Note and Stock Purchase Agreement - CMGI Inc. and ClearBlue Technologies Inc.
NOTE AND STOCK PURCHASE AGREEMENT, dated as of September 11, 2002
(this "Agreement"), by and between CMGI, Inc. (the "Seller") and ClearBlue
Technologies, Inc. ("CBT" or the "Purchaser").
WHEREAS, the Seller has determined that it is in the best interests of
the Seller and its stockholders to sell all of its equity and debt interests in
NaviSite, Inc., a Delaware corporation (the "Company"), to the Purchaser; and
WHEREAS, the parties hereto desire to consummate the transaction
contemplated herein, pursuant to which (a) the Seller will transfer to the
Purchaser, or at the Purchaser's direction, a wholly-owned subsidiary, all
shares, options, warrants and other rights to purchase shares, whether
certificated or uncertificated (collectively, the "Shares") of Common Stock, par
value $0.01 per share, of the Company owned by the Seller (including, without
limitation, 71,029,391 shares in certificated form), (b) the Seller will
transfer to the Purchaser, or at the Purchaser's direction, a wholly-owned
subsidiary, the 12% Convertible Note issued to the Seller by the Company,
representing $10.0 million aggregate principal amount plus all accrued interest
thereon (the "Debt") and (c) the Purchaser will transfer to the Seller 131,579
shares of common stock (the "ClearBlue Shares"), par value $0.01 per share, of
the Purchaser, representing 2% of the issued and outstanding equity securities
of the Purchaser (after giving effect to (i) the transactions contemplated
hereby and (ii) the issuance of shares of common stock of the Purchaser to
Hewlett-Packard Financial Services Company ("HP") pursuant to that certain Note
and Stock Purchase Agreement between HP and CBT (the "HP Agreement").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE I
Exchange of Stock and Notes
SECTION 1.1 Exchange. Subject to the terms and conditions of this
Agreement, at the Closing, the Seller agrees to transfer to the Purchaser, or at
the Purchaser's direction, to ClearBlue Technologies Equity, Inc. ("Equity") and
ClearBlue Finance, Inc. ("Finance"), the Shares and the Debt, respectively, and
the Purchaser agrees to transfer to the Seller the ClearBlue Shares.
SECTION 1.2 The Closing.
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Heller Ehrman White &
McAuliffe LLP, 120 West 45th Street, New York, NY 10036, simultaneously with the
execution of this Agreement (the "Closing Date").
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(b) Concurrently with the execution of this Agreement, the following
shall occur:
(i) the Purchaser shall deliver to the Seller the ClearBlue
Shares;
(ii) the Seller shall deliver to the Purchaser, or pursuant to
the Purchaser's instructions, to Equity, the stock
certificates evidencing the Shares, together with fully
executed stock powers;
(iii) the Seller shall deliver to the Purchaser, or pursuant to
the Purchaser's instructions, to Finance, the promissory
note evidencing the Debt together with an appropriate
allonge or other debt transfer instrument;
(iv) HP shall have consented to the transfer of the Debt and
each of the Seller and the Purchaser shall have waived
Section 7.01(j) of the Note Purchase Agreement dated as
of October 29, 2001 among the Company, HP and the Seller
with respect to the transactions contemplated hereby;
(v) 400 Minuteman Limited Partnership shall have consented to
the satisfaction of the parties to the assignment of the
Lease, dated May 14, 1999, between 400 Minuteman Limited
Partnership and the Company, as amended;
(vi) the Purchaser shall have received an opinion dated as of
the date of this Agreement of Browne Rosedale & Lanouette
LLP, counsel of the Seller, in the form acceptable to the
Purchaser;
(vii) the Seller shall have received an opinion dated as of the
date of this Agreement of Heller Ehrman White & McAuliffe
LLP, counsel to the Purchaser, in the form acceptable to
the Seller;
(viii) the Seller shall have used its best efforts to cause the
Board of Directors of the Company to fill two of the
vacancies on such Board by appointing Arthur Becker and
Andy Ruhan as directors of the Company; and
(ix) prior to the Closing, the transactions contemplated by
the HP Agreement shall have been consummated.
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ARTICLE II
Representations and Warranties of the Seller
The Seller represents and warrants to the Purchaser that, except as
set forth in the Disclosure Schedule prepared by the Seller and delivered to the
Purchaser simultaneously with the execution of this Agreement (the "CMGI
Disclosure Schedule"), the statements contained in this Article II are true and
correct as of the date of this Agreement, except to the extent such
representations and warranties are specifically made as of a particular date (in
which case such representations and warranties will be true and correct as of
such date). The CMGI Disclosure Schedule shall be arranged in sections and
subsections corresponding to the numbered and lettered sections and subsections
contained in this Article II. The disclosures in any section or subsection of
the CMGI Disclosure Schedule shall qualify other sections and subsections in
this Article II only to the extent it is clear from a reading of the disclosure
that such disclosure is applicable to such other sections and subsections. As
used in this Agreement, a "CMGI Material Adverse Effect" shall mean any material
adverse change, event, circumstance or development with respect to, or material
adverse effect on, the business, assets, liabilities, condition (financial or
other), or results of operations of the Seller (other than changes, events,
circumstances or developments that are the result of economic factors affecting
the economy as a whole or that are the result of factors generally affecting the
industry or specific markets in which the Seller competes). For the avoidance of
doubt, the parties agree that the terms "material", "materially" or
"materiality" as used in this Agreement with an initial lower case "m" shall
have their respective customary and ordinary meanings, without regard to the
meaning ascribed to CMGI Material Adverse Effect.
SECTION 2.1 Power and Authority; Enforceability. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. The Seller has all requisite capacity,
power and authority to execute, deliver and perform this Agreement. This
Agreement has been duly executed and delivered and constitutes a valid and
legally binding obligation of the Seller, enforceable against the Seller in
accordance with its terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally and (b) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies.
SECTION 2.2 Ownership; Transferability. The Seller is the legal and
beneficial owner of the Shares and the Debt, free and clear of any security
interest, mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or otherwise), charge against or interest in
property to secure payment of a debt or performance of an obligation or other
priority or preferential arrangement of any kind or nature whatsoever (each, an
"Encumbrance"), and there are no restrictions on transfer of the Shares or the
Debt to the Purchaser, or at the Purchaser's direction, to Equity and Finance,
respectively, pursuant to the terms of this Agreement. There are no voting
trusts, voting agreements, proxies or other agreements, instruments or
understandings with respect to the voting of the Shares being sold by
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the Seller to the Purchaser to which the Seller is a party. Other than this
Agreement, there are no options, warrants, or purchase, subscription, call,
conversion, exchange or other contracts or instruments obligating the Seller to
sell, exchange, or otherwise deliver, or to purchase, acquire or otherwise
receive, securities of the Company.
SECTION 2.3 Consents and Approvals. Subject to the accuracy of the
representations and warranties made by the Purchaser in Article IV hereof, to
the knowledge of Seller, neither the execution, delivery and performance of this
Agreement by the Seller, nor the consummation by the Seller of any transaction
related hereto will require any consent, approval, order or authorization of,
filing, registration, declaration or taking of any other action with, or notice
to, any person, other than such consents, approvals, filings or actions (a) as
may be required under the Federal securities laws which have or will be made or
(b) which have already been obtained.
SECTION 2.4 Conflicts. The execution and delivery by the Seller of
this Agreement and any ancillary contracts, agreements or other documents that
are to be entered into in connection with the transactions contemplated hereby
to which it is or will be a party do not, and the consummation of the
transactions contemplated by this Agreement (the "Contemplated Transactions") do
not, (a) conflict with, or result in any violation or breach of any provision of
the certificate of incorporation or by-laws of the Seller, (b) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, contract
or other agreement, instrument or obligation to which the Seller is a party or
by which it or any of its properties or assets may be bound, or (c) conflict or
violate any permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation of any government, governmental
instrumentality or court, domestic or foreign, applicable to the Seller or any
of its properties or assets, except in the case of (b) and (c) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which would not, individually or in the aggregate, materially and adversely
affect the Shares and the Debt being conveyed by the Seller to the Purchaser, or
at the Purchaser's direction, to Equity and Finance, respectively, hereunder.
SECTION 2.5 Litigation. There are no actions, suits, proceedings,
orders, investigations or claims pending or, to the knowledge of the Seller,
threatened against or affecting the Seller, at law or in equity, before any
court, arbitration panel, tribunal or governmental commission, bureau, agency or
instrumentality which seeks to enjoin or restrain, or could have the effect of
delaying, the consummation of the transactions contemplated by this Agreement.
The Seller has no actual knowledge of any material actions, suits, proceedings,
orders, investigations or claims pending or threatened against or affecting the
Company, at law or in equity, before any court, arbitration panel, tribunal or
governmental commission, bureau, agency or instrumentality except as publicly
disclosed in the Company's filings with the Securities and Exchange Commission
pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
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SECTION 2.6 Company Liabilities. The Seller has no actual knowledge of
any undisclosed liabilities of the Company, whether material, contingent or
otherwise except (a) those not reasonably required to be disclosed under
generally accepted accounting principles or (b) those occurring in the ordinary
course of business.
SECTION 2.7 Company Default. The Seller does not have any actual
knowledge of a default under any agreement or contract between the Seller and
the Company.
ARTICLE III
Representations and Warranties of the Purchaser
The Purchaser represents and warrants to the Seller that, except as
set forth in the Disclosure Schedule prepared by the Purchaser and delivered to
the Seller simultaneously with the execution of this Agreement (the "CBT
Disclosure Schedule"), the statements contained in this Article III are true and
correct as of the date of this Agreement, except to the extent such
representations and warranties are specifically made as of a particular date (in
which case such representations and warranties will be true and correct as of
such date). The CBT Disclosure Schedule shall be arranged in sections and
subsections corresponding to the numbered and lettered sections and subsections
contained in this Article III. The disclosures in any section or subsection of
the CBT Disclosure Schedule shall qualify other sections and subsections in this
Article III only to the extent it is clear from a reading of the disclosure that
such disclosure is applicable to such other sections and subsections. As used in
this Agreement, a "CBT Material Adverse Effect" shall mean any material adverse
change, event, circumstance or development with respect to, or material adverse
effect on, the business, assets, liabilities, condition (financial or other), or
results of operations of the Purchaser and the Subsidiaries, taken as a whole
(other than changes, events, circumstances or developments that are the result
of economic factors affecting the economy as a whole or that are the result of
factors generally affecting the industry or specific markets in which the
Purchaser competes). For the avoidance of doubt, the parties agree that the
terms "material", "materially" or "materiality" as used in this Agreement with
an initial lower case "m" shall have their respective customary and ordinary
meanings, without regard to the meaning ascribed to CBT Material Adverse Effect.
