Common use of Operational Efficiencies Clause in Contracts

Operational Efficiencies. The Separation and the Distribution will provide us the opportunity to streamline the corporate organization of the entity that holds the LookSmart Business, which we believe will result in significant savings to the Company over the long term. For example, Group is incorporated in Nevada as opposed to Delaware, where LS is incorporated. Under Delaware law, the annual franchise tax is based upon the authorized capital of a company, or alternatively, upon the product of the authorized capital stock of a company and a fraction determined by the relationship between a company’s total assets and the number of authorized shares it has issued. In Nevada, there is no annual franchise tax. Although there are no assurances that we will use the funds that may arise from these tax savings effectively, such savings could also result in an increased trading value of our common stock. LS’ board of directors considered a number of potentially negative factors in evaluating the Merger Agreement and specifically, the Separation and the Distribution, including: · the decreased capital available for investment; · potential disruptions to the businesses as a result of the Separation and the Distribution; · risks of being unable to achieve the benefits expected to be achieved from the Separation and the Distribution; · the reaction of LS’ shareholders to the Separation and the Distribution; · the risk that the Separation, the Distribution and/or merger with Pyxis might not be completed; and · the one-time and ongoing costs of the Separation, the Distribution and/or merger with Pyxis might not be completed. Ultimately, LS’ board of directors concluded that the potential benefits of the Separation and the Distribution outweighed these risks. Neither we nor LS can assure you that, following the Separation and the Distribution, any of the enumerated opportunities or benefits will be realized to the extent anticipated or at all. In recognition of the wide variety of factors considered in connection with the evaluation of the Separation, the Distribution and the complexity of these matters, LS’ board of directors did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights to the factors considered. The individual members of LS’ board of directors may have given different weights to different factors. We expect the Distribution will be effective on the Distribution Date, provided that, among other conditions described in the Assignment and Assumption Agreement between LS and Group, the following conditions shall have been satisfied or waived by LS in its sole discretion: · the LS board of directors will have approved the Distribution of all outstanding shares of Group common stock to LS’s stockholders; · the SEC will have declared our Registration Statement on Form 10, of which this Information Statement is a part, effective under the Exchange Act, no stop order suspending the effectiveness of the Registration Statement will be in effect, no proceedings for that purpose will be pending before or threatened by the SEC and notice of Internet availability of this Information Statement or this Information Statement will have been mailed to LS’s stockholders; · no order, injunction or decree that would prevent the consummation of the Distribution will be threatened, pending or issued (and still in effect) by any governmental entity of competent jurisdiction, no other legal restraint or prohibition preventing the consummation of the Distribution will be in effect, and no other event outside the control of LS will have occurred or failed to occur that prevents the consummation of the Distribution; · no other events or developments will have occurred prior to the Distribution that, in the judgment of the LS board of directors, would result in the Distribution having a material adverse effect on LS or its stockholders; and · LS and us will have executed and delivered all ancillary agreements related to the Distribution. The fulfillment of the above conditions will not create any obligation on LS’s part to effect the Distribution. We are not aware of any material federal, foreign or state regulatory requirements with which we must comply, other than SEC rules and regulations, or any material approvals that we must obtain in connection with the Distribution. LS has the right not to complete the Distribution if, at any time, the LS board of directors determines, in its sole and absolute discretion, that the Distribution is not in the best interests of LS or its stockholders or is otherwise not advisable.