EXHIBIT 2.1
ASSET PURCHASE AND SALE AGREEMENT
THIS
ASSET PURCHASE AND SALE AGREEMENT (this “
Agreement ”), is made and entered into as of
September 28, 2007, by and between Internet Brands, Inc., a
Delaware corporation (“ Internet Brands ”),
and LION, Inc., a Washington corporation (the “
Seller ”), which owns the website Mortgage101.com
(the “ Website ”). Internet
Brands and Seller are hereinafter at times individually
referred to as a “ Party ” and collectively
to as the “ Parties .”
RECITALS
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A.
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Seller
operates the Website and its related business, and owns or
otherwise has rights to all of the related domain and sub-domain
names, technology platforms, software source code, customer,
advertiser, member and content databases and all other assets and
licenses related thereto.
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B.
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Internet
Brands desires to acquire all of such assets comprising the Website
and its business as set forth herein.
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C.
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Seller
desires to sell such assets to Internet Brands, subject to the
terms and conditions contained in this Agreement (the “
Transaction ”).
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NOW,
THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and
valuable consideration, and intending to be legally bound
hereby, the Parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
Section 1.1 Purchase and Sale of Assets; Assumption
of Liabilities. At the Closing (defined in Section
1.2 hereof) and subject to the terms and conditions of this
Agreement including, without limitation, satisfaction of the
conditions found in Article 6 hereof:
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(a)
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Seller
shall sell, transfer, convey and deliver to Internet Brands and
Internet Brands shall purchase and acquire from Seller, all of
Seller’s rights, title, and interest in all Website-related
domain and sub-domain names, URLs, software, assets, content,
customer, advertiser and member databases, trademarks, service
marks, trade names, copyrights, contract rights and all other
intellectual property and technology comprising the Website and
exclusively related to its business, in each case identified on
Schedule 1.1(a) hereof, free and clear of any liens, claims,
charges, pledges, security interests, options or other legal or
equitable encumbrances (collectively, the “ Purchased
Assets ”).
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(b)
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Notwithstanding
Section 1.1(a), the Purchased Assets shall exclude any assets (the
“ Excluded Assets ”) not specifically set forth
in Schedule 1.1(a) and Schedule 2.3 , including
without limitation assets related to Seller’s retail
websites’ business, Seller’s wholesale and
correspondent loan programs library and related databases, and
Seller’s “Lion Broker” broker-to-broker portal
and pricing engine. Notwithstanding anything to the
contrary herein, except for the express assignments granted in this
Agreement, nothing herein shall be deemed to transfer any rights in
any intellectual property owned, licensed to, conceived, reduced to
practice or otherwise developed by Seller by virtue of its
reference, incorporation or use within any of the Purchased
Assets.
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(c)
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As
of the Closing Date, Internet Brands shall assume and be liable for
all liabilities arising from the Purchased Assets after Closing,
including all post-Closing liabilities for performance under each
of the assumed contracts except liabilities, even if arising
post-Closing, for services provided by Seller under the assumed
contracts prior to Closing (collectively, the “ Assumed
Liabilities ”). Internet Brands agrees to promptly pay,
perform, honor and discharge, or cause to be paid or otherwise
promptly performed, honored and discharged, from and after the
Closing all Assumed Liabilities as they become due and payable and
in accordance with the terms thereof.
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(d)
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Notwithstanding
anything to the contrary herein, Internet Brands is not assuming
and shall not become responsible for any liability of Seller of
whatever nature, whether presently in existence or arising
hereafter, including any liability incurred in connection with,
arising out of, or related to the ownership or use of any of the
Purchased Assets or the conduct of the Website or its business on
or prior to the Closing Date, and all severance and transition
costs, except the Assumed Liabilities. All such
liabilities other than the Assumed Liabilities are referred to
herein as the “ Excluded Liabilities ” and shall
be retained by and remain liabilities of Seller.
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Section 1.2 Closing. The closing of
the purchase and sale of the Purchased Assets to Internet Brands
(the “ Closing ”) shall occur as promptly as
practicable, but not later than October 1, 2007; provided ,
however , that all of the conditions to Closing set forth in
Article 6 hereof shall have been satisfied or
waived. The date on which the Closing actually occurs
shall be referred to as the “ Closing Date
.” The Closing shall take place at the offices of
Internet Brands in El Segundo, California, or via overnight courier
at the election of the Parties.
Section 1.3 Purchase Consideration.