SECTION 3.1 Existence; Power and Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. The Purchaser has the requisite corporate
power and authority to execute, deliver and perform this Agreement. The
execution, delivery and performance by the Purchaser of this Agreement and the
consummation by it of the transactions contemplated hereby (the "Contemplated
Transactions") have been duly authorized by the Board of Directors of the
Purchaser, and no other corporate action on the part of the Purchaser is
necessary to authorize the execution and delivery by the Purchaser of this
Agreement or the consummation by it of the Contemplated Transactions. No vote
of, or consent by, the holders of any class or series of capital stock issued by
the Purchaser is necessary to authorize the consummation of the
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Contemplated Transactions. This Agreement has been duly executed and delivered
and, upon execution by the Seller, will constitute a valid and legally binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally and (b) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
SECTION 3.2 Ownership; Transferability. The ClearBlue Shares have been
duly authorized and when issued, will be duly and validly issued, fully paid and
non-assessable.
SECTION 3.3 RESERVED.
SECTION 3.4 RESERVED.
SECTION 3.5 RESERVED.
SECTION 3.6 No Conflict.
(a) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will (with
or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of any
provision of the Certificate of Incorporation or bylaws of the Purchaser;
(ii) contravene, conflict with, or result in a violation of any
federal, state, local, or other administrative order, constitution, law,
ordinance, principle of common law, regulation or statute ("Legal Requirement"),
or any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other governmental body or by any arbitrator (an "Order") to which the
Purchaser, or any of the assets owned or used by the Purchaser, may be subject;
(iii) contravene, conflict with, or result in a violation or
breach of any provision of, or give any person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any material contract or agreement of the
Purchaser; or
(iv) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by the Purchaser.
(b) The Purchaser is not nor will it be required to give any notice
to or obtain any consent from any person or governmental entity in connection
with the execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
SECTION 3.7 Capitalization.
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(a) The authorized capital stock of the Purchaser consists of (i)
10,000,000 shares of common stock, par value $0.01 (the "Common Shares"), of
which 5,000,000 shares are issued and outstanding and (ii) 10,000,000 Preferred
Shares, par value $0.01, none of which are issued and outstanding. Prior to the
Closing Date, 1,447,368 additional Common Shares will have been issued to HP.
(b) Section 3.7 of the CBT Disclosure Schedule sets forth a
complete and accurate list, as of the date of this Agreement, of the holders of
capital stock of the Purchaser, showing the number of shares of capital stock,
and the class or series of such shares, held by each stockholder. Section 3.7 of
the CBT Disclosure Schedule also indicates all outstanding Common Shares that
constitute restricted stock or that are otherwise subject to a repurchase or
redemption right, indicating the name of the applicable stockholder, the vesting
schedule (including any acceleration provisions with respect thereto), and the
repurchase price payable by the Purchaser. All of the issued and outstanding
shares of capital stock of the Purchaser have been duly authorized and validly
issued and are fully paid and nonassessable. All of the issued and outstanding
shares of capital stock of the Purchaser have been offered, issued and sold by
the Purchaser in compliance with all applicable federal and state securities
laws.
(c) Section 3.7 of the CBT Disclosure Schedule sets forth a
complete and accurate list, as of the date of this Agreement of: (i) all stock
option plans or other stock or equity-related plans of the Purchaser (the "CBT
Stock Plans"), indicating for each CBT Stock Plan the number of Common Shares
issued to date under such Plan, the number of Common Shares subject to
outstanding options under such Plan and the number of Common Shares reserved for
future issuance under such Plan; (ii) all holders of outstanding options to
acquire Common Shares, indicating with respect to each option the CBT Stock Plan
under which it was granted, the number of Common Shares subject to such option,
the exercise price, the date of grant, and the vesting schedule (including any
acceleration provisions with respect thereto); and (iii) all holders of
outstanding warrants to acquire Common Shares, indicating with respect to each
warrant the agreement or other document under which it was granted, the number
of shares of capital stock, and the class or series of such shares, subject to
such warrant, the exercise price, the date of issuance and the expiration date
thereof. All of the shares of capital stock of the Purchaser subject to options
and warrants will be, upon issuance pursuant to the exercise of such
instruments, duly authorized, validly issued, fully paid and nonassessable.
(d) Except as set forth in Section 3.7 of the CBT Disclosure
Schedule, (i) no subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of capital
stock of the Purchaser is authorized or outstanding, (ii) the Purchaser has no
obligation (contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right, or to issue or distribute to holders
of any shares of its capital stock any evidences of indebtedness or assets of
the Purchaser, (iii) the Purchaser has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or to make any other distribution in
respect thereof, and (iv) there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Purchaser.
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(e) Except as set forth in Section 3.7 of the CBT Disclosure
Schedule, there is no agreement, written or oral, between the Purchaser and any
holder of its securities, or, to the best of the Purchaser's knowledge, among
any holders of its securities, relating to the sale or transfer (including
agreements relating to rights of first refusal, co-sale rights or "drag-along"
rights), registration under the Act, or voting, of the capital stock of the
Purchaser.
SECTION 3.8 Subsidiaries.
(a) Section 3.8 of the CBT Disclosure Schedule sets forth: (i)
the name of each Subsidiary; (ii) the number and type of outstanding equity
securities of each Subsidiary and a list of the holders thereof; (iii) the
jurisdiction of organization of each Subsidiary; (iv) the names of the officers
and directors of each Subsidiary; and (v) the jurisdictions in which each
Subsidiary is qualified or holds licenses to do business as a foreign
corporation or other entity.
(b) Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each Subsidiary is duly qualified to conduct business and is in
good standing under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified or in good standing,
individually or in the aggregate, has not had and would not reasonably be
expected to have a CBT Material Adverse Effect. Each Subsidiary has all
requisite power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. No Subsidiary is in
default under or in violation of any provision of its charter or by-laws. All of
the issued and outstanding shares of capital stock of each Subsidiary are duly
authorized, validly issued, fully paid and nonassessable. All shares of each
Subsidiary that are held of record or owned beneficially by either the Purchaser
or any Subsidiary are held or owned free and clear of any restrictions on
transfer (other than restrictions under the Act and state securities laws),
claims, Encumbrances, options, warrants, rights, contracts, calls, commitments,
equities and demands. There are no outstanding or authorized options, warrants,
rights, agreements or commitments to which the Purchaser or any Subsidiary is a
party or which are binding on any of them providing for the issuance,
disposition or acquisition of any capital stock of any Subsidiary. There are no
outstanding stock appreciation, phantom stock or similar rights with respect to
any Subsidiary. There are no voting trusts, proxies or other agreements or
understandings with respect to the voting of any capital stock of any
Subsidiary.
(c) The Purchaser does not control directly or indirectly or have
any direct or indirect equity participation or similar interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business association or entity which is not a Subsidiary.
(d) "Subsidiary" shall mean any corporation, partnership, trust,
limited liability company or other non-corporate business enterprise in which
the Purchaser (or another Subsidiary) holds stock or other ownership interests
representing (a) more than 50% of the voting power of all outstanding stock or
ownership interests of such entity or (b) the right to receive more than 50% of
the net assets of such entity available for distribution to the holders of
outstanding stock or ownership interests upon a liquidation or dissolution of
such entity.
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SECTION 3.9 Financial Statements. Section 3.9 of the CBT
Disclosure Schedule contains: (a) unaudited consolidated balance sheets of the
Purchaser and the Subsidiaries as at December 31, 2001 and the related unaudited
consolidated statements of income, changes in stockholders' equity, and cash
flow for the fiscal year then ended, and (b) an unaudited consolidated balance
sheet of the Purchaser and the Subsidiaries as at June 30, 2002 (the "Interim
Balance Sheet") and the related unaudited consolidated statements of income,
changes in stockholders' equity, and cash flow for the six months then ended,
including in each case the notes thereto. Such financial statements and notes
fairly present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Purchaser and the Subsidiaries as at
the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
included in the Interim Balance Sheet); the financial statements referred to in
this Section 3.9 reflect the consistent application of such accounting
principles throughout the periods involved. No financial statements of any
person other than the Purchaser and the Subsidiaries are required by GAAP to be
included in the consolidated financial statements of the Purchaser.
SECTION 3.10 Books and Records. The books of account, minute
books, stock record books, and other records of the Purchaser and the
Subsidiaries are complete and correct. The minute books of the Purchaser and the
Subsidiaries contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Boards of Directors, and
committees of the Boards of Directors of the Purchaser and the Subsidiaries, and
no meeting of any such stockholders, Board of Directors, or committee has been
held for which minutes have not been prepared and are not contained in such
minute books.
SECTION 3.11 Title to Properties; Encumbrances. Section 3.11 of
the CBT Disclosure Schedule contains a complete and accurate list of all real
property, leaseholds, or other interests therein owned by the Purchaser and the
Subsidiaries. The Purchaser and the Subsidiaries own (with good and marketable
title in the case of real property, subject only to the matters permitted by the
following sentence) all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) that they purport to own, including
all of the properties and assets reflected in the Interim Balance Sheet (except
for assets held under capitalized leases disclosed to the Seller and personal
property sold since the date of the Interim Balance Sheet, as the case may be,
in the ordinary course of business), and all of the properties and assets
purchased or otherwise acquired by the Purchaser and the Subsidiaries since the
date of the Interim Balance Sheet (except for personal property acquired and
sold since the date of the Interim Balance Sheet in the ordinary course of
business and consistent with past practice). All material properties and assets
reflected in the Balance Sheet and the Interim Balance Sheet are free and clear
of all Encumbrances and are not, in the case of real property, subject to any
rights of way, building use restrictions, exceptions, variances, reservations,
or limitations of any nature except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the Interim Balance Sheet
as securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would constitute a
default) exists, (b)
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mortgages or security interests incurred in connection with the purchase of
property or assets after the date of the Interim Balance Sheet (such mortgages
and security interests being limited to the property or assets so acquired),
with respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (c) liens for current taxes not yet
due, and (d) with respect to real property, (i) minor imperfections of title, if
any, none of which is substantial in amount, materially detracts from the value
or impairs the use of the property subject thereto, or impairs the operations of
the Purchaser or the Subsidiaries, and (ii) zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto.
