Exhibit 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
QUINSTREET, INC.,
CAR INSURANCE.COM, INC.,
CAR INSURANCE AGENCY. INC.,
CAR INSURANCE HOLDINGS, INC. AND
CARINSURANCE.COM. INC.
AND
THE STOCKHOLDERS NAMED HEREIN
NOVEMBER 5, 2010
TABLE OF CONTENTS
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Page
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ARTICLE I Definitions
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1
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1.1.
Definitions
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1
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ARTICLE II Purchase and Sale of Shares; Purchase Price; Closing
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10
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2.1.
Purchase and Sale of Shares
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10
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2.2.
Purchase Price
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10
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2.3.
Closing
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10
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2.4.
Adjustment for Carrier Contingency Payment
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10
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ARTICLE III Representations and Warranties of the Target Entities and Sellers
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10
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3.1.
Sellers Representations and Warranties
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10
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3.2.
Target Entities and Sellers Representations and Warranties
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12
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ARTICLE IV Buyers Representations and Warranties
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36
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4.1.
Organization of Buyer
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36
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4.2.
Authorization of Transaction
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37
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4.3.
Non-contravention
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37
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4.4.
Brokers Fees
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37
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4.5.
Sufficient Funds
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37
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ARTICLE V Additional Covenants and Agreements
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37
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5.1.
Further Actions
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37
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5.2.
Litigation Support
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38
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5.3.
Transition
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38
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5.4.
Confidentiality
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38
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5.5.
Covenant Not to Compete and Not to Solicit
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39
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5.6.
Employee Matters
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39
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Page
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ARTICLE VI Closing Deliverables
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40
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6.1.
Sellers Closing Deliverables
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40
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6.2.
Buyers Closing Deliverables
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41
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ARTICLE VII Remedies for Breaches of This Agreement
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42
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7.1.
Survival
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42
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7.2.
Indemnification Provisions for Buyers Benefit
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42
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7.3.
Indemnification Provisions for Sellers Benefit
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42
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7.4.
Claims for Indemnification; Matters Involving Third Parties
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43
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7.5.
Adjustment to Purchase Price
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45
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7.6.
Other Indemnification Provisions
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45
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ARTICLE VIII Tax Matters
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46
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8.1.
Tax Indemnification
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46
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8.2.
Straddle Period
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46
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8.3.
Responsibility for Filing Tax Returns
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46
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8.4.
Cooperation on Tax Matters
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47
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8.5.
Transfer Taxes
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47
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8.4.
Section 338(h)(10) Election
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47
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8.4.
Tax Claims
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47
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8.4.
Treatment of Payments
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47
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ARTICLE IX Miscellaneous
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48
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9.1.
Nature of Sellers Obligations
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48
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9.2.
Press Releases and Public Announcements
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49
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9.3.
No Third-Party Beneficiaries
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49
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9.4.
Entire Agreement; Amendment and Waivers
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49
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9.5.
Succession and Assignment
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49
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Page
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9.6.
Counterparts
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49
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9.7.
Headings
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50
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9.8.
Notices
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50
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9.9.
Governing Law; Exclusive Jurisdiction
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50
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9.10.
WAIVER OF JURY TRIAL
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51
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9.11.
Severability
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51
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9.12.
Expenses
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51
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9.13.
Payment Agent
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52
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9.14.
Construction
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52
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9.15.
Incorporation of Exhibits and Schedules
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53
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9.16.
Specific Performance
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53
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Schedules
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Section 3.2(a)
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Directors and Officers
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Section 3.2(c)
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Ownership of Shares
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Section 3.2(h)
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Target Entities Interests in Target
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Section 3.2(j)
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Absence of Certain Events
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Section 3.2(k)
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Undisclosed Liabilities
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Section 3.2(l)(ii)
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Legal Compliance; Permits
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Section 3.2(m)(vi)
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Tax Matters
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3.2(m)(xiv)
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Tax Matters
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Section 3.2(n)
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Real Property
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Section 3.2(o)(ii)
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Intellectual Property
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Section 3.2(o)(iii)
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Intellectual Property
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Section 3.2(o)(iv)
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Intellectual Property
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Section 3.2(o)(xi)
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Intellectual Property
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Section 3.2(o)(xx)
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Intellectual Property
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Section 3.2(p)
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Tangible Assets
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Section 3.2(q)
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Material Contracts
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Section 3.2(r)
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Notes and accounts receivable
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Section 3.2(s)
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Insurance
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Section 3.2(t)
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Litigation
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Section 3.2(u)(ii)(B)
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Personnel policies
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Section 3.2(u)(iii)
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Employees
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Section 3.2(u)(iv)
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Contractors
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Section 3.2(v)
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Employee Benefits
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Section 3.2(w)
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Indebtedness; Guarantees
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Section 3.2(z)(i)
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Carriers; Customers
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Section 3.2(z)(ii)
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Publishers
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Section 3.2(ee)
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Accuracy of Data
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Section 3.2(ff)
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Commissions
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Section 3.2(gg)
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Bank and Credit Card Accounts
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Section 3.2(hh)
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Yellow Pages
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Schedule 7.2
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Specific Indemnities
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Schedule 9.8
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Contact Information
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Exhibits
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A
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Financial Statements
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B
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Form of General Release and Assignment
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C
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Form of Spousal Consent
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D
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Form of Consulting Agreement
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E
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Form of Legal Opinion
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this
Agreement
) is entered into as of November 5, 2010, by
and among QuinStreet, Inc., a Delaware corporation (
Buyer
), Car Insurance.com, Inc., a
Florida corporation (
Target
), Car Insurance Agency, Inc., a Florida corporation,
Car Insurance Holdings, Inc., a Florida corporation, and CarInsurance.com,
Inc., an Oklahoma corporation (collectively with Target, the Target Entities) and each
stockholder of the Target Entities listed on the signature page hereto (each a
Seller
and
collectively,
Sellers
).
A. Sellers, in the aggregate, own all of the issued and outstanding Shares of the Target
Entities.
B. Buyer desires to purchase from Sellers, and Sellers desire to sell to Buyer, all of the
outstanding Shares in consideration of the payment of cash, all upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in
consideration of the representations, warranties, and covenants herein contained, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
1.1.
Definitions
. For all purposes of this Agreement, the following terms shall have the
following respective meanings:
(a)
Advertising Agreement
means contracts and insertion orders (whether written or oral)
between the Target Entities and any Person pursuant to which any of the Target Entities purchases
the right to place advertising on such Persons websites or network of websites or in print,
including any pay per click account agreements or subscription agreements.
(b) 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.
(c)
Affiliated Group
means any affiliated group within the meaning of Code Section
1504(a) or any similar group defined under a similar provision of Law.
(d)
Applicable Election Date
has the meaning set forth in Section 3.2(m)(xiii).
(e)
Basis
means any past or present fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act or transaction that
forms or could form the basis for any specified consequence.
1
(f)
Business Day
means any day that is not a Saturday, a Sunday or a day on which
banking institutions in San Francisco, California are authorized or obligated by Law or executive
order to close.
(g)
Buyer
has the meaning set forth in the preface above.
(h)
Buyer Indemnified Parties
has the meaning set forth in Section 7.2(a) below.
(i)
Buyer Indemnifying Parties
has the meaning set forth in Section 7.3(a) below.
(j)
Capital Interests
means any and all stockholder interests, economic interests,
equity interests and all other capital interests in the Target Entities (or any of such entities
individually), whether represented by any class of Shares, analogous form of ownership interest or
otherwise.
(k)
Carrier
means a Person (other than the Target Entities) who is a party to any
Carrier Agreement.
(l)
Carrier Agreement
means any contract (written or oral) between any of the Target
Entities and an insurance carrier or a managed agency relating to the Target Entities operating as
an agent for such insurance carrier or managed agency.
(m)
Carrier Contingency Measurement Period
means, with respect to a particular Carrier,
the period during which a potential contingency payment is measured pursuant to the applicable
Carrier Agreement.
(n)
Carrier Contingency Payment
means any payment made by a Carrier to any of the Target
Entities in the event that any of the Target Entities achieves certain thresholds in the sale and
brokering of insurance policies for such Carrier under the applicable Carrier Agreement.
(o)
Carrier Contingency Portion
means the amount of a Carrier Contingency Payment
multiplied by a fraction, the numerator of which is the number of days of the Carrier Contingency
Measurement Period during which the Sellers owned an applicable Target Entity and the denominator
of which is the total number of days of the Carrier Contingency Measurement Period.
(p)
Closing
has the meaning set forth in Section 2.3 below.
(q)
Closing Date
has the meaning set forth in Section 2.3 below.
(r)
COBRA
means the requirements of Part 6 of Subtitle B of Title I of ERISA and Code
Section 4980B and of any similar state Law.
(s)
Code
means the Internal Revenue Code of 1986, as amended.
2
(t)
Commissions
means all commissions and fees relating to the selling and brokering of
insurance policies through any of the Target Entities or any of their respective Affiliates
pursuant to a Carrier Agreement, including any renewal commissions.
(u)
Confidential Information
means, at a particular time, any information concerning the
businesses and/or affairs of the Target Entities that is not already generally available to the
public.
(v)
Customer
means a Person (other than the Target Entities) who is a party to any
Customer Agreement.
(w)
Customer Agreement
means any contract or license (written or oral) between a Person
and any of the Target Entities pursuant to which such Person purchases leads, clicks, quotes,
website traffic, data services, subscription services or other products or services from any of the
Target Entities.
(x)
Damages
means all claims, demands, injunctions, judgments, orders, decrees, rulings,
damages (including incidental, consequential and punitive damages), deficiencies, diminutions of
value, dues, penalties, fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes,
Liens, losses, expenses and fees, including court costs and attorneys fees and expenses.
(y)
Data Laws
has the meaning set forth in Section 3.2(aa)(i) below.
(z)
DG Liability Amount
means $1,200,002.00.
(aa)
Direct General
means Direct General Insurance Agency, Inc., a Tennessee
corporation.
(bb)
Direct General Documents
means, collectively, the promissory note, the security
agreement and section 2 of the option termination agreement, entered into between Direct General
and Target, as of April 27, 2010.
(cc)
Disclosure Schedule
has the meaning set forth in Section 3.2 below.
(dd)
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.
(ee)
Employee Pension Benefit Plan
has the meaning set forth in ERISA Section 3(2).
(ff)
Employee Welfare Benefit Plan
has the meaning set forth in ERISA Section 3(1).
(gg)
Environmental, Health, and Safety Requirements
shall mean, as amended and as now
and hereafter in effect, all Laws and other provisions having the force or effect of Law, all
judicial and administrative orders and determinations, all contractual
3
obligations and all common
law concerning public health and safety, worker health and safety, pollution or protection of the
environment, including all those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals,
petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation.
(hh)
ERISA
means the Employee Retirement Income Security Act of 1974, as amended.
(ii)
Fiduciary
has the meaning set forth in ERISA Section 3(21).
(jj)
Financial Statements
has the meaning set forth in Section 3.2(i) below.
(kk)
Foreign Partnership Agreement
means any contract or license (written or oral)
between any of the Target Entities and any Person whose business operations are based outside of
the United States of America.
(ll)
GAAP
means United States generally accepted accounting principles as in effect from
time to time, consistently applied.
(mm)
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 (or any
department or subdivision thereof).
(nn)
Indebtedness
means at a particular time, without duplication: (i) all Liabilities
for borrowed money of the Target Entities; (ii) all Liabilities evidenced by bonds, debentures,
notes or similar instruments; (iii) all Liabilities in respect of mandatorily redeemable or
purchasable Capital Interests or securities convertible into or exchangeable for Capital Interests;
(iv) all Liabilities for the deferred purchase price of property (other than accounts payable
incurred in the Ordinary Course of Business); (v) all Liabilities in respect of any lease of (or
other arrangement conveying the right to use) real or personal property or a combination thereof,
which Liabilities are required to be classified and accounted for under GAAP as capital leases;
(vi) all Liabilities for the reimbursement of any obligor or any letter of credit, bankers
acceptance or similar credit transaction securing obligations of a type described in clauses (i),
(ii), (iii), (iv), or (v); (vii) all payments required to obtain third party consents and expenses
incurred by the Target Entities in connection with the transactions contemplated by this Agreement
or the other Transaction Documents; (viii) all employee payments, sale bonuses, stay bonuses,
severance payments and change of control payments payable by the Target Entities; and (ix) all
accrued Tax Liabilities, current or deferred.
(oo)
Indemnifying Parties
has the meaning set forth in Section 7.4(a) below.
(pp)
Indemnified
Parties has the meaning set forth in Section 7.4(a) below.
4
(qq)
Intellectual Property
means all of the following in any jurisdiction throughout the
world: (i) works of authorship including computer programs and software, Source Code and executable
code (whether embodied in software, firmware or otherwise), documentation, designs, files, records,
data and mask works, including all applications therefor and registrations and extensions and
renewals thereof; (ii) copyrights, copyright applications and copyright registrations including all
extensions and renewals thereof; (iii) moral rights and publicity rights; (iv) inventions (whether
or not patentable and whether or not reduced to practice), improvements and technology; (v) patent
applications and patents, together with all reissues, continuations, continuations-in-part,
divisionals, revisions, extensions and reexaminations thereof; (vi) logos, trademarks, trade names
and service marks and all applications therefor and registrations and renewals thereof; (vii)
registered designs and applications therefor; (viii) internet domain names, web addresses and sites
and all content thereon, (ix) all rights in telephone numbers; (x) proprietary and confidential
information and trade secrets (including know how, ideas, research and development, formulas,
compositions, drawings, designs, specifications, invention disclosures and business and marketing
plans); (xi) databases, data compilations, collections and technical data and related
documentation; (xii) tools, methods and processes; (xiii) all advertising and promotional
materials; (xiv) all other proprietary rights; and (xv) any and all instantiations of the foregoing
in any form and embodied in any media.
(rr)
Intellectual Property Rights
means all common law, civil law and statutory rights
anywhere in the world associated with: (i) Intellectual Property; (ii) the protection of trade and
industrial secrets and confidential information; (iii) other proprietary rights relating to
Intellectual Property; and (iv) all rights analogous to those set forth herein.
(ss)
IRS
means the Internal Revenue Service.
(tt)
Knowledge
means any fact, matter or circumstance of which any individual and, in
the context of an entity, any director, manager, officer or key employee of such entity or other
employee with responsibility for the applicable subject matter, had actual knowledge or could
reasonably be expected to have knowledge, in each case, after due inquiry and investigation.
(uu)
Law
means any federal, state, local, municipal, foreign, international,
multinational, or other constitution, law, rule, standard, requirement, administrative ruling,
judgment, order, injunction, decree, ordinance, principle of common law, legal doctrine, code,
regulation, statute, plan, treaty or process, including, without limitation, the Foreign Corrupt
Practices Act, 15 U.S.C. 78dd-1 et seq., and those laws relating to the use of consumer credit and
other data in connection with acting as an insurance agency (including but not limited to the Fair
Credit Reporting Act and the Gramm-Leach-Bliley Act), of any Governmental Authority or administered
or enforced by or on behalf of, any Governmental Authority.
(vv)
Lease Consents
means the landlord consents required in connection with the
consummation of the transaction contemplated hereby.
5
(ww)
Leased Real Property
means all leasehold or subleasehold estates and other rights
to use or occupy any land, buildings, structures, improvements, fixtures or other interest in real
property held by the Target Entities.
(xx)
Leases
means all leases, subleases, licenses, concessions and other agreements
(written or oral), including all amendments, extensions, renewals, guaranties and other agreements
with respect thereto, pursuant to which the Target Entities hold any Leased Real Property,
including the right to all security deposits and other amounts and instruments deposited by or on
behalf of the Target Entities thereunder.
(yy)
Liability
means any and all debts, liabilities and obligations of whatever kind or
nature (whether known or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes and Unearned Commissions.
(zz)
Lien
means any mortgage, pledge, hypothecation, encumbrance, community property
interest, right of others, deed of trust, lien or other security interest, charge, lease, sublease,
license, occupancy agreement, adverse claim or interest, easement, right of way, encroachment,
burden, title defect, title retention agreement, conditional sale agreement, any purchase option,
voting trust agreement, ownership interest, economic interest or other interest, right of first
refusal, call or similar right of a third party, or any other restriction or covenant with respect
to such securities of any nature whatsoever, other than (i) restrictions on the offer and sale of
securities under federal and state securities laws and (ii) liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
(aaa)
Material Adverse Effect
or
Material Adverse Change
means any effect or change
that could, individually or in the aggregate, be (or could reasonably be expected to be) materially
adverse to the business, assets, condition (financial or otherwise), operating results, operations
or business prospects of the Target Entities or to the ability of Sellers to consummate timely the
transactions contemplated hereby (regardless of whether or not such adverse effect or change can be
or has been cured at any time or whether Buyer has knowledge of such effect or change on the
Closing Date), including any adverse change, event, development or effect arising from or relating
to (i) changes in GAAP, (ii) changes in Laws, and (iii) the taking of any action contemplated by
this Agreement or any other Transaction Document.
