<PAGE>
EXHIBIT 10.39
EXECUTION COPY
================================================================================
ASSET PURCHASE AGREEMENT
BY AND AMONG
ZIFF DAVIS MEDIA INC.,
MBPS.COM, INC.,
FILEFRONT, L.P.
AND
THE FILEFRONT PRINCIPALS
DATED AS OF NOVEMBER 4, 2005
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<PAGE>
TABLE OF CONTENTS
<TABLE>
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SECTION 1.
DEFINITIONS....................................................................................
1
1A.
Definitions....................................................................................
1
1B. Other
Definitions..............................................................................
6
SECTION 2. PURCHASE AND
SALE OF
ASSETS....................................................................
8
2A. Purchase and
Sale of
Assets....................................................................
8
2B. No
Assumption of
Liabilities...................................................................
8
2C. Closing
Transactions...........................................................................
9
2D. Adjustment
Amount..............................................................................
10
2E. Additional
Purchase Price
Payment..............................................................
11
2F. Allocation
of Purchase
Price...................................................................
12
SECTION 3. CONDITIONS TO
CLOSING..........................................................................
13
3A. Conditions
to Buyer's
Obligations..............................................................
13
3B. Conditions
to Sellers'
Obligations.............................................................
15
SECTION 4. REPRESENTATIONS
AND WARRANTIES OF SELLER AND THE FILEFRONT
PRINCIPALS.......................... 16
4A.
Organization and
Limited Partnership
Power.....................................................
16
4B.
Authorization of
Transactions..................................................................
16
4C. Absence of
Conflicts...........................................................................
16
4D. Absence of
Liabilities.........................................................................
17
4E. Purchased
Assets...............................................................................
17
4F. Legal
Compliance...............................................................................
17
4G. Contracts
and
Commitments......................................................................
17
4H. Intellectual
Property..........................................................................
17
4I.
Brokerage......................................................................................
18
4J. Affiliate
Transactions.........................................................................
18
4K.
Disclosure.....................................................................................
18
SECTION 5. REPRESENTATIONS
AND WARRANTIES OF
BUYER........................................................
19
5A. Organization
and Corporate
Power...............................................................
19
5B.
Authorization of
Transactions..................................................................
19
5C. No
Violation...................................................................................
19
5D. Governmental
Authorities and
Consents..........................................................
19
5E.
Brokerage......................................................................................
19
SECTION 6. INDEMNIFICATION
AND RELATED
MATTERS............................................................
19
6A.
Survival.......................................................................................
19
6B.
Indemnification of
Buyer.......................................................................
20
6C.
Indemnification of
Sellers.....................................................................
20
6D.
Procedure......................................................................................
21
6E. Payments;
Setoff...............................................................................
22
SECTION 7. ADDITIONAL
AGREEMENTS..........................................................................
22
</TABLE>
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7A. Tax
Matters....................................................................................
22
7B. Press
Releases and
Announcements...............................................................
22
7C. Further
Transfers..............................................................................
22
7D. Specific
Performance...........................................................................
22
7E.
Expenses.......................................................................................
23
7F.
Non-Competition, Non-Solicitation and
Confidentiality..........................................
23
7G. Amendment of
Filefront's Limited Partnership Agreement and MBPS Certificate of
Incorporation...
25
7H. Transfer of
Ownership of
Sellers...............................................................
25
7I.
Websites.......................................................................................
25
7J. Budgets and
Operations.........................................................................
26
7K. Other
Business
Obligations.....................................................................
27
7L. Amendment of
Filefront
Name....................................................................
28
7M. The
Queue......................................................................................
28
SECTION 8.
MISCELLANEOUS..................................................................................
28
8A. Amendment and
Waiver...........................................................................
28
8B.
Notices........................................................................................
28
8C. Binding
Agreement;
Assignment..................................................................
29
8D.
Severability...................................................................................
30
8E.
Construction...................................................................................
30
8F.
Headings.......................................................................................
30
8G. Entire
Agreement...............................................................................
30
8H.
Counterparts...................................................................................
30
8I. Governing
Law..................................................................................
30
8J. Submission
to
Jurisdiction.....................................................................
30
8K. No
Third-Party
Beneficiaries...................................................................
31
8L.
Arbitration....................................................................................
31
8M. Delivery by
Facsimile..........................................................................