SECTION 3.12 Absence of Certain Changes. Since June 30, 2002,
there has occurred no event or development which, individually or in the
aggregate, has had, or could reasonably be expected to have in the future, a CBT
Material Adverse Effect.
SECTION 3.13 Undisclosed Liabilities. Neither the Purchaser nor
the Subsidiaries has any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated and whether due or to become
due), except for (a) liabilities shown on the Interim Balance Sheet, (b)
liabilities which have arisen since June 30, 2002 in the ordinary course of
business, (c) contractual and other liabilities that would not reasonably be
required by GAAP to be reflected on a balance sheet and (d) liabilities incurred
after June 30, 2002 in the ordinary course of business and which are not
material in amount.
SECTION 3.14 Tax Matters.
(a) Each of the Purchaser and the Subsidiaries has filed on a
timely basis all Tax Returns that it was required to file, and all such Tax
Returns were complete and accurate and disclose all Taxes required to be paid by
the Purchaser and each Subsidiary. Neither the Purchaser nor any Subsidiary is
or has ever been a member of a group of corporations with which it has filed (or
been required to file) consolidated, combined or unitary Tax Returns, other than
a group of which only the Purchaser and the Subsidiaries are or were members.
Each Affiliated Group has filed all Tax Returns that it was required to file
with respect to any Affiliated Period, and all such Tax Returns were complete
and accurate and disclose all Taxes required to be paid by the Purchaser and
each Subsidiary. Each of the Purchaser and the Subsidiaries has paid on a timely
basis all Taxes that were due and payable and each member of an Affiliated Group
has paid all Taxes that were due and payable with respect to all Affiliated
Periods. The unpaid Taxes of the Purchaser and the Subsidiaries for tax periods
through June 30, 2002 do not exceed the accruals and reserves for Taxes
(excluding accruals and reserves for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the Interim Balance
Sheet. Neither the Purchaser nor any Subsidiary has any actual or potential
liability for any Tax obligation of any taxpayer (including any affiliated group
of corporations or other entities that included the Purchaser or any Subsidiary
during a prior period) other than the Purchaser and the Subsidiaries. All Taxes
that the Purchaser or any Subsidiary is or was required by law to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Entity. All Taxes (whether or not shown on
any Tax Return) owed by any of the Purchaser and any Affiliated Group have been
timely paid.
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(b) All deficiencies assessed against the Purchaser, any
Subsidiary or any Affiliated Group have been paid in full. The federal income
Tax Returns of the Purchaser and each Subsidiary and each member of an
Affiliated Group have been audited by the Internal Revenue Service or are closed
by the applicable statute of limitations for all taxable years through the
taxable year specified in Section 3.9(b) of the CBT Disclosure Schedule. No
examination or audit of any Tax Return of the Purchaser or any Subsidiary or any
member of an Affiliated Group with respect to an Affiliated Period by any
Governmental Entity is currently in progress or, to the knowledge of the
Purchaser, threatened or contemplated. Neither the Purchaser nor any Subsidiary
nor any member of an Affiliated Group has been informed by any jurisdiction that
the jurisdiction believes that the Purchaser or any Subsidiary or any member of
an Affiliated Group was required to file any Tax Return that was not filed.
Neither the Purchaser nor any Subsidiary nor any member of an Affiliated Group
has waived any statute of limitations with respect to Taxes or agreed to an
extension of time with respect to a Tax assessment or deficiency.
(c) Neither the Purchaser nor any Subsidiary: (i) is a
"consenting corporation" within the meaning of Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"), and none of the assets of the
Purchaser or the Subsidiaries are subject to an election under Section 341(f) of
the Code; (ii) has been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(l)(A)(ii) of the Code; or (iii) has any actual or
potential liability for any Taxes of any person (other than the Purchaser and
its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of federal, state, local, or foreign law), or as a transferee or
successor, by contract, or otherwise.
(d) None of the assets of the Purchaser or any Subsidiary: (i) is
"tax-exempt use property" within the meaning of Section 168(h) of the Code; or
(ii) directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code.
(e) Neither the Purchaser nor any Subsidiary has undergone a
change in its method of accounting resulting in an adjustment to its taxable
income pursuant to Section 481 of the Code.
(f) Except as set forth on Section 3.14 of the CBT Disclosure
Schedule, as a direct or indirect result of the transactions contemplated by
this Agreement, no payment or other benefit by the Purchaser, and no
acceleration of the vesting of any options, payments or other benefits by the
Purchaser will be (or under Section 280G of the Code and the Treasury
Regulations thereunder be presumed to be) a "parachute payment" to a
"disqualified individual" as those terms are defined in Section 280G of the Code
and the Treasury Regulations thereunder, without regard to whether such payment
or acceleration is reasonable compensation for personal services performed or to
be performed in the future.
(g) As used in this Agreement:
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"Affiliated Group" shall mean a group of corporations with which the
Purchaser or a Subsidiary has filed (or was required to file) consolidated,
combined, unitary or similar Tax Returns.
"Affiliated Period" shall mean any period in which the Purchaser or a
Subsidiary was a member of an Affiliated Group.
"Taxes" shall mean all taxes, charges, fees, levies or other similar
assessments or liabilities, including income, gross receipts, ad valorem,
premium, value-added, excise, real property, personal property, sales, use,
transfer, withholding, employment, unemployment, insurance, social security,
business license, business organization, environmental, workers compensation,
payroll, profits, license, lease, service, service use, severance, stamp,
occupation, windfall profits, customs, duties, franchise and other taxes imposed
by the United States of America or any state, local or foreign government, or
any agency thereof, or other political subdivision of the United States or any
such government, and any interest, fines, penalties, assessments or additions to
tax resulting from, attributable to or incurred in connection with any tax or
any contest or dispute thereof.
"Tax Returns" shall mean all reports, returns, declarations, statements
or other information required to be supplied to a taxing authority in connection
with Taxes.
SECTION 3.15 Assets.
(a) The Purchaser or the applicable Subsidiary is the true and
lawful owner, and has good title to, all of the assets (tangible or intangible)
purported to be owned by the Purchaser or the Subsidiaries, free and clear of
all Encumbrances. Each of the Purchaser and the Subsidiaries owns or leases all
tangible assets sufficient for the conduct of its businesses as presently
conducted and as presently proposed to be conducted. Each such tangible asset is
free from material defects, has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear) and is suitable for the purposes for which it presently is used.
(b) Section 3.15(b) of the CBT Disclosure Schedule lists
individually (i) all fixed assets (within the meaning of GAAP) of the Purchaser
or the Subsidiaries having a book value greater than $100,000, indicating the
cost, accumulated book depreciation (if any) and the net book value of each such
fixed asset as of June 30, 2002, and (ii) all other assets of a tangible nature
(other than inventories) of the Purchaser or the Subsidiaries whose book value
exceeds $100,000.
(c) All assets of the Purchaser and each of its Subsidiaries that
were acquired by the Purchaser or such Subsidiary from an affiliate of the
Purchaser were acquired for fair value in arms-length transactions.
SECTION 3.16 Owned Real Property. Neither the Purchaser nor any
of its Subsidiaries currently owns, or has owned in the past, any real property.
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SECTION 3.17 Real Property Leases. Section 3.17 of the CBT
Disclosure Schedule lists all leases or subleases pursuant to which the
Purchaser or a Subsidiary leases or subleases from another party any real
property (the "Leases") and lists the term of such Lease, any extension and
expansion options, and the rent payable thereunder.
With respect to each Lease:
(a) such Lease is legal, valid, binding, enforceable and in full
force and effect;
(b) such Lease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect immediately prior to the Closing;
(c) neither the Purchaser nor any Subsidiary, to either's
knowledge, nor, to the knowledge of the Purchaser, any other party, is in breach
or violation of, or default under, any such Lease, and no event has occurred, is
pending or, to the knowledge of the Purchaser, is threatened, which, after the
giving of notice, with lapse of time, or otherwise, would constitute a breach or
default by the Purchaser or any Subsidiary or, to the knowledge of the
Purchaser, any other party under such Lease;
(d) to each of the Purchaser's and any Subsidiary's knowledge,
there are no disputes, oral agreements or forbearance programs in effect as to
such Lease;
(e) neither the Purchaser nor any Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
the leasehold or subleasehold;
(f) to the knowledge of the Purchaser, all facilities leased or
subleased thereunder are supplied with utilities and other services adequate for
the operation of said facilities; and
(g) the Purchaser is not aware of any Encumbrance, easement,
covenant or other restriction applicable to the real property subject to such
lease which would reasonably be expected to materially impair the current uses
or the occupancy by the Purchaser or a Subsidiary of the property subject
thereto.
SECTION 3.18 Intellectual Property.
(a) Section 3.18(a) of CBT Disclosure Schedule lists (i) each
patent, patent application, copyright registration or application therefor, mask
work registration or application therefor, and trademark, service mark and
domain name registration or application therefor of the Purchaser or any
Subsidiary and (ii) each Customer Deliverable of the Purchaser or any
Subsidiary.
(b) Each of the Purchaser and the Subsidiaries owns or possesses
sufficient legal rights to use all Intellectual Property necessary (i) to use,
manufacture, have manufactured,
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market and distribute the Customer Deliverables and (ii) to operate the Internal
Systems, without any known conflict with, or infringement of, the rights of
others. The Purchaser or the appropriate Subsidiary has taken all reasonable
measures to protect the proprietary nature of each item of CBT Intellectual
Property, and to maintain in confidence all trade secrets and confidential
information, that it owns or uses. To the knowledge of the Purchaser, no other
person or entity has any rights to any of the CBT Intellectual Property owned by
the Purchaser or the Subsidiaries (except pursuant to agreements or licenses
specified in Section 3.18(b) of the CBT Disclosure Schedule), and, to the
knowledge of the Purchaser, no other person or entity is infringing, violating
or misappropriating any of the CBT Intellectual Property.