(bbb)
Material Contracts
has the meaning set forth in Section 3.2(q) below.
(ccc)
Most Recent Balance Sheet
has the meaning set forth in Section 3.2(i) below.
(ddd)
Most Recent Fiscal Month End
has the meaning set forth in Section 3.2(i) below.
(eee)
Multiemployer Plan
has the meaning set forth in ERISA Section 3(37).
(fff)
Objection Notice
has the meaning set forth in Section 7.4(a)(i) below.
6
(ggg)
Open Source Materials
has the meaning set forth in Section 3.2(o)(ii)(H) below.
(hhh)
Organizational Documents
means, with respect to a particular entity, the bylaws,
certificate of formation, certificate of incorporation, limited liability company agreement,
limited partnership agreement, partnership agreement, or any other similar organizational documents
of such entity.
(iii)
Ordinary Course of Business
means the ordinary course of business consistent with
past custom and practice (including with respect to quantity and frequency).
(jjj)
Payment Agent
shall have the meaning set forth in Section 9.13.
(kkk)
Payment Agent Sections
shall have the meaning set forth in Section 9.13.
(lll)
Permitted Liens
means (i) statutory liens for current Taxes not yet due or
delinquent (or which may be paid without interest or penalties) or the validity or amount of which
is being contested in good faith by appropriate proceedings, (ii) mechanics, carriers, workers
and repairers liens arising or incurred in the Ordinary Course of Business relating to obligations
as to which there is no default on the part of the Target Entities or any Seller or the validity or
amount of which is being contested in good faith by appropriate proceedings, or pledges, deposits
or other liens securing the performance of bids, trade agreements, contracts, leases or statutory
obligations (including workmans compensation, unemployment insurance or other social security
legislation) and (iii) all covenants, conditions, restrictions, easements, charges and
rights-of-way of record set forth in any state, local or municipal franchise of the Target Entities
which do not materially interfere with the present use of the Leased Real Property.
(mmm)
Person
means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization, any other business entity or a Governmental Authority.
(nnn)
Pre-Closing Tax Period
has the meaning set forth in Section 8.1.
(ooo)
Privacy Statement
means, collectively, all of each of the Target Entities privacy
policies previously or currently published on any Target Site, contained within each of the Target
Entities terms of use, or otherwise made available by any of the Target Entities regarding the
collection, retention, use, disclosure, transfer and/or distribution of personal information of
individuals, including from visitors and users of any Target Site.
(ppp)
Prohibited Transaction
has the meaning set forth in ERISA Section 406 and Code
Section 4975.
(qqq)
Publisher
means a Person (other than the Target Entities) who is a party to any
Publisher Agreement.
7
(rrr)
Publisher Agreement
means any contract or license (written or oral) between any of
the Target Entities and any Person pursuant to which any of the Target Entities purchases leads,
data collection or publishing, information services or other traffic sources from one or more
third-party websites or networks or in print.
(sss)
Purchase Price
has the meaning set forth in Section 2.2 below.
(ttt)
Registered Intellectual Property
means Intellectual Property and Intellectual
Property Rights that have been registered, filed, certified or otherwise perfected or recorded with
or issued by any Governmental Authority, wherever located.
(uuu)
Restrictive Period
has the meaning set forth in Section 5.5(a) below.
(vvv)
SEC
means the Securities and Exchange Commission.
(www)
Section 338 Forms
has the meaning set forth in Section 8.6.
(xxx)
Section
338(h)(10)
Election
has the meaning set forth in Section 8.6.
(yyy)
Securities Act
means the Securities Act of 1933, as amended.
(zzz)
Securities Exchange Act
means the Securities Exchange Act of 1934, as amended.
(aaaa)
Sellers
has the meaning set forth in the preface above.
(bbbb)
Seller Indemnified Parties
has the meaning set forth in Section 7.3(a) below.
(cccc)
Seller Indemnifying Parties
has the meaning set forth in Section 7.2(a) below.
(dddd)
Shares
means the interests in the Target Entities (or any of such entities
individually) represented by any class of stock as set forth in such Target Entities
Organizational Documents.
(eeee)
Source Code
means human-readable computer software and code, in a form other than
Object Code form or machine-readable form, including related programmer comments and annotations,
help text, data and data structures, object-oriented and other code, which may be printed out or
displayed in human-readable form, and, for purposes of this Source Code definition,
Object Code
means computer software code, substantially or entirely in binary form, which is intended to be
directly executable by a computer after suitable processing and linking but without the intervening
steps of compilation or assembly.
(ffff)
Specified Representations
shall mean the following representations and
warranties: 3.1(a) (Authorization of Transaction), 3.1(b) (Non-Contravention), 3.1(c) (Shares),
3.1(e) (Tax Matters), 3.2(a) (Organization, Qualification, and Corporate Power), 3.2(b)
(Authorization of Transaction), 3.2 (c) (Capitalization), 3.2(e) (Non-Contravention), 3.2(g) (Title
8
to Assets), 3.2(h) (Subsidiaries; Power of Attorney), 3.2(l) (Legal Compliance; Permits), 3.2(m)
(Tax Matters), 3.2(o)(i)(v), (vi), (x) and (xv) (Intellectual Property) and 3.2(aa) (Data Privacy).
(gggg)
Straddle Period
has the meaning set forth in Section 8.2.
(hhhh)
System
s has the meaning set forth in Section 3.2(cc) below.
(iiii)
Target
has the meaning set forth in the preface above.
(jjjj)
Target Entities
has the meaning set forth in the preface above.
(kkkk)
Target Expenses
has the meaning set forth in Section 9.12 below.
(llll)
Target Intellectual Property
has the meaning set forth in Section 3.2(o)(i)
below.
(mmmm)
Target Registered Intellectual Property
has the meaning set forth in Section
3.2(o)(ii) below.
(nnnn)
Target Sites
means the websites and domains listed on Section 3.2(o)(ii)(a) of
the Disclosure Schedule.
(oooo)
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, including any interest, penalty or addition thereto,
whether disputed or not and including any obligations to indemnify or otherwise assume or succeed
to the Tax liability of any other Person.
(pppp)
Tax Claim
has the meaning set forth in Section 8.7.
(qqqq)
Tax Return
means any return, declaration, report, claim for refund or information
return or statement relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
(rrrr)
Third-Party Claim
has the meaning set forth in Section 7.4(b) below.
(ssss)
Transaction Documents
means, collectively, this Agreement and any ancillary
agreements, documents and instruments contemplated hereby or thereby or entered into in connection
herewith or therewith.
(tttt)
Transferred Employees
has the meaning set forth in Section 5.6.
(uuuu)
Unearned Commissions
means the portion of any Commissions which relates to a
policy sold or brokered by any of the Target Entities or any of their respective Affiliates
pursuant to a Carrier Agreement which is cancelled or adjusted to reduce coverage.
9
(vvvv)
White Label License Agreements
means any contract (written or oral) between a
Person and any of the Target Entities pursuant to which any of the Target Entities licenses for a
fee certain technology in white label form.
ARTICLE II
Purchase and Sale of Shares; Purchase Price; Closing
2.1.
Purchase and Sale of Shares.
On and subject to the terms and conditions of this
Agreement, Buyer agrees to purchase from each Seller, and each Seller agrees to sell, transfer,
assign and deliver to Buyer at the Closing, all of the issued and outstanding Shares held or
beneficially owned by each such Seller free and clear of all Liens, for the consideration specified
below in this Article II.
2.2.
Purchase Price.
Subject to the terms and considerations of this
Agreement, in consideration of the sale, transfer, assignment and delivery of all of the Shares and
the agreements of Sellers made in Section 5.5 (Covenant Not to Compete and Not to Solicit), Buyer
agrees to pay to the Payment Agent, on behalf of Sellers, to an account that is designated by
Payment Agent at least two (2) business days prior to the Closing Date, in the aggregate an amount
in cash equal to Forty-Nine Million Six Hundred Fifty-Five Thousand U.S. Dollars (US
$49,655,000.00),
less
any amounts Buyer may deduct pursuant to Section 9.12 (Target Expenses),
less
the DG Liability Amount (the
Purchase Price
), payable by wire transfer of immediately available
funds at Closing. Buyers payment to the Payment Agent of the Purchase Price, including the
Carrier Contingency Portion pursuant to Section 2.4, shall be allocated by the Payment Agent among
the Sellers in proportion to their ownership of the Shares as set forth in Section 3.2(c) of the
Disclosure Schedule. Buyer agrees to pay the DG Liability Amount to Direct General, on behalf of
the Target Entities, to an account that is designated by Direct General at least two (2) business
days prior to the Closing Date, payable by wire transfer of immediately available funds at Closing.
2.3.
Closing.
The closing of the transactions contemplated by this Agreement (the
Closing
)
shall take place concurrently with the execution and delivery of this Agreement (the
Closing
Date
). The transactions contemplated by this Agreement will be deemed to have been made
simultaneously and will become effective at and as of 4:00 p.m. Eastern Time, on the Closing Date.
2.4.
Adjustment for Carrier Contingency Payment.
If a Carrier Contingency Payment is
received by Buyer following the Closing and the Carrier Contingency Measurement Period for such
Carrier Contingency Payment included a period during which the Sellers owned the applicable Target
Entity, then, within 30 days after receipt of such Carrier Contingency Payment, Buyer shall deliver
to the Payment Agent, on behalf of Sellers, cash in the amount of the Carrier Contingency Portion.
ARTICLE III
Representations and Warranties of the Target Entities and Sellers
3.1.
Sellers Representations and Warranties
. Each Seller represents and warrants to Buyer
that the statements contained in this Section 3.1 are true, correct and complete at and as of the
Closing Date, with respect to himself.
(a)
Authorization of Transaction
. Seller has full power and authority to execute and
deliver this Agreement and all other Transaction Documents to which Seller is a
10
party and to
perform his or her obligations under this Agreement and all such other Transaction Documents and to
consummate the transactions contemplated hereby and thereby, and the execution, delivery and
performance of this Agreement and all such other Transaction Documents to which Seller is a party
have been duly authorized by Seller. This Agreement and all other Transaction Documents constitute
the valid and legally binding obligation of Seller, enforceable in accordance with its respective
terms and conditions, except as such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar Laws affecting or relating to creditors rights generally.
(b)
Non-contravention
. Neither the execution and delivery of this Agreement or any other
Transaction Document, nor the consummation of the transactions contemplated hereby or thereby, will
(A) violate any Law to which Seller is subject, or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice or consent under any agreement,
contract, lease, license, instrument or other arrangement to which Seller is a party or by which he
or she is bound or to which any of his assets or Shares are subject, or (C) result in the
imposition or creation of a Lien upon or with respect to the Shares. Seller need not give any
notice to, make any filing with, or obtain any authorization, consent or approval of any
Governmental Authority in order to consummate the transactions contemplated by this Agreement or
any other Transaction Documents.
(c)
Shares
. Seller holds of record and owns beneficially the number of Shares set forth
next to his or her name in Section 3.2(c) of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the Securities Act and state securities
laws), Taxes, Liens, options, warrants, purchase rights, contracts, commitments, equities, claims
and demands. Seller is not a party to any option, warrant, purchase right, preemption right or
other contract, commitment or arrangement (other than this Agreement) that could require Seller to
encumber, sell, assign, transfer or otherwise dispose of any Capital Interests of the Target
Entities. Seller is not a party to any voting trust, voting agreement, proxy or other agreement or
understanding with respect to the voting of any Capital Interests of the Target Entities.
(d)
Brokers Fees
. Seller has no Liability to pay any fees or commissions to any broker,
finder, agent or investment bank with respect to the transactions contemplated by this Agreement.
(e)
Tax Matters
. Seller has had an opportunity to review with his or her own tax
advisors the tax consequences of the transactions contemplated by this Agreement. Such Seller
understands that he or she must rely solely on his or her advisors and not on any statements or
representations made by Buyer, the Target Entities or any of their respective agents. Such Seller
understands that he or she (and not Buyer or the Target Entities) shall be responsible for his or
her own Tax liability that may arise as a result of the consummation of the transactions
contemplated by this Agreement.
(f)
Absence of Claims by Sellers
. No Seller has any present claim against the Target
Entities and there is no Basis for any future claim against the Target Entities whether, contingent
or unconditional, fixed or variable under any contract or on any other legal basis
11
whatsoever,
whether in such Sellers capacity as a stockholder, employee, director, officer, consultant,
contractor or otherwise.
3.2.
Target Entities and Sellers Representations and Warranties
. As a material inducement to
Buyer to enter into this Agreement and to consummate the transactions contemplated hereby, the
Target Entities and Sellers (jointly and severally) represent and warrant to Buyer that the
statements contained in this Section 3.2 are true, correct and complete at and as of the Closing
Date, except as set forth in the correlative section of the disclosure schedule prepared by Sellers
and attached hereto (the
Disclosure Schedule
). Notwithstanding the foregoing, nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the Disclosure Schedule identifies the exception with particularity and
describes the relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be
deemed adequate to disclose an exception to a representation or warranty made herein (unless the
representation or warranty pertains to the existence of the document or other item itself).
(a)
Organization, Qualification, and Corporate Power
. Target is a duly incorporated
corporation, validly existing and in good standing under the Laws of Florida. Car Insurance
Agency, Inc. is a duly incorporated corporation, validly existing and in good standing under
the Laws of Florida. Car Insurance Holdings, Inc. is a duly incorporated corporation,
validly existing and in good standing under the Laws of Florida. CarInsurance.com, Inc.
is a duly incorporated corporation, validly existing and in good standing under the Laws of
Oklahoma. Each of the Target Entities is duly authorized to conduct business and is in good
standing under the Laws of each jurisdiction where such qualification is required (including with
respect to operating its insurance agency business). Each of the Target Entities has full corporate
power and authority and has obtained and has in effect all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged, and in which it presently proposes to
engage, and to own and use the properties owned and used by such Target Entity. Section 3.2(a) of
the Disclosure Schedule lists the directors and officers of each of the Target Entities. Sellers
have delivered to Buyer correct and complete copies of the Organizational Documents of the Target
Entities (as amended to date). The minute books (containing the records of all meetings of the
stockholders, the board of directors and any committees of the board of directors), the stock
certificate books, and the stock record books for the Target Entities are correct and complete.
Complete and accurate copies of all such minute books and the stock record books
have been provided to Buyer. Such minutes reflect all meetings of the Target Entities
shareholders, board of directors and any committees thereof since each of the Target Entities
inception, and such minutes accurately reflect in all material respects the events of and actions
taken at such meetings. Such stock record books accurately reflect all issuances and transfers of
shares of capital stock of each of the Target Entities since its inception. None of the Target
Entities is in default under or in violation of, and will not be as a result of entering into or
consummating the transactions contemplated by this Agreement or any of the other Transaction
Documents or any provision of its Organizational Documents.
(b)
Authorization of Transaction
. Each of the Target Entities has full corporate power
and authority to execute and deliver this Agreement and all other Transaction Documents and to
perform its obligations hereunder and thereunder and to consummate the
12
transactions contemplated
hereby and thereby, and the execution, delivery and performance of this Agreement and all such
other Transaction Documents have been duly authorized by all requisite action of each Target
Entity. This Agreement and each of the Transaction Documents constitute a legal, valid and binding
obligation of each of the Target Entities, enforceable against such Target Entity in accordance
with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar Laws affecting or relating to creditors rights generally.
(c)
Capitalization
. The entire authorized Capital Interests of Target consists of 10,000
Shares, of which 6,000 Shares are issued and outstanding. The entire authorized Capital Interests
of Car Insurance Agency, Inc. consists of 10,000 Shares, of which 6,000 Shares are issued
and outstanding. The entire authorized Capital Interests of Car Insurance Holdings, Inc.
consists of 10,000 Shares, of which 6,000 Shares are issued and outstanding. The entire authorized
Capital Interests of CarInsurance.com, Inc. consists of 7,500 Shares, of which 600 Shares
are issued and outstanding. All of the issued and outstanding Shares have been duly authorized, are
validly issued, fully paid, non-assessable and are not subject to any preemptive or subscription
rights. All outstanding Shares are held of record by the respective Sellers, with the domicile
addresses and in the amounts as set forth in Section 3.2(c) of the Disclosure Schedule. All of the
issued and outstanding Shares were offered, issued, sold and delivered in compliance with the
registration requirements of the Securities Act and any applicable state securities laws or an
applicable exception therefrom. None of the issued and outstanding Shares are subject to vesting.
