 120 days after the Closing Date, Seller shall prepare and deliver to Purchaser a statement (the “ Closing Statement ”) setting forth Seller’s final determination of the Net Working Capital as of the Closing Date (the “ Closing Net Working Capital ”). The Closing Statement shall be prepared in accordance with the definition of Net Working Capital and shall be accompanied by appropriate information and documentation in reasonable detail supporting Seller’s calculation.

(b) Upon receipt of the Closing Statement, Purchaser shall have 30 days (the “ Review Period ”) to review such Closing Statement and the related computation of Net Working Capital. To the extent reasonably necessary in connection with Purchaser’s review of the Closing Statement, Seller shall give Purchaser and its Representatives reasonable access to the personnel, books, records and other materials of the Business (including work papers prepared by Seller or its accountants); provided , however , that any such access shall be conducted during normal business hours, under the supervision of Seller’s personnel and in such a manner as not to interfere with the normal operations of its business. In connection with Purchaser’s review of the Closing Statement, Seller and Purchaser shall review all accounts receivable which remain uncollected as of such date and mutually, reasonably agree which remains collectible. Determination of collectibility will be based on information Seller and Purchaser deem relevant, including past time period to collect, financial wherewithal and any notices from the respective customers. Only the accounts receivable mutually agreed to be collectible will be included in the calculation of Final Net Working Capital and accounts deemed uncollectible shall be deemed Excluded Assets and shall be assets of Seller. If Purchaser has accepted the Closing Statement in writing

 

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or has not given written notice to Seller setting forth in reasonable detail any objection of Purchaser to such Closing Statement (a “ Statement of Objections ”) prior to the expiration of the Review Period, then the determination of Closing Net Working Capital set forth in such Closing Statement shall be deemed to be the amount of Closing Net Working Capital that is final and binding upon the parties for purposes of this Agreement (the “ Final Net Working Capital ”). In the event that Purchaser delivers a Statement of Objections during the Review Period, Purchaser and Seller shall use their commercially reasonable efforts to agree on the Final Net Working Capital within 30 days following the receipt by Seller of the Statement of Objections. If the Parties are unable to reach an agreement as to such amounts within such 30 day period, then the matter shall be submitted to Ernst & Young or, to the extent such firm is unwilling to accept such engagement, an independent accounting firm of national reputation mutually acceptable to the Parties (such accountant, the “ Settlement Accountant ”), who, acting as an expert and not as an arbitrator, shall resolve the matters still in dispute and adjust the Closing Statement to reflect such resolution and establish the Final Net Working Capital. The Settlement Accountant shall make such determination within 45 days following the submission of the matter to the Settlement Accountant for resolution, and such determination shall be final and binding upon Purchaser and Seller.

(c) In the event any dispute is submitted to the Settlement Accountant for resolution as provided in Section 3.5(b), the fees, charges and expenses of the Settlement Accountant shall be borne (i) exclusively by Seller if the Final Net Working Capital is less than the Closing Net Working Capital, (ii) exclusively by the Purchaser if the Final Net Working Capital exceeds the Closing Net Working Capital and (iii) fifty percent (50%) by each of Seller and Purchaser if Final Net Working Capital equals the Closing Net Working Capital.

(d) Following the determination of the Final Net Working Capital:

(i) if the Final Net Working Capital is greater than $2,973,000.00, Purchaser shall promptly pay Seller the difference;

(ii) if the Final Net Working Capital is equal to $2,973,000.00, the Anniversary Payment shall not be adjusted;

(iii) if the Final Net Working Capital is less than $2,973,000.00 but equal to or greater than $2,673,000.00, the Anniversary Payment shall be reduced by an amount equal to the sum of $2,973,000.00 minus the Final Net Working Capital; and

(iv) if the Final Net Working Capital is less than $2,673,000.00, then (x) the Anniversary Payment shall be reduced by $300,000.00, and (y) Seller shall promptly pay Purchaser an amount equal to the sum of $2,673,000.00 minus the Final Net Working Capital.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

OF SELLER

Except as specifically set forth in the Schedule of Exceptions, Seller hereby represents and warrants to Purchaser that the statements contained in this Article IV are true, correct and complete as of the date hereof or, if a representation or warranty is made as of a specified date, as of such date. Notwithstanding anything to the contrary herein, (1) the representations and warranties set forth in this Article IV are made for the purpose of allocating contractual risk between the parties hereto and shall not constitute or be deemed to be an admission of fact to any third party concerning any item set forth herein and (2) the use and meaning of the term “material” (and variations thereof) herein may be different from the use and meaning of such term under applicable securities laws.