(c) To the knowledge of the Purchaser, none of the Customer
Deliverables, or the marketing, distribution, provision or use thereof,
infringes or violates, or constitutes a misappropriation of, any Intellectual
Property rights of any person or entity. To the knowledge of the Purchaser, none
of the Internal Systems, or the use thereof, infringes or violates, or
constitutes a misappropriation of, any Intellectual Property rights of any
person or entity. Section 3.18(c) of the CBT Disclosure Schedule lists any
complaint, claim or notice, or written threat thereof, received by the Purchaser
or any Subsidiary alleging any such infringement, violation or misappropriation.
(d) Section 3.18(d) of the CBT Disclosure Schedule identifies
each license or other agreement pursuant to which the Purchaser or a Subsidiary
has licensed, distributed or otherwise granted any rights to any third party
with respect to, any CBT Intellectual Property. Except as described in Section
3.18(d) of the CBT Disclosure Schedule, neither the Purchaser nor any Subsidiary
has agreed to indemnify any person or entity against any infringement, violation
or misappropriation of any Intellectual Property rights with respect to any
Customer Deliverables.
(e) Section 3.18(e) of the CBT Disclosure Schedule identifies
each item of CBT Intellectual Property that is owned by a party other than the
Purchaser or a Subsidiary, and the license or agreement pursuant to which the
Purchaser or a Subsidiary uses it (excluding off-the-shelf software programs
licensed by the Purchaser pursuant to "shrink wrap" licenses).
(f) Neither the Purchaser nor any Subsidiary has disclosed the
source code for the Software or other confidential information constituting,
embodied in or pertaining to the Software to any person or entity, except
pursuant to the agreements listed in Section 3.18(f) of the CBT Disclosure
Schedule, and the Purchaser has taken reasonable measure to prevent disclosure
of such source code.
(g) All of the copyrightable materials (including Software)
incorporated in or bundled with the Customer Deliverables have been created by
employees of the Purchaser or a Subsidiary within the scope of their employment
by the Purchaser or a Subsidiary or by independent contractors of the Purchaser
or a Subsidiary who have executed agreements expressly assigning all right,
title and interest in such copyrightable materials to the Purchaser or a
Subsidiary. No portion of such copyrightable materials was jointly developed
with any third party.
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(h) The Customer Deliverables and the Internal Systems are free
from significant defects or programming errors and conform in all material
respects to the written documentation and specifications therefore.
(i) As used in this Agreement:
"CBT Intellectual Property" shall mean the Intellectual Property
owned by or licensed to the Purchaser or a Subsidiary and covering, incorporated
in, underlying or used in connection with the Customer Deliverables or the
Internal Systems.
"Customer Deliverables" shall mean (a) the products that the
Purchaser or any Subsidiary (i) currently manufactures, markets, sells or
licenses, or (ii) has manufactured, marketed, sold or licensed within the
previous year, or (iii) currently plans to manufacture, market, sell or license
in the future and (b) the services that the Purchaser or any Subsidiary (i)
currently provides, or (ii) has provided within the previous year, or (iii)
currently plans to provide in the future.
"Intellectual Property" shall mean all:
(a) patents, patent applications, patent disclosures and all
related continuation, continuation-in-part, divisional, reissue, reexamination,
utility model, certificate of invention and design patents, patent applications,
registrations and applications for registrations;
(b) trademarks, service marks, trade dress, Internet domain
names, logos, trade names and corporate names and registrations and applications
for registration thereof;
(c) copyrights and registrations and applications for
registration thereof;
(d) mask works and registrations and applications for
registration thereof;
(e) computer software, data and documentation;
(f) inventions, trade secrets and confidential business
information, whether patentable or nonpatentable and whether or not reduced to
practice, know-how, manufacturing and product processes and techniques, research
and development information, copyrightable works, financial, marketing and
business data, pricing and cost information, business and marketing plans and
customer and supplier lists and information;
(g) other proprietary rights relating to any of the foregoing
(including remedies against infringements thereof and rights of protection of
interest therein under the laws of all jurisdictions); and
(h) copies and tangible embodiments thereof.
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"Internal Systems" shall mean the internal systems of the
Purchaser or any Subsidiary that are used in its business or operations,
including computer hardware systems, software applications and embedded systems.
"Software" shall mean any of the software owned by the Purchaser
or a Subsidiary.
SECTION 3.19 Inventory. All inventory of the Purchaser and the
Subsidiaries, whether or not reflected on the Interim Balance Sheet, consists of
a quality and quantity usable and saleable in the ordinary course of business,
except for obsolete items and items of below-standard quality, all of which have
been written-off or written-down to net realizable value on the Interim Balance
Sheet. All inventories not written-off have been priced at the lower of cost or
market. The quantities of each type of inventory, whether raw materials,
work-in-process or finished goods, are not excessive in the present
circumstances of the Purchaser and the Subsidiaries.
SECTION 3.20 Contracts.
(a) Section 3.20 of the CBT Disclosure Schedule lists the
following agreements (written or oral) to which the Purchaser or any Subsidiary
is a party as of the date of this Agreement:
(i) any agreement (or group of related agreements) for the
lease of personal property from or to third parties providing for lease payments
in excess of $100,000 per annum or having a remaining term longer than 12
months;
(ii) any agreement (or group of related agreements) for the
purchase or sale of products or for the furnishing or receipt of services (A)
which calls for performance over a period of more than one year, (B) which
involves more than the sum of $100,000, or (C) in which the Purchaser or any
Subsidiary has granted manufacturing rights, "most favored nation" pricing
provisions or marketing or distribution rights relating to any products or
territory or has agreed to purchase a minimum quantity of goods or services or
has agreed to purchase goods or services exclusively from a certain party;
(iii) any agreement concerning the establishment or
operation of a partnership, joint venture or limited liability company;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed or guaranteed (or may create, incur,
assume or guarantee) indebtedness (including capitalized lease obligations)
involving more than $100,000 or under which it has imposed (or may impose) an
Encumbrance on any of its assets, tangible or intangible;
(v) any agreement for the disposition of any significant
portion of the assets or business of the Purchaser or any Subsidiary (other than
sales of products in the ordinary
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course of business) or any agreement for the acquisition of the assets or
business of any other entity (other than purchases of inventory or components in
the ordinary course of business);
(vi) any agreement concerning noncompetition;
(vii) any employment or consulting agreement;
(viii) any agreement involving any current or former officer,
director or stockholder of the Purchaser or an Affiliate (as defined in Rule
12b-2 under the Exchange Act) thereof;
(ix) any agreement under which the consequences of a
default or termination would reasonably be expected to have a CBT Material
Adverse Effect;
(x) any agreement which contains any provisions requiring
the Purchaser or any Subsidiary to indemnify any other party (excluding
indemnities contained in agreements for the purchase, sale or license of
products entered into in the ordinary course of business); and
(xi) any other agreement (or group of related agreements)
either involving more than $100,000 or not entered into in the ordinary course
of business.
(b) With respect to each agreement listed in Section 3.17,
Section 3.18 and Section 3.20 of the CBT Disclosure Schedule: (i) the agreement
is legal, valid, binding and enforceable and in full force and effect; (ii) the
agreement will continue to be legal, valid, binding and enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing; and (iii) neither the
Purchaser nor any Subsidiary nor, to the knowledge of the Purchaser, any other
party, is in breach or violation of, or default under, any such agreement, and
no event has occurred, is pending or, to the knowledge of the Purchaser, is
threatened, which, after the giving of notice, with lapse of time, or otherwise,
would constitute a breach or default by the Purchaser or any Subsidiary or, to
the knowledge of the Purchaser, any other party under such agreement.
SECTION 3.21 Accounts Receivable. All accounts receivable of the
Purchaser and the Subsidiaries reflected on the Interim Balance Sheet (other
than those paid since such date) are valid receivables subject to no setoffs or
counterclaims and are current and collectible (within 90 days after the date on
which it first became due and payable), net of the applicable reserve for bad
debts on the Interim Balance Sheet. A complete and accurate list of the accounts
receivable reflected on the Interim Balance Sheet, showing the aging thereof, is
included in Section 3.21 of the CBT Disclosure Schedule. All accounts receivable
of the Purchaser and the Subsidiaries that have arisen since June 30, 2002 are
valid receivables subject to no setoffs or counterclaims and are collectible
(within 90 days after the date on which it first became due and payable), net of
a reserve for bad debts in an amount proportionate to the reserve shown on the
Interim Balance Sheet. Neither the Purchaser nor any Subsidiary has received any
written notice from an account debtor stating that any account receivable in an
amount in excess of $100,000 is subject to any contest, claim or setoff by such
account debtor.
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SECTION 3.22 Powers of Attorney. There are no outstanding powers
of attorney executed on behalf of the Purchaser or any Subsidiary.
SECTION 3.23 Insurance. Section 3.23 of the CBT Disclosure
Schedule lists each insurance policy (including fire, theft, casualty,
comprehensive general liability, workers compensation, business interruption,
environmental, product liability and automobile insurance policies and bond and
surety arrangements) to which the Purchaser or any Subsidiary is a party, all of
which are in full force and effect. Such insurance policies are of the type and
in amounts customarily carried by organizations conducting businesses or owning
assets similar to those of the Purchaser and the Subsidiaries. There is no
material claim pending under any such policy as to which coverage has been
questioned, denied or disputed by the underwriter of such policy. All premiums
due and payable under all such policies have been paid, neither the Purchaser
nor any Subsidiary may be liable for retroactive premiums or similar payments,
and the Purchaser and the Subsidiaries are otherwise in compliance in all
material respects with the terms of such policies. the Purchaser has no
knowledge of any threatened termination of, or premium increase with respect to,
any such policy. Each such policy will continue to be enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing.
SECTION 3.24 Litigation. Except as disclosed in Section 3.24 of
the CBT Disclosure Schedule, there is no action, suit, proceeding, claim,
arbitration or investigation before any governmental entity or before any
arbitrator (a "Legal Proceeding") which is pending or has been threatened in
writing against the Purchaser or any Subsidiary which (a) seeks either damages
in excess of $100,000 or equitable relief or (b) in any manner challenges or
seeks to prevent, enjoin, alter or delay the transactions contemplated by this
Agreement. There are no judgments, orders or decrees outstanding against the
Purchaser or any Subsidiary.