31
</TABLE>
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<PAGE>
INDEX OF EXHIBITS
Exhibit A-1
Form of Executive Agreement with Todd Faulk
Exhibit A-2
Form of Executive Agreement with Derek Labian
Exhibit B
Budget
INDEX OF SCHEDULES
Schedule 1.1
Assumed Indebtedness
Schedule 2A(i)(A)
List of Purchased Assets
Schedule 2A(i)(B)
List of Assigned Contracts
Schedule 2A(ii)
List of Excluded Assets
Schedule 2F
Allocation of
Purchase Price
Schedule 4C
Absence of Conflicts
Schedule 4D
Absence of Liabilities
Schedule 4E
Title to Assets
Schedule 4G
Contracts and Commitments
Schedule 4H(ii)
Intellectual Property
Schedule 4H(iv)
Historical Monthly Unique Visitors
Schedule 4I
Brokerage
Schedule 4J
Affiliate Transactions
Schedule 5E
Brokerage
Schedule 7K
Other Business Obligations
-iii-
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of
November 4, 2005, by and among FILEFRONT, L.P., a Texas limited
partnership
("Filefront"), MBPS.com, Inc. ("MBPS" and together with Filefront,
each a
"Seller" and collectively, the "Sellers"); Todd Faulk ("Faulk");
Derek Labian
("Labian") (each of Faulk and Labian a "Filefront Principal" and,
collectively,
the "Filefront Principals"); and Ziff Davis Media Inc., a Delaware
corporation
("Buyer"). Sellers, the Filefront Principals, and Buyer are
collectively
referred to herein as the "Parties" and individually as a
"Party."
On the terms and subject to the conditions set forth in this
Agreement, Buyer desires
to acquire from each Seller, and each Seller desires to sell to
Buyer, all of the assets of such Seller other than the Excluded
Assets.
NOW, THEREFORE, in consideration of the premises,
representations
and warranties and mutual covenants contained herein and of other
good and
valuable consideration, the receipt and sufficiency of which are
hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1A.
Definitions. For purposes of this Agreement, the following terms
shall
have the meanings set forth below:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such
particular Person,
where "control" means the possession, directly or indirectly, of
the power to
direct the management and policies of a Person whether through the
ownership of
voting securities or otherwise.
"Assumed Indebtedness" means Indebtedness of Sellers and their
Subsidiaries expressly agreed to be assumed by Buyer at the Closing
as set forth
on Schedule 1.1 attached hereto.
"Assumed Liabilities" means, with respect to the Purchased
Assets,
(i) liabilities to the extent included in (but only to the extent
included in)
the computation of Effective Date Net Working Capital, (ii)
accounts payable and
accrued liabilities first incurred in the ordinary course of
business between
the Effective Date and the Closing Date that would, on a balance
sheet prepared
in accordance with GAAP, be characterized as current liabilities,
(iii)
performance obligations under Assigned Contracts that first arise
after the
Closing Date and (iv) the Assumed Indebtedness to the extent
included in (but
only to the extent included in) the computation of Closing
Indebtedness;
provided that, notwithstanding the foregoing, "Assumed Liabilities"
shall not
include any obligation or liability that arises from breach of any
such Assigned
Contract arising on or prior to the Closing Date or any obligation
or liability
that arises in whole or in part from consummation of the
transactions
contemplated hereby.
"Average Number of Monthly Unique Visitors" means, for any
Applicable Measurement Period, the quotient equal to the number of
Monthly
Unique Visitors for such
<PAGE>
Applicable Measurement Period divided by (i) three (3) in the case
of the
Alternative Measurement Period and (ii) six (6) in the case of the
General
Measurement Period.
"Business" means the business of Sellers as conducted on or prior
to
the Closing Date, including the operation of www.filefront.com
website and
sub-domains.
"Cause" means, with respect to the circumstances surrounding
the
termination of a Filefront Principal's employment by Buyer, (i) the
indictment
of, or plea of no contest, by the Filefront Principal with respect
to a felony
or a crime involving moral turpitude; (ii) the commission of any
other act or
omission by the Filefront Principal constituting fraud against
Buyer or any of
its Affiliates or any of their customers, suppliers, or business
relations, or
the violation of any fiduciary duty to Buyer and/or its Affiliates
under
applicable law; (iii) willful or reckless misconduct or gross
negligence (which,
in the case of gross negligence by the Filefront Principal is not
cured within
fifteen (15) days after written notice thereof to the Filefront
Principal), with
respect to Buyer or any of its Affiliates; (iv) failure of such
Filefront
Principal to devote substantially all of his business time and
attention to
Buyer in accordance with his Executive Agreement or failure to
perform his job
responsibilities, in each case not cured within fifteen (15) days
after written
notice thereof to the Filefront Principal, (v) any breach of any of
Sections 7F,
7G, or 7H of this Agreement or breach of the restrictive covenants
of such
Filefront Principal's Executive Agreement, in each case which is
not cured
within fifteen (15) days after written notice thereof to the
Filefront
Principal; or (vi) any material breach of Buyer's company policies
established
by the CEO of Buyer, which breach, if curable, is not cured within
fifteen (15)
calendar days after written notice thereof to such Filefront
Principal.
"Closing Indebtedness" means Assumed Indebtedness as of 12:01 am
on
the Closing Date.
"Closing Net Working Capital" means Net Working Capital as of
12:01
am on the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended from
time
to time.
"Contract" means any contract, license, sublicense, franchise,
permit, mortgage, purchase order, indenture, loan agreement, lease,
sublease,
agreement, obligation, instrument, Employee Benefit Plan, Employee
Pension
Benefit Plan, or other arrangement or any commitment to enter into
any of the
foregoing (in each case, whether written or oral).