(i) There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, preemptive rights or other contracts,
commitments or arrangements that could require the Target Entities to issue, sell or otherwise
cause to become outstanding any of its Capital Interests. There are no outstanding or authorized
options, rights, other securities, contracts, commitments or arrangements that could require the
Target Entities to redeem, repurchase or otherwise acquire (directly or indirectly) or retire any
Capital Interests of the Target Entities (or options, warrants or other rights exercisable
therefor) or to pay any distributions or returns relating to any Capital Interests of the Target
Entities. There are no outstanding or authorized unit appreciation, phantom stock, profit
participation or similar rights with respect to the Target Entities.
(ii) There are no voting trusts, voting agreements, proxies or other agreements or
understandings with respect to the voting of the Capital Interests of the Target Entities.
(iii) There are no outstanding rights which permit the holder thereof to cause any of the
Target Entities to file a registration statement under the Securities Act or which permit the
holder thereof to include securities of any of the Target Entities in a registration statement
filed by any of the Target Entities under the Securities Act.
(d)
SEC Filings
. None of the Target Entities has been required, and is currently
required, under the Securities Act, the Securities Exchange Act or any securities law of any other
jurisdiction to file with the SEC or any other similar Governmental Authority any
13
form, report,
statement, schedule or other document. None of the Target Entities has made any filing with the
SEC or any other similar Governmental Authority.
(e)
Non-contravention
. Neither the execution and the delivery of this Agreement or any
other Transaction Document, nor the consummation of the transactions contemplated hereby or
thereby, will (i) violate any Law to which any of the Target Entities is subject or any provision
of any Target Entities Organizational Documents or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party the right to
accelerate, result in a loss of a benefit under, terminate, modify or cancel, or require any notice
or consent under any agreement, contract, lease, license, instrument or other arrangement to which
any Target Entity is a party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Lien upon any of its assets). None of the Target Entities is
required to give any notice to, make any filing with, or obtain any authorization, consent or
approval of any Governmental Authority in order for the parties to consummate the transactions
contemplated by this Agreement and the other Transaction Documents.
(f)
Brokers Fees
. None of the Target Entities has any Liability to pay, and there are no
claims for, any fees, commissions or other compensation to any broker, finder, agent or investment
bank with respect to the transactions contemplated by this Agreement.
(g)
Title to Assets
. The Target Entities have good and marketable title to, or a valid
leasehold interest in, the properties and assets (1) used by the Target Entities, (2) necessary in
the operation of the Target Entities business as presently conducted or presently proposed to be
conducted, (3) located on its premises, or (4) shown on the Most Recent Balance Sheet or acquired
after the date thereof, free and clear of all Liens, other than Permitted Liens, and except for
properties and assets disposed of in the Ordinary Course of Business since the date of the Most
Recent Balance Sheet.
(h)
Subsidiaries; Power of Attorney
. None of the Target Entities owns or controls,
directly or indirectly, any interest in another corporation, association or other business entity.
None of the Target Entities is a participant in any joint venture, partnership or similar
arrangement. There are no outstanding powers of attorney executed on behalf of any of the Target
Entities. Except as set forth on Section 3.2(h) of the Disclosure Schedule, none of Car
Insurance Agency, Inc., Car Insurance Holdings, Inc. or CarInsurance.com,
Inc. owns or controls, directly or indirectly, any interest in the business operated by
Target.
(i)
Financial Statements
. Attached hereto as
Exhibit A
are the following
financial statements (collectively the
Financial Statements
): (i) unaudited balance sheets and
statements of income, changes in stockholders equity and cash flow as of and for the fiscal years
ended December 31, 2009 and December 31, 2008 for the Target Entities on a consolidated basis; and
(ii) unaudited interim balance sheets and statements of income, changes in stockholders equity and
cash flow (the
Most Recent Balance Sheet
) as of and for the nine (9) month period ended September
30, 2010 (the
Most Recent Fiscal Month End
) for the Target Entities on a consolidated basis. The
Financial Statements (including the notes thereto) have been prepared pursuant to the cash method
of accounting applied on a consistent basis throughout the periods covered thereby, present fairly
the financial condition of the Target
14
Entities as of such dates and the results of operations of
the Target Entities for such periods, are correct and complete and are consistent with the books
and records of the Target Entities, including all entries and files made in QuickBooks (which books
and records are correct and complete).
(j)
Absence of Certain Events
. Except as set forth in Section 3.2(j) of the Disclosure
Schedule, since January 1, 2010 there has not been: (i) any Material Adverse Change; (ii) any
authorization for issuance, sale, delivery, grant of any right for, other agreement or any
commitment to issue, sell, transfer, deliver or grant, any Shares or other Capital Interests or any
securities convertible, exchangeable or exercisable into Shares or any other Capital Interests;
(iii) any declaration, setting aside or payment of any dividend or other distribution with respect
to any of Capital Interests (whether in cash or in kind) or any split, combination, subdivision,
reclassification, redemption, purchase or otherwise acquisition of any such Capital Interests; (iv)
any change in the focus of any of the Target Entities business activities; (v) any change in the
independent accountants of the Target Entities or any material change in the accounting methods or
practices followed by the Target Entities or any material change in depreciation or amortization
policies or rates; (vi) any transfer, assignment, disposal of or lapse of any rights in, to or for
the use of any Intellectual Property, or any disclosure to any Person other than employees of the
Target Entities, of any Intellectual Property not heretofore a matter of public knowledge, except
pursuant to judicial or administrative process; (vii) any acceleration, termination, modification,
amendment or cancellation of or waiver of any material of any Material Contract or the execution of
any Material Contract, including the acceleration of payment or prepayment of any receivable by any
Person to any of the Target Entities outside the Ordinary Course of Business; (viii) any delay in
paying any Liabilities, including accounts payables, outside the Ordinary Course of Business; (ix)
any resignation or termination, or notice of such, of any director, officer, key employee or group
of employees of the Target Entities; (x) any adoption, amendment, modification or termination of
any bonus, profit sharing, incentive, severance, change of control or other termination pay, or
other plan, contract, commitment or compensation for the benefit of any of the Target Entities
directors, officers, consultants or employees (or taken any such action with respect to any other
Employee Benefit Plan); (xi) the employment or engagement of any new employee, contractor or
consultant; (xii) any sale, lease, transfer, assignment, pledge, encumbrance or other disposition
of any of the Target Entities assets, tangible or intangible, or properties; (xiii) any agreement
to acquire any business or merge or consolidate with another Person; (xiv) any change made to or
authorization to change any
Organizational Document of any of the Target Entities; or (xv) any occurrence, event,
incident, action, failure to act or transaction outside the Ordinary Course of Business. No Seller
or any of the Target Entities has agreed, committed or offered (in writing or otherwise), and has
not attempted, to take any of the actions referred to in clauses (i) through (xv) in this Section
3.2(j).
(k)
Undisclosed Liabilities
. None of the Target Entities has any Liability (and there is
no Basis for any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against any of the Target Entities giving rise to any Liability), except
for (i) Liabilities set forth on Section 3.2(k) of the Disclosure Schedule, which schedule
includes the name of the Person to whom the Liability is owed, the amount of Liabilities owing in
the thirty (30) days immediately following the Closing Date, and the total forecasted Liabilities,
(ii) Liabilities set forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto), (iii) Liabilities that have arisen after the Most Recent Fiscal Month End in the
15
Ordinary
Course of Business not yet due and payable and disclosed in Section 3.2(k) of the Disclosure
Schedule (none of which results from, arises out of, relates to, is in the nature of, or was caused
by any breach of contract, breach of warranty, tort, infringement, lawsuit, misappropriation,
claim, environmental matter or violation of Law) or (iv) Liabilities for executory obligations for
the future performance by any of the Target Entities under any Material Contract identified in
Section 3.2(q) of the Disclosure Schedule. The reserves, if any, established by the Target
Entities in the Most Recent Balance Sheet or the lack of reserves, if applicable, are reasonable
based upon facts and circumstances known by the Target Entities.
(l)
Legal Compliance; Permits.
(i) Each of the Target Entities and its properties, assets, operations and business have
complied and are in compliance with all applicable Laws, at any time in effect with any
Governmental Authority, except for such instances of noncompliance as would not individually or in
the aggregate have a Material Adverse Effect or any adverse effect on any of the Target Entities
ability to execute, deliver and perform this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby. No action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has been filed or commenced
against any of the Target Entities alleging any failure to so comply.
(ii) Section 3.2(l)(ii) of the Disclosure Schedule contains a list of all licenses,
permits, and authorizations issued by Governmental Authorities held by any of the Target Entities
in connection with the use, conduct and operation of its properties and business. All such
licenses, permits and authorizations that are necessary for the use, conduct and operation of the
Target Entities properties and business as presently conducted or presently proposed to be
conducted have been obtained and are presently in full force and effect. Each of the Target
Entities is in full compliance with all terms and conditions of such licenses, permits and
authorizations, no proceeding is pending, or to the Knowledge of the Target Entities, threatened to
revoke or limit any thereof, and there is no Basis for any such proceeding, and the consummation of
the transactions contemplated by this Agreement will not result in the non-renewal, revocation or
termination of any such license, permit or authorization.
(m)
Tax Matters.
(i) Each of the Target Entities has prepared and timely filed all Tax Returns that they
were required to file under applicable Laws. All such Tax Returns were true, correct and complete
in all respects and were prepared and filed in compliance with all applicable Laws.
(ii) All Taxes due and owing by each of the Target Entities (whether or not shown on any
Tax Return) have been timely paid and there is no Tax deficiency outstanding, assessed or proposed
against the Target Entities, nor has any of the Target Entities executed any outstanding waiver of
any statute of limitations on or extension of the period for the assessment or collection of any
Tax. None of the Target Entities is currently the beneficiary of any extension of time within
which to file any Tax Return.
16
(iii) No claim has ever been made by an authority in a jurisdiction where the Target
Entities do not file Tax Returns that such is or may be subject to taxation by that jurisdiction.
There are no (and immediately following the Closing there will be no) Liens for Taxes (other than
Taxes not yet due and payable) upon any of the assets of the Target Entities, and none of the
Target Entities has (or immediately following the Closing will have) any Liabilities for unpaid
Taxes (other than Taxes not yet due and payable).
(iv) The Target Entities have withheld and timely paid all Taxes required to have been
withheld and paid in connection with any amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party.
(v) No Seller, and no director or officer (or employee responsible for Tax matters) of any
of the Target Entities expects any authority to assess any additional Taxes with respect to any of
the Target Entities for any period for which Tax Returns have been filed. No foreign, federal,
state or local tax audits or administrative or judicial Tax proceedings are pending or being
conducted with respect to any of the Target Entities. None of the Target Entities has received
from any foreign, federal, state or local taxing authority (including jurisdictions where such
entity has not filed Tax Returns) any (i) notice indicating an intent to open an audit or other
review, (ii) request for information related to Tax matters, or (iii) notice of deficiency or
proposed adjustment for any amount of Tax proposed, asserted or assessed by any taxing authority.
(vi) Section 3.2(m)(vi) of the Disclosure Schedule lists all federal, state, local and
foreign income Tax Returns that have been audited, and indicates those Tax Returns that currently
are the subject of audit. Sellers have delivered to Buyer true, correct and complete copies of all
federal income Tax Returns, examination reports and statements of deficiencies assessed against or
agreed to by any of the Target Entities, filed or received for any period since such entitys
inception.
(vii) None of the Target Entities is a party to any agreement, contract, arrangement or
plan that has resulted or could result, separately or in the aggregate, in the payment of (a) any
excess parachute payment within the meaning of Code Section 280G (or any corresponding provision
of state, local or foreign Tax Law) and (b) any amount that will not be fully deductible as a
result of Code Section 162(m) (or any corresponding provision of state, local or foreign Tax Law).
None of the Target Entities is, and has been at any time, a United
States real property holding corporation within the meaning of Code Section 897(c)(2) during
the applicable period specified in Code Section 897(c)(1)(A)(ii).
(viii) None of the Target Entities (a) is or has been at any time, a party to or bound by
any Tax allocation, indemnification or sharing agreement, (b) is not, and has not been at any time,
a member of an Affiliated Group filing a consolidated federal income Tax Return and (c) has no
Liability for the Taxes of any Person (other than the Target Entities) under Reg. Section 1.1502-6
(or any similar provision of Law), as a transferee or successor, by contract or otherwise.
(ix) The unpaid Taxes of any of the Target Entities (a) did not, as of the Most Recent
Fiscal Month End, exceed the reserve for Tax Liability (rather than any reserve for
17
deferred Taxes
established to reflect timing differences between book and Tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (b) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the past custom and
practice of the Target Entities in filing its Tax Returns. Since the date of the Most Recent
Balance Sheet, none of the Target Entities had incurred any Liability for Taxes arising from
extraordinary gains or losses, outside the Ordinary Course of Business.
(x) None of the Target Entities will be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any:
(A) change in method of accounting for a taxable period ending on or prior to the Closing
Date;
(B) closing agreement as described in Code Section 7121 (or any corresponding or similar
provision of state, local or foreign income Tax Law) executed on or prior to the Closing Date;
(C) intercompany transaction or excess loss account described in Treasury Regulations
under Code Section 1502 (or any corresponding or similar provision of state, local or foreign
income Tax Law);
(D) installment sale or open transaction disposition made on or prior to the Closing Date;
or
(E) prepaid amount received on or prior to the Closing Date.
(xi) None of the Target Entities has distributed stock of another Person, or had its stock
distributed by another Person, in a transaction that was purported or intended to be governed in
whole or in part by Code Section 355 or Code Section 361.
(xii) There is no contract, plan or arrangement to which any of the Target Entities is a
party, including the provisions of this Agreement, covering any employee or former employee of any
of the Target Entities or other Person which, individually or collectively, could give rise to the
payment of any amount that would not be deductible pursuant to Section
280G, 404 or 162(m) of the Code or any similar provision of applicable Law or that would give
rise to a penalty under Section 409A of the Code.
(xiii) Each of the Target Entities has made a valid and timely election to be classified
as an S corporation for federal and state income tax purposes, effective as of January 1, 2006 with
respect to Target, effective as of January 1, 2006 with respect to Car Insurance Agency, Inc.,
effective as of February 15, 2005 with respect to Car Insurance Holdings, Inc., and effective as of
September 11, 2006 with respect to CarInsurance.com, Inc. (the Applicable Election Date). At all
times from the Applicable Election Date through the Closing Date, the applicable Target Entity has
been and will be an S corporation within the meaning of Section 1361(a)(1) of the Code. The Target
Entities and Sellers have not taken any action that has or shall result in the termination of any
of the Target Entities status as an S corporation within the meaning of Section 1361(a)(1) of the
Code. Each of the Target Entities
18
status as an S corporation will continue to be in effect at the
time of the consummation of the transactions contemplated hereby so as to permit the effectiveness
of the Section 338(h)(10) Election (as defined in Section 8.6) and Sellers shall not take, and
shall not cause or permit any of the Target Entities to take any action inconsistent with the
foregoing. None of the material assets of any of the Target Entities are held by any subsidiaries
of Target.
(xiv) Except for potential Tax under Section 1374 of the Code as disclosed on Section
3.2(m)(xiv) of the Disclosure Schedule, which shall not exceed $5,100,000.00, the Target Entities
will not be liable for any Tax as a result of the transactions contemplated herein (including,
without limitation, Taxes resulting from the deemed sale of assets caused by the Section 338(h)(10)
Election).
(xv) There is no basis for treating any portion of the Purchase Price as compensation for
income tax purposes. Buyer will not be required by Law to withhold or deposit any Tax with respect
to the payment of the Purchase Price or any other payment contemplated by this Agreement. None of
the Shares are, or were, subject to a substantial risk of forfeiture (within the meaning of Section
83 of the Code) which will lapse as a result of the transactions contemplated herein, or lapsed at
any time during 2010. There have been and will be no transfers of Shares to or by any Seller in
contemplation of, or in connection with, the transactions contemplated by this Agreement. None of
the Shares were issued by any of the Target Entities during 2010. No Shares have been, during
2010, or will be in connection with the transactions contemplated herein, issued pursuant to the
exercise of stock options. The Purchase Price will be paid to the Sellers by the Payment Agent
strictly according to their relative ownership of the Shares.
(n)
Real Property
. None of the Target Entities owns and has ever owned any real property.