In full consideration of the sale, assignment and
transfer of the Purchased Assets and the execution and delivery of
this Agreement and the Ancillary Documents, as defined below, made
in connection with the Transaction, at Closing Internet Brands
shall:
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(a)
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pay
to Seller Five Million Dollars ($5,000,000) by wire transfer of
immediately available funds; and
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(b)
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deposit
into a separate account, to be held in trust as escrow agent for
the benefit of Seller, Three Hundred Fifty Thousand Dollars
($350,000) of immediately available funds (the “
Transition Plan Holdback ”). The Transition
Plan Holdback plus any interest accrued thereon shall be available
to satisfy any amounts owed by Seller to Internet Brands under this
Agreement, and the balance, if any, shall be distributed to Seller,
all in accordance with the terms set forth in Section 5.7
hereof.
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Section 1.4 Purchase Price Allocation.
The purchase price shall be allocated in the manner
required by the Internal Revenue Code of 1986, as amended (the
“ Code ”). After the Closing, the
Parties shall make consistent use of the allocation, fair market
value and useful lives for all tax purposes and in all filings,
declarations and reports with the Internal Revenue Service (the
“ IRS ”) in respect thereof, including the
reports required to be filed under Section 1060 of the
Code. Buyer shall prepare and deliver IRS Form 8594 to
Seller within forty-five (45) days after the Closing Date to be
filed with the IRS. In any proceeding related to the determination
of any tax, neither Internet Brands nor Seller shall contend or
represent that such allocation is not a correct
allocation.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller
hereby represents and warrants to Internet Brands as of the
date hereof and as of the Closing Date:
Section 2.1 Organization of Seller.
Seller is a corporation duly incorporated and validly
existing under the laws of the State of Washington, with full
corporate power and authority to conduct its business as it is now
being conducted. Seller is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of
the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except where the
failure to be so qualified or in good standing would not reasonably
be expected to have a material adverse effect on Seller’s
business or properties.
Section 2.2 Authority.
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(a)
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Seller
possesses all requisite power and authority to enter into this
Agreement and perform its obligations hereunder. The
execution, delivery, and performance of this Agreement have been
duly authorized by all necessary corporate action on the part of
Seller. This Agreement constitutes the valid and binding
obligation of Seller, enforceable against Seller in accordance with
its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights
generally, or (ii) as limited by laws relating to the availability
of specific performance, injunctive relief or other equitable
remedies and principles of public policy (subsections (i) and (ii)
are referred to as “ Equitable Exceptions
”).
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(b)
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The
execution, delivery and performance of this Agreement by Seller and
the consummation by Seller of the Transaction does not (i) violate
any provision of Seller’s articles of incorporation or
bylaws, as amended, or (ii) conflict with or result in any breach,
violation, modification or termination of, accelerate or permit the
acceleration of the performance required by the terms of, or
constitute a default, under any of the terms or provisions of any
agreement, indenture, loan, mortgage, lien, lease, obligation,
license, permit, franchise, judgment, decree, order, statute, rule,
regulation or other instrument or restriction of any kind to which
Seller is a party or by which its assets or property is bound,
except for any such events or occurrences that could not reasonably
be expected to have a material adverse effect on Seller’s
business or properties.
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(c)
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No
consent, approval, order or authorization of, or registration,
declaration or, except as set forth on Schedule 2.2(c) ,
filing with, any governmental entity or public or regulatory unit,
agency, body or authority is required in connection with the
execution, delivery or performance of this Agreement by Seller or
the consummation by Seller of this Transaction.
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Section 2.3 Ownership of Purchased Assets.
(a) Seller owns all of the Purchased Assets identified
on Schedule 1.1(a) hereof, which includes a list of all
customers, partners, affiliates and advertisers; (b) the Purchased
Assets, together with the assumed contracts, identified on
Schedule 2.3 , assigned to Internet Brands, constitute all
of the assets comprising the Website and its business, including
without limitation, all related sub-domain names, content,
customer, advertiser and member databases, contract rights,
copyrights, trademarks, trade names, logos, graphic art and all
other intellectual property, free and clear of liens, claims and
encumbrances; (c) Seller owns or has valid leases, licenses or
similar rights to all right, title and interest to all intellectual
property necessary to operate the Website and its related business,
free and clear of any liens, encumbrances or security interests and
without any infringement of the intellectual property rights of
others; and (d) as a result of the execution and delivery of this
Agreement or the performance of Seller's obligations hereunder,
Seller shall not be in violation in any material respect of any
license, sublicense or agreement.
Section 2.4 Absence of Undisclosed Liabilities.
There are no outstanding liabilities that would attach
to the Purchased Assets except the continuing obligations under the
assumed contracts set forth on Schedule 2.3
. There are no claims or commitments with respect to the
Purchased Assets or that are reasonably likely to result in a lien
or claim on any of the Purchased Assets, including without
limitation, any claims of creditors of Seller, former or purported
officers, directors, shareholders, employees or independent
contractors of Seller who provided services with respect to the
Website or its business, or any claims or threatened claims of
trademark or copyright infringement.