"Effective Date" means November 1, 2005.
"Effective Date Net Working Capital" means Net Working Capital as
of
12:01 am on the Effective Date.
"Employee Benefit Plan" means any "employee benefit plan" (as
such
term is defined in ERISA Section 3(3)) and any other employee
benefit plan,
program, or arrangement of any kind.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA
Section 3(2).
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<PAGE>
"ERISA" means the Employee Retirement Income Security Act of
1974,
as amended from time to time.
"Executive Agreement" means, as the context may require, (i)
the
Executive Agreement, dated as of the Closing Date, by and between
Faulk and
Buyer in form and substance as set forth on Exhibit A-1 attached
hereto and (ii)
the Executive Agreement, dated as of the Closing Date, by and
between Labian and
Buyer in form and substance as set forth on Exhibit A-2 attached
hereto, in each
case as the same may be amended, modified, supplemented, or waived
from time to
time.
"Full Calendar Month" means any calendar month for which there
are
at least 20 Measurable Calendar Days.
"GAAP" means United States generally accepted accounting
principles
as in effect from time to time, consistently applied.
"Good Reason" means, with respect to any Filefront Principal,
the
occurrence, without a Filefront Principal's consent, of any of the
following:
(i) failure to make funding available for the Business in
accordance with the
Budget by more than 10% in the aggregate in any fiscal quarter
which is not
cured after written notice to Buyer by making available to the
Business
additional funding in an amount equal to such shortfall in the
fiscal quarter
immediately following such notice; (ii) a reduction in such
Filefront
Principal's annual Base Salary as contemplated by such Filefront
Principal's
Executive Agreement, except for across-the-board salary reductions
similarly
affecting all senior executives of the Buyer; or (iii) Buyer moves
the
headquarters for the Business more than 30 miles from Spring,
Texas.
"Guarantor" means Ziff Davis Holdings Inc., a Delaware
corporation.
"Incapacity" means, for each Filefront Principal, the disability
of
such Filefront Principal caused by any physical or mental injury,
illness or
incapacity as a result of which such Filefront Principal is unable
to
effectively perform the essential functions of such Filefront
Principal's duties
as determined by Buyer in good faith, for a period of ninety (90)
consecutive
calendar days or a period of one hundred and twenty (120) calendar
days during
any one hundred and eighty (180) calendar day period.
"Indebtedness" means (i) any indebtedness for borrowed money or
issued in substitution for or exchange of indebtedness for borrowed
money
(including, but not limited to, interest and prepayment penalties
computed as
though payment is being made on the Closing Date), (ii) any
indebtedness
evidenced by any note, bond, debenture or other debt security,
(iii) any
indebtedness for the deferred purchase price of property or
services with
respect to which a Person is liable, contingently or otherwise, as
obligor or
otherwise (including any deferred purchase price in the form of
contingent
consideration, whether in the form of seller debt, earn-out or
otherwise), (iv)
any commitment by which a Person assures a creditor against loss
(including,
without limitation, contingent reimbursement liabilities with
respect to letters
of credit), (v) any indebtedness guaranteed in any manner by a
Person
(including, without limitation, guarantees in the form of an
agreement to
repurchase or reimburse), (vi) any liabilities under capitalized
leases with
respect to which a Person is liable, contingently or otherwise,
as
- 3 -
<PAGE>
obligor, guarantor or otherwise, or with respect to which
liabilities a Person
assures a creditor against loss, (vii) any amounts owed to any
Person under any
noncompetition, consulting or similar arrangements, (viii) all
liabilities
related to any change-of-control or similar payment or increased
cost which is
triggered in whole or in part by the transactions contemplated by
this
Agreement, and (ix) any liabilities incurred by such Person
(including, but not
limited to, any fees, costs and expenses incurred on behalf of
Sellers) in
connection with the negotiation of the Letter of Intent, this
Agreement, the
other Transaction Documents, the performance of such Person's and
its
pre-Closing Affiliates' obligations hereunder and thereunder, and
the
consummation of the transactions contemplated hereby and
thereby.
"Initial Period" means the 24-month period beginning on November
1,
2005 and ending on October 31, 2007.
"Intellectual Property" means in any jurisdiction throughout
the
world: (i) all inventions (whether patentable or unpatentable and
whether or not
reduced to practice), all improvements thereto, and all patents,
patent
applications, and patent disclosures, together with all
reissuances,
continuations, continuations-in-part, revisions, extensions, and
reexaminations
thereof, (ii) all trademarks, service marks, trade dress, logos,
slogans, trade
names (including filefront and derivations thereof), corporate
names, Internet
domain names (including www.filefront.com and any sub-domain names)
and rights
in telephone numbers, and including all goodwill associated
therewith, and all
applications, registrations, and renewals in connection therewith,
(iii) all
copyrightable works, all copyrights, and all applications,
registrations, and
renewals in connection therewith, (iv) all mask works and all
applications,
registrations, and renewals in connection therewith, (v) all trade
secrets,
website content, and confidential business information (including
ideas,
research and development, know-how, formulas, notes, compositions,
manufacturing
and production processes and techniques, technical data, designs,
drawings,
specifications, customer and supplier lists, pricing and cost
information, and
business and marketing plans and proposals), (vi) all computer
software
(including source code, executable code, data, databases, and
related
documentation), (vii) all advertising and promotional materials,
(viii) all
other proprietary rights, and (ix) all copies and tangible
embodiments thereof
(in whatever form or medium).