Section 3.2(n) of the Disclosure Schedule sets forth the address of each parcel of Leased Real
Property, and a true and complete list of all Leases for each such Leased Real Property (including
the date and name of the parties to such Lease document). The applicable Target Entity has good
and valid leasehold interests in its respective Leased Real Property free and clear of all Liens,
other than Permitted Liens. The Target Entities have delivered to Buyer a true and complete copy
of each such Lease document, and in the case of any oral Lease, a written summary of the material
terms of such Lease. With respect to each of the Leases: (i) such Lease is legal, valid, binding,
enforceable and in full force and effect; (ii) the consummation of the
transactions contemplated by this Agreement and the other Transaction Documents do not require
the consent of any other party to such Lease (except for those Leases for which Lease Consents are
obtained on or prior to the Closing Date), will not result in a breach of or default under such
Lease, and will not otherwise cause such Lease to cease to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the Closing; (iii) each Target Entitys
possession and quiet enjoyment of the Leased Real Property under such Lease has not been disturbed
and there are no disputes with respect to such Lease; (iv) none of the Target Entities or any other
party to the Lease is in breach of or default under such Lease, and no event has occurred or
circumstance exists that, with the delivery of notice, the passage of time or both, would
constitute such a breach or default, or permit the termination, modification or acceleration of
rent, under such Lease; (v) no security deposit or portion thereof deposited with respect to such
Lease has been applied in respect of a breach of or default under such Lease that has not been
redeposited in full; (vi) none of the Target Entities has subleased, licensed or otherwise
19
granted
any Person the right to use or occupy the Leased Real Property or any portion thereof; and (vii)
none of the Target Entities has collaterally assigned or granted any other Lien in such Lease or
any interest therein. The Leased Real Property identified in Section 3.2(n) of the Disclosure
Schedule, comprise all of the real property used or intended to be used in, or otherwise related
to, the Target Entities businesses. The Leased Real Property is in good condition and repair
(normal wear and tear excepted) and is sufficient for the business of the Target Entities as
currently conducted and proposed to be conducted.
(o)
Intellectual Property
.
(i) The Target Entities own and possess or have the right to use pursuant to a valid and
enforceable written license, sublicense, agreement or permission, all Intellectual Property
necessary for the operation of the business of the Target Entities as presently conducted and as
presently proposed to be conducted, and, immediately following the Closing Date, each such
Intellectual Property Right will be sufficient and appropriate to operate the business of the
Target Entities as presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Target Entities (whether registered or unregistered,
Target Intellectual Property
) immediately prior to the Closing will be owned or available for use
by the Target Entities on identical terms and conditions immediately after the Closing. Each of
the Target Entities has taken all necessary action to maintain and protect each item of Target
Intellectual Property.
(ii) Section 3.2(o)(ii) of the Disclosure Schedule (a) identifies all Registered
Intellectual Property owned by, or filed in the name of, each of the Target Entities (
Target
Registered Intellectual Property
), specifying as to each such Target Registered Intellectual
Property the co-owner (if any), jurisdiction of registration, registration number, date of
registration and status of registration, (b) identifies each pending application for registration
that the Target Entities have made with respect to any Intellectual Property, specifying as to each
such application the name or names in which the application was filed, jurisdiction of application,
application number, date of application and status of such application, (c) identifies each
unregistered trademark, service mark, trade name, corporate name or Internet domain name, computer
software item (other than commercially available off-the-shelf software purchased or licensed for
less than a total cost of $1,000 in the aggregate) and each unregistered copyright used by the
Target Entities in connection with its business, and (d) identifies each license,
sublicense, agreement, or other permission or right (whether or not currently exercisable)
that the Target Entities have granted to any third party with respect to any Target Intellectual
Property. Sellers have delivered to Buyer correct and complete copies of all such patents,
registrations, applications, licenses, sublicenses, agreements and permissions (as amended to
date). With respect to each item of Intellectual Property required to be identified in Section
3.2(o)(ii) of the Disclosure Schedule:
(A) the Target Entities own and possess all right, good and marketable title, and interest
in and to the item, free and clear of any Lien, license or other restriction or limitation
regarding use, exploitation or disclosure anywhere in the world;
(B) the item is not subject to any outstanding injunction, judgment, order, decree, ruling
or charge;
20
(C) no action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand is pending or is threatened that challenges the legality, validity, enforceability, use or
ownership of the item, and there are no grounds for the same;
(D) none of the Target Entities has ever agreed to indemnify any Person for or against any
interference, infringement, misappropriation or other conflict with respect to the item;
(E) no loss or expiration of the item is threatened, pending or reasonably foreseeable,
except for patents expiring at the end of their statutory terms (and not as a result of any act or
omission by Sellers or any of the Target Entities, including a failure by Sellers or the Target
Entities to pay any required maintenance fees);
(F) to the extent that any item has been developed or created independently or jointly by
any Person other than the Target Entities, the Target Entities have legally valid, binding and
enforceable written agreement with such Person with respect thereto and has provided Buyer with a
copy of all such agreements, and the Target Entities thereby have obtained ownership of, and is the
exclusive owner of, all such Intellectual Property therein and associated Intellectual Property
Rights;
(G) none of the Target Entities has transferred ownership of, or granted any exclusive
license of or exclusive right to use, or authorized the retention of any exclusive rights to use or
joint ownership of, any such item of Intellectual Property or Intellectual Property Rights to any
other Person; and
(H) the underlying item of Intellectual Property does not constitute open source, public
source or freeware Intellectual Property, or any modification or derivative work thereof, including
any version of any software licensed pursuant to any GNU General Public License, GNU Lesser General
Public License, Mozilla License, Common Public License, Apache License, BSD License, Artistic
License, Sun Community Source License or other limited general public license, or other software
that is licensed pursuant to a license that purports to require the distribution of, or access to,
Source Code or purports to restrict a partys ability to charge for distribution or use of software
(
Open Source Materials
), and Open Source Materials were not used in, incorporated into,
integrated or bundled with, any Intellectual
Property that is, or was, incorporated in, or used in the development or compilation of, any
such Intellectual Property.
(iii) Section 3.2(o)(iii) of the Disclosure Schedule identifies each item of Intellectual
Property that any third party owns and that any of the Target Entities uses pursuant to license,
sublicense, agreement or permission, other than shrink-wrap and similar widely available binary
code and commercial end-user licenses with a total cost of less than $2,000 in the aggregate (but
not including Open Source Materials). Sellers have delivered to Buyer correct and complete copies
of all such licenses, sublicenses, agreements and permissions (each as amended to date). No third
party who has licensed Intellectual Property or Intellectual Property Rights to any of the Target
Entities has ownership rights or license rights to improvements made by any of the Target Entities
in such Intellectual Property which has been
21
licensed to any of the Target Entities. With respect
to each item of Intellectual Property required to be identified in Section 3.2(o)(iii) of the
Disclosure Schedule:
(A) the license, sublicense, agreement or permission covering the item is legal, valid,
binding, enforceable, and in full force and effect;
(B) the license, sublicense, agreement or permission will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following consummation of the
transactions contemplated hereby;
(C) no party to the license, sublicense, agreement or permission is in breach or default,
and no event has occurred that with notice or lapse of time would constitute a breach or default or
permit termination, modification or acceleration thereunder;
(D) no party to the license, sublicense, agreement or permission has repudiated any
provision thereof;
(E) with respect to each sublicense, the representations and warranties set forth in
subsections (A) through (D) above are true and correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(G) no action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand is pending or is threatened that challenges the legality, validity or enforceability of the
underlying item of Intellectual Property, and there are no grounds for the same; and
(H) none of the Target Entities has granted any sublicense or similar right with respect
to the license, sublicense, agreement or permission.
(iv) Section 3.2(o)(iv) of the Disclosure Schedule sets forth all contracts, agreements,
commitments, licenses, sublicenses or other understanding between each of the Target Entities and
any other Person wherein or whereby any of the Target Entities has agreed to, or assumed, any
obligation or duty to warrant, indemnify, reimburse, hold harmless,
guaranty or otherwise assume or incur any obligation or liability with respect to the
infringement or misappropriation by any of the Target Entities or such other Person of the
Intellectual Property Rights of any person other than the Target Entities.
(v) None of the Target Entities has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property Rights of third parties, and none of
Sellers and the directors and officers (and employees with responsibility for Intellectual Property
matters) of any of the Target Entities has ever received any charge, complaint, claim, demand or
notice alleging any such interference, infringement, misappropriation or violation (including any
claim that any of the Target Entities must license or refrain from using any Intellectual Property
Rights of any third party). To the Knowledge of the Target Entities or any of Sellers, no third
party has interfered with, infringed upon,
22
misappropriated, otherwise come into conflict with any
Intellectual Property Rights of any of the Target Entities.
(vi) The operation of the business of the Target Entities as currently conducted and
currently proposed to be conducted, including the design, development, use, import, manufacture,
sale and offer for sale of the products, technology or services of the Target Entities (including
products, technology or services currently under development), does not and will not infringe or
misappropriate or otherwise come into conflict with the Intellectual Property or Intellectual
Property Rights of any other Person (including rights to privacy or publicity), or constitute
unfair competition or trade practices under the applicable Laws of any jurisdiction, and to the
Knowledge of the Target Entities or any of Sellers: (A) there are no facts that indicate a
likelihood of any of the foregoing; and (B) no notices regarding any of the foregoing (including
any demands or offers to license any Intellectual Property from any third party) have been
received.
(vii) None of Sellers or any of the Target Entities has any Knowledge of any new products,
inventions, procedures or methods that any competitors or other third parties have developed that
reasonably could be expected to supersede or make obsolete any product or process of the Target
Entities or to limit the business of the Target Entities as presently conducted or as presently
proposed to be conducted.
(viii) Sellers and the Target Entities have taken all necessary and desirable actions to
maintain and protect all Target Intellectual Property and, with respect to each item of Target
Registered Intellectual Property, have paid all necessary registration, maintenance and renewal
fees and filed all necessary applications, documents and certificates with the relevant patent,
copyright, trademark or other authorities in the United States or foreign jurisdictions for the
purposes of registering, perfecting, preserving, prosecuting, renewing and maintaining such Target
Registered Intellectual Property. There are no actions that must be taken by any of the Target
Entities within six months after the Closing Date, including the payment of any registration,
maintenance or renewal fees or the filing of any documents, applications or certificates for the
purposes of perfecting, preserving, maintaining or renewing any Target Registered Intellectual
Property. In each case in which any of the Target Entities has acquired any Intellectual Property
Rights from any Person, the Target Entities have obtained a valid and enforceable assignment
sufficient to irrevocably transfer all rights in such Intellectual Property and the associated
Intellectual Property Rights (including the right to seek past and
future damages with respect thereto) to the Target Entities and, to the maximum extent
provided for by, and in accordance with applicable Laws, the Target Entities have recorded each
such assignment with the relevant Governmental Authorities. To the Knowledge of any of Sellers,
the owners of any of the Intellectual Property licensed to the Target Entities have taken all
necessary and desirable actions to maintain and protect the Intellectual Property covered by such
license.
(ix) Neither this Agreement or the other Transaction Documents nor the transactions
contemplated hereby or thereby will result in: (a) Buyer or any of the Target Entities granting to
any third party any right to or with respect to any Intellectual Property owned by, or licensed to,
either of them, (b) Buyer or any of the Target Entities, being bound by, or subject to, any
non-compete or other material restriction on the operation or scope of their respective businesses,
or (c) Buyer or any of the Target Entities being obligated to pay any
23
royalties or other material
amounts to any third party in excess of those payable by either of them, respectively, in the
absence of this Agreement or the transactions contemplated hereby.
(x) None of the Target Entities has any claim pending against any third party for
infringing or misappropriating any Intellectual Property of any of the Target Entities.
(xi) Each Target Entity has protected its rights in Confidential Information and trade
secrets of the Target Entities to the extent reasonable and customary in the industry in which the
Target Entities operate, including implementing the following measures: (a) each of the Target
Entities requires any employee, contractor or consultant that will have access to Target
Intellectual Property or Confidential Information to execute a non-disclosure agreement on Targets
standard form, a copy of which has been provided to Buyer and identified as the standard form; (b)
each of the Target Entities stores the Source Code for its products on a physically secure computer
in a physically secure room with limited access; and (c) none of the Target Entities has disclosed
the Source Code to any third-party other than Buyer for the purposes of performing a Source Code
review. Each of the Target Entities has and enforces a policy requiring each employee, contractor
and consultant of the Target Entities who has developed, created or modified, or helped to develop,
create or modify, any Target Intellectual Property, and the officers and directors of the Target
Entities, to execute a proprietary rights, assignment and confidentiality agreement substantially
in the forms attached to Section 3.2(o)(xi) of the Disclosure Schedule, which in each case
constitutes a valid, binding and enforceable agreement. All current and former employees,
contractors and consultants of the Target Entities who have developed, created or modified, or
helped to develop, create or modify, any Target Intellectual Property are listed on Section
3.2(o)(xi) of the Disclosure Schedule, and each such Person has executed such a valid, binding and
enforceable agreement assigning all of such employees, contractors or consultants rights in and
to such Target Intellectual Property.
(xii) No government funding, facilities or resources of a university, college, other
educational institution or research center or funding from third parties was used in the
development of the Target Intellectual Property and no Governmental Authority, university, college,
other educational institution or research center has any claim or right in or to such Intellectual
Property.
(xiii) None of the Target Entities has any Knowledge of any facts or circumstances that
would render any Target Intellectual Property invalid or unenforceable.
(xiv) None of the Target Entities has engaged in spyware, adware or incentive marketing
and is in compliance with the Federal Can Spam regulations and all other applicable Laws governing
spyware, adware, incentive marketing or analogous activities and, to the Target Entities
Knowledge, none of their respective Affiliates engage in such conduct and are in compliance with
Federal Can Spam regulations and all other applicable Laws governing spyware, adware, incentive
marketing or analogous activities.
(xv) None of the Target Entities has engaged in any black hat techniques for search
engine results optimization, meaning any of the following practices: (1) link farming, meaning
using websites that any of the Target Entities owns or controls to secure
24
links to the Target Sites
or sites that link to the Target Sites; (2) cloaking, meaning deliberately showing different
content to search engines and human users to influence any of the Target Entities search ranking
or the content displayed within search results; (3) doorway pages (similar to cloaking), meaning
having a webpage that ranks for a phrase where the end user is then re-directed to a substantially
different webpage (provided, that this technique is not a 301 webpage re-direct); (4) hidden text,
meaning using text on a website that is not meant to be read, but is for search engines; (5)
selling links or using disguised exchanges or otherwise accepting anything of value for a link from
the Target Sites to another website; (6) website tools spam, including, without limitation,
offering a website hit counter with a link back to a Target Site or any other means of getting a
link back from a site owner without the their explicit knowledge (e.g., a wordpress theme download
with a hidden link); and (7) purchasing paid links, including, without limitation, purchasing links
through networks.
(xvi) Each of the Target Entities has taken all reasonable steps to safeguard the
information technology systems utilized in the operation of the business of the Target Entities,
including the implementation of procedures to ensure that such information technology systems are
free from any disabling codes or instructions, timer, copy protection device, clock, counter or
other limiting design or routing and any back door, time bomb, Trojan horse, worm, drop
dead device, virus (as such terms are commonly understood in the software industry), or other
software routines or hardware components that in each case permit or are intended to permit, or
capable of performing, (a) unauthorized access, unauthorized disablement, unauthorized erasure or
other damage or destruction of any data file or other software by a third party, or (b) disrupting,
harming, damaging or otherwise impeding in any manner the operation of a technology system, network
or other device on which such code is stored or installed, and to date there have been no
successful unauthorized intrusions or breaches of the security of the information technology
systems. None of the Intellectual Property used by any of the Target Entities nor the Target
Entities network and server have malicious programs (e.g. virus, worms, Trojan horses, e-mail
bombs, etc.).
(xvii) Neither Target Intellectual Property nor content on Target Sites contains any
violent content, content that promotes racial intolerance or advocacy against any individual, group
or organization, pornography, hacking/cracking content or other content that is illegal, promotes
illegal activity or infringes on the legal rights of others.
(xviii) The Target Entities own all of the content on Target Sites and such content was
developed by the Target Entities or licensed by the Target Entities or under
agreement, contract, license or sublicense exclusively for the Target Entities benefit and
does not use third parties logos, brand names, content or other material on any Target Sites.
(xix) None of the Target Entities has engaged in the following pay per click tactics: (i)
bidding on third party trademarks as keywords, and (ii) using trademarks or terms confusingly
similar to third party trademarks in the URL of a landing page or in any advertising copy.
(xx) Section 3.2(o)(xx) of the Disclosure Schedule contains a complete and accurate
description of the Target Entities business processes and Systems used in, and in connection with,
obtaining leads and providing those leads to Customers.
25
(xxi) Sellers and the Target Entities have complied with and are presently in compliance
with all foreign, federal, state, local, governmental (including, but not limited to, the Federal
Trade Commission and State Attorneys General), administrative or regulatory Laws applicable to any
Intellectual Property.
(xxii) The names Car Insurance.com, Inc., Car Insurance Agency, Inc.,
Car Insurance Holdings, Inc., and CarInsurance.com, Inc. are the only trade
names used by the Target Entities and Sellers within the past five (5) years.