SECTION 3.25 Warranties. No product or service manufactured,
sold, leased, licensed or delivered by the Purchaser or any Subsidiary is
subject to any guaranty, warranty, right of return, right of credit or other
indemnity other than (i) the applicable standard terms and conditions of sale or
lease of the Purchaser or the appropriate Subsidiary, which are set forth in
Section 3.25 of the CBT Disclosure Schedule and (ii) manufacturers' warranties
for which neither the Purchaser nor any Subsidiary has any liability. Section
3.25 of the CBT Disclosure Schedule sets forth the aggregate expenses incurred
by the Purchaser and the Subsidiaries in fulfilling their obligations under
their guaranty, warranty, right of return and indemnity provisions during the
fiscal year and the interim period covered by the Financial Statements; and the
Purchaser does not know of any reason why such expenses should significantly
increase as a percentage of sales in the future.
SECTION 3.26 Employees.
(a) Section 3.26 of the CBT Disclosure Schedule contains a
list of all employees of the Purchaser and each Subsidiary whose annual rate of
compensation exceeds $100,000 per year, along with the position and the annual
rate of compensation of each such person. Each current or past employee of the
Purchaser or any Subsidiary has entered into a
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confidentiality agreement with the Purchaser or such Subsidiary. Section 3.26 of
the CBT Disclosure Schedule contains a list of all employees of the Purchaser or
any Subsidiary who are a party to a non-competition agreement with the Purchaser
or any Subsidiary. All of the agreements referenced in the two preceding
sentences will continue to be legal, valid, binding and enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing. Section 3.26 of the CBT
Disclosure Schedule contains a list of all employees of the Purchaser or any
Subsidiary who are not citizens of the United States. To the knowledge of the
Purchaser, no key employee or group of employees has any plans to terminate
employment with the Purchaser or any Subsidiary.
(b) Neither the Purchaser nor any Subsidiary is a party to or
bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Purchaser has no knowledge of any organizational effort
made or threatened, either currently or within the past year, by or on behalf of
any labor union with respect to employees of the Purchaser or any Subsidiary.
SECTION 3.27 Employee Benefits.
(a) Section 3.27(a) of the CBT Disclosure Schedule contains a
complete and accurate list of all CBT Plans.
(b) Each CBT Plan has been administered in all material respects
in accordance with its terms and each of the Purchaser, the Subsidiaries and the
ERISA Affiliates has in all material respects met its obligations with respect
to each CBT Plan and has made all required contributions thereto. The Purchaser,
each Subsidiary, each ERISA Affiliate and each CBT Plan are in compliance in all
material respects with the currently applicable provisions of ERISA and the Code
and the regulations thereunder (including Section 4980 B of the Code, Subtitle
K, Chapter 100 of the Code and Sections 601 through 608 and Section 701 et seq.
of ERISA). All filings and reports as to each CBT Plan required to have been
submitted to the Internal Revenue Service or to the United States Department of
Labor have been duly submitted. No CBT Plan has assets that include securities
issued by the Purchaser or any ERISA Affiliate.
(c) There are no Legal Proceedings (except claims for benefits
payable in the normal operation of the CBT Plans and proceedings with respect to
qualified domestic relations orders) against or involving any CBT Plan or
asserting any rights or claims to benefits under any CBT Plan that could give
rise to any material liability.
(d) All the CBT Plans that are intended to be qualified under
Section 401(a) of the Code have received determination letters from the Internal
Revenue Service to the effect that such CBT Plans are qualified and the plans
and the trusts related thereto are exempt from federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, no such determination
letter has been revoked and revocation has not been threatened, and no such CBT
Plan has been amended since the date of its most recent determination letter or
application therefor in any respect, and no act or omission has occurred, that
would adversely affect its qualification or
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materially increase its cost. Each CBT Plan which is required to satisfy Section
401(k)(3) or Section 401(m)(2) of the Code has been tested for compliance with,
and satisfies the requirements of Section 401(k)(3) and Section 401(m)(2) of the
Code for each plan year ending prior to the Closing Date.
(e) Neither the Purchaser, any Subsidiary, nor any ERISA Affiliate
has ever maintained an Employee Benefit Plan subject to Section 412 of the Code
or Title IV of ERISA.
(f) At no time has the Purchaser, any Subsidiary or any ERISA
Affiliate been obligated to contribute to any "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any CBT Plan providing
benefits after termination of employment to any employee of the Purchaser or any
Subsidiary (or to any beneficiary of any such employee), including but not
limited to retiree health coverage and deferred compensation, but excluding
continuation of health coverage required to be continued under Section 4980B of
the Code or other applicable law and insurance conversion privileges under state
law. The assets of each CBT Plan which is funded are reported at their fair
market value on the books and records of such CBT Plan.
(h) No act or omission has occurred and no condition exists with
respect to any CBT Plan that would subject the Purchaser, any Subsidiary or any
ERISA Affiliate to (i) any material fine, penalty, tax or liability of any kind
imposed under ERISA or the Code or (ii) any contractual indemnification or
contribution obligation protecting any fiduciary, insurer or service provider
with respect to any CBT Plan.
(i) No CBT Plan is funded by, associated with or related to a
"voluntary employee's beneficiary association" within the meaning of Section
501(c)(9) of the Code.
(j) Each CBT Plan is amendable and terminable unilaterally by the
Purchaser at any time without liability or expense to the Purchaser or such CBT
Plan as a result thereof (other than for benefits accrued through the date of
termination or amendment and reasonable administrative expenses related thereto)
and no CBT Plan, plan documentation or agreement, summary plan description or
other written communication distributed generally to employees by its terms
prohibits the Purchaser from amending or terminating any such CBT Plan.
(k) Section 3.27(k) of the CBT Disclosure Schedule sets forth the
policy of the Purchaser and any Subsidiary with respect to accrued vacation,
accrued sick time and earned time off and the amount of such liabilities as of
June 30, 2002.
(l) As used in this Agreement:
"CBT Plan" shall mean any Employee Benefit Plan maintained, or
contributed to, by the Purchaser, any Subsidiary or any ERISA Affiliate.
"Employee Benefit Plan" shall mean any "employee pension benefit plan"
(as defined in Section 3(2) of ERISA), any "employee welfare benefit plan" (as
defined in Section
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3(1) of ERISA), and any other written or oral plan, agreement or arrangement
involving direct or indirect compensation, including insurance coverage,
severance benefits, disability benefits, deferred compensation, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement compensation.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any entity which is, or at any applicable
time was, a member of (1) a controlled group of corporations (as defined in
Section 414(b) of the Code), (2) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (3) an affiliated service
group (as defined under Section 414(m) of the Code or the regulations under
Section 414(o) of the Code), any of which includes or included the Purchaser or
a Subsidiary.
SECTION 3.28 Environmental Matters.
(a) Each of the Purchaser and the Subsidiaries has complied with all
applicable Environmental Laws. There is no pending or, to the knowledge of the
Purchaser, threatened civil or criminal litigation, written notice of violation,
formal administrative proceeding, or investigation, inquiry or information
request by any Governmental Entity, relating to any Environmental Law involving
the Purchaser or any Subsidiary.
(b) Neither the Purchaser nor any Subsidiary has any liabilities or
obligations arising from the release of any Materials of Environmental Concern
into the environment.
(c) Neither the Purchaser nor any Subsidiary is a party to or bound by
any court order, administrative order, consent order or other agreement between
the Purchaser and any Governmental Entity entered into in connection with any
legal obligation or liability arising under any Environmental Law.
(d) Set forth in Section 3.28(d) of the CBT Disclosure Schedule is a
list of all documents (whether in hard copy or electronic form) that contain any
environmental reports, investigations and audits relating to premises currently
or previously owned or operated by the Purchaser or a Subsidiary (whether
conducted by or on behalf of the Purchaser or a Subsidiary or a third party, and
whether done at the initiative of the Purchaser or a Subsidiary or directed by a
Governmental Entity or other third party) which the Purchaser has possession of
or access to.
(e) The Purchaser is not aware of any material environmental liability
of any solid or hazardous waste transporter or treatment, storage or disposal
facility that has been used by the Purchaser or any Subsidiary.
(f) As used in this Agreement:
"CERCLA" shall mean the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
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"Governmental Entity" shall mean any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency.
"Environmental Law" shall mean any federal, state or local law,
statute, rule, order, directive, judgment, Permit or regulation or the common
law relating to the environment, occupational health and safety, or exposure of
persons or property to Materials of Environmental Concern, including any
statute, regulation, administrative decision or order pertaining to: (i) the
presence of or the treatment, storage, disposal, generation, transportation,
handling, distribution, manufacture, processing, use, import, export, labeling,
recycling, registration, investigation or remediation of Materials of
Environmental Concern or documentation related to the foregoing; (ii) air, water
and noise pollution; (iii) groundwater and soil contamination; (iv) the release,
threatened release, or accidental release into the environment, the workplace or
other areas of Materials of Environmental Concern, including emissions,
discharges, injections, spills, escapes or dumping of Materials of Environmental
Concern; (v) transfer of interests in or control of real property which may be
contaminated; (vi) community or worker right-to-know disclosures with respect to
Materials of Environmental Concern; (vii) the protection of wild life, marine
life and wetlands, and endangered and threatened species; (viii) storage tanks,
vessels, containers, abandoned or discarded barrels and other closed
receptacles; and (ix) health and safety of employees and other persons. As used
above, the term "release" shall have the meaning set forth in CERCLA.
"Materials of Environmental Concern" shall mean any: pollutants,
contaminants or hazardous substances (as such terms are defined under CERCLA),
pesticides (as such term is defined under the Federal Insecticide, Fungicide and
Rodenticide Act), solid wastes and hazardous wastes (as such terms are defined
under the Resource Conservation and Recovery Act), chemicals, other hazardous,
radioactive or toxic materials, oil, petroleum and petroleum products (and
fractions thereof), or any other material (or article containing such material)
listed or subject to regulation under any law, statute, rule, regulation, order,
Permit, or directive due to its potential, directly or indirectly, to harm the
environment or the health of humans or other living beings.
SECTION 3.29 Legal Compliance. Each of the Purchaser and the
Subsidiaries is currently conducting, and have at all times since August 1, 2001
conducted, their respective businesses in compliance with each applicable law
(including rules and regulations thereunder) of any federal, state, local or
foreign government, or any Governmental Entity, except for any violations or
defaults that, individually or in the aggregate, have not had and would not
reasonably be expected to have a CBT Material Adverse Effect. Neither the
Purchaser nor any Subsidiary has received any notice or communication from any
Governmental Entity alleging noncompliance with any applicable law, rule or
regulation.