"Knowledge" as used in the phrases "to the Knowledge of
Sellers",
"to Sellers' Knowledge" or phrases of similar import means the
actual knowledge
of the either Filefront Principal or either Seller (which shall
include the
actual knowledge of the partners, managers, officers and key
employees of
Sellers), after making reasonable inquiry with respect to the
particular matter
in question.
"Letter of Proposal" means that certain letter agreement, dated
August 2, 2005, addressed to Filefront.
"Liens" means any mortgage, pledge, lien, encumbrance, security
interest, Tax, or charge of any kind (including, without
limitation, any
conditional sale or other title retention agreement or lease in the
nature
thereof), any sale of receivables with recourse against any Seller
or any of its
Affiliates, and any filing or agreement to file a financing
statement as debtor
under the Uniform Commercial Code or any similar statute.
- 4 -
<PAGE>
"Measurable Calendar Day" means a calendar day during which
there
are not more than six (6) hours during which (a) access to the
filefront.com
website and sub-domains thereof or (b) proper measurement of site
traffic by the
applicable third party site tracking tool is materially and
adversely
interrupted due to external events outside the control of the
Filefront
Principals and Buyer (e.g., earthquake or internet shutdown).
"Monthly Unique Visitors" means United States unique visitors to
the
www.filefront.com web site or any sub-domains of filefront.com
(excluding unique
visitors generated by (a) paid referrals for uniques, including
search engines
and (b) non-U.S. domains) calculated on a monthly, unduplicated
basis, as
measured by Omniture SiteCatalyst; provided that paid referrals
shall not
include any general advertising or marketing campaign by Buyer in
the ordinary
course of business; provided further that in the event that (i)
Omniture
SiteCatalyst is not available to measure Monthly Unique Visitors,
then Monthly
Unique Visitors will be determined by a similar third party site
tracking tool
for measurement proposed by Buyer consented to by Sellers (which
consent shall
not be unreasonably withheld, delayed or conditioned) or (ii) no
third party
tracking tool is agreed to by the Parties, the Parties will jointly
calculate
the Monthly Unique Visitors (with the default method being to
calculate United
States Monthly Unique Visitors by setting a cookie on the visitor's
browser,
uniquely identifying the visitor, with spiders and BOTS to be
excluded from any
such calculation of Monthly Unique Visitors).
"Net Working Capital" means the difference between (i) the sum
of
operating expenses paid by Sellers prior to the Effective Date with
respect to
which Buyer will receive the benefit for the operation of the
Business on and
after the Effective Date over (ii) the sum of customer deposits and
revenues and
subscription revenues received by Sellers prior to the Effective
Date with
respect to periods on and after the Effective Date. In calculating
amounts
pursuant to clauses (i) and (ii) of this definition, amounts shall
be ratably
applied between periods prior to the Effective Date, on the one
hand, and on and
after the Effective Date, on the other hand, such that, by way of
example, if a
$1,000 payment is made by Sellers for the period between September
1, 2005 and
December 31, 2005, the amount included for such expense in the
calculation of
Net Working Capital shall be $1,000 multiplied by a fraction, the
numerator of
which is the number of days between the Effective Date and the
December 31, 2005
and the denominator of which is the number of days between
September 1, 2005 and
December 31, 2005.
"Person" means an individual, a partnership, a limited
liability
company, a corporation, an association, a joint stock company, a
trust, a joint
venture, an unincorporated organization, and a governmental entity
(or any
department, agency, or political subdivision thereof).
"Purchase Price" means the Cash Portion plus the Additional
Purchase
Price Payment, as adjusted by the Final Adjustment Amount.
"Remaining Filefront Principal" means in the event that one
Filefront Principal ceases to be employed with Buyer for any
reason, the other
Filefront Principal that remains employed with Buyer after
cessation of
employment for the first Filefront Principal.
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<PAGE>
"Remaining Vesting Period" means, for a Remaining Filefront
Principal, the number of calendar days between the Termination Date
for such
Remaining Filefront Principal and the last day of the Initial
Period, inclusive.