(p)
Tangible Assets
. The Target Entities have good and valid title to, or a valid
leasehold interest in, as applicable, all buildings, machinery, equipment, and other tangible
assets necessary or used by the applicable Target Entity in the operation of its business as
presently conducted and as presently proposed to be conducted, free and clear of all Liens except
statutory liens for the payment of current Taxes that are not yet due or delinquent. All such
tangible assets are listed in Section 3.2(p) of the Disclosure Schedule and together with the
Intellectual Property listed in Section 3.2(o) of the Disclosure Schedule constitute all assets
necessary to continue to operate the business of the Target Entities as presently conducted and as
presently proposed to be conducted. Each such tangible asset is free from defects (patent and
latent), has been maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), is suitable for the purposes for which it
presently is used and presently is proposed to be used, and, with respect to each such tangible
asset which is leased by the Target Entities, is in the condition required by the terms of the
lease applicable thereto.
(q)
Material Contracts
. Section 3.2(q) of the Disclosure Schedule lists all of the
following contracts, letters of intent, term sheets, arrangements and other agreements (written or
oral) to which any of the Target Entities is a party or by which it is bound (collectively, the
Material Contracts
):
(i) any Carrier Agreement;
(ii) any Customer Agreement;
(iii) any Publisher Agreement;
(iv) any Advertising Agreement;
(v) any White Label License Agreement;
(vi) any Foreign Partnership Agreement;
(vii) any agreement or license with Google, Yahoo and MSN;
(viii) any agreement with any Person who serves as an independent contractor or consultant
to any of the Target Entities (or similar arrangements) that is not cancelable without penalty or
further payment and without more than 30 days notice;
26
(ix) any agreement concerning the assignment or license of any Intellectual Property
Right;
(x) any agreement (or group of related agreements) for the lease of personal property to or
from any Person providing for lease payments in excess of $5,000 per annum;
(xi) any agreement (or group of related agreements) for the purchase or sale of raw materials,
commodities, supplies, products or other personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period of more than one year, or involve
consideration valued in excess of $5,000;
(xii) any agreement concerning a partnership or joint venture;
(xiii) any agreement (or group of related agreements) under which it has created, incurred,
assumed or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, or
under which it has imposed a Lien on any of its assets, tangible or intangible;
(xiv) any agreement concerning confidentiality, non-competition or non-solicitation;
(xv) any agreement with any Seller and any of their respective Affiliates (other than any of
the Target Entities);
(xvi) any profit sharing, option, unit purchase, unit appreciation, deferred compensation,
severance or other termination pay, or other plan or arrangement for the benefit of its current or
former directors, officers, and employees;
(xvii) any collective bargaining agreement;
(xviii) any agreement for the employment of any individual on a full-time, part-time,
consulting or other basis or providing severance benefits or other termination pay;
(xix) any agreement with any director, officer or stockholder of any of the Target Entities or
any of their Affiliates;
(xx) any agreement under which it has advanced or loaned any amount to any of its directors,
officers, stockholders, employees or any other Person;
(xxi) any agreement under which the consequences of a default or termination could have a
Material Adverse Effect;
(xxii) any agreement under which it has granted any Person any registration rights (including
demand and piggyback registration rights);
27
(xxiii) any settlement, conciliation or similar agreement, the performance of which will
involve payment after the Most Recent Fiscal Month End of consideration in excess of $5,000, or
imposition of monitoring or reporting obligations to any Governmental Authority;
(xxiv) any agreement for the sale or other disposition of any material assets, properties or
rights of any of the Target Entities or any other sale of any of the Target Entities in whole or in
part;
(xxv) any agreement containing any warranty by any of the Target Entities to any other Person
with respect to any product or service offered by any of the Target Entities;
(xxvi) any agreement containing provisions providing for indemnification by any of the Target
Entities, other than indemnification obligations arising from purchase or sale agreements entered
into; and
(xxvii) any agreement (or group of related agreements) with the same party the consideration
under which involves payments or obligations valued (individually or in the aggregate) in excess of
$5,000.
Sellers have delivered to Buyer a correct and complete copy of each written Material Contract (as
amended to date) and a written summary setting forth the terms and conditions of each oral Material
Contract. With respect to each Material Contract: (A) the agreement is legal, valid, binding,
enforceable and in full force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby; (C) no party is in breach or default, and no event has
occurred that with notice or lapse of time would constitute a breach or default, or permit
termination, modification or acceleration, under the agreement; (D) no party has repudiated any
such agreement or any provision thereof; and (E) there is no dispute Known to any of the Target
Entities or Sellers regarding the scope of or performance under such agreement, including with
respect to any payments to be made or received by any of the Target Entities thereunder.
(r)
Notes and Accounts Receivable
. Section 3.2(r) of the Disclosure Schedule provides as of
the Closing Date (i) a breakdown and aging of all accounts receivable, notes receivable and other
receivables of each of the Target Entities, and (ii) a list of all unreturned security deposits and
other deposits made by, or held by any Person for the benefit of each of the Target Entities. All
notes and accounts receivable of the Target Entities are reflected properly on its books and
records, are valid notes and receivables arising from bona fide transactions entered into in the
Ordinary Course of Business subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts set forth on the face of the Most Recent Balance Sheet (rather than in any
notes thereto) as adjusted for the passage of time through the Closing Date in accordance with
GAAP, and arose solely out of bona fide sales and delivery of goods and performance of services.
28
(s)
Insurance
. Section 3.2(s) of the Disclosure Schedule sets forth a list of all insurance
policies (including policies providing property, casualty, liability, and workmans compensation
coverage and bond and surety arrangements) to which each of the Target Entities is currently a
party, a named insured or otherwise the beneficiary of coverage, and the following information with
respect to each such insurance policy:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the name of each covered
insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was on a claims made,
occurrence or other basis) and amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or other loss-sharing arrangements.
True and complete copies of each such insurance policy have been provided to Buyer or its counsel.
With respect to each such insurance policy: (A) the policy is in the name of each of the Target
Entities, (B) the policy is legal, valid, binding, enforceable and in full force and effect; (C)
the policy will continue to be legal, valid, binding, enforceable and in full force and effect on
identical terms following the consummation of the transactions contemplated hereby; (D) neither the
Target Entities nor any other party to the policy is in breach or default (including with respect
to the payment of premiums or the giving of notices), and no event has occurred that, with notice
or the lapse of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; (E) no party to the policy has repudiated,
revoked, denied or rescinded any provision thereof; and (F) none of the Target Entities has
received notice of cancellation or termination of any such policy, nor has any issuer of such
policy refused to renew it on the same terms and conditions. There have been no claims in the last
five years for which an insurance carrier denied or threatened to deny coverage. Each of the
Target Entities carries, or is covered by, insurance with companies that each of the Target
Entities believes to be financially sound and reputable in such amounts with such deductibles and
against such risks and losses as are reasonable for the business and assets of the Target Entities.
Each of the Target Entities has continuously been covered since its inception by insurance in
scope and amount customary and reasonable for the businesses in which each of the Target Entities
has engaged during the aforementioned period. Section 3.2(s) of the Disclosure Schedule describes
any self-insurance arrangements affecting any of the Target Entities. No such insurance policy
will expire (without being renewed or extended), be modified or cancelled as a result of the
consummation of the transactions contemplated hereby.
(t)
Litigation
. Except as set forth in Section 3.2(t) of the Disclosure Schedule, (i) neither
the Target Entities nor any of their respective assets or properties or officers or directors in
their respective capacities is subject to any outstanding injunction, judgment, order, decree,
ruling or charge and (ii) neither the Target Entities nor their respective officers or
29
directors in their respective capacities is a party or, to the Knowledge of the Target
Entities or any of Sellers, is threatened to be made a party to any action, suit, proceeding,
hearing or investigation of, in or before (or that could come before) any Governmental Authority.
None of Sellers and the directors and officers (and employees with responsibility for litigation
matters) of any of the Target Entities has any Knowledge that any such action, suit, proceeding,
hearing or investigation may be brought or threatened against any of the Target Entities or any of
its assets or properties or that there is any Basis for the foregoing. None of the actions, suits,
proceedings, hearings and investigations disclosed in Section 3.2(t) of the Disclosure Schedule
could result in any Material Adverse Change. There is no investigation or other proceeding pending
or, to the Knowledge of any of Sellers and the directors and officers (and employees with
responsibility for litigation matters) of any of the Target Entities, threatened, against any of
the Target Entities, any of its assets or properties or officers or directors in their respective
capacities by or before any Governmental Authority. No Governmental Authority has provided any of
the Target Entities with notice challenging or questioning the legal right of any of the Target
Entities to conduct its operations as conducted at the time or as presently conducted. There is no
action, suit, proceeding or investigation by any of the Target Entities currently pending or that
any of the Target Entities intends to initiate.
(u)
Employees.
(i) With respect to the businesses of the Target Entities:
(A) there is no collective bargaining agreement or relationship with any labor organization;
(B) to the Knowledge of any of Sellers or the Target Entities, no executive or director of the
Target Entities (1) has any present intention to terminate his or her employment, or (2) is a party
to any confidentiality, non-competition, proprietary rights or other such agreement between such
employee and any Person besides the Target Entities that would be material to the performance of
such employees employment duties, or the ability of the Target Entities or Buyer to conduct the
business of the Target Entities;
(C) no labor organization or group of employees has filed any representation petition or made
any written or oral demand for recognition;
(D) to the Knowledge of any of Sellers or the Target Entities, no union organizing or
decertification efforts are underway or threatened and no other question concerning representation
exists;
(E) no labor strike, work stoppage, slowdown or other material labor dispute has occurred, and
none is underway or, to the Knowledge of any of Sellers or the Target Entities, is threatened;
(F) there is no workmans compensation liability, experience or matter outside the Ordinary
Course of Business;
(G) there is no employment-related charge, complaint, grievance, investigation, inquiry or
obligation of any kind, pending or threatened in any forum,
30
relating to an alleged violation or breach by the Target Entities (or their respective
officers or directors) of any Law or contract; and
(H) no employee, officer, director or agent of the Target Entities has committed any act or
omission giving rise to material Liability for any violation or breach identified in subsection (G)
above.
(ii) The employment of each officer, employee and consultant of the Target Entities is
terminable at the will of the Target Entities. Except as set forth in Section 3.2(u)(ii) of the
Disclosure Schedule, (A) there are no employment contracts or severance agreements (written or
oral) with any employees, contractors or consultants of the Target Entities, and (B) there are no
written personnel policies, rules or procedures applicable to employees of the Target Entities.
True and complete copies of any such documents have been provided to Buyer prior to the Closing
Date. To the Target Entities Knowledge, no employee, contractor or consultant of the Target
Entities is in violation of any term of any employment contract, proprietary information agreement
or other agreement relating to the right of any such individual to be employed by, or to contract
with, the Target Entities, and to the Target Entities Knowledge, the employment by the Target
Entities or Buyer of the Target Entities present employees, and the performance of the Target
Entities contracts with its contractors and consultants, will not result in such violation.
(iii) Section 3.2(u)(iii) of the Disclosure Schedule contains a complete and accurate list of
the employees of the Target Entities and shows with respect to each such employee: (a) the persons
name, position held, all remuneration payable and other benefits provided or which each of the
Target Entities is bound to provide (whether at present or in the future) to each such employee, or
any person in connection with any such employee, and includes, if any, particulars of all profit
sharing, incentive and bonus arrangements to which each Target Entity is a party, whether legally
binding or not, (b) the date of hire, (c) vacation eligibility for the current calendar year and
paid time off accrued, (d) leave status (including type of leave, expected return date and
expiration dates for disability leaves), and (e) visa status.
(iv) Section 3.2(u)(iv) of the Disclosure Schedule contains a complete and accurate list of
the contractors and consultants of the Target Entities and shows with respect to each such
contractor or consultant: (a) the persons name, role, all remuneration payable and other benefits
provided or which each of the Target Entities is bound to provide (whether at present or in the
future) to each such contractor and consultant, or any person in connection with any such
contractor or consultant, and includes, if any, particulars of all profit sharing, incentive and
bonus arrangements to which each Target Entities is a party, whether legally binding or not, (b)
the date of engagement, and (d) visa status.
(v) With respect to the transactions contemplated hereby or by any other Transaction Document,
any notice required under any Law or collective bargaining agreement has been given, and all
bargaining obligations with any employee representative have been satisfied. Within the past three
years, none of the Target Entities has implemented any plant closing or layoff of employees that
could implicate the Worker Adjustment and Retraining Notification Act of 1988, as amended, or any
similar Law, and no such action will be implemented without advance notification to Buyer.
31
(v)
Employee Benefits
.
(i) Section 3.2(v) of the Disclosure Schedule lists each Employee Benefit Plan that each
Target Entity maintains, to which any of the Target Entities contributes or has any obligation to
contribute, or with respect to which any Target Entity has any Liability.
(ii) Each such Employee Benefit Plan (and each related trust, insurance contract or fund) has
been maintained, funded and administered in accordance with the terms of such Employee Benefit Plan
and the terms of any applicable collective bargaining agreement and complies in form and in
operation in all respects with the applicable requirements of ERISA, the Code, and other applicable
Laws.
(iii) All required reports and descriptions (including Form 5500 annual reports, summary
annual reports, and summary plan descriptions) have been timely filed and/or distributed in
accordance with the applicable requirements of ERISA and the Code with respect to each such
Employee Benefit Plan. The requirements of COBRA have been met with respect to each such Employee
Benefit Plan that is an Employee Welfare Benefit Plan subject to COBRA.
(iv) All contributions (including all employer contributions and employee salary reduction
contributions) that are due have been made within the time periods prescribed by ERISA and the Code
to each such Employee Benefit Plan that is an Employee Pension Benefit Plan and all contributions
for any period ending on or before the Closing Date that are not yet due have been made to each
such Employee Pension Benefit Plan or accrued in accordance with the past custom and practice of
the Target Entities. All premiums or other payments for all periods ending on or before the Closing
Date have been paid with respect to each such Employee Benefit Plan that is an Employee Welfare
Benefit Plan.
(v) Each such Employee Benefit Plan that is intended to meet the requirements of a qualified
plan under Code Section 401(a) has received a determination from the Internal Revenue Service that
such Employee Benefit Plan is so qualified, and nothing has occurred since the date of such
determination that could adversely affect the qualified status of any such Employee Benefit Plan.
All such Employee Benefit Plans have been or will be timely amended for the requirements of the Tax
legislation commonly known as GUST and EGTRRA and have been or will be submitted to the
Internal Revenue Service for a favorable determination letter on the GUST requirements within the
remedial amendment period prescribed by GUST.
(vi) There have been no Prohibited Transactions with respect to any such Employee Benefit
Plan. No Fiduciary has any Liability for breach of fiduciary duty or any other failure to act or
comply in connection with the administration or investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding, hearing or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit Plan (other than
routine claims for benefits) is pending or threatened. None of Sellers, the directors and officers
(and employees with responsibility for employee benefits matters) of any of the Target Entities has
any Knowledge of any Basis for any such action, suit, proceeding, hearing or investigation.
32
(vii) Sellers have delivered to Buyer correct and complete copies of the plan documents and
summary plan descriptions, the most recent determination letter received from the Internal Revenue
Service, the most recent annual report (Form 5500, with all applicable attachments), and all
related trust agreements, insurance contracts, and other funding arrangements that implement each
such Employee Benefit Plan.
(viii) None of the Target Entities either contributes to or has any obligation to contribute
to, nor has any Liability under or with respect to, any Employee Pension Benefit Plan that is
either a defined benefit plan (as defined in ERISA Section 3(35)) or a Multiemployer Plan. No
asset of any of the Target Entities is subject to any Lien under ERISA or the Code.
(w)
Indebtedness; Guarantees
. None of the Target Entities has any Indebtedness of any type
(whether accrued, absolute, contingent, matured, unmatured or other and whether or not required to
be reflected in financial statements prepared pursuant to the cash method of accounting) that is
not fully reflected on Section 3.2(w) of the Disclosure Schedule. Section 3.2(w) of the Disclosure
Schedule accurately and completely lists each item of Indebtedness (including any Indebtedness
reflected on the Financial Statements) identifying the creditor, including the name and address,
the type of instrument under which the Indebtedness is owed and the total amount of Indebtedness
owing as of the Closing Date (including any deposits). With respect to each item of Indebtedness,
none of the Target Entities is in default, no payments are past due, and no circumstance exists
that, with notice, the passage of time or both, could constitute a default by any of the Target
Entities under any item of Indebtedness. None of the Target Entities has received any notice of a
default, alleged failure to perform or any offset or counterclaim with respect to any item of
Indebtedness that has not been fully remedied and withdrawn. The consummation of the transactions
contemplated by this Agreement will not cause a default, breach or an acceleration, automatic or
otherwise, of any conditions, covenants or other terms of any item of Indebtedness. None of the
Target Entities is a guarantor or otherwise liable for any Liability (including Indebtedness) of
any other Person.