Section 2.5 Financial Statements; Revenue and
Deferred Revenue; Accounts Receivables.
Seller has delivered to Internet Brands (a) a
report of all customer deposits attached to assumed customer
agreements as of August 31, 2007; (b) a report of all deferred
revenue for subscription products as of August 31, 2007; (c) a
report of all accrued revenue for leads as of August 31, 2007; (d)
a report of all monthly Website revenue from Google AdSense for the
period January 1, 2006 through September 1, 2007; (e) unaudited
profit and loss statements consolidated by product line for the
eight months ended August 31, 2007; (f) a daily earnings report
from SureHits for the period July 1, 2007 through August 31, 2007;
(g) a report of all monthly revenue by customer for August 2007;
(h) a report of all monthly invoiced revenue by customer and by
sub-product for the period January 1, 2006 through September 19,
2007 for leads, and through September 23, 2007 for subscription
services; (i) a report of all monthly expenses relating to the
Website and its business, for the month of August 2007; and (j) a
report of all accounts receivables as of September 17, 2007, all of
which reports and statements are unaudited (collectively, the
“ Financial Statements ”). The
Financial Statements, together with any notes thereto, are attached
hereto as Exhibit 2.5 . The Financial Statements are true,
correct and fairly present the financial information as of the
dates thereof. Since August 31, 2007, there has been no
material adverse change to the operations or financial results of
the Website business. With regard to the Purchased
Assets financial information contained in the Financial Statements,
to Seller’s knowledge, (i) there are no undisclosed revenue
adjustments, credits or refunds, (ii) the customer deposits and
deferred revenue is properly stated, (iii) there are no sales
discounts other than those reflected on the revenue schedules
provided to Internet Brands, (iv) there are no other costs and
expenses, except as disclosed to Internet Brands, and (v) there are
no undisclosed offsets to or uncollectible amounts included in
accounts receivable.
Section 2.6 Contracts.Schedule 2.3 hereto sets
forth a complete and correct list of all material contracts,
agreements, commitments and obligations of Seller, either written
or oral, relating to the Website. Except as set forth on
Schedule 4.2 hereto, copies of all written contracts
relating to the Website have been provided or made available to
Internet Brands. Each such contract or agreement is a
valid and binding agreement of Seller enforceable against Seller
subject to the Equitable Exceptions. Seller has fulfilled all of
its obligations under such contracts as of the date hereof which
are required to be fulfilled as of the date hereof.
Section 2.7 Tax Matters . There are no
liens, encumbrances or security interests on any of the Purchased
Assets arising in connection with any failure (or alleged failure)
to pay any tax, and Seller has no knowledge of any basis for the
assertion of any claims attributable to taxes that, if adversely
determined, would result in any such lien, encumbrance or security
interest (except for taxes that are not yet due and
payable).
Section 2.8 Legal Proceedings. There
is no pending or to Seller’s knowledge, threatened proceeding
(a) by or against Seller or that could reasonably be expected to
have a material adverse affect on the Website or its business, or
on any of the Purchased Assets; or (b) that could reasonably be
expected to have the effect of preventing, delaying, or making
illegal the Transaction.
Section 2.9 Accuracy of Information; Full
Disclosure. This Agreement, the Ancillary
Documents, the exhibits and schedules hereto and thereto, and all
other documents delivered at Closing by Seller to Internet Brands
in connection with the Closing, when taken as a whole, do not
contain any untrue statement of a material fact nor omit to state a
material fact necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances
under which they were made.
Section 2.10 Books and Records.
Seller has made and kept (and given Internet Brands
access to) books and records and accounts, which, in reasonable
detail, fairly and accurately reflect the operations of Seller in
all material respects relating to the Website’s business and
the Purchased Assets.
Section 2.11 Compliance with Laws.
Seller has complied in all material respects with the
laws and regulations applicable to it in the operation of the
Website and delivery of leads to Website customers.
Section 2.12 Employees; Independent Contractors.
Seller has no employees whose employment shall be transferred to
Internet Brands at Closing. Schedule 2.12 hereto
contains a correct and complete list of all of Seller’s
employees and independent contractors that perform work related to
the Website or its business. Seller has complied with
all applicable employment laws and regulations, including without
limitation, all federal and state wage laws, and collection and
payment of withholding taxes. There are no claims pending or
threatened against Seller by any employee or independent
contractor, including claims or investigations pending with any
federal or state agency or any grievance or arbitration
proceeding.
Section 2.13 Limitation of Representations
. Except for the representations and warranties
contained in this Article 2, (a) neither Seller nor any other
person has made any representation or warranty, express or implied,
at law or in equity, on behalf of either of Seller or its
representatives regarding the Website, the Purchased Assets or the
Website business (or the value of any of them) or the transactions
contemplated by this Agreement and (b) Seller hereby disclaims
any such representation or warranty, notwithstanding the delivery
or disclosure to Internet Brands, its representatives or any other
person of any information, documentation or other
materials.