"Subsidiary" means, with respect to any Person, any
corporation,
limited liability company, partnership, association, or other
business entity of
which (i) if a corporation, a majority of the total voting power of
shares of
stock entitled (without regard to the occurrence of any
contingency) to vote in
the election of directors, managers, or trustees thereof is at the
time owned or
controlled, directly or indirectly, by that Person or one or more
of the other
Subsidiaries of that Person or a combination thereof or (ii) if a
limited
liability company, partnership, association, or other business
entity (other
than a corporation), a majority of partnership or other similar
ownership
interest thereof is at the time owned or controlled, directly or
indirectly, by
that Person or one or more Subsidiaries of that Person or a
combination thereof
and for this purpose, a Person or Persons owns a majority ownership
interest in
such a business entity (other than a corporation) if such Person or
Persons
shall be allocated a majority of such business entity's gains or
losses or shall
be or control any managing director or general partner of such
business entity
(other than a corporation). The term "Subsidiary" shall include all
Subsidiaries
of such Subsidiary.
"Tax" or "Taxes" means any federal, state, local, or foreign
income,
gross receipts, license, payroll, employment, excise, severance,
stamp,
occupation, premium, windfall profits, environmental (including
taxes under Code
Section 59A), customs duties, capital stock, franchise, profits,
withholding,
social security (or similar), unemployment, disability, real
property, personal
property, sales, use, transfer, registration, value added,
alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, whether
computed on a
separate or consolidated, unitary or combined basis or in any other
manner,
including any interest, penalty, or addition thereto, whether
disputed or not
and including any obligation to indemnify or otherwise assume or
succeed to the
tax liability of any other Person.
"Termination Date" with respect to a Filefront Principal shall
have
the same meaning as defined in that Filefront Principal's Executive
Agreement.
"Total Vesting Period" means the number of calendar days in the
Initial Period.
"Transaction Documents" means this Agreement, the Executive
Agreements and any other agreement or document contemplated hereby
to which
either Seller or either of the Filefront Principals is a party.
"Treas. Reg." means the Treasury Regulations promulgated pursuant
to
the Code.
"Unvested Portion"
means the percentage obtained by dividing the
Remaining Vesting Period by the Total Vesting Period.
1B. Other
Definitions. Each of the following defined terms has the
meaning
given such term in the Section set forth opposite such defined
term:
<TABLE>
<CAPTION>
DEFINED TERM
SECTION REFERENCE
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<S>
<C>
Accounting Firm
2C(iv)
</TABLE>
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<PAGE>
<TABLE>
<S>
<C>
Acquisition Target
7F(ii)
Additional Purchase Price Payment 2E(i)
Agreement
Preamble
Allocation
2F
Alternative Measurement Period
2E(iii)
Applicable Measurement Period
2E(iii)
Assigned Contracts
2A(i)
Basket
6B
Budget
7J(i)
Buyer
Preamble
Buyer Parties
6B
Cash Portion
2C(ii)
Closing
2C(i)
Closing Date
2C(i)
Closing Statement
2C(iii)
Closing Transactions
2C(ii)
Confidential Information
7F(iii)
Dispute Notice
2C(iii)
Estimated Closing Indebtedness
2C(ii)
Excluded Assets
2A(ii)
Faulk
Preamble
Filefront
Preamble
Filefront Principals
Preamble
Final Adjustment Amount
2D
Forfeited Amount
2E(v)
General Measurement Period
2E(iii)
Indemnified Party
6D
Indemnifying Party
6D
Insiders
4J
Item of Dispute
2C(iii)
Labian
Preamble
Loss
6B
Losses
6B
MBPS
Preamble
Noncompete Period
7F(i)
Parties
Preamble
Party
Preamble
Purchased Assets
2A(i)
Restricted Person
7F(i)
Retained Liabilities
2B
Rules
8L
Seller(s)
Preamble
ZD Entity
7F(ii)
</TABLE>
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<PAGE>
SECTION 2. PURCHASE
AND SALE OF ASSETS
2A.
Purchase and Sale of Assets.
(i) Purchased Assets. On the terms and subject to the
conditions
contained in this Agreement, on the Closing Date, Buyer shall
purchase from each
Seller, and each Seller shall sell, convey, assign, transfer, and
deliver to
Buyer, free and clear of all Liens, all assets, properties, rights,
titles, and
interests of every kind and nature owned or leased by such Seller
(including
indirect and other forms of beneficial ownership) as of the Closing
Date whether
tangible, intangible, real or personal and wherever located and by
whomever
possessed (the "Purchased Assets"), including, but not limited to,
the assets
listed on Schedule 2A(i)(A) attached hereto, cash on hand arising
from business
generated from and after the Effective Date through the Closing
Date,
receivables arising from and after the Effective Date and all
Intellectual
Property, but excluding all Excluded Assets, against payment by
Buyer of an
aggregate amount in cash equal to the Cash Portion (as defined
below); provided
that the Purchased Assets shall include only those contracts of
Sellers listed
as being assigned to Buyer on Schedule 2A(i)(B) hereof that are
actually
assigned to Buyer in accordance with its terms (the "Assigned
Contracts");
provided further that in no event shall Assigned Contracts include
any Employee
Benefit Plan or Employee Pension Benefit Plan.