(x)
Environmental, Health, and Safety Matters
. Each of the Target Entities has complied, and
is in compliance, with all applicable Environmental, Health, and Safety Requirements and has
obtained and as in compliance with all permits, licenses and other authorizations that are required
pursuant to applicable Environmental, Health, and Safety Requirements for the occupation of the
Target Entities facilities and the operation of the Target Entities business. None of the Target
Entities has received any written or oral notice, report or other information, and to the Target
Entities Knowledge, there are no claims threatened against any of the Target Entities, regarding
any actual or alleged violation of Environmental, Health, and Safety Requirements or any
Liabilities, including any investigatory, remedial or corrective obligations, relating to any of
the Target Entities or their respective facilities arising under any Environmental, Health, and
Safety Requirements. Sellers and the Target Entities have furnished to Buyer all environmental
audits, reports and other material environmental documents relating to the Target Entities past or
current properties, facilities or operations that are in the Target Entities possession or under
the Target Entities reasonable control. Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement will result in any obligations for site investigation
or cleanup, or notification to or consent of government agencies
33
or third parties, pursuant to any of the so-called transaction-triggered or responsible
property transfer Environmental, Health, and Safety Requirements.
(y)
Certain Business Relationships with the Target
Entities. None of Sellers, their
respective Affiliates, directors, officers, employees, shareholders and any individual related by
blood, marriage or adoption and any of the Target Entities directors, officers, employees and
stockholders have been involved in any business arrangement or relationship with any of the Target
Entities within the past 5 years or is a party to any outstanding agreement, contract, commitment
or transaction with any of the Target Entities (in each case, other than pursuant to any employment
contract or severance agreement disclosed in Section 3.2(u)(ii) of the Disclosure Schedule and, in
the case of Sellers, excluding the Organizational Documents of any of the Target Entities), and
none of Sellers, their respective Affiliates, directors, officers, employees and shareholders and
any individual related by blood, marriage or adoption and any of the Target Entities directors,
officers, employees and stockholders owns or has any interest in any asset, tangible or intangible,
that is used in the business of each of the Target Entities.
(z)
Carriers, Customers and Publishers.
(i) Section 3.2(z)(i) of the Disclosure Schedule lists all of the Carriers and Customers (on a
consolidated basis) for the December 31, 2009 fiscal year end and sets forth opposite the name of
each such Carrier and Customer the percentage of consolidated net revenue attributable to such
Carrier or Customer. Section 3.2(z)(i) of the Disclosure Schedule also lists any additional
current Carriers and Customers that each of the Target Entities anticipates shall be among the 20
largest Carriers and Customers for the current fiscal year. There are no disputes, actions, suits,
claims or proceedings pending or, to the Target Entities Knowledge, threatened by any such Carrier
or Customer. Since January 1, 2010, no Carrier or Customer listed on Section 3.2(z)(i) of the
Disclosure Schedule has indicated that it may stop, or materially decrease the rate of, buying
products or services from any of the Target Entities (whether as a result of the consummation of
the transactions contemplated hereby or otherwise), and no Carrier has notified any of the Target
Entities that any insurance program in place with such Carrier has been or is intended to be
cancelled or non-renewed by Carrier or that such Carrier intends to restrict any of the Target
Entities authority as such Carriers appointed insurance agency. The cessation of any of the
Target Entities agency business (including the cessation of selling insurance policies) will not
result in (1) a breach of, (2) a loss of a benefit or right under, (3) the right to terminate or
modify, (4) the obligation to provide notice or obtain consent, or (5) the imposition of any Lien
on any of the Target Entities assets, in each case, under any Carrier Contract.
(ii) Section 3.2(z)(ii) of the Disclosure Schedule lists all of the Publishers for the
December 31, 2009 fiscal year end and sets forth opposite the name of each such Publisher the
amount of payments made to such Publisher. Section 3.2(z)(ii) of the Disclosure Schedule also
lists any additional current Publishers that any of the Target Entities anticipates shall be among
the 20 largest Publishers for the current fiscal year. There are no disputes, actions, suits,
claims or proceedings pending or, to the Target Entities Knowledge, threatened by any such
Publisher. Since June 1, 2010, no Publisher listed on Schedule 3.2(z)(ii) has indicated that it
may stop, or materially decrease the services or products it provides to any of the Target
Entities.
34
(iii) Section 3.2(z)(iii) of the Disclosure Schedule contains a complete and accurate list
which shows with respect to each Carrier: (1) the names of the Target Entities which are appointed
as the Carriers insurance agency, including the states in which such appointments apply, (2) the
names of the licensed insurance agents employed by the Target Entities who are appointed as agents
to each Carrier, including the states in which such appointments apply, and (3) whether it has
granted the Target Entities the right to display such Carriers logos on the Target Sites.
(aa)
Data Privacy.
(i) The collection, use, transfer, import, export, storage, protection, disposal, and
disclosure by any of the Target Entities and, to the Target Entities Knowledge, by its Carriers
and Customers, of personally identifiable information, or other information relating to Persons
protected by Law, has not violated and, if performed after Closing in substantially the same manner
as performed immediately prior to Closing, will not violate any published Privacy Statement or any
applicable Law relating to data collection, use, privacy, storage or protection (collectively,
Data Laws
). The transactions contemplated by this Agreement will not result in the violation of
any Data Laws or any Privacy Statement. Each of the Target Entities has, at all times, taken
reasonable measures to protect and maintain the confidential nature of the personal information
provided to the Target Entities by individuals, in accordance with the terms of any published
Privacy Statement and all Data Laws.
(ii) (A) There is no complaint, audit, proceeding, investigation or claim against or, to the
Knowledge of any of Sellers and the directors and officers (and employees with responsibility for
data privacy matters) of the Target Entities, threatened against, the Target Entities by any
Governmental Authority, or by any Person respecting the collection, use, transfer, import, export,
storage, protection, disposal or disclosure of personal information of any Person in connection
with the Target Entities business, and (B) there have been no security breaches compromising the
confidentiality or integrity of such personal information.
(bb)
Business Practices
. None of the Target Entities or any Person acting on behalf of any of
the Target Entities has ever paid or delivered, or promised to pay or deliver, directly or
indirectly through any other Person, any monies or anything else of value to any government
official or employee of any political party, for the purpose of illegally or improperly inducing or
rewarding any action by such official favorable to the Target Entities.
(cc)
Business Continuity
. None of the computer software, computer hardware (whether general
or special purpose), telecommunications capabilities (including all voice, data and video networks)
and other similar or related items of automated, computerized and/or software systems and any other
networks or systems and related services that are used by or relied on by the Target Entities in
the conduct of their businesses (collectively, the
Systems
) have experienced bugs, failures,
breakdowns or continued substandard performance in the past 2 years that has caused any material
disruption or interruption in or to the use of any such Systems by the Target Entities. Each of
the Target Entities is covered by business interruption insurance in scope and amount customary and
reasonably to ensure the ongoing business operations of the Target Entities business.
35
(dd)
Disclosure
. No representations and warranties made by the Target Entities in this
Agreement (including the exhibits and schedules attached hereto) and any other Transaction
Document, and no statements made by Sellers to Buyer, contained any untrue statement of a fact or
omitted to state any fact necessary in order to make the statements and information contained
herein and therein or otherwise not misleading. Sellers have disclosed to Buyer all material facts
relating to the Target Entities and the transactions contemplated by this Agreement.
(ee)
Accuracy of Data.
The reports included in Section 3.2(ee) of the Disclosure Schedule
were accurate and complete in all material respects at the time generated.
(ff)
Commissions.
Section 3.2(ff) of the Disclosure Schedule contains a schedule setting forth
each of the following: (1) all policies sold or brokered by any of the Target Entities or any of
their respective Affiliates which are outstanding as of the Closing Date, (2) the dates in which
such policies were sold or brokered, (3) the Carriers who insure such policies, (4) whether such
policies represent new or renewal business, and (5) the commissions payable on such policies. The
quality of the policies set forth in Section 3.2(ff) of the Disclosure Schedule is reasonably
consistent with historical quality standards of policies sold or brokered by the Target Entities
and their respective Affiliates. The information set forth in Section 3.2(ff) of the Disclosure
Schedule was accurate and complete in all material respects at the times generated. Neither the
execution and the delivery of this Agreement or any other Transaction Document, nor the
consummation of the transactions contemplated hereby or thereby, will result in any loss of the
Target Entities rights to any Commissions under any Carrier Agreement or pursuant to applicable
Law.
(gg)
Bank and Credit Card Accounts.
Section 3.2(gg) of the Disclosure Schedule contains a
schedule setting forth (1) each of the following with respect to each bank account held by any of
the Target Entities or any of the Sellers on behalf of the Target Entities: the name of the bank,
the name on the account, the account number, the signatories, and the balance as of two (2) days
prior to the Closing, and (2) each of the following with respect to each credit card account held
by any of the Target Entities or any of the Sellers on behalf of the Target Entities: the name of
the issuer, the name on the account, the account number, the authorized users, and the balance as
of two (2) days prior to the Closing.
(hh)
Yellow Pages.
The summaries with respect to Targets relationship and agreements with
Yellow Pages included in Section 3.2(hh) of the Disclosure Schedule are accurate and complete as of
the Closing Date
.
ARTICLE IV
Buyers Representations and Warranties
Buyer represents and warrants to Sellers that the statements contained in this Article IV are
true, correct and complete at and as of the Closing Date.
4.1.
Organization of Buyer
. Buyer is a corporation validly existing and in good standing under the Laws of the State of
Delaware. Buyer has all requisite corporate power and
36
authority necessary to enable it to own and
operate its properties and to conduct its business as now being conducted.
4.2.
Authorization of Transaction
. Buyer has all requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. Assuming the due
authorization, execution and delivery by the other parties hereto, this Agreement constitutes the
valid and legally binding obligation of Buyer, enforceable in accordance with its terms and
conditions, except as such enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar Laws affecting or relating to creditors rights generally. Buyer need not give any
notice to, make any filing with, or obtain any authorization, consent or approval of any
Governmental Authority in order to consummate the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement and all other Transaction Documents to which
Buyer is a party have been duly authorized by Buyer.
4.3.
Non-contravention
. Neither the execution and delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, will (A) violate any Law to which Buyer is subject or any
provision of its Organizational Documents as currently in effect or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify or cancel, or require any notice under any agreement, contract,
lease, license, instrument or other arrangement to which Buyer is a party or by which it is bound
or to which any of its assets are subject.
4.4.
Brokers Fees
. Buyer has no Liability to pay any fees or commissions to any broker, finder,
agent or investment bank with respect to the transactions contemplated by this Agreement for which
any Seller could become liable or obligated.
4.5.
Sufficient Funds
. Buyer has and will have available to it sufficient funds to meet its
obligations under Section 2.2 of this Agreement at Closing and Section 2.4 following the Closing,
if applicable.
ARTICLE V
Additional Covenants and Agreements
5.1.
Further Actions
. In case at any time after the Closing any further actions are necessary or
desirable to carry out the purposes of this Agreement and the other Transaction Documents or to
effect the transactions contemplated hereby or thereby, each of the parties will take such further
actions (including (a) the execution and delivery of such further instruments and documents, (b)
the obtaining of all necessary actions or non-actions, waivers, consents, approvals, orders and
authorizations from
Governmental Authorities, (c) the making of all necessary registrations, declarations and filings
with the Governmental Authorities or any other Person, and (d) the taking of such reasonable steps
as may be necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Authority) as expeditiously as reasonably possible as any other party may request, all
at the sole cost and expense of the requesting party (unless the requesting party is entitled to
indemnification therefor under Article VII or Section 8.1 below or the requested activity is within
the scope of the other partys covenants under this Agreement or the other Transaction Documents).
Sellers acknowledge and
37
agree that, from and after the Closing, Buyer will be entitled to
possession of all documents, books, records (including Tax records), agreements, and financial data
of any sort relating to the Target Entities.
5.2.
Litigation Support
. In the event and for so long as any party actively is contesting or
defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand in connection with (i) any challenge to this Agreement, any other Transaction Document or
any transaction contemplated hereby or thereby, including seeking to have any stay or temporary
restraining order entered by any Governmental Authority vacated or reversed, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act or transaction on or prior to the Closing Date involving any of the Target
Entities, each of the other parties will cooperate with him, her or it and his, her or its counsel
in such contest or defense, make available his, her or its personnel, and provide such testimony
and access to his, her or its books and records as shall be necessary in connection with such
contest or defense, all at the sole cost and expense of the contesting or defending party (unless
the contesting or defending party is entitled to indemnification therefor under Article VII or
Section 8.1 below).
5.3.
Transition
. None of Sellers will take any action that is designed or intended to have the
effect of discouraging any lessor, licensor, Carrier, Customer, Publisher, Advertiser, vendor,
sales representative, or other business associate of any of the Target Entities from maintaining
the same business relationships with any of the Target Entities after the Closing as it maintained
with the Target Entities prior to the Closing. Each of Sellers will refer all inquiries relating
to the business of the Target Entities to Buyer from and after the Closing. Following the Closing,
the Sellers will promptly deliver to Buyer all logins and passwords of the Target Entities and a
copy of the database file with respect to the Target Sites.
5.4.
Confidentiality
. Each Seller agrees that the terms and conditions and existence of this
Agreement, and, after the Closing, all Confidential Information, shall be kept confidential and
that no reference to the terms, conditions or existence of this Agreement or to the activities
pertaining thereto or concerning the business or affairs of the Target Entities after the Closing
may be made by any Seller without the prior written consent of Buyer, except and only to the extent
(i) as required by any Governmental Authority having jurisdiction, (ii) as otherwise required by
applicable Law, (iii) to its legal counsel or (iv) that are made public by Buyer as part of any
public filing or
announcement. In the event that any Seller is requested or required pursuant to written or oral
question or request for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand or similar process to disclose any Confidential Information, such Seller
will notify Buyer promptly of the request or requirement so that Buyer may seek an appropriate
protective order or waive compliance with the provisions of this Section 5.4. If, in the absence
of a protective order or the receipt of a waiver hereunder, any of Sellers is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable
for contempt, such Seller may disclose the Confidential Information to the tribunal;
provided,
however
, that the disclosing Seller shall use his or her best efforts to obtain, at the
reasonable request of Buyer, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be disclosed as Buyer shall
designate. The foregoing provisions shall not apply to any Confidential Information that is
generally available to the public immediately
38
prior to the time of disclosure unless such
Confidential Information is so available due to the actions of a Seller. Each Seller shall refrain
from using any of the Confidential Information except in connection with this Agreement, and
deliver promptly to Buyer or destroy, at the request and option of Buyer, all tangible embodiments
(and all copies) of the Confidential Information that are in his or her possession. Each of the
Target Entities and Sellers acknowledge that Buyers confidentiality obligations relating to the
Target Entities under the Mutual Non-Disclosure Agreement, dated as of December 10, 2009, between
Buyer and Target, are hereby terminated as of the Closing Date.
5.5.
Covenant Not to Compete and Not to Solicit
(a). For a period of four years from and after
the Closing Date (the
Restrictive Period
), none of Sellers and their respective Affiliates will
engage directly or indirectly in Competition worldwide. A Person shall be deemed to have engaged
in
Competition
if such Person, directly or indirectly, in each case, solely with respect to the
insurance space: (a) builds, markets or operates any internet or world wide web property that could
be reasonably assumed to compete directly with the Target Entities, anywhere in the world or on the
internet or world wide web, (b) builds, markets or operates any click or lead generation business
anywhere in the world or on the internet or world wide web, (c) operates any pay per click bidding
under the same name or password or account identifier after the Closing Date that is the same as
any such account used in conjunction with any portion of the Target Entities business on or before
the Closing Date, or (d) collects and resells policyholder data;
provided, however
, that
no owner of less than 1% of the outstanding stock of any publicly traded corporation shall be
deemed to engage, solely by reason, thereof in its business. Sellers hereby acknowledge and agree
that the geographic scope, market and duration of the foregoing non-compete covenant is fair and
reasonable in light of the nature and scope of the Target Entities business.
(b) During the Restrictive Period, none of Sellers and their Affiliates shall directly or
indirectly (i) take any action to solicit any employee, contractor or consultant of the Target
Entities as of the Closing Date to terminate its employment or contractor or consulting
relationship, as applicable, with the Target Entities, (ii) take any action to solicit any of the
Carriers, Customers, Publishers, or vendors of the Target Entities as of the Closing Date to
terminate their relationship with the Target Entities or (iii) take any other action that is
reasonably likely to cause injury to the relationship between any of the Target Entities, on the
one hand, and its employees, contractors, consultants, Carriers, Customers, Publishers and
vendors, on the other hand.
(c) If the final judgment of a court of competent jurisdiction declares that any term or
provision of this Section 5.5 is invalid or unenforceable, the parties agree that the court making
the determination of invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is valid and enforceable
and that comes closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the expiration of the time
within which the judgment may be appealed.
39
(d) Sellers and Buyer agree that in the event of a breach of this Section 5.5, it would be
impractical or extremely difficult to fix the actual damages to Buyer and/or any of the Target
Entities (or their respective successors or assigns).
5.6.