 

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4.1 Due Organization; Power; No Subsidiaries; Etc. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Seller has all requisite corporate power and authority to own, operate or lease the Business Assets. Seller is duly authorized to conduct business and is in good standing in each jurisdiction where such authorization is required to conduct the Business as presently conducted by it, except where the failure to be so qualified does not constitute a Material Adverse Effect. Except as set forth in Section 4.1 of the Schedule of Exceptions, no Subsidiary of Seller or any other Entity in which Seller holds an interest owns any of the Business Assets. Neither Seller nor any of its stockholders has ever approved, or commenced any proceeding or made any election contemplating, the dissolution or liquidation of Seller or the winding up or cessation of Seller’s business or affairs.

4.2 Due Authorization. The execution and delivery by Seller of this Agreement and the Ancillary Agreements to which Seller is or is to become a party, the performance of its obligations hereunder and thereunder, and the Transactions have been duly and validly authorized by all necessary corporate action on the part of Seller other than the Seller Stockholder Approval. Seller has the absolute and unrestricted right, power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is or is to become a party and to perform its obligations hereunder and thereunder. Seller has obtained the unanimous approval of its board of directors for the approval of this Agreement, the Ancillary Agreements and the Transactions prior to the execution of this Agreement. This Agreement has been, and each of the Ancillary Agreements to which Seller is or is to become a party, when executed and assuming due authorization, execution and delivery by Purchaser and each other party hereto or thereto other than Seller, will be, duly executed and delivered by Seller and constitute valid and legally binding obligations of Seller enforceable in accordance with their respective terms, except as such enforceability may be (i) limited by applicable bankruptcy, insolvency, reorganization, fraudulent transfer and other laws affecting creditors’ rights generally (other than claims brought by Alan Meckler), and (ii) subject to the rules of law governing specific performance, injunctive relief, or other equitable remedies.

4.3 No Conflict; Third Party Consents. Except as set forth in Section 4.3 of the Schedule of Exceptions and assuming that the Seller Stockholder Approval is obtained, the execution and delivery of this Agreement does not, and the execution and delivery of the Ancillary Agreements to which Seller is a party will not, and the consummation of the Transactions will not (a) violate or conflict with the provisions of Seller’s certificate of incorporation or bylaws, (b) result in the imposition of any Encumbrance (other than the rights of Purchaser hereunder) upon any of the Business Assets, cause the acceleration, cancellation or material modification of any obligation under, create in any party the right to terminate, constitute a default or breach of, or violate or conflict with the terms, conditions or provisions of, or result in the loss of a material benefit under, any Contract to which Seller is a party or by which Seller or the Business Assets are bound or (c) result in a material breach or violation by Seller of any of the terms, conditions or provisions of any Legal Requirement, Governmental Authorization or Governmental Order. Except as set forth in Section 4.3 of the Schedule of Exceptions and except for the Seller Stockholder Approval, Seller is not required to give any notice to any Person, and no consent, approval or authorization of, or registration or filing with, any Person or Governmental Authority is required in connection with the execution, delivery or performance by Seller of this Agreement or any of the Ancillary Agreements to which Seller is or is to become a party or the consummation of the Transactions.

4.4 Financial Statements.

(a) Seller has made available (including via EDGAR) to Purchaser true and complete copies of the Seller SEC Documents filed with the SEC by Seller on or prior to the Closing Date, and Seller shall make available (including via EDGAR) to Purchaser true and complete copies of any Seller SEC Documents filed with the SEC by Seller after the date hereof and prior to the Closing Date. As of

 

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their respective filing dates, (i) the Seller SEC Documents complied or will comply, as applicable, in all material respects with the requirements of the Exchange Act and the Securities Act and (ii) none of the Seller SEC Documents contained or will contain, as applicable, any untrue statement of a material fact related to the Business or the Business Assets, or omitted or will omit, as applicable, to state a material fact required to be stated therein or necessary to make the statements made therein related to the Business or the Business Assets, in the light of the circumstances under which they were made, not misleading, except to the extent amended or superseded by a subsequently filed Seller SEC Document.