SECTION 3.30 Customers and Suppliers. Section 3.30 of the CBT
Disclosure Schedule sets forth a list of (a) each customer that accounted for
more than 10% of the consolidated revenues of the Purchaser during the last full
fiscal year or the interim period through June 30, 2002 and the amount of
revenues accounted for by such customer during each such period and (b) each
supplier that is the sole supplier of any significant product or service to
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the Purchaser or a Subsidiary. To the knowledge of the Purchaser, no such
customer or supplier has indicated within the past year that it will stop, or
decrease the rate of, buying products or supplying products, as applicable, to
the Purchaser or any Subsidiary. No unfilled customer order or commitment
obligating the Purchaser or any Subsidiary to process, manufacture or deliver
products or perform services will result in a loss to the Purchaser or any
Subsidiary upon completion of performance. No purchase order or commitment of
the Purchaser or any Subsidiary is in excess of normal requirements, nor are
prices provided therein in excess of current market prices for the products or
services to be provided thereunder.
SECTION 3.31 Permits. Section 3.31 of the CBT Disclosure Schedule sets
forth a list of all permits, licenses, registrations, certificates, orders,
approvals, franchises, variances and similar rights issued by or obtained from
any Governmental Entity (including those issued or required under Environmental
Laws and those relating to the occupancy or use of owned or leased real
property) ("Permits") issued to or held by the Purchaser or any Subsidiary. Such
listed Permits are the only Permits that are required for the Purchaser and the
Subsidiaries to conduct their respective businesses as presently conducted or as
proposed to be conducted. Each such Permit is in full force and effect; or the
applicable Subsidiary is in material compliance with the terms of each such
Permit; and, to the knowledge of the Purchaser, no suspension or cancellation of
such Permit is threatened and there is no basis for believing that such Permit
will not be renewable upon expiration. Each such Permit will continue in full
force and effect immediately following the Closing.
SECTION 3.32 Certain Business Relationships With Affiliates. No
Affiliate of the Purchaser or of any Subsidiary (a) owns any property or right,
tangible or intangible, which is used in the business of the Purchaser or any
Subsidiary, (b) has any claim or cause of action against the Purchaser or any
Subsidiary, or (c) owes any money to, or is owed any money by, the Purchaser or
any Subsidiary. Section 3.32 of the CBT Disclosure Schedule describes any
transactions or relationships between the Purchaser or a Subsidiary and any
Affiliate thereof which occurred or have existed since the beginning of the time
period covered by the Financial Statements.
SECTION 3.33 Brokers' Fees. Neither the Purchaser nor any Subsidiary
has any liability or obligation to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this Agreement.
SECTION 3.34 Disclosure. No representation or warranty by the
Purchaser contained in this Agreement, and no statement contained in the CBT
Disclosure Schedule or any other document, certificate or other instrument
delivered or to be delivered by or on behalf of the Purchaser pursuant to the
terms of this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
SECTION 3.35 Reorganization. The Purchaser represents that it has no
present intention to file, or cause a filing of, a petition involving the
Company for reorganization
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pursuant to the Bankruptcy Code and represent that it has no present intention
to foreclose on the assets of the Company.
ARTICLE IV
Acknowledgements and Covenants of the Parties
SECTION 4.1 Company Non-Public Information. Each of the Seller and the
Purchaser acknowledges that it has material non-public information concerning
the Company.
SECTION 4.2 Legends. The Purchaser understands and acknowledges that
the certificate(s) evidencing the Shares shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR WITH ANY STATE SECURITIES COMMISSION, AND
MAY NOT BE TRANSFERRED OR DISPOSED OF BY THE HOLDER IN THE ABSENCE OF A
REGISTRATION STATEMENT WHICH IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE LAWS AND RULES OR UNLESS SUCH TRANSFER MAY BE EFFECTED WITHOUT
VIOLATION OF THE SECURITIES ACT OF 1933 AND OTHER APPLICABLE STATE LAWS AND
RULES.
SECTION 4.3 Restricted Securities. The Purchaser understands and
acknowledges that the Shares are characterized as "restricted securities" under
the Federal securities laws inasmuch as they are being acquired from an
affiliate of the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Act only in certain limited circumstances. The
Seller understands that the ClearBlue Shares are characterized as "restricted
securities" under the Federal securities laws inasmuch as they are being
acquired in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Act only in certain limited circumstances.
SECTION 4.4 Purchase Entirely for Own Account.
(a) This Agreement is being entered into by the Seller in reliance
upon the Purchaser's representation to the Seller that (a) the Shares and the
Debt purchased by the Purchaser are being acquired for investment for the
Purchaser's own account, and not with a view toward, or for sale in connection
with, any distribution of any part thereof, and (b) the Purchaser has no present
intention of selling, granting any participation in, or otherwise distributing
the same, except, in the case of (a) and (b) of this Section, as permitted by
the Act, (c) the Purchaser has received and reviewed such information as it
deems necessary to evaluate the merits and risks of its investment in the Shares
and the Debt, (d) the Purchaser is an "accredited investor" within the meaning
of Rule 501(a) under the Act, and (e) the Purchaser has such knowledge and
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experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment in the Shares and the Debt, including a
complete loss of its investment. In addition, prior to the date hereof, the
Purchaser has made and conducted due inquiry, including without limitation an
investigation of the Company and its subsidiaries and their respective business,
operations, assets, liabilities and financial condition. The Purchaser is
entering into this Agreement based on its due diligence investigation and
(except for representations made herein by the Seller) is not relying upon any
representation or warranty of the Seller or the Company or any affiliate thereof
or any officer, director, employee, agent or advisor of any of them, nor upon
the accuracy of any record, projection or statement made available or given to
the Purchaser in the performance of such due diligence or otherwise. Except as
otherwise provided in this Agreement, the Purchaser acknowledges that it is
acquiring the Shares and the Debt on an "as is, with all faults" basis without
any express or implied representation or warranty of any kind.
(b) This Agreement is being entered into by the Purchaser in reliance
upon the Seller's representation to the Purchaser that (a) the ClearBlue Shares
purchased by the Seller are being acquired for investment for the Seller's own
account, and not with a view toward, or for sale in connection with, any
distribution of any part thereof, and (b) the Seller has no present intention of
selling, granting any participation in, or otherwise distributing the same,
except, in the case of (a) and (b) of this Section, as permitted by the Act, (c)
the Seller has received and reviewed such information as it deems necessary to
evaluate the merits and risks of its investment in the ClearBlue Shares, (d) the
Seller is an "accredited investor" within the meaning of Rule 501(a) under the
Act, and (e) the Seller has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
investment in the ClearBlue, including a complete loss of its investment. In
addition, prior to the date hereof, the Seller has made and conducted due
inquiry, including without limitation an investigation of the Purchaser and its
subsidiaries and their respective business, operations, assets, liabilities and
financial condition. The Seller is entering into this Agreement based on its due
diligence investigation and (except for representations made herein by the
Purchaser) is not relying upon any representation or warranty of the Purchaser
or any affiliate thereof or any officer, director, employee, agent or advisor of
any of them, nor upon the accuracy of any record, projection or statement made
available or given to the Seller in the performance of such due diligence or
otherwise. Except as otherwise provided in this Agreement, the Seller
acknowledges that it is acquiring the ClearBlue Shares on an "as is, with all
faults" basis without any express or implied representation or warranty of any
kind.
SECTION 4.5 [RESERVED]
SECTION 4.6 Transition Services Agreement. The Seller agrees to
continue to provide those services to the Company set forth in the Facilities
Support and Administrative Services Agreement (the "Facilities Agreement")
between the Company and the Seller, except as disclosed on Section 4.6 of the
CMGI Disclosure Schedule to the extent such services are currently provided by
the Seller to the Company, until the earliest of (i) September 30, 2002 and (ii)
the time the Company and/or the Purchaser provide notice to the Seller that such
services are no longer needed. The Seller will use its best efforts to enter
into a Transition Services Agreement with the Company, and the Purchaser will
use its best efforts to cause the Company
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to enter into such agreement, provided that such agreement is in a form
satisfactory to the Purchaser, including commercially reasonable terms and
consistent with the Facilities Agreement except that Seller shall provide the
services therein on a "cost plus" basis.
SECTION 4.7 Web Hosting Agreements.
(a) Upon expiration of the Seller's current web hosting agreement with the
Company (such expiration in accordance with the current terms of such
agreement), the Seller agrees to negotiate in good faith to enter into a new web
hosting agreement with the Company with a minimum term of three years upon
commercially reasonable terms at prevailing market rates at the time of the
negotiation based on the capacity and needs of the Seller at the time of such
negotiation;
(b) Upon expiration of each of AltaVista Company's ("AltaVista") and
Yesmail, Inc.'s ("Yesmail") current web hosting agreements with the Company
(such expirations in accordance with the current terms of such web hosting
agreements), the Seller will use best efforts to cause each of AltaVista and
Yesmail to negotiate in good faith to enter into a new hosting agreement with
the Company for a minimum term of three years upon commercially reasonable terms
at prevailing market rates at the time of the negotiation, based on the needs of
AltaVista and Yesmail, as applicable, at the time of the negotiation, and
provided that each such company is then a majority-owned subsidiary of the
Seller.
(c) The Purchaser agrees to use its best efforts to cause the Company to
include in any such new web hosting agreement a waiver and release by the
Company in favor of the Seller, AltaVista and Yesmail, as applicable, of any
claims the Company may have against any of them under their current web hosting
agreements.
SECTION 4.8 Company's Zanker Road Facility. The Purchaser agrees to
indemnify the Seller in connection with the Seller's guaranty of the Company's
obligations under the lease by and between the Company and CarrAmerica Realty
Corporation, as landlord, dated April 30, 1999, as amended (the "Zanker Road
Facility"); provided that in the event the Seller learns of any default or other
issue concerning the Zanker Road Facility that could result in the Seller being
obligated to pay or take other action under its guaranty, the Seller agrees to
promptly provide the Purchaser via facsimile or e-mail (with copy via overnight
delivery) with a copy of any such written notice (or a transcription of any oral
notification) received from the landlord of the Zanker Road Facility and
provided further that Seller will use its best efforts to provide the Purchaser
with an opportunity to negotiate and conduct discussions with the landlord with
regard to the default or issue raised in such notice; provided, however, that
under no circumstances (prior to the expiration of any requisite time to cure)
will the Seller be placed in a position where it would be in default under its
guaranty. In the event that the Seller fails to notify the Purchaser promptly
after Seller's receipt of the notice from the landlord and the Purchaser's
rights or position are adversely affected by said failure to notify or delay in
providing such notice, then the Purchaser's obligation to indemnify under this
Section 4.8 shall be relieved to the extent the Purchaser is prejudiced thereby.