Employee Matters
. At the Closing, Buyer will make offers of at-will employment,
including retention bonuses or severance payments, to certain employees of Target. The employees of
Target who accept an offer of employment from Buyer are hereinafter referred to as
Transferred
Employees
. Nothing contained in this Agreement shall confer upon any Transferred Employee or
former employee of Target or any beneficiary or dependent of a Transferred Employee or any such
former employee, any right with respect to employment with or benefits of Buyer. Sellers shall
assist Buyer to ensure a smooth transition of employment with respect to the Transferred Employees
and such other employees whose employment will be terminated in connection with the transactions
contemplated hereby.
ARTICLE VI
Closing Deliverables
6.1.
Sellers Closing Deliverables.
Sellers shall deliver the following documents or perform the
following actions at or prior to the Closing:
(a)
Source Code.
Provide access to or deliver a fully zipped up set of source code for the
Target Sites.
(b)
Intentionally Omitted
.
(c)
Transfer of Accounts.
Upon Buyers request, arrange the transfer to Buyer of ownership and
management of, full access to and ability to utilize and control, all existing accounts with
service providers required to operate and send traffic to the Website, including, but not limited
to, registrars accounts, hosting accounts and Pay Per Click campaigns sending traffic to the
Website and the transfer of billing and contact information and all login and password information
related to such accounts.
(d)
PPC Campaigns.
Remove any campaigns utilizing the PPC bidding accounts that are not
related to the Target Sites.
(e)
Share Certificates.
Original share certificates representing the Shares, duly endorsed
(or accompanied by duly executed stock powers) and affidavits with respect to non-issued
certificates of Shares;
(f)
General Releases and Assignments.
General releases and assignments in the form of
Exhibit B
executed by each Seller;
(g)
Third Party and Governmental Consents.
All (i) authorizations, consents, and approvals of
all Governmental Authorities referred to in Sections 3.1(b) and 3.2(e) above, (ii) Lease Consents,
and (iii) spousal consents duly executed by each Sellers spouse or registered domestic partner, if
any, in the form attached hereto as
Exhibit C
;
40
(h)
Director and Officer Resignations
. Written resignations, effective as of the Closing, of
each director and officer of each of the Target Entities, other than those officers whom Buyer
shall have specified in writing at least five Business Days prior to the Closing Date;
(i)
Bank Signatories
. Written resignations, effective as of the Closing, of Targets bank
account signatories and appointment of such signatories as designated by Buyer;
(j)
Consulting services agreements.
Executed counterparts by Lloyd (Jon) Register IV, David
Fitzgerald and Randy Horowitz of a consulting services agreement in substantially the form of
Exhibit D;
(k)
Targets Transaction Expenses
. A Target Expenses certificate delivered to Buyer as of the
Closing Date;
(l)
Legal Opinion.
A legal opinion in form and substance as set forth in
Exhibit E
attached hereto, addressed to Buyer and on which Buyers legal counsel shall be entitled to rely,
and dated as of the Closing Date;
(m)
FIRPTA Affidavit.
A non-foreign affidavit dated as of the Closing Date from each Seller,
sworn under penalty of perjury and in form and substance required under the Treasury Regulations
issued pursuant to Code Section 1445 stating that such Seller is not a Foreign Person as defined
in Code Section 1445;
(n)
Affiliate Loans Repaid.
Evidence that any outstanding loans to officers, directors,
stockholders and/or employees of any of the Target Entities or any Affiliate of any Seller have
been repaid in full, including accrued interest;
(o)
Certified Formation Documents.
Copies of the certificate of incorporation of each of the
Target Entities, certified on or shortly before the Closing Date by the Secretary of State of the
State of incorporation of each such Target Entity;
(p)
Good Standing Certificates Corporation.
Copies of the certificate of good standing of
Target, issued no more than one week before the Closing Date by the Secretary
of State of the States of Florida, California and New York, and issued no more than three
months before the Closing Date by the Secretary of State (or comparable officer) of each other
jurisdiction in which Target is qualified to do business; copies of the certificate of good
standing of each of the Target Entities (other than Target) issued no more than one week before the
Closing Date by the Secretary of State of the State of incorporation of each such Target Entity;
(q)
Secretarys Certificate of Target
. A certificate of the secretary or an assistant
secretary of Target, dated as of the Closing Date, in form and substance reasonably satisfactory to
Buyer, as to: (i) the terms and effectiveness of the Organizational Documents and the good standing
of Target; (ii) the valid adoption of resolutions of the board of directors of Target authorizing
the execution, delivery, and performance of this Agreement and the transactions contemplated
hereby; and (iii) execution of this Agreement by all Sellers; and
41
(r)
Direct General Release.
An executed counterpart by Direct General of a general release
relating to the termination of the DG Documents and the corresponding release of all of Direct
Generals claims relating thereunder.
6.2.
Buyers Closing Deliverables.
Buyer shall deliver the following documents or perform the
following actions at or prior to the Closing:
(a)
Purchase Price.
Deliver the Purchase Price to the Payment Agent, on behalf of the Sellers, as
contemplated by Section 2.2.
(b)
DG Liability Amount
. Deliver the DG Liability Amount to Direct General as contemplated by
Section 2.2.
ARTICLE VII
Remedies for Breaches of This Agreement
7.1.
Survival
. All of the representations and warranties of the parties contained in this
Agreement (other than the Specified Representations) shall survive the Closing hereunder and
continue in full force and effect thereafter (subject to any applicable statutes of limitations)
for a period of four (4) years. The Specified Representations shall remain in full force and
effect and shall survive until the later of the longest applicable statute of limitations with
regard to third-party claims pertaining to the matters covered thereby and the fifth anniversary of
the Closing Date. The covenants and obligations under this Agreement and the other Transactional
Agreements shall remain in full force and effect and shall not expire, except as may otherwise be
provided specifically in the other Transactional Agreements.
7.2.
Indemnification Provisions for Buyers Benefit.
Each of Sellers (the
Seller Indemnifying Parties
) shall jointly and severally indemnify,
defend and hold harmless the Target Entities, Buyer and each Affiliate of Buyer and the Target
Entities and their respective employees, directors, managers, officers, representatives and
stockholders (excluding Sellers) (collectively, the
Buyer Indemnified Parties
) from and against
the entirety of any Damages any Buyer Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of or caused by (i) any breach (or in the event any third party alleges
facts that, if true, would mean any of the Target Entities or any Seller has breached) or
inaccuracy of any of the Target Entities or any Sellers representations, warranties or covenants
contained herein (other than the covenants in Section 2.1 above and the representations and
warranties in Section 3.1 above) or in any other Transaction Document or in any schedule, exhibit,
certificate or agreement delivered pursuant hereto or thereto, (ii) any Target Expenses not
deducted from the Purchase Price that is paid by Buyer, (iii) any additional payment owed to Direct
General arising out of the Direct General Documents that was not included in the DG Liability
Amount and (iv) the matters described on Schedule 7.2;
provided
that Buyer makes a written claim
for indemnification against any Seller pursuant to Section 7.4 below.
(b) In the event any Seller breaches (or in the event any third party alleges facts that, if
true, would mean any Seller breached) any of his covenants in Section 2.1 above or any Seller
breaches or there is an inaccuracy in any of his representations and warranties in Section 3.1
above, and provided that Buyer makes a written claim for indemnification against
42
such a Seller
pursuant to Section 7.4 below, then such Seller shall individually indemnify, defend and hold
harmless the Buyer Indemnified Parties from and against the entirety of any Damages any Buyer
Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of or
caused by the breach (or the alleged breach).
(c) The representations, warranties, covenants and obligations of Sellers and the rights and
remedies that may be exercised by any Buyer Indemnified Party shall not be limited or otherwise
affected by or as a result of any information furnished to, or any investigation made by or any
Knowledge of, any Buyer Indemnified Party or their respective Affiliates or representatives.
7.3.
Indemnification Provisions for Sellers Benefit
.
(a) Buyer (the
Buyer Indemnifying Parties
) shall indemnify, defend and hold harmless Seller
and its respective employees, directors, managers, officers, representatives, and stockholders
(collectively, the
Seller Indemnified Parties
) from and against the entirety of any Damages any
Seller Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of
or caused by any breach (or in the event any third party alleges facts that, if true, would mean
Buyer has breached) or inaccuracy of any of Buyers representations, warranties or covenants
contained herein or in any other Transaction Document or in any schedule, exhibit, certificate or
agreement delivered pursuant hereto or thereto,
provided
that Sellers make a written claim for
indemnification against Buyer pursuant to Section 7.4 below.
(b) The representations, warranties, covenants and obligations of Buyer and the rights and
remedies that may be exercised by any Seller Indemnified Party shall not be limited or otherwise
affected by or as a result of any information furnished to, or any investigation made by or any
Knowledge of, any Seller Indemnified Party or their respective Affiliates or representatives.
7.4.
Claims for Indemnification; Matters Involving Third Parties
(a).
Claims for
Indemnity
. Except as set forth in Section 7.4(b) below, claims for indemnity by any Buyer
Indemnified Party or Seller Indemnified Party (an
Indemnified Party
) pursuant to this Article VII
or Section 8.1 below (with respect to Buyer Indemnified Parties only) shall be made by delivery of
an Officers Certificate (as defined below) to the Seller Indemnifying Party or the Buyer
Indemnifying Party, as applicable (an
Indemnifying Party
);
provided
,
however
, that no delay on
the part of any Indemnified Party in notifying an Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party
are thereby prejudiced. For purposes of this Section 7.4,
Officers Certificate
shall mean a
certificate signed by any officer of Buyer or a certificate signed by an authorized agent of
Sellers, as applicable: (i) stating that an Indemnified Party has become aware of a matter that may
give rise to an indemnifiable claim or has suffered, accrued or incurred any Damages or anticipates
that it may suffer, accrue or incur any Damages and (ii) specifying the facts pertinent to such
indemnification claim and the individual items of losses, costs and other Damages so stated and, in
the case of potential Damages, the basis for such potential Damages.
(i) The Indemnifying Party may make a written objection (an
Objection Notice
) to any claim
for indemnification stating the basis for such objection in
43
reasonable detail to permit the
Indemnified Party to evaluate such objection. Such Objection Notice shall be delivered to the
Indemnified Party within 30 days after delivery of the Officers Certificate to the Indemnifying
Party.
(ii) If the Indemnifying Party fails to timely deliver an Objection Notice in accordance with
Section 7.4(a)(i) above, such failure to object shall be deemed an irrevocable acknowledgment by
the Indemnifying Party that the Indemnified Parties are entitled to the full amount of the claim
for Damages arising from the indemnification claim as set forth in such Officers Certificate, and
upon expiration of the 30-day period for delivery of the Objection Notice, (x) if Buyer is the
Indemnified Party, Sellers shall be liable for and shall wire the amount equal to such Damages
suffered by such Buyer Indemnified Parties to the Buyer Indemnified Parties and (y) if Sellers are
the Indemnified Parties, Buyer shall be liable for and shall wire the amount equal to such Damages
suffered by such Seller Indemnified Parties to the Payment Agent.
(iii) Sellers and the Buyer shall attempt in good faith to resolve any claim for
indemnification to which an Objection Notice is made. If Sellers and Buyer are unable to resolve a
claim for indemnification to which an Objection Notice has been timely delivered in accordance with
Section 7.4(a)(i) above within 30 days after delivery thereof, Sellers or Buyer may pursue any
other right or remedy provided in this Agreement or as otherwise allowed by law or equity.
(iv) Entry of a non-appealable order by a court of competent jurisdiction as to the validity
and amount of any claim in such Officers Certificate shall be final, binding and conclusive upon
the parties to this Agreement.
(b)
Third Party Claims
. If any third party notifies any Indemnified Party with
respect to any matter (a
Third-Party Claim
) that may give rise to a claim for indemnification
against any Indemnifying Party under this Article VII or Section 8.1 below (with respect to Buyer
Indemnified Parties only), then the Indemnified Party shall promptly notify each Indemnifying Party
thereof in writing;
provided, however
, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party is thereby prejudiced.
(i) Any Indemnifying Party will have the right to defend the Indemnified Party against the
Third-Party Claim with counsel of his, her or its choice reasonably satisfactory to such
Indemnified Party so long as (A) the Indemnifying Party notifies such Indemnified Party in writing
within 30 days after such Indemnified Party has given notice of the Third-Party Claim that the
Indemnifying Party will indemnify such Indemnified Party from and against the entirety of any
Damages such Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of or caused by the Third-Party Claim, (B) the Indemnifying Party provides the Indemnified
Party with evidence reasonably acceptable to such Indemnified Party that the Indemnifying Party
will have the financial resources to defend against the Third-Party Claim and fulfill its
indemnification obligations hereunder, (C) the Third-Party Claim involves only money damages and
does not seek an injunction or other equitable relief, (D) settlement of, or an adverse judgment
with respect to, the Third Party Claim is not, in the good
44
faith judgment of the Indemnified Party,
likely to establish a legal precedent or precedential custom or practice materially adverse to the
continuing business interests or the reputation of such Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third-Party Claim actively and diligently.
(ii) So long as the Indemnifying Party is conducting the defense of the Third-Party Claim in
accordance with Section 7.4(b)(i) above, (A) the Indemnified Party may retain separate co-counsel
at his, her or its sole cost and expense and participate in the defense of the Third-Party Claim,
(B) the Indemnified Party will not consent to the entry of any judgment on or enter into any
settlement with respect to the Third-Party Claim without the prior written consent of the
Indemnifying Party (not to be unreasonably withheld), and (C) the Indemnifying Party will not
consent to the entry of any judgment on or enter into any settlement with respect to the
Third-Party Claim without the prior written consent of the Indemnified Party (not to be
unreasonably withheld).
(iii) In the event any of the conditions in Section 7.4(b)(i) above is or becomes unsatisfied,
however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment on
or enter into any settlement with respect to, the Third-Party Claim in any manner he, she or it may
reasonably deem appropriate (and the Indemnified Party need not consult with, or obtain any consent
from, any Indemnifying Party in connection therewith), (B) the Indemnifying Parties will reimburse
the Indemnified Party promptly and periodically for the costs of defending against the Third-Party
Claim (including reasonable attorneys fees and
expenses), and (C) the Indemnifying Parties will remain responsible for any Damages the
Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of or
caused by the Third-Party Claim to the fullest extent provided in this Article VII.
7.5.
Adjustment to Purchase Price
. Any indemnification payment under this Article VII or Section
8.1 shall be deemed adjustments to the Purchase Price when made by Buyer Indemnified Parties.
7.6.
Other Indemnification Provisions
. The foregoing indemnification provisions are in addition
to, and not in derogation of, any statutory, equitable or common law remedy (including any such
remedy arising under Environmental, Health, and Safety Requirements) any party may have with
respect to the Target Entities or the transactions contemplated by this Agreement. The parties may
pursue any such rights or remedies singly, together or successively, and exercise of any such right
or remedy shall not be deemed an election of remedies, nor shall the failure to exercise any right
or remedy be deemed a waiver of any existing or subsequent right or remedy. Each Seller hereby
agrees that he or she will not make any claim for indemnification against the Target Entities by
reason of the fact that he or she was a director, officer, employee or agent of any of the Target
Entities or was serving at the request of any of the Target Entities as a partner, trustee,
director, manager, officer, employee or agent of another entity (whether such claim is for
judgments, damages, penalties, fines, costs, amounts paid in settlement, losses, expenses or
otherwise and whether such claim is pursuant to any statute, charter document, bylaw, agreement or
otherwise) with respect to any action, suit, proceeding, complaint, claim or demand brought by
Buyer against such Seller (whether such action, suit, proceeding, complaint, claim or demand is
pursuant to this Agreement, applicable Law or otherwise).
45
ARTICLE VIII
Tax Matters
The following provisions shall govern the allocation of responsibility as between Buyer and
Sellers for certain tax matters following the Closing Date:
8.1.
Tax Indemnification
. Each Seller shall jointly and severally indemnify and defend the Target
Entities, Buyer, and each Affiliate of Buyer and the Target Entities and hold them harmless from
and against any loss, claim, Liability, expense, penalty or other damage attributable to (i) all
Taxes (or the non-payment thereof) of the Target Entities for all taxable periods ending on or
before the Closing Date and the portion through the end of the Closing Date for any taxable period
that includes (but does not end on) the Closing Date (
Pre-Closing Tax Period
), (ii) all Taxes of
any member of an affiliated, consolidated, combined or unitary group of which any of the Target
Entities (or any predecessor of any of the Target Entities) is or was a member on or prior to the
Closing Date, including pursuant to Treasury Regulation Section 1.1502-6 or any analogous or
similar Law, (iii) any and all Taxes of any person (other than the Target Entities) imposed on any
of the Target Entities as a transferee or successor, by contract or pursuant to any Law, which
Taxes relate to an event or transaction occurring before the Closing, and (iv) any Tax imposed on
any
of the Target Entities as a result of the transactions contemplated by this Agreement, including,
without limitation, Taxes resulting from the application of Section 1374 of the Code (or any
similar state or locate Tax Law) in connection with the deemed sale of assets caused by the Section
338(h)(10) Election. Sellers shall reimburse Buyer for any Taxes of any of the Target Entities
that are the responsibility of Sellers pursuant to this Section 8.1 within 15 Business Days after
payment of such Taxes by Buyer or Buyers written request therefor. For the avoidance of doubt,
the Sellers obligations pursuant to this Article VIII shall not be subject to any limitations on
indemnification that may be contained in Article VII.