(ii) Excluded Assets. Notwithstanding the foregoing, the
following
assets are expressly excluded from the purchase and sale
contemplated hereby
(the "Excluded Assets") and, as such, are not included in the
Purchased Assets:
(a) the limited partnership certificate of formation, limited
partnership agreement, certificate of incorporation, bylaws,
qualifications to
conduct business as a foreign company, arrangements with registered
agents
relating to foreign qualifications, taxpayer and other
identification numbers,
seals, minute books, unit or stock transfer books, blank unit or
stock
certificates, and other documents relating to the organization,
maintenance, and
existence of Seller as a limited partnership;
(b) any of the rights of Sellers under this Agreement (or
under any side agreement between either Seller on the one hand and
Buyer on the
other hand entered into on or after the date of this
Agreement);
(c) any right to receive mail and other communications
addressed to either Seller relating exclusively to the Excluded
Assets;
(d) any rights in and with respect to the assets associated
with Seller's Employee Benefit Plans or Employee Pension Benefit
Plans, if any;
and
(e) any assets listed on Schedule 2A(ii).
2B. No
Assumption of Liabilities. Subject to the conditions specified
in
this Agreement, from and after the Closing Date, except for the
Assumed
Liabilities, Buyer will not assume or in any way be responsible for
any
liabilities or obligations whatsoever related to the ownership,
operation, or
condition of the Business or the Purchased Assets at any time on or
prior to the
Closing Date or any liabilities or other obligations of any Seller
or any
Filefront
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Principal, whether incurred prior to, on, or after the Closing Date
(such
liabilities or obligations, other than the Assumed Liabilities, are
referred to
herein as the "Retained Liabilities") and Sellers shall pay and
discharge all
Retained Liabilities when such become due and payable.
2C.
Closing Transactions.
(i) Closing. Subject to satisfaction or waiver of the
conditions
contained in this Agreement, the closing of the transactions
contemplated by
this Agreement (the "Closing") will occur at the offices of
Kirkland & Ellis
LLP, 200 East Randolph Drive, Chicago, Illinois 60601, at 10 a.m.
on November 4,
2005 or at such other time and on such other date as the Parties
hereto mutually
agree. The date and time of the Closing are herein referred to as
the "Closing
Date." Notwithstanding anything to the contrary herein, the Closing
shall be
effective as of 12:01 am on the Closing Date.
(ii) Closing Transactions. Subject to the conditions set forth
in
this Agreement, the Parties shall consummate the following
"Closing
Transactions" on the Closing Date:
(a) Sellers shall convey all of the Purchased Assets to Buyer
and shall deliver to Buyer such appropriately executed instruments
of sale,
transfer, or assignment, transfer tax declarations, and all other
instruments of
conveyance that are necessary or desirable to effect transfer to
Buyer of good
and marketable title to the Purchased Assets (free and clear of all
Liens),
including documents acceptable for recording with the United States
Patent and
Trademark Office, the United States Copyright Office, and any other
similar
domestic or foreign office, department or agency and all
instruments necessary
or desirable to change the registered owner of all internet domain
names to
Buyer (it being understood that all of the foregoing shall be
satisfactory in
form and substance to Buyer and its counsel);
(b) Buyer shall deliver to Sellers an aggregate amount in cash
(the "Cash Portion") equal to the result of (1) $5,235,000 minus
(2) the amount
of Closing Indebtedness (estimated by Seller and agreed to by Buyer
prior to the
Closing Date to be $200,776.39 (the "Estimated Closing
Indebtedness")), with
such consideration to be allocated between Sellers as directed in
writing signed
by Sellers prior to the Closing Date; and
(c) Sellers and Buyer shall deliver the opinions, certificates
and other documents and instruments required to be delivered by or
on behalf of
such Party under Section 3 hereof.
(iii) The Closing Statement. Promptly, but in any event within
60
days after the Closing, Buyer shall furnish to Sellers a statement
(the "Closing
Statement") setting forth (a) Closing Indebtedness and (b)
Effective Date Net
Working Capital. Unless within the 30-day period following Sellers'
receipt of
the Closing Statement, Sellers deliver written notice to Buyer (the
"Dispute
Notice") setting forth in reasonable detail any and all items of
disagreement
related to the Closing Statement (each, an "Item of Dispute"), the
Closing
Statement shall be conclusive and binding upon Sellers and Buyer;
provided that
the only basis on which Sellers shall be permitted to submit an
Item of Dispute
is that such Item of Dispute was not prepared in accordance with
this Agreement.
Each Seller and each of the Filefront Principals shall
cooperate
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fully with Buyer in connection with the preparation of the Closing
Statement.
After the delivery of the Closing Statement, Buyer shall cooperate
with Sellers
in connection with the review of the Closing Statement, including,
without
limitation, providing Sellers and their accountants reasonable
access during
business hours to materials (including accountants' work papers)
used in the
preparation of the Closing Statement.
(iv)
Dispute Resolution. If Sellers deliver the Dispute Notice to
Buyer within such 30-day period, Buyer and Sellers shall use
reasonable efforts
to resolve their differences concerning the Items of Dispute, and
if any Item of
Dispute is so resolved, the Closing Statement shall be modified as
necessary to
reflect such resolution. If all Items of Dispute are so resolved,
the Closing
Statement (as so modified) shall be conclusive and binding on
Sellers and Buyer.