(b) Section 4.4(b) of the Schedule of Exceptions sets forth the following financial statements of the Business: (i) the unaudited balance sheet of the Business as of December 31, 2008 and the related statements of income for the year then ended; and (ii) the unaudited balance sheet of the Business as of June 30, 2009 and the related statements of income for the six months then ended (together, the “ Financial Statements ”). The Financial Statements were prepared in accordance with GAAP applied on a basis consistent throughout the periods indicated (except as otherwise stated in such Financial Statements) and fairly present in all material respects the consolidated financial condition and the results of operations of the Business as at the respective dates thereof and for the periods indicated therein.

(c) Seller has implemented and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) designed to ensure that all material information relating to Seller, including its consolidated Subsidiaries, required to be disclosed by Seller in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported to the individuals responsible for preparing such reports within the time periods specified in the rules and forms of the SEC and all such information is accumulated and communicated to Seller’s management, including its principal executive and principal financial officers, and to other individuals responsible for preparing such reports as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the principal executive officer and principal financial officer of Seller required under the Exchange Act with respect to such reports. Seller has disclosed, based on its most recent evaluation prior to the date hereof, to Seller’s outside auditors and the audit committee of Seller’s board of directors (i) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that are reasonably likely to adversely affect Seller’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Seller’s internal control over financial reporting.

(d) Seller’s system of internal controls over financial reporting are reasonably sufficient in all material respects to provide reasonable assurance regarding the reliability of Seller’s financial reporting and financial statements, and include policies and procedures (i) providing reasonable assurance that (A) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and (B) receipts and expenditures are in accordance with the authorization of Seller’s management and directors and (ii) regarding prevention or timely detection of unauthorized acquisition, use or disposition of Seller’s assets that could have a material effect on Seller’s financial statements. Except as set forth on Section 4.4(d) of the Schedule of Exceptions, no significant deficiency or material weakness was identified in management’s assessment of internal controls as of December 31, 2008 with respect to the Business or Business Assets, nor has any such deficiency or weakness been identified between that date and the date of this Agreement with respect to the Business or Business Assets.

4.5 Absence of Changes . From June 30, 2009 through the date hereof, (i) each of Seller and its Subsidiaries has, in all material respects, conducted the Business in the Ordinary Course of Business; (ii) there has not occurred any change, event or condition that is a Material Adverse Effect or would

 

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reasonably be expected to result in a Material Adverse Effect and (iii) Seller has not taken any of the actions that Seller has agreed not to take from the date hereof through the Closing Date pursuant to Section 6.2 of this Agreement.

4.6 No Undisclosed Liabilities . Neither Seller nor any of its Subsidiaries has any Liabilities of any nature with respect to the Business (whether accrued, matured or unmatured, fixed or contingent or otherwise) other than (i) those set forth or accrued for in the consolidated balance sheet (and the related notes thereto) of Seller and its Subsidiaries as of June 30, 2009 included in the Financial Statements (the “ Unaudited Interim Balance Sheet ”), (ii) those incurred in the Ordinary Course of Business since June 30, 2009 that individually do not exceed $20,000 and in the aggregate do not exceed $100,000, (iii) those incurred in connection with the execution of this Agreement or (iv) those set forth in Section 4.6 of the Schedule of Exceptions.

4.7 Receivables; Major Customers .

(a) Section 4.7(a) of the Schedule of Exceptions provides, in all material respects, an accurate and complete list of all accounts receivable and other receivables of Seller relating to the Business as of June 30, 2009, together with a range of days elapsed since invoice.

(b) All existing accounts receivable of Seller (including those accounts receivable reflected on the Unaudited Interim Balance Sheet that have not yet been collected and those accounts receivable that have arisen since the date of the Unaudited Interim Balance Sheet and have not yet been collected): (i) represent valid obligations of customers of Seller arising from bona fide transactions entered into in the Ordinary Course of Business; and (ii) are, to the Knowledge of Seller, collectible (without any counterclaim or setoff).