8.2.
Straddle Period
. In the case of any taxable period that includes (but does not end on) the
Closing Date (a
Straddle Period
), the amount of any Taxes based on or measured by
income or receipts of the Target Entities for the Pre-Closing Tax Period shall be determined based
on an interim closing of the books as of the close of business on the Closing Date and the amount
of other Taxes of the Target Entities for a Straddle Period that relates to the Pre-Closing Tax
Period shall be deemed to be the amount of such Tax for the entire taxable period multiplied by a
fraction the numerator of which is the number of days in the period ending on the Closing Date and
the denominator of which is the number of days in such Straddle Period.
8.3.
Responsibility for Filing Tax Returns
. Buyer shall prepare or cause to be prepared and file
or cause to be filed all Tax Returns for the Target Entities that are filed after the Closing Date
other than income tax returns of the Target Entities for periods ending on or before the Closing
Date, which shall be the responsibility of Sellers. As soon as practicable following Buyers
preparation of any Tax Return related to a Tax period ending on or before the Closing Date
(including the portion of any Straddle Period ending on the close of business on the Closing Date),
and in no event later than fifteen (15) days prior to the filing of such Tax Return, Buyer shall
deliver to the Sellers a copy of any such Tax Return for review and comment (which comments shall
be considered in good faith by Sellers) and written notice of the amount of the Tax shown thereon
that is the obligation of Sellers. As soon as practicable following Sellers
46
preparation of any
income Tax Return of the Target Entities for Tax periods ending on or before the Closing Date, and
in no event later than fifteen (15) days prior to the filing of such Tax Return, Sellers shall
deliver to Buyer a copy of any such Tax Return for review and comment, which comments shall be
considered in good faith by the Buyer.
8.4.
Cooperation on Tax Matters
. Buyer, the Target Entities and Sellers shall cooperate fully, as
and to the extent reasonably requested by the other party, in connection with the filing of Tax
Returns pursuant to this Article VIII and any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other partys request) the
provision of records and information that are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. The Target Entities and
Sellers agree (A) to retain all books and records with respect to Tax matters pertinent to the
Target Entities relating to
any taxable period beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer or Sellers, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements entered into with any
taxing authority, and (B) to give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party so requests, the Target
Entities or Sellers, as the case may be, shall allow the other party to take possession of copies
of such books and records.
(a) Buyer and Sellers further agree, upon request, to use their best efforts to obtain any
certificate or other document from any Governmental Authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(b) Buyer and Sellers further agree, upon request, to provide the other party with all
information that either party may be required to report pursuant to Code Section 6043, Code Section
6043A or Treasury Regulations promulgated thereunder.
8.5.
Transfer Taxes.
All transfer, documentary, sales, use, stamp, registration and other such
Taxes, and all conveyance fees, recording charges and other fees and charges (including any
penalties and interest) incurred in connection with consummation of the transactions contemplated
by this Agreement shall be paid by Sellers when due, and Sellers will, at their own expense, file
all necessary Tax Returns and other documentation with respect to all such Taxes, fees and charges,
and, if required by applicable Law, Buyer will, and will cause its Affiliates to, join in the
execution of any such Tax Returns and other documentation.
8.6.
Section
338(h)(10)
Election.
(a) Upon Buyers request, the Sellers will join with Buyer in making an election under Code
Section 338(h)(10) (and any corresponding elections under Law) with respect to the purchase and
sale of the Shares hereunder (a
Section 338(h)(10) Election
). Sellers will include all income,
gain, loss, deduction, or other Tax item resulting from the Section 338(h)(10) Election on their
Tax Returns and shall pay on behalf of the Target Entities any Tax imposed on the Target Entities
attributable to the making of the Section 338(h)(10) Election, including, but not limited to, (i)
any Tax imposed under Code Section 1374, or (ii) any
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state, local or foreign Tax imposed on the
Target Entities (other than state or local transfer Taxes) resulting from the Section 338(h)(10)
Election.
(b) Buyer shall be responsible for, and control, the preparation and filing of the Section
338(h)(10) Election. The Sellers shall execute and deliver to Buyer at the Closing (and thereafter
as requested by Buyer) such documents or forms (including Section 338 Forms, as defined below) as
Buyer shall request or as are required by applicable Law to make effective the Section 338(h)(10)
Election.
Section 338 Forms
shall mean all returns, documents, statements, and other forms that
are required to be submitted to any federal, state, local or foreign Taxing authority in connection
with a Section 338(h)(10) Election, including, without limitation, any statement of Section 338
Election and IRS Form 8023 (together with any schedules or attachments thereto) that are required
pursuant to Treasury Regulations.
(c) If Buyer elects to make a Section 338(h)(10) Election, the parties will allocate the
aggregate purchase consideration paid to Sellers among the assets of the Target Entities according
to the allocation prepared by Buyer as soon as reasonably practicable after the Closing. Each of
Buyer, Sellers, and the Target Entities agrees (a) to act in accordance with such allocation
schedule in the preparation of financial statements and filing of all Tax Returns (including IRS
Form 8594), (b) not to voluntarily take any position inconsistent therewith in the course of any
Tax proceeding, unless required to do so by applicable Law, and (c) to provide the other promptly
with any other information required to timely file IRS Form 8594.
8.7.
Tax Claims
. After the Closing, each of Buyer and Sellers shall promptly notify each of
the other parties in writing upon receipt of any written notice of any pending or threatened audit
or assessment, suit, proposed adjustment, deficiency, dispute, administrative or judicial
proceeding or similar claim relating to Taxes (
Tax Claim
) for which the Sellers could be liable
pursuant to this Agreement. Buyer will control the defense of all Tax Claims, provided that
Sellers may elect, at their own expense, to have competent and reputable counsel satisfactory to
Buyer to participate in such defense by providing written notice to Buyer. This Section 8.7 shall
govern the parties handling of Tax Claims in lieu of Section 7.4(b).
8.8.
Treatment of Payments
. For the avoidance of doubt, all indemnification and similar
payments made pursuant to this Agreement shall be treated for tax purposes as an adjustment to the
Purchase Price, and each party will report such payments consistently with such treatment for all
Tax purposes.
ARTICLE IX
Miscellaneous
9.1.
Nature of Sellers Obligations
.
(a) The covenants of each Seller in Section 2.1 above concerning the sale of his Shares to
Buyer and the representations and warranties of each Seller in Section 3.1 above concerning the
transaction are individual, and not joint and several, obligations. This means that the particular
Seller making the representation, warranty or covenant shall be solely responsible
48
to the extent
provided in Section 7.2(b) above for any Damages any Buyer Indemnified Party may suffer as a result
of any breach thereof.
(b) The remainder of the representations, warranties and covenants in this Agreement are joint
and several obligations. This means that each Seller shall be responsible to the extent provided
in Sections 7.2(a) and 8.1 above for the entirety of any Damages any Buyer Indemnified Party may
suffer as a result of any breach thereof.
9.2.
Press Releases and Public Announcements
. None of the Sellers shall issue any press release or
make any public announcement relating to the subject matter of this Agreement without the prior
written approval of Buyer;
provided,
however
, that any of the Sellers may make any public disclosure it believes in good faith is
required by applicable Law (in which case the Seller will use its best efforts to advise Buyer
prior to making the disclosure).
9.3.
No Third-Party Beneficiaries
. This Agreement shall not confer any rights or remedies upon
any Person other than the parties hereto and their respective successors and permitted assigns,
except that the Indemnified Parties shall be entitled to the rights and remedies under Article VII
and the Buyer Indemnified Parties shall also be entitled to the rights and remedies under Section
8.1.
9.4.
Entire Agreement; Amendment and Waivers
. This Agreement (including the exhibits and schedules
attached hereto and the documents referred to herein) constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements or representations by or among the
parties, written or oral, to the extent they relate in any way to the subject matter hereof. No
amendment of any provision of this Agreement shall be valid unless the same shall be in writing and
signed by Buyer, the Target Entities and Sellers. No waiver by any party of any provision of this
Agreement or any default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and signed by the party
making such waiver nor shall such waiver be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such default, misrepresentation, or breach of warranty
or covenant.
9.5.
Succession and Assignment
. This Agreement shall be binding upon and inure to the benefit of
the parties named herein and their respective successors and permitted assigns. No party may
assign either this Agreement or any of his, her or its rights, interests or obligations hereunder
without the prior written approval of the other parties hereto;
provided, however
, that
Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its
Affiliates; (ii) designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases Buyer nonetheless shall remain responsible for the performance of all of
its obligations hereunder); and (iii) assign this Agreement in connection with a change of control
or sale of all or substantially all of its assets.
9.6.
Counterparts
. This Agreement may be executed in one or more counterparts (including by means
of facsimile), each of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
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9.7.
Headings
. The section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this Agreement.
9.8.
Notices
. All notices, requests, demands, claims, and other communications hereunder shall be in writing
and deemed duly given (i) when delivered personally to the recipient, (ii) one Business Day after
being sent by reputable overnight courier service (charges prepaid), (iii) one Business Day after
being sent by facsimile transmission or electronic mail, or (iv) four Business Days after being
mailed by certified or registered mail, return receipt requested and postage prepaid, and addressed
to the intended recipient as set forth below:
If to Sellers:
To the recipients and the
corresponding addresses set
forth in Schedule 9.8.
Copies to:
Infantino & Berman
180 S. Knowles Avenue, Suite 7
P.O. Drawer 30
Winter Park, FL 32790-0030
Attn: Jed Berman
Whitley and Company
601 N. Ferncreek Avenue, #200
Orlando, FL 32803
Attn: Larry Whitley
If to Buyer:
QuinStreet, Inc.
950 Tower Lane, 6
th
floor
Foster City, CA 94404
Attn: General Counsel
Any party may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other parties notice in the manner
herein set forth.
9.9.
Governing Law; Exclusive Jurisdiction
. This Agreement shall be governed by and construed in
accordance with the domestic Laws of the State of Delaware without giving
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effect to any choice or
conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that
would cause the application of the Laws of any jurisdiction other than the State of Delaware. Each
of the parties hereto irrevocably consents to the exclusive jurisdiction and venue of any state
court located in New Castle County, Delaware and any federal court located in the District of
Delaware in connection with any matter based upon or arising out of this Agreement or the matters
or agreements contemplated herein, and agrees that process may be served upon such party in any
manner authorized by the Laws of the State of Delaware for such person and waives and covenants not
to assert or plead any objection which they might otherwise have to such jurisdiction, venue and
process. Each party agrees not to commence any legal proceedings related hereto except in such
courts referenced in this Section 9.9.
9.10.
WAIVER OF JURY TRIAL
. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED,
EACH OF THE PARTIES HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE
OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR
INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY
WAY CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING. EACH PARTY HERETO ACKNOWLEDGES THAT HE, SHE OR IT HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND COVENANTS IN THIS SECTION 9.10.
9.11.
Severability
. Any term or provision of this Agreement that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
9.12.
Expenses
. Sellers will be solely responsible for the costs, fees and expenses incurred by
the Target Entities and/or Sellers (including costs, fees and expenses of the Target Entities
brokers, bankers, attorneys and employees, such as bonuses related to the sale of the Shares) in
connection with the negotiation and preparation of this Agreement and consummation of the
transactions contemplated by this Agreement (
Target Expenses
), and Buyer will be solely
responsible for the costs, fees and expenses incurred by Buyer in connection with the negotiation
and preparation of this Agreement and consummation of the transactions contemplated by this
Agreement. If, notwithstanding the foregoing, any such Target Expenses were paid or are payable by
the Target Entities or Buyer, Buyer shall deduct the aggregate amount of such Target Expenses from
the Purchase Price for any amounts paid prior to Closing and shall seek indemnification pursuant to
this Agreement for any amounts paid after Closing.
9.13.
Payment Agent
.
(a) Sellers hereby irrevocably nominate, constitute and appoint Infantino and Berman,
Attorneys at Law as the agent and true and lawful attorney in fact of Sellers (the
Payment
Agent
), with full power of substitution, to act in the name, place and stead of Sellers
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for
purposes of receiving and making payment and executing any documents and taking any actions
relating thereto that the Payment Agent may, in his/her/its sole discretion, determine to be
necessary, desirable or appropriate in connection with Sections 2.2, 2.4, 7.4(a)(ii) and this
Section 9.13 (the
Payment Agent Sections
). Sellers represent and warrant that the Payment
Agent has accepted his/her/its appointment as Payment Agent.
(b) Sellers hereby grant to the Payment Agent full authority to receive, execute, deliver,
acknowledge, certify and file on behalf of Sellers (in the name of any or all of Sellers or
otherwise) any and all funds and documents that the Payment Agent may, in his/her/its sole
discretion, determine to be necessary, desirable or appropriate, in such forms and containing such
provisions as the Payment Agent may, in his/her/its sole discretion, determine to be appropriate.
Notwithstanding anything to the contrary contained in this Agreement: Buyer shall be entitled to
deal exclusively with the Payment Agent on all matters relating to the Payment Agent Sections.
(c) Sellers recognize and intend that the power of attorney granted in Section 9.13(a) is
coupled with an interest and is irrevocable, may be delegated by the Payment Agent, and shall
survive the death or incapacity of each Seller.
(d) The Payment Agent shall be entitled to treat as genuine, and as the document it purports
to be, any letter, facsimile, telex or other document that is believed by him/her/it to be genuine
and to have been telexed, telegraphed, faxed or cabled by a Seller or to have been signed and
presented by a Seller.
(e) If the Payment Agent shall die, become disabled or otherwise be unable to fulfill
his/her/its responsibilities hereunder, Sellers shall, within ten days after such death or
disability, appoint a successor to the Payment Agent and immediately thereafter notify Buyer of the
identity of such successor. Any such successor shall succeed the Payment Agent as Payment Agent
hereunder. If for any reason there is no Payment Agent at any time, all references herein to the
Payment Agent shall be deemed to refer to Sellers.
(f) All expenses incurred by the Payment Agent in connection with the performance of
his/her/its duties as Payment Agent shall be borne and paid by Sellers.
9.14.
Construction
. Each party has been represented by counsel during the negotiation and
execution of this Agreement and, therefore, the parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and
no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any federal, state, local
or foreign Law shall be deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. The word including shall mean including without
limitation. 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 any particular provision of this
Agreement. The parties intend that each representation, warranty, and covenant contained herein
shall have independent significance. If any party has breached any representation, warranty or
covenant contained herein in any respect, the fact that there exists another
52
representation,
warranty or covenant relating to the same subject matter (regardless of the relative levels of
specificity) that
the party has not breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
9.15.
Incorporation of Exhibits and Schedules
. The exhibits and schedules identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.16.
Specific Performance
. Each party acknowledges and agrees that the other parties would be
damaged irreparably in the event any provision of this Agreement is not performed in accordance
with its specific terms or otherwise is breached, so that a party shall be entitled to injunctive
relief to prevent breaches of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in addition to any other remedy to which such party may be entitled, at
law or in equity. In particular, the parties acknowledge that the business of the Target Entities
is unique and recognize and affirm that in the event Sellers breach this Agreement, money damages
would be inadequate and Buyer would have no adequate remedy at law, so that Buyer shall have the
right, in addition to any other rights and remedies existing in its favor, to enforce its rights
and the other parties obligations hereunder not only by action for damages but also by action for
specific performance, injunctive, and/or other equitable relief.
* * *
53
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.
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BUYER:
QUINSTREET, INC.
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By:
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/s/ Tim Stevens
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Title: Senior Vice President
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TARGET ENTITIES:
CAR INSURANCE.COM, INC.
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By:
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/s/ Lloyd (Jon) Register IV
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Title: President
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CAR INSURANCE AGENCY, INC.
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By:
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/s/ Lloyd (Jon) Register IV
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Title: President
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CAR INSURANCE HOLDINGS, INC.
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By:
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/s/ Lloyd (Jon) Register IV
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Title: President
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CARINSURANCE.COM, INC.
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By:
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/s/ Lloyd (Jon) Register IV
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Title: President
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SELLERS:
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/s/ Lloyd (Jon) Register IV
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Lloyd (Jon) Register IV
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/s/ Lloyd Register III
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Lloyd Register III
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/s/ David Fitzgerald
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David Fitzgerald
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/s/ Timothy Register
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Timothy Register
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/s/ Randy Horowitz
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Randy Horowitz
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/s/ Erick Pace
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Erick Pace
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PAYMENT AGENT, with respect to the Payment Agent Sections:
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/s/ Thomas Infantino
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