If any Item of Dispute remains unresolved for a period of twenty
(20) days after
Buyer's receipt of the Dispute Notice, Buyer and Sellers shall
submit the
dispute to a nationally-recognized, independent certified public
accountant (the
"Accounting Firm") selected by the mutual agreement of Buyer and
Sellers within
ten (10) days after the end of such 20-day period. If Buyer and
Sellers are
unable to mutually agree upon such an accountant within such 10-day
period, then
Buyer and Sellers shall each select a "nationally recognized"
accountant and
within five (5) days after their selection, those two accountants
shall select a
third "nationally recognized" accountant, which third accountant
shall act as
the Accounting Firm. Buyer and Sellers shall request that the
Accounting Firm
render a determination (which determination shall be solely based
on whether
such Item of Dispute was prepared in accordance with this
Agreement) as to each
unresolved Item of Dispute within 45 days after its retention, and
Buyer, and
Sellers shall cooperate fully with the Accounting Firm so as to
enable it to
make such determination as quickly and as accurately as
practicable. The
Accounting Firm's determination as to each Item of Dispute
submitted to it shall
be in writing and shall be conclusive and binding upon Buyer and
Sellers, and
the Closing Statement shall be modified to the extent necessary to
reflect such
determination. The fees and expenses of the Accounting Firm shall
be allocated
to be paid by Buyer and/or Sellers based upon the percentage which
the portion
of the contested amount not awarded to each party bears to the
amount actually
contested by such party, as determined by the Accounting Firm.
(v) Indebtedness Adjustment. If the amount of the Closing
Indebtedness as reflected on the final Closing Statement is greater
than the
Estimated Closing Indebtedness, each of Sellers and each of the
Filefront
Principals (on a joint and several basis) shall pay to Buyer an
amount equal to
such excess. If the amount of the Closing Indebtedness as reflected
on the final
Closing Statement is less than the Estimated Closing Indebtedness,
Buyer shall
pay to Sellers an aggregate amount equal to such shortfall.
(vi) Net Working Capital Adjustment. If the Effective Date Net
Working Capital as determined by reference to the final Closing
Statement is
negative, each of Sellers and each of the Filefront Principals (on
a joint and
several basis) shall pay to Buyer an amount equal to the absolute
value of such
negative amount. If the Effective Date Net Working Capital as
determined by
reference to the final Closing Statement is positive, Buyer shall
pay to Sellers
an aggregate amount equal to such excess.
2D.
Adjustment Amount. Without duplication, all amounts owed pursuant
to
Sections 2C(v) and/or 2C(vi) shall be aggregated, and the net
amount (if any)
owed by Buyer to Sellers,
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<PAGE>
on the one hand, or Sellers and the Filefront Principals to Buyer,
on the other
hand, is referred to as the "Final Adjustment Amount". The Final
Adjustment
Amount shall be calculated as an adjustment to the Purchase Price
on the first
business day on which the Closing Statement becomes conclusive and
binding. The
Final Adjustment Amount shall bear simple interest at a rate of 6%
per annum
measured from the Closing Date to the date of such payment. Payment
of the Final
Adjustment Amount shall be paid by delivery of immediately
available funds to an
account designated by the recipient Party within ten business days
after the
date of final determination.
2E.
Additional Purchase Price Payment.
(i) In addition to the Cash Portion, Buyer shall pay to Sellers,
on
the terms and subject to the conditions and limitations set forth
below, the
following additional purchase price (the "Additional Purchase Price
Payment").
(ii) The Additional Purchase Price Payment shall be determined
as
the dollar amount resulting from: (A) the product of two dollars
and fifty cents
($2.50) times the number by which the Average Number of Monthly
Unique Visitors
during the Applicable Measurement Period exceeds two (2) million
minus (B) the
amount, as set forth in Section 7J(ii), by which the actual
aggregate operating
and capital expenses of the Business during the Initial Period
exceed the agreed
total of the budgeted operating and capital expenses during the
Initial Period
as set forth on Exhibit B. For example, by way of illustration
only, if the
Average Number of Monthly Unique Visitors during the Applicable
Measurement
Period is three (3) million (and assuming aggregate operating and
capital
expenses during the Initial Period do not exceed the agreed upon
budget amount),
then the Additional Purchase Price Payment would equal two million
five hundred
thousand dollars ($2,500,000) (i.e., $2.50 x (3,000,000 -
2,000,000)).
Notwithstanding anything to the contrary herein, the Additional
Purchase Price
Payment shall in no event exceed $10 million.