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SECTION 4.9 Company D&O Coverage. The Purchaser agrees to use its best
efforts to cause the Company, within seven days after the Closing Date, to
purchase an insurance policy (the "Insurance Policy") which covers the Company's
current and former officers and directors for a period of six years after the
Closing for claims relating to the period during which the officers and
directors served the Company. In the event the Purchaser is not successful in
causing the Company to purchase the Insurance Policy described in the foregoing
sentence, the Purchaser shall reimburse the Seller, via wire transfer, within
ten business days, the amount that Seller pays for obtaining the Insurance
Policy described in the foregoing sentence.
SECTION 4.10 Information. The Purchaser shall use its best efforts to cause
the Company to provide the Seller and its representatives with reasonable access
to the Company's books and records, personnel and representatives, and to cause
the Company, its personnel and representatives to reasonably cooperate and
communicate with the Seller, its personnel and representatives, with respect to
matters relating to the Seller's financial statements, SEC filings and tax
returns. In addition, the Purchaser shall use its best efforts to cause the
Company and its officers and employees to reasonably cooperate with the Seller
in Seller's efforts to comply with the rules and regulations affecting public
companies, including without limitation, the Sarbanes-Oxley Act of 2002.
SECTION 4.11 Compliance with Securities Laws. The Seller agrees to use its
best efforts to insure that David Wetherell and George McMillan, as directors of
the Company, take all necessary actions for the Company to comply with its
certificate of incorporation, by-laws and applicable securities laws, including
Rule 14f-1 promulgated under the Exchange Act ("Rule 14f-1"), and that the
Seller will use its best efforts to confirm that each of David Wetherell and
George McMillan has agreed not to resign as a director of the Company prior to
the Company complying in all respects with Rule 14f-1.
ARTICLE V
Release
SECTION 5.1 Release by the Seller and the Company. In consideration for the
obligations of the Purchaser and the Seller set forth in this Agreement, the
Seller agrees that it shall enter into, and the Purchaser agrees that it shall
use its best efforts to cause the Company to enter into, a mutual waiver and
release whereby each of the Seller and the Company, on behalf of itself, and its
respective agents, consultants, officers, directors, employees, investors,
shareholders, attorneys, administrators and assigns, hereby fully and forever
releases the other party and its respective agents, consultants, officers,
directors, employees, shareholders, administrators, attorneys, predecessor and
successor corporations and assigns, of and from any claim or cause of action
relating to any matters of any kind, whether presently known or unknown,
suspected or unsuspected, that the Seller may possess arising from any
omissions, acts or facts that have occurred up until and including the date of
mutual waiver and release, except as to any claims related to web hosting
contracts, the Facilities Agreement, and any exceptions described in the
Agreement of Compromise and Release by and between the Seller and the
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Company dated August 19, 2002 (and any exhibits thereto). The mutual release and
waiver described in the foregoing sentence shall be effective upon the mutual
waiver and release being fully executed by the Seller and the Company.
SECTION 5.2 Release by the Purchaser. In consideration for the obligations
of the Seller set forth in this Agreement, the Purchaser, on behalf of itself,
and its respective agents, consultants, officers, directors, employees,
investors, shareholders, attorneys, administrators and assigns, hereby fully and
forever release the Seller and its respective agents, consultants, officers,
directors, employees, shareholders, administrators, attorneys, predecessor and
successor corporations and assigns, of and from any claim, or cause of action
relating to the Debt and that certain 12% Convertible Note originally issued by
the Company to Compaq Financial Services Corporation, representing approximately
$55.0 million aggregate principal amount plus all accrued interest thereon,
except as to any claims or causes of action under this Agreement.
ARTICLE VI
Indemnification
SECTION 6.1 Indemnification by the Seller. The Seller shall indemnify the
Purchaser and its representatives, stockholders, directors, officers and
affiliates in respect of, and hold them harmless against, any and all Damages
arising, directly or indirectly, from or in connection with:
(a) any breach, as of the date of this Agreement or as of the Closing Date,
of any representation or warranty of the Seller contained in this Agreement or
any other agreement or instrument furnished by the Seller to the Purchaser
pursuant to this Agreement;
(b) any failure to perform any covenant or agreement of the Seller in this
Agreement or any agreement or instrument furnished by the Seller to the
Purchaser pursuant to this Agreement.
SECTION 6.2 Indemnification Claims.
(a) The Purchaser shall give written notification to the Seller of the
commencement of any third party action ("Third Party Action"). Such notification
shall be given within 20 days after receipt by the Purchaser of written notice
of such Third Party Action, and shall describe in reasonable detail (to the
extent known by the Purchaser) the facts constituting the basis for such Third
Party Action and the amount of the claimed damages; provided, however, that no
delay or failure on the part of the Purchaser in so notifying the Seller shall
relieve the Seller of any liability or obligation hereunder except to the extent
of any damage or liability caused by or arising out of such failure. Within 20
days after delivery of such notification, the Seller may, upon written notice
thereof to the Purchaser, assume control of the defense of such Third Party
Action with counsel reasonably satisfactory to the Purchaser; provided that (i)
the Seller may only assume control of such defense if (A) it acknowledges in
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writing to the Purchaser that any damages, fines, costs or other liabilities
that may be assessed against the Purchaser in connection with such Third Party
Action constitute Damages for which the Purchaser shall be indemnified pursuant
to this Article VI and (B) the ad damnum is less than or equal to the amount of
Damages for which the Seller is liable under this Article VI and (ii) the Seller
may not assume control of the defense of Third Party Action involving criminal
liability or in which equitable relief is sought against the Purchaser. If the
Seller does not, or is not permitted under the terms hereof to, so assume
control of the defense of a Third Party Action, the Purchaser shall control such
defense. The non-controlling party may participate in such defense at its own
expense. The controlling party shall keep the non-controlling party advised of
the status of such Third Party Action and the defense thereof and shall consider
in good faith recommendations made by the non-controlling party with respect
thereto. The non-controlling party shall furnish the controlling party with such
information as it may have with respect to such Third Party Action (including
copies of any summons, complaint or other pleading which may have been served on
such party and any written claim, demand, invoice, billing or other document
evidencing or asserting the same) and shall otherwise cooperate with and assist
the controlling party in the defense of such Third Party Action. The fees and
expenses of counsel to the Purchaser with respect to a Third Party Action shall
be considered Damages for purposes of this Agreement if (i) the Purchaser
controls the defense of such Third Party Action pursuant to the terms of this
Section 6.2(a) or (ii) the Seller assumes control of such defense and the
Purchaser reasonably concludes that the Seller and the Purchaser have
conflicting interests or different defenses available with respect to such Third
Party Action. The Seller shall not agree to any settlement of, or the entry of
any judgment arising from, any Third Party Action without the prior written
consent of the Purchaser, which shall not be unreasonably withheld, conditioned
or delayed; provided that the consent of the Purchaser shall not be required if
the Seller agrees in writing to pay any amounts payable pursuant to such
settlement or judgment and such settlement or judgment includes a complete
release of the Purchaser from further liability and has no other adverse effect
on the Purchaser. The Purchaser shall not agree to any settlement of, or the
entry of any judgment arising from, any such Third Party Action without the
prior written consent of the Seller, which shall not be unreasonably withheld,
conditioned or delayed.
(b) In order to seek indemnification under this Article VI, the Purchaser
shall deliver a Claim Notice to the Seller.
(c) Within 20 days after delivery of a Claim Notice, the Seller shall
deliver to the Purchaser a Response, in which the Seller shall: (i) agree that
the Purchaser is entitled to receive all of the Claimed Amount (in which case
the Response shall be accompanied by a payment by the Seller to the Purchaser of
the Claimed Amount, by check or by wire transfer, (ii) agree that the Purchaser
is entitled to receive the agreed amount (in which case the Response shall be
accompanied by a payment by the Seller to the Purchaser of the agreed amount, by
check or by wire transfer or (iii) dispute that the Purchaser is entitled to
receive any of the Claimed Amount.
(d) During the 30-day period following the delivery of a Response that
reflects a Dispute, the Seller and the Purchaser shall use good faith efforts to
resolve the Dispute. If the Dispute is not resolved within such 30-day period,
the Seller and the Purchaser shall discuss in
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good faith the submission of the Dispute to binding arbitration, and if the
Seller and the Purchaser agree in writing to submit the Dispute to such
arbitration, then the provisions of Section 6.2(e) shall become effective with
respect to such Dispute. The provisions of this Section 6.2(d) shall not
obligate the Seller and the Purchaser to submit to arbitration or any other
alternative dispute resolution procedure with respect to any Dispute, and in the
absence of an agreement by the Seller and the Purchaser to arbitrate a Dispute,
such Dispute shall be resolved in a state or federal court sitting in the State
of New York, in accordance with Section 7.12.
(e) If, as set forth in Section 6.2(d), the Purchaser and the Seller agree
to submit any Dispute to binding arbitration, the arbitration shall be conducted
by a single arbitrator (the "Arbitrator") in accordance with the Commercial
Rules in effect from time to time and the following provisions:
(i) In the event of any conflict between the Commercial Rules in
effect from time to time and the provisions of this Agreement, the provisions of
this Agreement shall prevail and be controlling.
(ii) The parties shall commence the arbitration by jointly filing a
written submission with the New York, New York office of the AAA in accordance
with Commercial Rule 5 (or any successor provision).
(iii) No depositions or other discovery shall be conducted in
connection with the arbitration.
(iv) Not later than 30 days after the conclusion of the arbitration
hearing, the Arbitrator shall prepare and distribute to the parties a writing
setting forth the arbitral award and the Arbitrator's reasons therefor. Any
award rendered by the Arbitrator shall be final, conclusive and binding upon the
parties, and judgment thereon may be entered and enforced in any court of
competent jurisdiction (subject to Section 7.12), provided that the Arbitrator
shall have no power or authority to grant injunctive relief, specific
performance or other equitable relief.