(c) Section 4.7(c) of the Schedule of Exceptions accurately identifies, and provides an accurate and complete breakdown of the revenues received from, each customer of the Business that accounted for (i) more than $50,000 of the gross revenues of Seller in 2008, or (ii) more than $25,000 of Seller’s gross revenues from January 1, 2009 through June 30, 2009. Seller has not received any written notice indicating that any customer required to be identified in Section 4.7(c) of the Schedule of Exceptions may cease dealing with Seller or may otherwise materially reduce the volume of business transacted by such Person with Seller below historical levels except in the Ordinary Course of Business.

4.8 Tangible Assets . Section 4.8 of the Schedule of Exceptions sets forth a list, as of the date of this Agreement, of each material item of Business Tangible Property. Seller has good, valid and marketable title to all such owned items of Business Tangible Property free of all Encumbrances other than Permitted Encumbrances or an enforceable right to use all leased items of Business Tangible Property. All such Business Tangible Property as it is operated on the date hereof: (i) is structurally sound, free of defects and deficiencies and in good condition and repair in all material respects (ordinary wear and tear excepted); (ii) complies in all material respects with, and is being operated and otherwise used in material compliance with, all applicable Legal Requirements; and (iii) is adequate for the uses to which it is being put. The Business Tangible Property is adequate for the conduct of the Business in the manner in which the Business is currently being conducted. All of the owned Business Tangible Property is owned by Seller free and clear of any Encumbrances, other than Permitted Encumbrances.

4.9 Leasehold Property . Section 4.9 of the Schedule of Exceptions sets forth a true, correct and complete list and contains a description (including street address and use) of all of the Leased Real Property. Except as set forth on Section 4.9 of the Schedule of Exceptions, Seller has no material maintenance or capital improvement obligations on the Leased Real Property in an amount over $10,000. The agreements pertaining to Leased Real Property are in full force and effect and valid and enforceable

 

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in accordance with their terms. The Leased Real Property is not subject to or subordinate to any Encumbrance, other than Permitted Encumbrances and Encumbrances which encumber the respective landlords’ interest in the Leased Real Property. Seller enjoys peaceful and undisturbed possession of such premises. The Leased Real Property is in a condition suitable for return to the lessor under the terms of the applicable agreement without payment of any penalty or forfeiture of a security deposit or any portion thereof. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, result in any breach of or constitute a default (or an event that with notice of lapse of time or both would become a default) under the respective leases of the Leased Real Property.

4.10 Intellectual Property; Privacy .

(a) Intentionally omitted.

(b) Registered IP . Section 4.10(b) of the Schedule of Exceptions accurately identifies: (i) each item of Registered Business IP; (ii) the jurisdiction in which each such item of Registered Business IP has been registered or filed and the applicable registration or serial number; and (iii) any other Person that has an ownership interest in each such item of Registered Business IP and the nature of such ownership interest. Section 4.10(b) of the Schedule of Exceptions also accurately identifies, with respect to each Website, the registrar for the domain name of such Website.

(c) Inbound Licenses . Section 4.10(c) of the Schedule of Exceptions accurately identifies: (i) each Business IP Contract pursuant to which any Intellectual Property Right is licensed, sold, assigned, or otherwise conveyed or provided (including in the form of a covenant not to assert) by any Person to Seller (other than (A) agreements between Seller and its employees or freelancers and (B) any non-customized Software that (1) is so licensed, sold, assigned, or otherwise conveyed or provided solely in executable or object code form pursuant to a non-exclusive, internal use software license, and (2) is generally available on standard terms and has been licensed by Seller for less than $5,000 for internal-use in the Business); and (ii) whether the licenses or rights granted to Seller in each such Business IP Contract are exclusive or non-exclusive.

(d) Outbound Licenses . Section 4.10(d) of the Schedule of Exceptions accurately identifies (i) each Business IP Contract pursuant to which any Person has been granted any license under, or otherwise has received or acquired any right (whether or not currently exercisable) or interest in (including in the form of a covenant not