(iii) When used herein, "Applicable Measurement Period" means
(A)
the three most recent Full Calendar Months during the Initial
Period immediately
prior to the Termination Date for the Remaining Filefront Principal
(the
"Alternative Measurement Period") in the event that (x) the
employment of both
Filefront Principals is terminated due to death or Incapacity of
the Filefront
Principals occurring during the Initial Period, or (y) the
Remaining Filefront
Principal's employment is terminated due to death or Incapacity of
the Remaining
Filefront Principal occurring during the Initial Period, and (B)
otherwise, the
last six Full Calendar Months during the Initial Period (the
"General
Measurement Period"); provided that, in the event that the
Remaining Filefront
Principal's employment with the Company is terminated by the
Company without
Cause or by the Remaining Filefront Principal's resignation with
Good Reason
prior to the expiration of the Initial Period, the "Applicable
Measurement
Period" shall be (I) the Alternative Measurement Period in the
event that the
Additional Purchase Price Payment to Sellers would be greater by
application of
the Alternative Measurement Period than the General Measurement
Period or (II)
the General Measurement Period in the event that the Additional
Purchase Price
Payment would be greater or equal by application of the General
Measurement
Period than the Alternative Measurement Period.
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<PAGE>
(iv) The Additional Purchase Price Payment shall be payable
within
30 days after the calculation thereof has been made, which such
calculation
shall be made within 30 days after the end of the Applicable
Measurement Period
or, in the case of application of the proviso to the foregoing
clause (iii),
within 30 days after the end of the General Measurement Period.
(v)
Notwithstanding anything to the contrary herein, if the
Remaining Filefront Principal ceases to be a full-time employee of
Buyer or any
of its Affiliates prior to the expiration of the Initial Period as
a result of
such Remaining Filefront Principal's termination by the Company
with Cause or
such Remaining Filefront Principal's resignation without Good
Reason, the
Additional Purchase Price Payment otherwise payable to Sellers
shall be reduced
by the product of (a) the Additional Purchase Price Payment
otherwise due and
owing hereunder (as determined in accordance with Section 2E(ii)
and without
regard to this Section 2E(v)), multiplied by (b) the Unvested
Portion (such
product, the "Forfeited Amount"). Each of the Parties agrees that
no Seller nor
any Filefront Principal shall have any rights to all or any portion
of the
Forfeited Amount and that Buyer may retain the Forfeited Amount or
make payments
of the Forfeited Amount to any Person as Buyer may determine in its
sole
discretion.
(vi) Guarantor is a party to this Agreement solely for the
purposes
of this Section 2E(vi). In consideration of the transactions
contemplated by
this Agreement, the receipt and sufficiency of which are hereby
acknowledged, in
the event that Buyer fails to make any Additional Purchase Price
Payment it is
required to make hereunder, Guarantor hereby unconditionally and
irrevocably
guarantees payment by Buyer of the Additional Purchase Price
Payment required to
be made by Buyer and agrees to indemnify Sellers for any Losses
suffered by
Sellers as a result of its failing to comply with its obligations
under this
Section 2E(iv) or breach of any representations of Seller made in
this Section
2E(vi), subject to any defenses of Buyer. In no event shall the
aggregate
liability of Guarantor arising under or related to this Agreement
and the
transactions contemplated hereby, whether based in contract, tort,
strict
liability, other Law or otherwise, exceed Buyer's obligations under
this
Agreement. Guarantor hereby represents and warrants to Seller that
(A) Guarantor
is a corporation duly organized, validly existing and in good
standing under the
laws of the State of Delaware has full corporate power and
authority to execute,
deliver and perform this Agreement, (B) the execution, delivery and
performance
by Guarantor of this Agreement have been duly authorized by all
requisite
corporate action on the part of Guarantor, and (C) this Agreement
has been duly
executed and delivered by Guarantor and constitutes the valid and
binding
obligation of Guarantor, enforceable against Guarantor in
accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency,
reorganization, arrangement, moratorium or other similar Laws
relating to
creditors' rights generally, and general equitable principles.
Guarantor's
obligations shall terminate on the earliest of (x) the time that
the Additional
Purchase Price Payment is made, (y) the time that Buyer ceases to
be a
Subsidiary of Guarantor, and (z) the time that Buyer's obligations
to make the
Additional Purchase Price Payment are assigned to another Person
(other than an
Affiliate of Buyer) in accordance with Section 8C hereof.
2F.
Allocation of Purchase Price. Buyer and Sellers shall jointly
allocate
the Purchase Price in accordance with Section 1060 of the Code
(the
"Allocation") among the Purchased Assets using the methodology and
allocation
amounts set forth on the Schedule 2F attached hereto. For purposes
of the
Allocation, the Purchase Price shall mean an amount equal to the
Purchase Price
plus Assumed Liabilities for U.S. federal income Tax purposes. To
the
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<PAGE>
extent that the Purchase Price is adjusted after the Closing Date
pursuant to
Section 2, Buyer and Sellers agree to revise and amend the
Allocation in
accordance with the character of each such adjustment, consistent
with the
methodology on Schedule 2F. Sellers and Buyer agree to prepare and
file an IRS
Form 8594 for or such other form or statement as may be required by
applicable
law, rule or regulation, and any c