(v) The Arbitrator shall have no power or authority, under the
Commercial Rules or otherwise, to (x) modify or disregard any provision of this
Agreement, including the provisions of this Section 6.2(e), or (y) address or
resolve any issue not submitted by the parties.
(vi) In connection with any arbitration proceeding pursuant to this
Agreement, each party shall bear its own costs and expenses, except that the
fees and costs of the AAA and the Arbitrator, the costs and expenses of
obtaining the facility where the arbitration hearing is held, and such other
costs and expenses as the Arbitrator may determine to be directly related to the
conduct of the arbitration and appropriately borne jointly by the parties (which
shall not include any party's attorneys' fees or costs, witness fees (if any),
costs of investigation and similar expenses) shall be shared equally by the
Purchaser and the Seller.
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(f) Notwithstanding the other provisions of this Section 6.2, if a third
party asserts (other than by means of a lawsuit) that the Purchaser is liable to
such third party for a monetary or other obligation which may constitute or
result in Damages for which the Purchaser may be entitled to indemnification
pursuant to this Article VI, and the Purchaser reasonably determines that it has
a valid business reason to fulfill such obligation, then (i) the Purchaser shall
be entitled to satisfy such obligation, without prior notice to or consent from
the Seller, (ii) the Purchaser may subsequently make a claim for indemnification
in accordance with the provisions of this Article VI, and (iii) the Purchaser
shall be reimbursed, in accordance with the provisions of this Article VI, for
any such Damages for which it is entitled to indemnification pursuant to this
Article VI (subject to the right of the Seller to dispute the Purchaser's
entitlement to indemnification, or the amount for which it is entitled to
indemnification, under the terms of this Article VI).
SECTION 6.3 Survival of Representations and Warranties. All representations
and warranties that are covered by the indemnification agreement in Section
6.1(a) shall (a) survive the Closing and (b) shall expire on the date two years
following the Closing Date, except that the representations and warranties set
forth in Sections 2.1 and 2.2 shall survive the Closing without limitation. If
the Purchaser delivers to the Seller, before expiration of a representation or
warranty, either a Claim Notice based upon a breach of such representation or
warranty, or an Expected Claim Notice based upon a breach of such representation
or warranty, then the applicable representation or warranty shall survive until,
but only for purposes of, the resolution of the matter covered by such notice.
If the legal proceeding or written claim with respect to which an Expected Claim
Notice has been given is definitively withdrawn or resolved in favor of the
Purchaser, the Purchaser shall promptly so notify the Seller. The rights to
indemnification set forth in this Article VI shall not be affected by (i) any
investigation conducted by or on behalf of the Purchaser or any knowledge
acquired (or capable of being acquired) by the Purchaser, whether before or
after the date of this Agreement or the Closing Date, with respect to the
inaccuracy or noncompliance with any representation, warranty, covenant or
obligation which is the subject of indemnification hereunder or (ii) any waiver
by the Purchaser of any closing condition relating to the accuracy of
representations and warranties or the performance of or compliance with
agreements and covenants.
SECTION 6.4 Limitations.
(a) Notwithstanding anything to the contrary herein, (i) the aggregate
liability of the Seller for Damages under Section 6.1(a) shall not exceed the
lesser of (x) the fair market value of the ClearBlue Shares at the time a claim
is made and (y) $2,000,000, and (ii) the Seller shall be liable only for Damages
under Section 6.1(a) which exceed $250,000, at which point such Damages shall be
fully indemnifiable from the first dollar. In the event the Seller shall be
obligated to pay any Damages under this Article VI, the Seller shall satisfy
such obligations by tendering, in its sole discretion, cash or ClearBlue Shares,
or any combination thereof. In the event the Seller chooses to satisfy its
indemnification obligations hereunder by tendering ClearBlue Shares, the value
of such ClearBlue Shares shall be deemed to equal (i) the fair market value at
the time a claim is made as determined in good faith by the Purchaser's Board of
Directors, if the ClearBlue Shares are not then listed or traded on a national
stock exchange or
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quotation system, or (ii) the average closing price of ClearBlue Shares for the
five trading days ending the day prior to the date a claim is made, if the
ClearBlue Shares are listed or traded on a national stock exchange or quotation
system.
(b) Except with respect to claims based on fraud, after the Closing, the
rights of the Purchaser under this Article VI shall be the sole and exclusive
remedy of the Purchaser with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement contained in this Agreement.
(c) As used in this Agreement:
"Claim Notice" shall mean written notification which contains (i) a
description of the Damages incurred or reasonably expected to be incurred by the
Purchaser and the Claimed Amount of such Damages, to the extent then known, (ii)
a statement that the Purchaser is entitled to indemnification under Article VI
for such Damages and a reasonable explanation of the basis therefor, and (iii) a
demand for payment in the amount of such Damages.
"Claimed Amount" shall mean the amount of any Damages incurred or
reasonably expected to be incurred by the Purchaser.
"Damages" shall mean any and all debts, obligations and other liabilities
(whether absolute, accrued, contingent, fixed or otherwise, or whether known or
unknown, or due or to become due or otherwise), diminution in value, monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including amounts paid in settlement, interest, court costs, costs of
investigators, fees and expenses of attorneys, accountants, financial advisors
and other experts, and other expenses of litigation), other than those costs and
expenses of arbitration of a Dispute which are to be shared equally by the
Purchaser and the Seller as set forth in Section 6.2(e)(vi).
"Dispute" shall mean the dispute resulting if the Seller in a Response
disputes its liability for all or part of the Claimed Amount.
"Expected Claim Notice" shall mean a notice that, as a result of a legal
proceeding instituted by or written claim made by a third party, the Purchaser
reasonably expects to incur Damages for which it is entitled to indemnification
under Article VI.
"Response" shall mean a written response containing the information
provided for in Section 6.2(c).
ARTICLE VII
General Provisions; Other Agreements
SECTION 7.1 Press Releases. Neither the Purchaser nor the Seller will,
without first obtaining the approval of the other, make any public announcement,
directly or indirectly,
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regarding this Agreement, nor the nature of the transaction contemplated by this
Agreement, to any person except as required by law or regulatory bodies and
other than to the respective principals or other representatives of the Seller,
the Purchaser and HP, each of whom shall be similarly bound by such
confidentiality obligations. If any such press release or public announcement is
so required by either party (except in the case of any disclosure required under
the Federal securities laws to be made in a filing with the Securities and
Exchange Commission), the disclosing party shall consult with the Seller prior
to making such disclosure, and the parties shall use all reasonable efforts,
acting in good faith, to agree upon a text for such disclosure which is
satisfactory to each of the parties.
SECTION 7.2 Expenses. All legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party hereto incurring such costs and expenses.
SECTION 7.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the conflicts of laws provisions thereof.
SECTION 7.4 Headings. Article and Section headings used in this Agreement
are for convenience only and shall not affect the meaning or construction of
this Agreement.
SECTION 7.5 Notices. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing and
shall be deemed to have been duly given to any party hereto when delivered by
hand, by messenger or by a nationally recognized overnight delivery company,
when delivered by facsimile and confirmed by return facsimile, in each case to
the applicable addresses set forth below:
(a) if to the Purchaser, to:
ClearBlue Technologies, Inc.
100 First Street
Suite 2000
San Francisco, CA 94105; and
with a copy to:
Guy N. Molinari, Esq.
Heller Ehrman White & McAuliffe LLP
120 West 45/th/ Street
New York, NY 10036
Facsimile: (212) 763-7600
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(b) if to the Seller to:
CMGI, Inc.
100 Brickstone Square
Andover, MA 01810
Attention: General Counsel
Facsimile: (978) 684-3601
with a copy to:
Browne Rosedale & Lanouette LLP
100 Brickstone Square, 1/st/ Floor
Andover, MA 01810
Attention: Thomas B. Rosedale, Esq.
Facsimile: (978) 684-3845
SECTION 7.6 Parties in Interest. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party. Subject to the preceding sentence, all the
terms and provisions of this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
permitted assigns.
SECTION 7.7 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements and
understandings, both written and oral, with respect to the subject matter
hereof.
SECTION 7.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Signatures on this
Agreement may be communicated by facsimile transmission and shall be binding
upon the parties hereto so transmitting their signatures. Counterparts with
original signatures shall be provided to the other parties hereto following the
applicable facsimile transmission; provided that the failure to provide the
original counterpart shall have no effect on the validity or the binding nature
of this Agreement.
SECTION 7.9 Amendment. Any term of this Agreement may be modified or
amended only by an instrument in writing signed by each of the parties hereto.
SECTION 7.10 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforced in accordance with its
terms.
SECTION 7.11 Definitions. For purposes of this Agreement, "know",
"knowledge" or words of like import, when used in this Agreement in connection
with
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representations and warranties made by the Seller, shall mean the actual
knowledge of George A. McMillan, Thomas Oberdorf and Peter L. Gray, and no other
person.
SECTION 7.12 Submission to Jurisdiction. Each party hereto (a)
submits to the jurisdiction of any state or federal court sitting in the State
of New York in any action or proceeding arising out of or relating to this
Agreement (including any action or proceeding for the enforcement of any
arbitral award made in connection with any arbitration of a Dispute hereunder),
(b) agrees that all claims in respect of such action or proceeding may be heard
and determined in any such court, (c) waives any claim of inconvenient forum or
other challenge to venue in such court, (d) agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court and
(e) waives any right it may have to a trial by jury with respect to any action
or proceeding arising out of or relating to this Agreement; provided in each
case that, solely with respect to any arbitration of a Dispute, the Arbitrator
shall resolve all threshold issues relating to the validity and applicability of
the arbitration provisions of this Agreement, contract validity, applicability
of statutes of limitations and issue preclusion, and such threshold issues shall
not be heard or determined by such court. Each party hereto agrees to accept
service of any summons, complaint or other initial pleading made in the manner
provided for the giving of notices in Section 7.5, provided that nothing in this
Section 7.12 shall affect the right of any party to serve such summons,
complaint or other initial pleading in any other manner permitted by law.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Note and Stock
Purchase Agreement to be duly executed and delivered as of the date set forth
above.
CMGI, INC.
By: /s/ Thomas Oberdorf
-------------------------------------------
Name: Thomas Oberdorf
Title: Chief Financial Officer
CLEARBLUE TECHNOLOGIES, INC.
By: /s/ Arthur Becker
-------------------------------------------
Name: Arthur Becker
Title: Vice President
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