EXCEPT
AS OTHERWISE EXPRESSLY SET FORTH IN THIS ARTICLE 2, THE
PURCHASED ASSETS, THE ASSUMED LIABILITIES AND THE WEBSITE
BUSINESS ARE TRANSFERRED “AS IS,” “WHERE
IS” AND, SUBJECT TO THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN THIS ARTICLE 2, WITH ALL FAULTS AND WITHOUT ANY
OTHER REPRESENTATION OR WARRANTY OF ANY KIND OR NATURE
WHATSOEVER, EXPRESS OR IMPLIED, ORAL OR WRITTEN, AND IN
PARTICULAR, WITHOUT ANY IMPLIED WARRANTY OR REPRESENTATION AS
TO CONDITION, VALUE, MERCHANTABILITY OR FITNESS OR SUITABILITY
FOR ANY PARTICULAR PURPOSE OR WARRANTY REGARDING THE USE OF
ANY OF THE PURCHASED ASSETS, OR THAT THEIR AVAILABILITY SHALL
BE UNINTERRUPTED, THAT THEY SHALL BE ERROR FREE OR THAT
CERTAIN RESULTS MAY BE OBTAINED FROM THEIR USE, OR THAT THE
PURCHASED ASSETS SHALL CONFORM TO ANY DESCRIPTION THEREOF
PROVIDED BY SELLER.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF INTERNET BRANDS
As
a material inducement to Seller to execute and deliver this
Agreement and to consummate the Transaction (subject to the
conditions contained herein), Internet Brands represents,
warrants and agrees as follows:
Section 3.1 Organization of Internet Brands.
Internet Brands is a corporation duly organized,
validly existing and in good standing under the laws of the state
of Delaware. Internet Brands has the corporate power to own its
properties and to carry on its business as now
conducted. Internet Brands is duly qualified to do
business as now being conducted and is authorized and in good
standing in its place of incorporation and each jurisdiction in
which the failure to so qualify or be in good standing would result
in a material adverse effect on Internet Brands’ business or
properties.
Section 3.2 Authority. Internet
Brands has all requisite power and authority to enter into this
Agreement and to consummate the Transaction. The
execution and delivery of this Agreement and the approval of the
Transaction have been duly authorized by all necessary corporate
action including by Internet Brands’ Board of Directors, as
evidenced by authorizing resolutions delivered to Seller at
Closing. This Agreement constitutes the valid and
binding obligation of Internet Brands, enforceable in accordance
with its terms, subject to the Equitable Exceptions. The
execution and delivery of this Agreement by Internet Brands and the
consummation of the Transaction shall not (a) conflict with its
Certificate of Incorporation or Bylaws, as amended, or (b) conflict
with or result in any breach of, violation of, modification of,
termination of, accelerate or permit the acceleration of the
performance required by the terms of, or constitute a default under
any of the terms or provisions of any material agreement,
indenture, loan, mortgage, lien, lease, obligation, license,
permit, franchise, judgment, decree, order, statute, rule,
regulation or other instrument or restriction of any kind to which
Internet Brands is a party or by which the assets or property of
Internet Brands is bound, or (c) result in a breach of any
fiduciary or other obligation of Internet Brands to any third
party. No consent, waiver, approval, order or
authorization of any governmental authority, instrumentality,
agency or commission, or any third party, is required for the
execution and delivery of this Agreement by Internet Brands or the
consummation of the Transaction.
Section 3.3 No Brokers . Internet
Brands has not employed and is not liable for the payment of any
fee to any finder, broker, consultant or similar person in
connection with this Agreement or Transaction.
Section 3.4 Tax Withholding . Internet
Brands shall not withhold from or in respect of any sum payable by
Internet Brands under this Agreement.
Section 3.5 Acknowledgment of Limitation of
Warranties . Internet Brands is experienced and
sophisticated with respect to the transactions contemplated by this
Agreement and has undertaken such investigation, and has been
provided with and has evaluated such documents and information, as
it has deemed necessary in connection with the execution, delivery
and performance of this Agreement. Internet Brands
acknowledges that, except to the extent expressly set forth in
Article 2 of this Agreement, no representation or warranty has been
made by or on behalf of either of Seller or any of its
representatives with respect to any information, documents or
material provided or made available by either of Seller or any of
its representatives to Internet Brands or any of its
representatives relating to the Website or its business, or the
Purchased Assets.
ARTICLE 4
COVENANTS OF SELLER
Section 4.1 [Intentionally Omitted].
Section 4.2 Transition of the Website’s
Technology and Business.
